Sirius Minerals (LON:SXX), the British junior struggling to build a huge fertilizer mine beneath a national park, has set up the timetable for Anglo American’s £405 million (about $524m) planned takeover and opened a shareholder helpline to explain why they should accept it.
“There is no alternative,” the miner said in a statement. “If the acquisition is not approved by shareholders and does not complete there is a high probability that the Sirius board will place the business into administration or liquidation.”
Shareholders will vote on whether
or not to accept Anglo’s lifeline on March 3. At the peak, around 85,000
individual private investors had shares in the Yorkshire mine developer, and most
of them were believed to be either first time or fairly inexperienced
investors.
Sirius said shareholders could call
the helpline (0371 664 0321 or 00 800 3742 6163) if they had questions about
the offer documents, the pending court meeting, general meeting or how to
complete proxy voting forms.
Jupiter Asset Management, which
controls about 7.8% of Sirius shares, recently urged the company’s board to
explore a rival approach said to have contacted the company lately. According
to Jupiter, a consortium of financial investors is offering $680 million of
debt-based funding, which is a proposal that “would enable shareholders to
remain invested in the project”.
Sirius has repeatedly recommended
the Anglo takeover as the “only feasible option” and believes the alternative bid
is “not acceptable” as it would have required the company to “undertake a
substantial new equity-raising”.
Anglo’s offer of 5.5p a share is equivalent to one-third more than the targeted company’s market value the day before the proposed takeover was made public.
Sirius, however, was worth more
than $2.3 billion 18 months ago, before its funding plans failed.
The firm, which is midway through building its Woodsmith fertilizer mine in the North Yorks Moors national park, has seen its share price collapse after warning last September that multibillion dollar funding for the next stage had fallen through. It warned at the time it only had enough cash to last another six months.
The company has already raised £920
million ($1.2bn) to develop Woodsmith and received the backing of thousands of
local retail investors, but needs a further $3.8bn to turn it into the world’s
biggest producer of polyhalite, a multi-nutrient fertilizer.
As a last resource, Sirius launched in November a rescue plan involving the participation of a potential strategic investor and a revised two-stage development plan for the mine.
Anglo seems to be just what Sirius
has been waiting for. The British junior said it was prepared to recommend the
offer provided it can secure satisfactory assurances around jobs and other
“stakeholder interests.”
If the deal goes ahead, if could
save more than 1,000 jobs in one of England’s most underprivileged areas, which
goes hand in hand with Prime Minister Boris Johnson’s pledge to revive poorer
regions of the UK.
Long time coming
Anglo American, which is looking to retreat from thermal coal, hinted the
unexpected bid had been in the works for months. It noted it identified the project
as being of potential interest “some time ago” due to its quality in terms of
scale, resources and costs.
“We are unashamedly transitioning our portfolio to later cycle products that we believe the world will need as it goes forward,” chief financial officer, Stephen Pearce, said on a call last month with reporters.
If successful, the takeover would
mark a comeback to the fertilizer sector for Anglo, which owned some phosphate
assets in the past but in recent years has focused on “four pillars” — copper,
iron ore, diamonds and platinum.
It would also add a second major
project to Anglo’s $5bn Quellaveco copper mine in Peru, at a time when
most rivals are reluctant to expand.
“We fundamentally believe part of
our responsibility is to keep an eye on growth over all the aspects of
different time frames,” Pearce added.
Analysts, such as Humphrey Knight,
senior potash analyst at CRU, consider Anglo’s move risky.
“Sirius’ planned production is around 30 times larger than the total polyhalite market size in 2018. The company’s plan to rapidly increase production to over 10 million tonnes only a few years after starting operations, which adds to concerns of significant disruption to wider fertilizer markets — even with its numerous offtake agreements,” Knight told MINING.COM in September.
