London-listed Sirius Minerals will reduce the rate of development across its North Yorkshire polyhalite project and pulled a planned $500-million offering, after the UK government denied a request for financial support for the project.
The company’s share price plunged by 50% to 4.99p each by 9:00 in London.
The cancellation of the bond issue follows an earlier postponement and is the result of “poor bond market conditions”, with Sirius noting that it was not aware of any significant new issuer in the B/B- credit range that had come to the market.
The bond was a condition of the $2.5-billion revolving credit facility that the firm entered into in April this year.
"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. As a result, 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 MD and CEO Chris Fraser.
Sirius had expected the participation of the Infrastructure and Projects Authority, which is part of HM Treasury, for funding of the project, but paused discussions in early 2019 to allow the company to pursue the RFC-based financing plan. Following the postponement of the proposed senior secure notes offering in August, the company re-engaged with the UK government, requesting a commitment to enable the issue of up to $1-billion of guaranteed bonds in the event the company was unable to issue unguaranteed bonds to refinance the RCF. The government has reportedly reviewed the case for the provision of the support requested to facilitate the financing of the project and has decided not to provide the support requested.
At the end of August, Sirus had about £180-million of unrestricted cash, which included more than £117-million of uncommitted capital. This was not deemed sufficient liquidity for the company to continue development of the project in line with its publicly articulated development schedule.
Sirius will now conduct a 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 to give the company the time necessary to restructure its plans to move the project forward. The process will incorporate feedback from prospective credit providers around the risks associated with construction and will include seeking a major strategic partner for the project," said Fraser.
The Woodsmith project area is said to contain the largest, highest grade resource of polyhalite to be found anywhere in the world at 2.66-billion tonnes.
The Woodsmith mine is expected to operate at ten-million tons a year by 2024, expanding to 20-million tons a year by 2029. Construction of the mine started in May 2017.