(Alliance News) - Sirius Minerals PLC is to carry out a strategic review after a failure to complete crucial debt funding for the Woodsmith fertiliser project, it said on Tuesday.
Sirius believes its USD500 million senior note offering can not go ahead "in current market conditions", and as a result, it will be scaling down construction at the polyhalite project in North Yorkshire, north east England, while a strategic review is carried out.
The USD500 million note offer had been postponed in August due to poor market conditions. It formed part of USD3.8 billion of stage-two funding for Woodsmith, and a USD2.5 billion revolving credit facility had been reliant on a USD500 million note offering being completed.
"Due to the ongoing poor bond market conditions for an issuer like Sirius, we have not been able to deliver our stage-two financing plan," said Managing Director & Chief Executive Chris Fraser.
"As a result, we have taken the decision to reduce the rate of development across the project in order to preserve funding to allow more time to develop alternatives and preserve the significant amount of inherent value in this world-class project.
"The company will now conduct a comprehensive strategic review over the next six months to assess and incorporate optimisations to the project development plan and to develop a different financing structure for the funds required," Fraser continued.
"This is the most prudent decision to give the company the time necessary to restructure its plans to move the project forward. The process will incorporate feedback from prospective credit providers around the risks associated with construction and will include seeking a major strategic partner for the project."
Sirius had successfully completed another part of the financing, a USD400 million convertible bond offering, which has been held in escrow since May. This will now be redeemed and returned to investors.
Sirius has been talking with the UK government since August about financing, following the postponement of the note offer, and it had requested USD1 billion of guaranteed bonds from the government if it could not carry out its own financing. However, the government turned the request down.
As of August 31, Sirius had GBP180 million of cash, it said, which is not enough to keep working at Woodsmith at the current rate.
"The company intends to explore alternative financing structures. While the current stage two financing process has been unable to be completed at this time, a number of different investors and advisers have indicated the potential for a range of alternative approaches," said Sirius.
"These alternatives will now be assessed in detail to determine if there is a way to structure the financing of the development of the project to enable either the existing development plan or a revised development plan to be financed through different means."
"The company believes the compelling economics of the project provide a strong basis for a revised financing plan but this will require time to bring together the components of such a plan and to assess investor appetite for a revised financing plan," Sirius concluded.
Sirius also reported results for the first half of 2019 on Tuesday, showing a GBP3.1 million pretax loss, narrowed from GBP96.3 million a year before. The prior year's period had booked a significant fair value loss on some convertible loans.
There was no revenue, as Sirius does not currently have any producing assets. It had hoped to begin production at Woodsmith by the end of 2021.