Stood down What’s happened and what does it mean?
What happened yesterday?
The company has shelved a $500m fundraiser, casting a shadow over plans to construct a giant fertiliser mine in North Yorkshire.
Shares in the mining firm shed around half their value, after it said it would be scaling back production at the site near Whitby and launching a strategic review.
The company said it believes its major bond offering cannot go ahead “in current market conditions” and will launch the “comprehensive” review over the next six months to assess different ways to secure the necessary funding for the project.
Sirius, the firm behind the multi-billion pound fertiliser mine and Teesside processing plant, had until the end of the month to sell £410m in bonds, which would unlock the further £2bn needed to take the project over the finish line.
It said it had asked the Government to provide loan guarantees for $1bn of bonds which would have secured the financing, but the Government refused.
How many people work on the project? Around 900 are already involved in the building of the company’s enormous mine.
Sites include its mine south of Whitby, the Wilton processing plant, a 23-mile underground conveyor system and its headquarters based in Scarborough.
Only in June, contractor DMC announced another recruitment drive for 150 experienced miners, electricians and deck operatives to help it sink two deep mineshafts. More than 1,000 also applied for 10 apprenticeship posts in the summer.
The project will be massive for Teesside and North Yorkshire; why won’t the Government help?
Sirius has said the UK government has turned down a request to guarantee $1bn of bonds after a review. If the Government had underwritten the funding, it “would have enabled the company’s financing to be delivered as planned,” Sirius said.
Originally, the plan was for the Government to guarantee £2bn for the mine but talks failed to reach any conclusion.
Why is Sirius shelving the sale of bonds?
The company has blamed ‘current market conditions’ - which are understood to include uncertainty around President Trump’s trade war with China. Uncertainty around Brexit and the UK’s shaky political landscape were also directly blamed by the company for its struggles in securing cash.
What will happen next?
The company has said it will “scale back” the construction project – which had previously been “on time and on budget” – in light of the latest news. It’s also beginning a “comprehensive” review over the next six months to look at different ways of securing the necessary funding.
What does this mean for jobs?
Sirius has said it is slowing work at its mine as it considers the future direction of the project. It is not yet clear if this means laying off workers, although this a clearly a possibility.
Boss Chris Fraser told the FT that 1,200 would ultimately be at risk if the project cannot secure funding.
What does this mean for shareholders?
The announcement sent the Sirius Minerals share price nosediving to less than 5p on Tuesday morning. Some investors – many of whom are smaller, individual shareholders including Teessiders – say they will choose to hold onto their stake in the company in the hope it will rise.
There also remains the prospect of investors’ cash being wiped out if shares tumble further. Shares in Sirius were trading above 35p last year.
The company now has a total value of around £334m - compared with £1.7bn in 2018. What about the Teesside economy?
The success of the Sirius Minerals scheme is seen as vital for the health of the Teesside economy.
It is one of Europe’s largest infrastructure projects that will deliver investment and wellpaid jobs in an area which badly needs them.
Teesside is still trying to recover from the closure of the SSI steelworks and fears remain over the health of British Steel after its recent collapse. The company says the project will deliver a £100bn boost to the UK economy and cut the UK’s trade deficit by 7%.
Labour MPs have criticised the Government for failing to back the project.
What are the options for Sirius now?
The Financial Times quoted boss Chris Fraser as saying the firm is now seeking a new partner to take a stake in the project.
This would ultimately unlock the funding needed to continue. Speaking before the announcement, Chris Steward from stockbrokers Redmayne Bentley said the now shelved $500m bond offering was not the only lifeline open to Sirius.
“In reality, if Sirius is not getting the money borrowed they can do some equity raising,” he told The Gazette.