RE: sirius shareholders8 Jan 2020 10:31
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Anglo American has made a surprise proposal to buy Sirius Minerals, the troubled Yorkshire fertiliser mine developer, for £386 million.
The FTSE 100 mining group said that it was in advanced discussions with Sirius in relation to a possible offer of 5.5p per Sirius share.
The future of Sirius’s Woodsmith mine near Whitby had been hanging in the balance since September, when its attempts to raise $3.8 billion to fund the project to completion failed, sending the shares plummeting.
Anglo said that it had “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 surprise rescue bid sent shares in Sirius up by almost a third from their rock-bottom levels to 5.4p in morning trading, while shares in Anglo American fell by about 2.5 per cent to £21.05 on concerns over the costs and risks of the project.
The possible offer would stem losses for investors in Sirius, including more than 80,000 retail shareholders who risked losing everything if the project failed. Many, however, will still be nursing heavy losses on their original investments, given that the offer is priced well below previous fundraising rounds.
An Anglo takeover would be a huge boost for the North Yorkshire area — 1,000 people had been employed in Sirius’s operations but hundreds were laid off as it ran out of cash.
Sirius is seeking to develop the Woodsmith mine into the world’s biggest producer of polyhalite, a type of potash fertiliser.
The ambitious project involves mining polyhalite from almost a mile beneath the North York Moors and transporting it via a 23-mile tunnel for processing on Teesside.
Anglo American is one of the world’s biggest mining groups, with underlying profits of $9.2 billion last year from mining commodities including copper, coal, iron ore, diamonds and platinum.
The company had appeared focused on developing a $5 billion copper mine at Quellaveco in Peru, its biggest new project in more than a decade, after cost blowouts and delays at its previous major development at Minas Rio in Brazil.
Analysts at Investec said that Sirius was “not another Minas Rio”. They wrote: “This is not completely out of Anglo’s area of expertise as it has owned phosphates assets, before being forced to sell them in 2015/2016 to repair the balance sheet.” Anglo once owned the Boulby mine, close to Sirius’s project, which used to produce potash and now mines polyhalite.
Anglo said that the Sirius project could fit its “established strategy of focusing on world-class assets” as it was currently the world’s largest known high-grade polyhalite deposit” and could be “mined efficiently using bulk mining methods through a relatively simple, low-energy, non-chemical production process”.
Anglo said that it remained “committed to its disciplined capital allocation framework” and that if it su
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