Shares plummet for owners of North Yorkshire potash mine
The news that listed company Sirius Minerals is struggling to raise enough money to develop its potash mining project in North Yorkshire has sparked concerns over the likely impact on retail investors.
The Scarborough-headquartered fertiliser development company warned it would need to review its options, after revealing that its $500m (£403m) bond offering would not be achievable in the current market conditions.
Sirius said this meant it would therefore have to reduce construction activities at its new North of England potash mine.
As a result, Sirius’ shares tumbled by 60% to 4p earlier today. This afternoon they were trading at 4.64p, a fall of 53%.
Responding to the announcement, Russ Mould, Investment Director at AJ Bell said: “This is terrible news for a very large number of retail investors who had put their faith in the company. Many of these shareholders live close to the mine and invested as a show of support in a project that had the potential to greatly improve the local economy.
“Although the share price has taken a beating on today’s news, it isn’t game over for Sirius and its shareholders. The miner has a few options to try and salvage the project.
“It has enough cash to give it six months’ breathing space to either find a different solution for the financing or bring in a new strategic investor who could theoretically provide cash upfront in exchange for a stake in the business.
“Given the current situation it seems highly likely that existing shareholders are going to suffer, because Sirius may have to raise more money or sell a chunk of its business to a new strategic investor on unfavourable terms, given how it is desperate for a lifeline.
“It is disappointing to see the UK Government refuse to support the company, when you consider that Sirius believes it can generate £100bn for the UK economy over the next 50 years should the mine become operational.
“However, the reality is that Sirius has never built a mine before, nor has it operated one. In that sense it is a high-risk entity from a lender’s point of view.
“History would suggest that finding a strategic partner is harder than you think, so that option is not a certainty. Sirius will need to find someone with very deep pockets and an appetite to back a mine which will create a product for which there is not currently an established market.
“It wants to extract polyhalite, a form of potash containing potassium, sulphur, magnesium and calcium. The product would be used by farmers to help improve crop yields. Traditionally farmers use different fertilisers and so Sirius is spending a lot of time educating potential buyers as to the benefits of polyhalite.
“Overall this situation is a reminder of the risks involved with investing. You need to fully understand what could go wrong as well as what could go right.”
