Sirius Shares Tumble Amid Potash Project Uncertainty

Plans to construct the UK’s largest fertilizer project were plunged into uncertainty after Sirius Minerals (LSE:SXX,OTC Pink:SRUXF) pulled plans to launch a US$500 million bond offering.

Sirius planned to use the money raised from the bonds to initiate the next construction phase at the Woodsmith polyhalite project in Yorkshire.

Shares of the early stage miner dropped 77.9 percent year-to-date following the announcement.

“Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our stage 2 financing plan,” said CEO and Managing Director Chris Fraser.

The company’s ambitious US$5 billion dollar Woodsmith mining vision involved the sinking of two mine shafts beneath a National park to access the “highest grade resource of polyhalite” in the world.

The polyhalite from Woodsmith is intended to make Sirius’ trademarked fertilizer Poly4, a multi nutrient fertilizer for the agricultural sector.

“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,” Fraser added.

To make matters worse, the UK government denied the company’s request to guarantee US$1 billion in bonds. The company says the bonds would have allowed financing to be delivered as planned.

Activity in and around Woodsmith has resulted in a boost for the local economy. To date, Sirius has spent roughly US$1.5 billion on the project, which employs 800 people.

Sirius will now undertake a six month strategic review of the current project plan and financing structure. During this time, alternative financing arrangements will be examined as well as potential revisions to the project development schedule.

The production plan at Woodsmith had set an initial output target date of 2021, with a ramp up to 10 million tonnes per annum (Mtpa) by 2024. It will be followed by a periodic ramp up to 20 Mtpa by 2029.

Shares of Sirius were down 33 percent on Tuesday (September 17), trading at GBX 4.66.

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