Anglo/Sirius Deal Could Save UK Potash Project

In a move that could breathe new life into stagnated UK potash project Woodsmith, international miner Anglo American (LSE:AAL) has confirmed it is in discussions to acquire the development’s owner, Sirius Minerals (LSE:SXX,OTCQX:SRUXY)

The multibillion dollar project, which is located under a North Yorkshire national park, has faced many pitfalls over the last year, leaving Sirius in a precarious state regarding advancement.

Anglo American, a major mining company specializing in platinum, diamonds, copper, nickel and thermal coal, is offering to buy Sirius for 5.5 pence per share for a total value of 386 million pounds.

Last September, Sirius’ shares were battered, dropping by as much as 77 percent following news that the company was scrapping plans to launch a US$500 million bond offering.

Plans for the ambitious US$5 billion Woodsmith project, which involved the sinking of two mine shafts beneath the park, were put on the backburner while Sirius continued to work to raise funds for the mine.

It was at roughly this time that Anglo began looking into the project, which is believed to be home to the “highest grade resource of polyhalite” in the world.

“Anglo American 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,” reads a statement from the multinational company.

If the deal reaches approval it would be Anglo’s re-entry into the UK’s agriculture sector, the company previously was a joint partner of the Boulby mine near the North York Moors in the UK. Boulby lies in close proximate to Woodsmith and is currently the only producing polyhalite mine.

The Sirius acquisition could also help the major appease shareholders wanting the company to move away from commodities that are heavy polluters, like coal.

“The project has the potential to fit well with Anglo American’s established strategy of focusing on world-class assets, particularly in the context of Anglo American’s portfolio trajectory towards later cycle products that support a fast-growing global population and a cleaner, greener, more sustainable world.”

Prior to its financing issues toward the end of last year, Sirius appeared to have obtained financial backing for Woodsmith in early 2019. The company reported in mid-March that it had received a conditional proposal from an unnamed global financial institution for US$3 billion.

However, by September, Sirius was reining back its plans and undertaking a six month strategic review.

“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,” said CEO and Managing Director Chris Fraser at the time.

With estimated reserves of 290 million metric tons, the polyhalite from Woodsmith is intended to make Sirius’ trademarked fertilizer Poly4, a multi-nutrient fertilizer for the agricultural sector.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.