RE: Times article7 Sep 2019 08:59
In case anyone can’t read it
Part 1
Sirius Minerals seeks lifeline for potash mine project
Miles Costello
September 7 2019, 12:01am, The Times
Sirius Minerals is boring a tunnel from its Woodsmith mine to carry polyhalite to the port at Redcar
The company trying to develop the world’s largest deposit of potash is hoping to secure cornerstone investors for a high-interest bond issue as it races to raise desperately needed financing by the end of the month or risk running out of money and failing.
There was growing speculation yesterday that Yorkshire-based Sirius Minerals might consider offering an additional incentive to potential bond buyers in the form of warrants that could be traded in for equity.
Should Sirius successfully raise the bond issue, it would guarantee the company’s future and the share price would be expected to jump dramatically, enabling bondholders to cash in immediately for a swift profit.
As part of a series of last-ditch efforts to complete a high-yield bond issue, it has also been suggested that Sirius might seek some form of government support through a loan guarantee to help with its proposed $500 million securities deal.
Sirius Minerals was founded in 2003, initially to explore potential mining projects in the US. Four years ago it secured a licence from the North York Moors National Park Authority to develop the polyhalite deposit located 1,500m underground three miles south of Whitby. As a condition of securing the licence, Sirius agreed that to protect the environment, it would build a 23-mile tunnel leading to a port at Teesside, from where the polyhalite could be crushed and shipped overseas.
The ambitious project is expected to cost $5 billion and Sirius has previously raised just over $2 billion, including a placing and the issue of bonds that convert into company shares.
It needs to raise the $500 million in order to unlock a $2.5 billion credit facility that it arranged with JP Morgan, the US investment bank, that would give it access to the rest of the money it requires.
The company has admitted that if it fails to raise finance it will probably have to stop spending and consider all available options, including administration. Sirius has already tried once to issue the bonds but was forced to pull the deal last month, when the high-yield markets went into seizure because of a sharp increase in the intensity of the battle over trade tariffs between the US and China.
Because of the risks involved in the project — Sirius does not expect to begin extracting polyhalite until the end of 2021 or generate positive cashflows before 2023 — it is likely to have to pay a very high interest rate on the bonds, expected to be about 13.5 per cent.
Sources in the high-yield market expressed scepticism that Sirius Minerals would be able to raise the money, arguing that investors would be cagey about taking a position in a UK British company with Brexit looming and with the uncertainty associated with its cash
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