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Investors braced for potential dilutive equity fundraise from Sirius Minerals
Investors are very worried about the price at which Sirius Minerals (SXX) could issue new shares to address a funding shortfall for its polyhalite mine development in Yorkshire.
Nearly a fifth of the company’s market value has been wiped off in the past week after the FTSE 250 miner updated on its capital requirements.
Sirius says it now needs an additional $400m to $600m which is mainly connected to higher costs from its transport system tunnel. It can either get the money by issuing new stock to investors and/or a new strategic partner. Or it can turn to debt or a third party to finance any cost overruns.
The market now appears to anticipate a share-based fundraising around the 26p level, being the point at which the share price has settled following last week’s shock decline.
Coinciding with the funding shortfall is news that the target for financial close of its $3bn stage 2 financing has been pushed back from December this year to the first quarter of 2019.
We flagged risks to the investment case in our July Under The Bonnet article on Sirius, saying that investors must recognise that securing financing would not be straightforward – and that is clearly proving to be the case. (DC)