After the disaster last year, when the Australian mining outfit and owner of the Drakelands tungsten and tin mine in Hemerdon near Plymouth, Wolf Minerals, ceased trading and appointed administrators – losing £100 million and leaving a scarred landscape in need of restoration in its wake – now another UK mining project is in trouble.
Today, shares in Sirius Minerals tumbled after it suspended financing – "throwing its ambitious plans to build a giant fertiliser mine in Yorkshire into doubt":
Sirius Minerals has suspended a $500m (£410m) fundraising due to "current market conditions" – effectively putting financing for its massive polyhalite mine on hold.
The company, which is building a £2.5bn mine and Teesside processing plant, says it has enough cash to keep building at its current pace until September.
Yesterday, the FT was already predicting that Sirius Minerals would have to pay a high price for such funding – "more than 13 per cent"; as one portfolio manager said "a high-risk project finance deal masquerading as a high-yield bond":
London-listed Sirius needs to raise $500m from the debt market so that it can unlock a $2.5bn revolving credit facility (RCF) being provided by JPMorgan and complete development of the Woodsmith mine, one of the largest civil construction projects in the UK.
As the FT reported last year – when the miner needed a further $400m to $600m in financing after being "armed with a better understanding of local geology":
Woodsmith is the largest mine to be built in the UK for a generation. The project involves sinking two 1.5km shafts below a national park on the North York Moors to access a massive deposit of polyhalite.
Many groups and campaigners had objected to such an intrusive proposal in a National Park:
An open letter signed by 29 different groups, including the Caravan Club, the RSPB and the Campaign for National Parks, was sent to the national park authority, whose own internal report stated that the economic benefits of the mine did not outweigh the environmental damage it would cause.
As one investment website now puts it:
...in reality, Sirius is at last coming face to face with an unpalatable truth. Because it’s so big, at least in terms of UK mining projects, half of London’s mining investment community have become beholden to it in terms of fees or the hope of future fees.
That’s given the company a distorted vision of its own prospects for success, not to mention leading a fair few investors astray too.
But just look at the company’s share price over the past year or so. The shares have lost more than a third of their value in the past year. They were down more than 31% today at the open. The market knows what’s what.
Whether it’s “current” or not.
Sirius Minerals looks like joining the long list of mining companies that over-promise and under-deliver.
Sirius Minerals: money pit https://t.co/vl6lH2RzDj— Financial Times (@FT) August 6, 2019
Sirius is the brightest star in the night sky... [however] There is little light at the end of the tunnel for Sirius investors. The stock has dropped 70 per cent during the past year. If the financing fails, Sirius could always seek a deep-pocketed investor such as Australian mining tycoon Gina Rinehart. But that might wipe out ordinary shareholders. Sirius has begun to resemble another astronomical phenomenon more than a star: a black hole.
