Sirius Ends Bond Sale, Putting $3.8 Billion English Mine at Risk

LONDON (Capital Markets in Africa) – Sirius Minerals Plc plunged as its plans to build a $3.8 billion mine in the northeast of England were thrown into doubt after the company suspended a $500 million bond sale.

The setback to a critical part of Sirius’s financing plan is the latest blow in almost a decade of efforts to build its giant potash mine. It’s so far had to overcome environmental opposition, concerns about demand prospects for its potash and a long battle to raise capital. The shares dropped as much as 39% and traded 24% lower at 12:16 p.m. in London.

Sirius, which needs to complete the bond sale to unlock a $2.5 billion credit facility from JPMorgan Chase & Co., said it was suspending the offering due to market conditions. The company will try again later this quarter when the situation has improved. The bonds had been expected to carry a 13.5% coupon.

Global markets have been roiled this week amid escalating trade tensions between China and the U.S. At the same time, the U.K.’s new Prime Minister, Boris Johnson, is threatening to crash out of the European Union without a deal on Oct. 31.

 “The silver lining is they still have effectively two months to get this done,” said Richard Knights, an analyst at Liberum Capital Markets, one of Sirius’s corporate brokers. “They’ve guided that cash runs out at the end of September; they can probably push that a couple of weeks, but not much further without slowing operations materially.”

Sirius, backed by Australian billionaire Gina Rinehart, plans to extract polyhalite from a mine more than a mile (1.6 kilometers) deep. It expects to produce the first potash in 2021.

The company had earlier been counting on getting loans guaranteed by the U.K.’s Infrastructure Project Authority, but secured the last-minute agreement with JPMorgan after a government deal failed to materialize.

Sirius’s $400 million convertible bonds due in November 2023 plunged 7 cents to 76.3 cents on the dollar, the lowest on record, according to data compiled by Bloomberg. The $400 million of convertible notes due in May 2027 fell 4 cents to a record low of 96 cents on the dollar.

The revolving credit facility provided by the bank, which was also arranging the high-yield sale, would be structured so that Sirius would need to issue a bond each time the outstanding balance reaches $500 million and use the proceeds to pay off the balance, Fitch Ratings said previously.

The proposed bond issue had been given an expected rating of B by Fitch and B- by S&P Global Ratings.

Source: Bloomberg Business News