(Alliance News) - Blue-chip miner Anglo American PLC confirmed Wednesday it is in advanced discussions to acquire Sirius Minerals PLC.
Anglo American is offering 5.50 pence per share for London-listed Sirius. The offer values Sirius at GBP386 million.
Anglo American shares closed at 2,160.00 pence in London on Tuesday, while in Johannesburg the shares ended at ZAR397.35. Sirius Minerals closed at 4.10p in London.
The offer represents a 34% premium to Sirius's closing price on Tuesday and a 47% premium to the company's volume-weighted average price since mid-September, when Sirius embarked on a strategic review of its business.
In September 2019, Sirius said that it was undertaking a strategic review in order to assess the development plan for its North Yorkshire polyhalite project, as the firm struggled to secure the required funding. Sirius also noted the broader process would include seeking a major strategic partner for the project.
Consequently, the Sirius said it intended to slow the development of its polyhalite mine.
Then, in November, Sirius outlined a new two-stage development plan for the first stage of the project. The Scarborough-based firm expects the initial phase to require around USD600 million in investment.
On Wednesday, London and Johannesburg-listed Anglo American said: "Anglo American identified the project as being of potential interest some time ago, given the quality of the underlying asset in terms of scale, resource life, operating cost profile and the nature and quality of its product.
"The project has the potential to fit well with Anglo American's established strategy of focusing on world-class assets, particularly in the context of Anglo American's portfolio trajectory towards later cycle products that support a fast-growing global population and a cleaner, greener, more sustainable world."
Based on this, Anglo American believes its offer to buy Sirius can provide "certainty" to Sirius shareholders, as the mining giant will bring "financial, technical and marketing resources and capabilities to progress the project over time."
Anglo American believes that the project has the potential to become a world-class, low-cost and long-life asset.
Sirius has previously indicated that the mine is currently the world's largest known high-grade polyhalite deposit with a JORC reserve of 290 million tonnes, with a grade of 88.8%, and a resource of 2.69 billion tonnes.
Anglo American added: "At this stage, the project requires a significant amount of further financing to develop and commission the operation that has proven challenging for Sirius to procure on an economic basis. Anglo American, as one of the world's leading mining companies, has the resources and capabilities to help build on the achievements of the Sirius team."
Both Anglo and Sirius stressed there is no certainty that any firm offer will be made.
By Paul McGowan; paulmcgowan@alliancenews.com
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