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Sirius Minerals has a plan to solve its financing requirements
It looks like short-term pain before long-term gain for shareholders in Sirius Minerals (SXX) after it launched a $3.8bn fundraising to help build its North Yorkshire-based Woodsmith potash project.
The shares fell 15% to 18.6p on news that it would issue $400m worth of new stock below the preceding day’s market closing price. The following day it confirmed the new shares would be issued at 15p and that it had raised a higher amount at $425m. It also raised a further $400 from the sale of convertible bonds.
It is seeking $500m from senior debt and JPMorgan said it would provide a $2.5bn revolving credit facility.
While shareholders will be unhappy that project costs went up last year and there will now be additional share dilution, Shore Capital analyst Yuen Low believes there is light at the end of the tunnel.
‘The next few weeks represent the crucial juncture for the company,’ says Low. ‘Successfully securing the Stage 2 financing is effectively the key to unlocking Sirius’s vast potential, and we expect [it] should catalyse a major re-rating of the shares.’
The project has drawn enthusiasm from investors because of the huge potential of polyhalite, a form of potash used in fertiliser products which Sirius intends to extract from the mine. Production from the mine is expected to begin in 2021.