* Company says 1,200 jobs at risk
* Options include seeking strategic partner
* Government says funding must offer taxpayers value
* Company reports deeper first-half loss
(Adds union reaction, updates share price)
By Barbara Lewis and Noor Zainab Hussain
LONDON, Sept 17 (Reuters) - Sirius Minerals scrapped
a plan to raise $500 million in a bond sale on Tuesday, delaying
a project to mine for fertiliser under a national park in
northern England and halving the value of its shares.
The company had already suspended the bond issue in August.
Sirius blamed market conditions aggravated by uncertainty over
Britain's departure from the European Union for its failure to
secure funding.
Sirius said on Tuesday the government had turned down a
renewed request for backing in August. The company said it would
conduct a six-month review to work out cost savings and would
slow development of the project.
"This is the most prudent decision to give the company the
time necessary to restructure its plans to move the project
forward," CEO Chris Fraser said, adding that one option was to
seek "a major strategic partner".
The company said 1,200 jobs involved in developing the
project would be lost if it failed, but Fraser told a conference
call he was confident it could be saved.
Sirius' shares opened more than 60% lower, before recovering
slightly to trade down 56% at 4.5 pence at 1342 GMT.
The plan would create Britain's biggest mine and add jobs to
a part of the country hit by the decline of heavy industry.
The Unite union urged the government to provide backing.
"This is a vital project for a region which is crying out for
new investment and jobs," national officer Ian Woodland said.
Many local people have invested in the plan to tunnel under
England's North York Moors to exploit what Sirius says is the
world's largest deposit of polyhalite, a multi-nutrient
fertiliser.
Polyhalite is meant to be superior to the traditional
fertiliser ingredient potash. But some potential investors are
concerned the market for polyhalite is not well established.
Until now, the world's only producer of polyhalite is
Israel's ICL, which has a mine near Sirius' project,
and markets it under its Polysulphate brand.
Although not in production, Sirius has offtake contracts
with customers in the United States, Europe, Brazil, India and
Africa. It has said it has the potential to generate billions of
pounds during half a century of mining.
The company said it had 180 million pounds ($223 million) in
cash at the end of August, which would help it explore options.
The company needed to issue a bond of at least $500 million
to gain full access to a $2.5 billion revolving credit facility
from JP Morgan Chase. JP Morgan Chase declined to comment.
Sirius also repeatedly sought government help and in August
had asked for government backing to enable the issuance of up to
$1 billion in guaranteed bonds.
A spokesman for Prime Minister Boris Johnson said any
request for financing had to weigh "the potential of a project
against the need to protect taxpayers' money".
Humphrey Knight, potash analyst at business intelligence
company CRU, said the project faced many risks, "not least, the
market for polyhalite remains very small".
Sirius Minerals on Tuesday reported an operating loss of
14.3 million pounds for the six months ended June 30 versus a
loss of 10.8 million pounds a year earlier.
($1 = 0.8059 pounds)
(Reporting by Barbara Lewis in London and Noor Zainab Hussain
in Bengaluru; additional reporting by Abhinav Ramnarayan and
Kylie MacLellan in London;
Editing by Dale Hudson and Edmund Blair)
