Gina Rinehart will emerge as a winner from the low-ball $766m offer.
Article by Colin Kruger courtesy of the Sydney Morning Herald
Billionaire Gina Rinehart has emerged as one of the few winners after financially embattled UK potash miner Sirius Minerals announced it was backing a low-ball 405 million ($766 million) offer from Anglo American.
Under the terms of the deal, which has been backed by the Sirius board, Mrs Rinehart’s Hancock Prospecting group is expected to retain its investment in the project to build a multibillion-dollar potash mine deep beneath the North York Moors National Park.
Sirius was set up by executives involved in the development of Andrew Forrest’s Fortescue Metals which closed at a record high valuation of $36 billion yesterday.
Sirius was worth as much as 1.5 billion at its peak but faced collapse after a $US500 million junk bond offering failed in September. The junk bond offering would have unlocked $US2.9 billion worth of funding – including a $US50 million cash injection from Hancock Prospecting – needed to complete the project.
According to the announcement from Sirius, if the Anglo takeover is successful, Hancock will no longer be required to make the equity investment and will relinquish its right to board seats.
Hancock will retain its $US250 million royalty agreement with Sirius that was agreed to in 2018, a spokesman said. Sirius shares traded as low as 2 pence before news emerged of the 5.5 pence-a-share bid from Anglo, which is run by Australian Mark Cutifani.
Sirius chairman – former Fortescue executive Russell Scrimshaw said the Anglo bid was the only concrete alternative on offer for investors and warned the company would collapse within weeks if investors failed to approve the deal.
“We acknowledge that to many shareholders our decision as a board to recommend this offer will have come as a shock,” said Mr Scrimshaw in the announcement.
Mr Cutifani said the deal, which would return the mining giant to the fertiliser business, “provides greater certainty for Sirius’ shareholders, employees and wider stakeholders while bringing the prospects for the development of this potential tier 1 project closer to reality.”
If the deal is approved by Sirius investors, Anglo will still face the risks associated with digging shafts 1.5 kilometres deep to reach the polyhalite and a 36-kilometre tunnel to convey it to the coast for export.
There is then the risk of actually selling the polyhalite, which is regarded as an unconventional potash resource.