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Sirius Minerals shares tumble as it suspends bond sale

By Michele Maatouk

Date: Tuesday 06 Aug 2019

Sirius Minerals shares tumble as it suspends bond sale

(Sharecast News) - Shares in Sirius Minerals tumbled on Tuesday after the company said it had decided to suspend a planned bond sale.

Sirius has suspended the proposed offer by its subsidiary of $500m of senior secured notes due 2027 due to "current market conditions".

The bond sale needs to be completed in order for Sirius to secure a credit line from JPMorgan and finish the construction of its deep potash and polyhalite Woodsmith mine in North Yorkshire.

Sirius said it plans to revisit the market "when conditions have improved later this quarter".

Russ Mould, investment director at AJ Bell, said: "The news this morning that prospective potash producer Sirius Minerals has pulled its $500m bond issue is a reflection of increasing investor nervousness across the board but also raises questions about the viability of its project in Yorkshire.

"The company needs to get the fundraise away by the end of September, as that is a crucial term and condition of getting the additional $2.5bn in lending via a revolving credit facility that JPMorgan will initially provide, which in turn is vital to being able to build the mine.

"This deadline feels uncomfortably close and the company's insistence that it will return to the bond market later in the quarter is likely to do little to reassure investors. After all what happens if market conditions deteriorate rather than getting better.

"With big upfront capital requirements, bringing a mining project into production is a massive challenge and it is one which the company has been tackling for years at this point, following lengthy attempts to secure planning approval and now financing for the project."

Whitman Howard analyst Roger Bade said: "One would have thought, what with rampant bond markets, German debt offering a negative yield and investors hoovering up junk bonds, that this sale would have been relatively easy. Apparently not and they will look to the markets again at the end of the quarter, if they are in better heart.

"In the meantime, the market will fret over the gap in funding for the project and that is before any consideration of cost overruns. If they can't raise the basic funding amount, what happens if anything goes wrong and there is a demand for more cash?

"Perhaps, with a new pro-Brexit Prime Minister, the Governmental guaranteed debt route might open up again."

At 0905 BST, the shares were down 26.1% at 10.79p.


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