Sirius Minerals investors suffer as giant UK mining plan in Yorkshire nears collapse
BRITAIN’S most ambitious mining project for a generation teetered on the brink of collapse today after the Government refused to provide finance and it was forced to scrap a crucial effort to raise funds.
London-listed Sirius Minerals has spent the past four years developing a giant potash fertiliser mine on the Yorkshire Moors near Whitby but now faces administration after spending the summer scrambling to stay afloat.
Its shares crashed 50% to just 4.8p, leaving 85,000 retail investors nursing massive losses. Members of the public own almost half of the shares.
In August Sirius warned it would run out of cash if it was unable to unlock a $2.5 billion (£2 billion) credit facility provided by JPMorgan, which was contingent on successfully issuing a $500 million (£402 million) junk bond. Today it admitted it had not been able to find investors to buy the bond.
The company also revealed the Government had refused a fresh request last month to provide a loan guarantee.
In January the company went cap-in-hand to Prime Minister Theresa May, who verbally backed the project as a building block in the “Northern Powerhouse” but put up no funds.
Chief executive Chris Fraser blamed Brexit and the volatile market conditions in the UK for being unable to secure the finance.
He said: “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. This is the most prudent decision.”
Sirius had hoped to have the Woodsmith mine up and running by 2021.
Analysts said the news was a huge disappointment for UK industry as the mine would have been the largest to be built in a generation, employing 1,000 people. The company’s demise is also a disaster for retail investors from Yorkshire and the North East, 25,000 of whom invested their savings in the company.
It has done significant reputational damage for Liberum and Shore Capital, who were brokers and responsible for selling the shares.
Retail fund managers have also heavily promoted the firm. Earlier this year Steve Davies at Jupiter posted a video on YouTube saying Sirius could be a FTSE 100 company.
Other notable backers included Australian billionaire Gina Rinehart, who ploughed £250 million cash into the mine in September last year in return for royalties once the company had started to produce and sell potash.
Sirius will look to bring in a strategic partner to save the project but Jay Ashfield, director at corporate finance firm Hannam & Partners, believes this is unlikely to succeed. He said: “This is embarrassing all round. The financing for the project has been a disaster from the start. It’ll be hard to find a partner as the company has not proven it has a ready end-market.”
