Sirius Minerals’ potash project had been in doubt, partly because of Brexit uncertainty

This article is more than 10 months old

This article is more than 10 months old

The company behind plans for a giant fertiliser mine under the North York Moors hopes to rescue the struggling project by raising $600m (£465m) from new investors by March.

Sirius Minerals has revised plans to finance the world’s largest potash mine of its type after the $5bn project was thrown into doubt in September when it abandoned a bond issue, blaming a lack of government support and Brexit uncertainty.

The London-listed company said on Monday it was already in talks with potential investors to fund the first phase of the project’s development.

Q&A What is polyhalite, and how is it used? Show Hide Polyhalite is a mineral deposited around 260m years ago during the evaporation of the Zechstein Sea. Sirius Minerals plans to grind polyhalite into a powder to produce pellets with the commercial name Poly4 - or K2SO4MgSO42CaSO42H2O for short.

What’s so good about it? Poly4 contains four of six key minerals that plants need to grow – potassium, sulphur, magnesium and calcium – making it ideal for use in agricultural fertiliser. Sirius says it is cheap to produce, certified for organic use and offers high crop yields. How much is there? Sirius thinks it has a 290m tonnes of recoverable polyhalite, which it could start mining in 2021 and continue exploiting for 100 years, up to a maximum of 20m tonnes per year.

The funds could provide an 11th-hour lifeline for what could prove to be the largest mine developed in the UK for a generation.

Sirius has already raised $1.2bn to develop the Woodsmith mine but needs a further $3.8bn to turn the project into the world’s biggest producer of polyhalite, a potent type of fertiliser.

The embattled company hopes that once the initial work programme is complete the project will be considered less risky by investors and will attract further funds to complete the development.

Chris Fraser, the chief executive of Sirius, said he was in discussions with potential strategic partners and debt investors “with the aim of securing the best route” to finance the first phase of the project.

The company’s share price climbed by more than 10% after the announcement to about 3.6p on Monday morning. It is a meagre increase for the company’s shareholders, which include about 85,000 retail investors, after shares have fallen more than 80% over the past year from 23p.

The last-ditch plan comes weeks after the developer plunged the project into severe doubt by shelving a crucial fundraising because the company did not believe it would be able to raise the cash.

Sirius pulled the plug on the $500m junk bond issue, blaming the investor uncertainty over Brexit and the government’s unwillingness to issue $1bn worth of loan guarantees.

It had previously warned that it would run the risk of going bust without the funding injection, but vowed to bring together a new financing plan.

The developer said it would seek alternative investors and might turn to a sovereign wealth fund, large fertiliser companies or a major mining group for help.

It ruled out further funds from Australia’s richest woman, Gina Rinehart. The mining magnate has already invested $250m in the Woodsmith mine project through her Hancock Prospecting company.

Helal Miah, an investment analyst at the Share Centre, said: “Today’s news is just a lifeline, nothing more, for a company that has a huge challenge with its viability and shows a company doing everything possible just to survive.

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“As an investor I would say it is still one to avoid because even if this funding were to be successful, further significant challenges will be met down the road, including convincing a government – assuming the Conservatives are successful – who have already turned them down once.”

Fraser said the progress achieved “on the ground” in recent months “remains a source of huge inspiration for the whole team”.

Sirius plans to construct a 1,500m-deep mine beneath the North York Moors national park that would use a 23-mile underground conveyor belt to ship tonnes of low-cost potash to Teesside for export.

More than 1,000 people are at work on the site and Sirius believes the project could support about 2,500 high-earning jobs in the area once it is up and running.