Sirius Minerals receives conditional proposal from financial institution

Graham Clark Operations Director for   Sirius Minerals  at the Woodsmith site near Whitby.
Graham Clark Operations Director for Sirius Minerals at the Woodsmith site near Whitby.

Sirius Minerals Plc, the company behind a giant mine that is set to transform North Yorkshire’s economy, today announced that it had received a conditional proposal from a major global financial institution in respect of the second stage of its financing.

The Woodsmith Mine, near Whitby, is a £3.2bn capital investment project which is expected to generate £100bn for the UK economy over the next 50 years.

Apart from creating 1,000, long-term, skilled jobs, the project is also set to support 1,500 supply chain jobs.

In a statement, Sirius said: “The company has been pursuing a senior debt financing with a group of prospective lenders since 2016. This was most recently adjusted on January 22 2019 to focus on a US$3 billion multi-tranche structure. The alternative proposal contains an alternative senior debt structure to completely replace that structure.

“The company believes that the alternative proposal potentially offers a more flexible and attractive solution to its stage two financing requirements and therefore it is pausing discussions with its existing prospective lenders to pursue the alternative proposal.

“A number of options for the additional non-senior debt financing requirement, as previously outlined in the company’s announcement of September 6 2018, continue to be progressed.

“The company is working towards obtaining firm commitments for the alternative proposal and its additional financing requirements before the end of April 2019.

“The alternative proposal is subject to the finalisation of the Financial Institution’s due diligence and internal approvals.

“Further announcements will be made in due course.”

In a note, Shore Capital described the announcement as “very intriguing”.

The note continued: “Specifically, the alternative proposal comprises an alternative senior debt structure which would completely replace the three-tranche concept for raising US$3.0bn of senior debt that had been outlined by Sirius in January 2019.

“Encouragingly, the alternative proposal potentially offers a more flexible and attractive solution, according to Sirius. “

“All things considered, while Sirius is currently at development stage and still some years from becoming a cash flow-generating company, we believe that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production.”

Bosses at Sirius Minerals believe the new mine in North Yorkshire will have a transformational impact on the region’s economy and help to improve global food security.

Gareth Edmunds, the company’s external affairs director, said recently that Sirius aims to provide a long-term boost for North Yorkshire’s economy by encouraging more pupils to focus on STEM (science, technology, engineering and mathematics) subjects at school.

He told The Yorkshire Post last year: “The deposits here of polyhalite can play a major role in helping to improve food security, mainly through providing more balanced nutrition for crops and (supporting) better farming practices.

“The majority of our team at HQ are from the local area. We have got our own skills programme to try and encourage the development of the right kinds of skills

“We have a big focus on STEM and on trying to help enrich the curriculum in schools and colleges throughout the area. We do that to benefit all of the businesses in the area.”

In late 2018, Sirius Minerals agreed a multi-million pound contract that will help to regenerate a former steelworks area.

Sirius announced that its subsidiary, York Potash Processing and Ports Ltd, and McLaughlin & Harvey Ltd had entered into an engineering, procurement and construction contract for the development of the port handling facility.

McLaughlin & Harvey will build storage facilities for around 250,000 tonnes of product, ship loading equipment, and a product screening facility, beside the Redcar Bulk Terminal in Teesside.

The port facilities will receive the company’s polyhalite fertiliser after it has been transported from the Woodsmith mine site, through the 23-mile underground mineral transport system and processed into the finished product at the Wilton Materials Handling Facility.

Ben Houchen, the Mayor of the Tees Valley, said: “I am delighted to see yet another step forward for Sirius Minerals’ nationally significant project.

“The level of commitment to Teesside from this project is huge as it will continue to generate jobs for local people and help expand our global reputation.

“The successful development of the Sirius project will see over £400m invested in Teesside and will importantly see the regeneration of the former Redcar steelworks port frontage.

“We expect many more regeneration projects will be announced on the South Tees Development Corporation site very soon.”