Article by Daniel Newell courtesy of the West Australian
Anglo American has struck a deal to buy Gina Rinehart-backed UK potash hopeful Sirius Minerals for £405 million ($766 million).
Sirius warned investors it could collapse within weeks if the takeover is not approved.
Anglo had previously identified the company’s $US4.2 billion ($6.2 billion) flagship project under the North Yorkshire Moors in north-east England as being of “potential interest”.
Mrs Rinehart, pictured below, sunk $US250 million into the project two years ago when Sirius flagged a $US500 million cost blowout with its construction.
But Sirius — chaired by former Fortescue Metals Group executive director Russell Scrimshaw — was forced to shelve construction in September last year when it failed to attract the funding necessary to continue with its plans.
Mrs Rinehart’s investment was in exchange for 5 per cent of the revenue from the first 13 million tonnes of production a year once the project was completed.
Her company Hancock Prospecting also signed a deal for the right to buy up to 20,000 tonnes of the mine’s fertiliser each year for use across her vast Australian cattle grazing properties.
She also agreed to buy $US50 million in Sirius shares, but it is believed that investment will not be needed under Anglo’s 51/2p-a-share takeover terms.
In 2018, Mrs Rinehart said Australian taxes and red tape had forced her to make overseas investments such as that in Sirius.
Mr Scrimshaw said Anglo’s lifeline was the only “feasible option” to save the mine and the thousands of jobs it promised to bring to the area.
“We regret that we are not able to deliver on our long-term goal of Sirius being able to deliver the project into production, although we assure all stakeholders that the team has worked tirelessly and diligently over the last nine years to try and achieve that,” he said.
“However, given the current cash constraints of Sirius, and lack of realistic and deliverable alternative financing and development options, we believe this to be a fair approach from Anglo American.”
If the acquisition was not completed, “there is a high probability that the business could be placed into administration or liquidation within weeks”.
Mr Scrimshaw said alternative funding had been considered but the offers were not deemed acceptable and it was unlikely any revisions could be delivered by the end of March.
Anglo American chief executive Mark Cutifani said the bid provided better certainty for Sirius’ shareholders “while bringing the prospects for the development of this potential tier one project closer to reality”.
“We intend to bring Anglo American’s financial, technical and product marketing resources and capabilities to the development of the project, which of course would be expected to unlock a significant and sustained associated employment and economic stimulus for the local area,” he said.
The project involves the Woodsmith underground mine, a 37km tunnel to transport the product to port facilities via a conveyor and a materials handling facility at Teeside.