Sirius Minerals (LON:SXX) digs deep to mine in the Yorkshire Moors

 

Chris Fraser, Managing Director and Chief Executive Officer, said:

“This is another important milestone for the Company as we fulfil our commitment to move to the Main Market.  The delivery of our Woodsmith Mine and associated infrastructure continues to proceed in a timely fashion and we look forward to providing further updates in due course.”

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Further to the announcements previously made by Sirius Minerals Plc (the “Company”) on 28 March 2017 and on 25 April 2017 the Company is pleased to confirm that, effective 8.00 am today, its entire ordinary share capital, being 4,164,514,405 ordinary shares, will be admitted to the premium listing segment of the Official List of the UK Listing Authority (the “Official List”) and to trading on London Stock Exchange plc’s main market (“Main Market”) for listed securities (together, “Admission”) and trading in the Company’s shares on the AIM market of London Stock Exchange plc (“AIM”) will be cancelled.

Ambitious: Sirius Minerals raised £940m last year for the 200-square mile mine near Whitby

Sirius Minerals is more than just another stock market-listed company. It is an adventure – a blend of British pioneering spirit at its best, mixed with thoroughly modern technology and a large dose of Australian perseverance.

Sirius is developing a 200-square mile mining project in the middle of the Yorkshire Moors and just a few miles from Teesside.

The site is home to the largest and highest-grade polyhalite resource in the world. Polyhalite is a top quality, multi-nutrient fertiliser that appears to have significant advantages over most conventional alternatives.

The scheme is the biggest mining project in the UK in decades and has been compared to mine sites developed during the Industrial Revolution, in terms of its ultimate scale, national economic contribution and regional social impact.

Run by Australian former banker Chris Fraser, the company has made huge strides since Midas last looked at it in 2012, when the shares were 25p.

First, the company has quantified how much polyhalite it will be able to mine from just a small part of the overall site – 2.66billion tons or around 10million tons annually for more than 260 years. Second, it has secured full planning permission, after agreeing to more than 90 conditions, ranging from road and rail upgrades to funding for tourism.

Third, it raised $1.2billion (£940million) last November to finance construction and development costs, from a mixture of new shares, a convertible bond and a royalty agreement with an Australian company.

A group of banks is already in place to provide more cash via a loan of up to $2.6billion, supported by the Government’s UK Guarantee Scheme, which backs big infrastructure projects. And last week, the group moved from AIM to the main market of the London Stock Exchange – an unusual step for a business that will not make any money until some time after 2021. Construction has started too, so the project is really under way.

Sirius’s efforts have been extensive but the shares – having risen to more than 50p last year – are now virtually unchanged from 2012 at 25¼p. The current price certainly reflects last year’s fundraising, which involved the issue of more than 1.8 billion new shares at 20p. But there are other factors that may deter investors.

The project’s sheer size and complexity may not be to everyone’s taste. Six banks, including Lloyds and RBS, have been appointed to arrange the debt facility, but they will need to bring in contributions from other lenders. Assuming they succeed, billions of pounds will be poured into the site to move it to production and, in the meantime, the company will remain loss- making.

Construction incurs further risk. The polyhalite is a mile underground and almost the entire project is being built below the surface to ensure that the mine does not become a blot on the landscape. Fraser is extremely capable, but mines are notoriously accident-prone during the construction phase.

Then there is the polyhalite itself, which is rarely seen outside North Yorkshire. The mineral provides four essential ingredients for crops – potassium sulphur, magnesium and calcium. It also appears to reduce root disease, enhance the amount of nutrients absorbed and benefit the soil.

Fraser believes he can sell his product around the world, particularly in huge crop-producing countries, such as the US, Brazil and China. Discussions are under way and some customers have already said they will buy the company’s polyhalite in the future. But Fraser still has some persuading to do.

Sirius has been testing polyhalite on 26 crops ranging from corn to cabbage since 2013

Polyhalite is cheaper than most fertilisers but it is not widely used today, so the global farming industry will need to be convinced that it does the trick. To that end, Sirius has been conducting trials since 2013, testing polyhalite on 26 crops ranging from corn to cabbage in 14 countries. So far, the results are encouraging.

If all goes well, Sirius’s polyhalite project could prove extremely rewarding for local people, British exports and investors. The company is already funding regional apprenticeships and will probably create at least 1,000 jobs once the site is up and running.

Around 500 landowners, ranging from small, Yorkshire farmers to the Crown Estate own the land on the surface of the mine and will also receive royalties once production starts.

On a national basis, polyhalite could prove to be a valuable export commodity – a top-of-the-range British fertiliser sold all over the world.

And for shareholders, a successful project and global demand would translate into profits of hundreds of millions of pounds, a soaring share price and robust annual dividends.

Midas verdict: Sirius Minerals is not a share for the faint-hearted, nor for investors seeking income in the short term. But for those who are prepared to take a risk, Sirius provides an opportunity to be part of one of the most ambitious industrial projects to come out of the UK in decades. An adventurous, long-term buy.

By  JOANNE HART FOR THE MAIL ON SUNDAY

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