Article by Nick Evans, courtesy of the Australian
Global mining giant Anglo American has joined BHP Group in staking its future growth on global demand for fertilisers, agreeing firm terms for Gina Rinehart-backed Sirius Minerals.
Anglo American will pay £405m ($766m) for Sirius in a deal to rescue to the troubled potash would-be, and its $US4.2bn ($6.1bn) project in North Yorkshire, from the brink of collapse.
Anglo American did not give any indication on how quickly it might immediately revive plans to push on with production, but said Sirius Minerals’ North Yorkshire polyhalite project has the potential to become a world-class, low-cost and long-life asset.
If shareholders accept the deal, recommended by its board, it would rescue Sirius and its $US4.2bn ($6.1bn) project in North Yorkshire from the brink of collapse, with the company set to run out of money within months on the back of last year’s failure to get a major bond issue away.
Sirius shares collapsed in September when it halted work at the project after pulling the bond issue and failing to win government support for the mine.
Ms Rinehart’s Hancock Prospecting has sunk $US250m into Sirius, initially offering the cash in 2016, to be delivered when the construction was completed, in return for a 5 per cent royalty on sales from the first 13 million tonnes of production.
But the WA mining magnate pulled forward the investment in September 2018 when Sirius hit financial and construction issues, and flagged a $US500m cost blowout at its mine.
The cut-price takeover won’t please many of Sirius’ UK shareholders, many of whom bought into the dream of owning a slice of the UK’s biggest new mine in decades when Sirius was flying high.
But it highlights the value of Mrs Rinehart’s decision to pump money into the project rather than the company, with the royalty appearing likely to survive the takeover.
Under the royalty deal, originally signed in 2016, Mrs Hancock also had the right to take up $US50m worth of Sirius shares. Disclosure documents published as part of the transaction show Mrs Rinehart has given up that right.
Anglo’s move on Sirius indicates it is serious about shifting its production profile into potash, also a strategy of BHP under outgoing chief executive Andrew Mackenzie, who consistently backed future development of the company’s massive Jansen potash mine despite widespread market scepticism about the project.