Miner Anglo American said Monday it had reached a deal to buy Sirius Minerals, the UK-based developer of the world’s biggest known high-grade deposit of fertilizer polyhalite, for GBP404.90 million ($526.13 million), representing a 34.1% premium to the closing price of Sirius’ shares on January 7.
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If the acquisition is approved by Sirius’ shareholders, it will become effective March 31, allowing Anglo to take over Sirius’ Woodsmith polyhalite mining project in North Yorkshire, with production aimed at export markets, market sources said.
Acquisition of Sirius would mark Anglo’s entry into mining in the UK amid what some industry sources expect to be a revival of interest in investment opportunities in the UK mining sector in the post-Brexit era. Integration of the polyhalite project into the mining giant’s global marketing network will build on its institutional experience in the world’s major fertilizer markets, it said. Anglo previously operated a fertilizer mine project in Brazil.
Sirius’ polyhalite product, POLY4, is a multi-nutrient fertilizer, containing potassium, sulfur, magnesium and calcium, certified for organic use and which can be blended with traditional fertilizer products, Anglo said.
Sirius chairman Russell Scrimshaw said in a statement that he considered the Anglo offer “the only viable proposal” for the project’s future. Sirius failed to raise $500 million in financing on bond markets last year. “If the Acquisition is not approved by Shareholders and does not complete there is a high probability that the business could be placed into administration or liquidation within weeks thereafter,” he added.
Anglo said in a statement it intended to speed up and optimize Sirius’ current development program for the deposit, spending approximately $300 million/year on its development over the next two years.
“Anglo American’s financial, technical and marketing resources should secure the local and regional employment and economic benefits the Woodsmith mine development brings to the area although many shareholders will incur significant losses,” broker SP Angel noted.
“Anglo American believes that the(Sirius) Project has the potential to become a world-class, low-cost and long-life asset. Sirius has progressed the development of the project to an advanced stage, with construction now under way for over two years,” Anglo stated. “The resource indicated by Sirius has the scale, thickness and quality to be mined efficiently through a relatively simple, low-energy, non-chemical production process.”
Sirius has indicated that the project could operate at an EBITDA margin potentially well in excess of 50%, Anglo said.
UK’s biggest mine
Woodsmith has the potential to become the UK’s biggest mine project. The polyhalite deposit has a JORC-measured mineral reserve of 290 million mt, with a grade of 88.8%, and a resource of 2.69 billion mt.
Sirius announced in September it was reviewing the polyhalite project and seeking a major strategic partner to help develop it, after failing to raise financing in August.
Anglo American said it had identified the project as being of potential interest some time ago, given the quality of the underlying asset in terms of scale, resource life and operating cost profile. “The project has the potential to fit well with Anglo American’s established strategy of focusing on world-class assets, particularly in the context of Anglo American’s portfolio trajectory towards later cycle products that support a fast-growing global population and a cleaner, greener, more sustainable world,” Anglo said.