Sirius Minerals is advising its shareholders to accept a takeover offer put forth by multinational company Anglo American.
After dreams of its billion dollar potash project were put on hold last year, Sirius Minerals (LSE:SXX,OTCQX:SRUXY) is awakening to the reality that it will need to sell in order for shareholders to recoup their investment — and it’s asking investors for support.
The company’s ambitious Woodsmith potash project in the UK has caught the eye of international miner Anglo American (LSE:AAL), which has offered to pay a total value of 409 million pounds for the company’s entire issued and to be issued share capital.
Sirius’ share price has fallen 75 percent over the last year as the explorer’s large-scale project encountered several roadblocks hindering development.
The Woodsmith project, located beneath the North Yorkshire national park in the UK, has been in development since 2017, with plans including the sinking of two mine shafts. Sirius had hoped to turn Woodsmith into the largest polyhalite mine in the world.
Polyhalite is part of the low-chloride potash family used as a fertilizer in the agricultural sector.
After being unable to secure phase two financing despite undertaking several options, Sirius announced in September that it was undergoing a strategic review and putting further work on hold.
“We now face a stark choice,” said Russell Scrimshaw, chairman of Sirius, in a Tuesday announcement. “If the acquisition is not approved by shareholders and does not complete there is a high probability that the business could be placed into administration or liquidation within weeks thereafter. This outcome would most likely result in shareholders losing all of their investment, as well as put the future of the entire project, and its associated benefits for the local area and the UK, at risk.”
The deal needs to garner the approval of 75 percent of shareholders to go through.
For Anglo American, a miner and producer of platinum, diamonds, copper, nickel and thermal coal, the acquisition could help the diversified company move away from controversial commodities like coal, something its shareholders would welcome.
In his own statement, Mark Cutifani, CEO of Anglo American, pointed to the “certainty” Anglo’s acquisition offers to Sirius shareholders, and explained how Woodsmith fits into the company’s long-term goals.
“The addition of the project supports our ongoing transition towards supplying those essential metals and minerals that will meet the world’s evolving needs — in terms of the undoubted need for cleaner energy and transport, and providing infrastructure and food for the world’s fast-growing and urbanizing population,” he said.
Currently, Anglo has no stake in the potash space, but the company was previously a joint partner at the Boulby mine — currently the only producing polyhalite mine globally — near the North York Moors and close to Woodsmith.
If approved, the deal will go into effect on March 31, 2020. Share of Sirius were flat on Tuesday, trading for GBX 5.51.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.