12 August 2013 13:42 [Source: ICIS news]
LONDON (ICIS)--Sirius Minerals Plc has secured up to £25m (€29m, $38m) in funding from a New York-based institutional investor for its planned potash mine in north Yorkshire UK, the potash specialist said on Monday.
The investor, which was not named, will inject up to £25m into the company by purchasing up to four tranches of interest free convertible securities, which are convertible into ordinary shares of the company at a later date.
The company said the financing is staged, so as to minimise dilution to existing shareholders, while maximising flexibility to the company.
Sirius also said it has the right to terminate the agreement at any time by paying a modest termination fee, or alternatively, at no cost if the company's share price falls below a certain level.
“These funds will enable the company to undertake the necessary work needed to secure the required approvals, in addition to other development initiatives including global crop trials that will continue to demonstrate the unique value of polyhalite and de-risk the project,” said Sirius CEO Chris Fraser.
Polyhalite is a mineral compound from which specialty fertilizer sulphate of potash (SOP) can be produced.
The proceeds from the financing will be used by Sirius for general corporate purposes, the company said. Added to the company’s existing cash flow of £8.5m as of 31 July, the financing will provide funding for at least 12 months of necessary work to secure approvals for the project, the company said.
Sirius Minerals said the financing demonstrates confidence in the on-going development of the York Potash project, especially at a time of increased volatility in the sector.
On 30 July, Russian potash major Uralkali shook the global potash industry by exiting its marketing cartel. The company has been vocal about its new strategy with the focus being on selling big volumes instead of seeking high prices.
Uralkali’s move has created concern that the industry’s profitability will be hit in the near term, and existing and new potash players will need to re-evaluate their Greenfield strategy.
Sirius Minerals has maintained that the York Potash project has a "robust business model" and its projected cash costs would place it at the bottom of the global potash cost curve.
However, the project is seeing some delay as agencies have questioned the environmental impact of the York Potash project. The company has deferred an outcome on its planning application in order to discuss the issues raised by the environmental agencies.
($1 = €0.75, €1 = £0.86, $1 = £0.65)
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