Sirius Minerals

Will Sirius Minerals go bust...probably not, but the risk profile means that a new investor won't be kind to existing equity investors

Sirius minerals

Interesting interview with John Meyer at Proactive Investors on Sirius Minerals and I agree with his views.

For SXX he says it is difficult to reboot the financing given the scale of investment in Woodside and the UK government and bond investors have been spooked by fears about the polyhalite market (with potash prices not great) as off take targets have not been hit. The money was not forthcoming from the government despite this being a flagship prospect for the “Northern powerhouse” and although they do not have a big record of supporting the mining industry, the financial advisors in Whitehall would have analysed the numbers and the investment is pretty substantial (SXX asked for £1 billion-plus guarantee) and plenty of risk.

Let’s face it, SXX could’’t get a bond issue off at 13.5% coupon, the Brexit excuse was a smokescreen. This is a risky investment for a small/medium cap UK mining company and bond investors wanted a pound of flesh. Too much for JP Morgan to stomach for their $2.5 billion financing package.

Sirius minerals share price october 10th 2019

I still think like SPAngel an investor will come in and finance the mine. Too much progress has been made to mothball Woodside in the Yorkshire Moors but existing shareholders who bought in at 10p plus, probably won’t come out smiling.

A huge rebound from these share price levels is unlikely to happen. I feel sorry for all those pensioners in Yorkshire who put in the life savings. But that was madness for this high-risk project. The shares dropped yesterday 7% to 3.4p. I’m not sure of the floor and fair value, but it is not 5-10p with current financing issues.I’m not rushing to build a position. Watching with high anticipation for the end of the strategic review at the end of October though.

Sirius Minerals update October 8 2019 - rises on hopes for project efficiencies but slips back

SXX share price october 8th 2019

Sirius Minerals (SXX) rose today to a high of 4.3p, compared with 3.82p last night as news of the company’s plans to conserve money and reduce cost/risk came to light. But late morning, the increase had been curtailed and the company closed down 0.3 per cent at 3.8p. Quite a swing for the day.

In today’s Times, SXX, CEO Chris Fraser, said that online shareholders were a disgrace and should be shut down. He said the FCA should investigate them, suggesting that private shareholders in the company had advised some to put their entire life savings into the shares. “They have these people sitting in their basements in their sweatpants, giving them investment advice - unregulated, unlicensed- and people follow them.” Fraser urged investors to “go and speak to professionals, otherwise, it is gambling”, going on to say "no one would tell a private investor to invest all your money from your pension and everything you have in a “high risk, but high reward potential venture” like Sirius.

This week Sirius announced the closure of the night shift at the Woodside Polyhalite mine to conserve cash, it has laid off 300 of its 1200 workers. The tunnelling at the mine has been going well, meaning that the company could well scrap plans for a third boring machine. SXX is looking at many plans to reduce project risk and bring forward production in order to generate cash earlier or use the existing waste convenor system. The strategic review is due at the end of October with detailed cost-cutting plans and potentially a new strategic investor in the project.

For now, I remain uninvested in SXX. Volatility great for trading opportunities though. The PR being generated by the company is rather impressive. From The Times to BBC…a lot of positive stories trying to generate interest in the company. For now though, funding remains the $64,000 question!

Rollercoaster ride for Sirius Minerals shareholders as Berenberg says polyhalite mine odds only 1 in 4

Polyhalite

Shareholders in Sirius Minerals (SXX) were smiling yesterday morning as the shares continued to rebound from the Friday lows. The Share price moved as high as 4.4p by 8.30 but started sliding in the afternoon, finishing the day down 6% at 3,75p. I hope some took advantage of the spike to reduce their holding in the future polyhalite producer.

The reasons for the fall back. Firstly the buying caused by shorts closing has dissiapated after Monday as they take profits, and then investment bank, Berenberg, said that the Woodsmith potash mine now has only a 25% chance of being built, in a broker note.

Berenberg’s Rikin Patel “A strategic investor appears to be the only lifeline left for the company, with financial backing from the UK government appearing unlikely. Given the increased uncertainty about financing, we reduce our assumption about the probability of completion of the mine to 25% (from 50%) and assume further delays to start-up. In recent weeks, Sirius returned to the UK government for financing, but without success. It appears that government guarantees or backing are unlikely for the foreseeable future, especially if the current political uncertainty persists.”

Patel cut his price target to 4p a share from 17p.

For those shareholders who are nursing large losses, it is tempting to hold on to get your money back. Berenberg seems to feel that the odds of that happening are slim. For traders in SXX, remember “Bulls make money, bears make money, hogs get slaughtered” i.e. take profits and don’t get greedy!

Sirius minerals SXX share price October 1 2019

BBC The One Show October 1, 2019

Further reading

Sirius Minerals- Check, but is it checkmate? (SXX)

01 OCT 2019 | Michael Taylor

It’s been a turbulent time for investors in Sirius Minerals (LSE:SXX). As a Teesside local, I have always had friends and friends of friends asking me for advice. I can’t give advice, but I did my offer them a balanced view to temper their bullish exuberance.

I pointed out a few facts:

Sirius Minerals isn’t making any money Sirius Minerals is not expected to make money until 2021

Sirius Minerals will need more money to develop this project, which is an even bigger engineering feat than the Channel Tunnel that itself cost way more than expected

Needless to say, these facts didn’t go down well. I told them I thought there was a strong chance that the value of their shares would go down and they would lose money.

But what a fine friend or fellow I would’ve been had I just said “yes, it’s great – fill your boots” instead. Which is, of course, what they wanted to hear.

The problem is, somebody always knew someone who worked there, or heard something from someone who knew someone who worked there. When Sirius failed to get their bonds away a few weeks ago, I did mention to some that the company needed cash and this situation rarely ended well. This caused some tension.

One of them tried really hard to persuade me why it was a buy, and eventually relented that he wished he could just watch from the sidelines, rather than owning it. “Oh, that’s easy”, I said – “you can just sell!” That killed that conversion and we haven’t spoken since.

The real fact is that stories sell, and facts themselves don’t. It’s why most people lose money- they jump in at the deep end, emotionally invested in the story, and not invested in the financials. There are stories of people with their entire life savings in Sirius, who are now sadly wiped out.

It’s hard to feel sorry for some people though. “I’m not a gambler”, said one punter, who literally put his entire pension and life savings into the stock. If that’s not gambling, what is?

On a final note here: it’s best to avoid talking about stocks with people who don’t trade or invest if you can help it. If you’re wrong – this is the best case and you’re made out to be an idiot. Fine. But if you’re right, they won’t blame themselves – they’ll blame you instead and resent you for it. There is no upside.

So, what happens next?

Well, Sirius Minerals needs cash. Everyone knows it. The vultures are circling. The company will be made to scream and be torn limb from limb because it is at the mercy of the funders. Without them – it will go bust and the entire project will fold. Sirius has no bargaining chips.

Getting the bonds away of at least $500m was key to unlocking a $2.5bn JP Morgan financing, but the firm didn’t get it because the bonds were pulled.

The stock price has been on a clear downtrend since the summer of 2018, with the latest bang collapsing the stock price to 4p.

It’s looking like check for the company. But is it checkmate? What are the options here?

1) Government funding

In my opinion, this is unlikely. The government had plenty of time to bail Thomas Cook, which I highlighted as a short here, and it didn’t. Is it different this time? Well, a lot people will lose their jobs in an already deprived economic area, and shareholders will lose everything.

But is that the government’s fault? Who cares if shareholders lose everything? We were outraged when we bailed out the banks – why should the taxpayer bail out failed and uneconomic projects?

2) Debt funding

This is highly unlikely too. There is no upside for debt holders here, unless you offer them a huge amount of interest compared to the risk. Well, that was offered, and it didn’t work.

3) Equity financing

This is probably the most likely. But what price do you put on something that needs you or it’s going bust? Well, whatever price you want. They’re going to accept it!

And that is why I am short. Yes, there are going to be squeezes on the way, and volatility, but my position here is short. I will trade around it, with force opens and scalp longs, but ultimately this goes much lower in my view.

Author Michael Taylor’s website www.shiftingshares.com contains numerous tutorials on how to trade and invest as well as his free book – ‘How to Make Six Figures in Stocks’.

Sirius Minerals share price mounts recovery despite lack of news flow

Sirius share price Sep 30th 2019

Sirius Minerals (SXX) share price bounced as high as 4.4p in mid morning trading yesterday on unusual trading action, partly explained by shorts closing. I cannot see any other reason reported in the media for the move from around 3p to 3.97p.

On Friday September 18th, Polygon reduced their short position by .16% (~9 million shares) and September 25th, thry bought back another 20 million shares to reduce their position by a further .28%. Their current short position (as of 27/9) is .29% (approx 20m) and any further reductions will not be disclosed.

The shorts are closing because the risk/reward ratio favours buying back their shorts as the share price is so low, hence they have made a good profit on any short positions from 10p plus. The management might pull a rabbit out of the hat and announce a new funding deal, which would obliterate the profits of any shorts, so prudently they are closing them down.

I still believe that any deal with new investors will mean that current shareholders will lose out to some extent, especially if it is does involve a new equity raise. Assuming of course equity is needed. If the bond issue with a 13% coupon failed, new investors will want a pound of flesh to take on any perceived risk. There’s no angels in this world, they will want a good return given the precarious funding situation for SXX right now. It will be fascinating to see what the company does to fill the funding gap and what steps to simplify the mine construction and reduce costs.

Amazing to watch from the sidelines, but a bit too much volatility for me at the moment. A traders heaven though.

Sirius Minerals continues to fall as financing worries grow

Back in April 2019, Sirius Minerals (SXX) announced that JP Morgan was providing a key part of its $3.8 billion financing package, with a $2.5 billion revolving credit facility to help complete the construction of its polyhalite mine in Yorkshire.

The deal was contingent Sirius selling $800 million of new equity and convertible bonds s to institutional investors, with a $500 million bond sale. Unfortinately the bond sale was pulled in September after weak demand and a yield which exceeded that allowed in the financing propsal. Management blamed Brexit and a lack of government support for the mine.

Now with the deadline for this final stage of financing looming this weekend, it looks like the JP Morgan deal will unravel. This drove another 22 percent drop in the SXX share price to 2.91, capping an awful few weeks, particularly for the 85,000 private investors.

Certainly if a deal is forthcoming to fund the mine, I fear more dilution for existing shareholders as the new investors will take a bigger chunk of the project to mitigate their risk. Next week will be fascinating for SXX.

SXX share price 27/9/2019

Interesting articles

Sirius Minerals (SXX) shares: is this the beginning of the end?

Sirius Minerals has failed to secure the vast sums it needs to build its huge polyhalite mine. It now has a matter of months to plug a huge funding shortfall, and investors are rightly concerned.

Joshua Warner | Writer, London | Tuesday 24 September 2019 15:07

What has happened to Sirius Minerals?

'Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our stage 2 financing plan. As a result, we have taken the decision to reduce the rate of development across the project in order to preserve funding to allow more time to develop alternatives and preserve the significant amount of inherent value in this world-class project.' – Chris Fraser, chief executive of Sirius.

Sirius Minerals has cancelled its plans to raise $500 million of loan notes, without which it can’t access a $2.5 billion credit facility from JPMorgan that formed the backbone of the financing it needs to build its polyhalite mine in North Yorkshire.

The company originally postponed the issuance of the loan notes in early August and said the market conditions have not improved since then, stating no company with a similar credit rating (of B/B- range) has tried to raise debt through the bond market recently.

What’s at risk?

Ultimately, with a $3 billion-plus funding gap to fill, the entire company and project is at stake. The company has £180 million in cash, of which £117 million isn’t already accounted for. It says this will last for the next six months but that it will need more funding by the end of March 2020 if it is to survive. Plus, if it wants to secure such a large and complex funding package it will have to have something in place much sooner, preferably before the end of 2019.

Although Sirius is confident it can find the funding it needs, the situation is precarious enough to raise doubts about its survival. 'The board of directors believes that additional financing will be secured in the coming months, however there is a risk that a successful outcome may not be reached. This therefore represents a material uncertainty that may cast significant doubt upon the group's ability to continue as a going concern,' the company said in its recently released interim report.

If no solution is found, then over 1000 jobs could be lost in a neglected area where jobs have already been lost. There could be further job losses if it spills over to any local contractors or suppliers. The story is a local one even when it comes to investors, with many of the company’s 85,000-plus retail investors thought to be from the surrounding area.

What now for the SXX share price?

The company has had to halt major development of the project and slow down the pace of work in order to hoard cash to survive over the next six months. Sirius intends to conduct a full strategic review during that time in the hope of finding the funding it needs.

Option 1: secure government support

As far as Sirius is concerned, its project is not only integral for the local area but for the country as a whole. It therefore hoped that it would secure support from the UK government, but this has proven to be an incorrect presumption. The company’s original funding plans for the project were based on the 'anticipated participation' of the Infrastructure and Projects Authority, part of the Treasury. But it abandoned those plans when JPMorgan stepped up and offered the credit facility.

Sirius went back and pleaded for the government to reconsider when it decided to postpone the bond issuance last month. It asked the government to guarantee $1 billion worth of the debt to get the wider financing plan over the line but was unsuccessful. This would have provided more confidence to those considering lending money to Sirius, because the government would act as a guarantor for a substantial portion of it.

'The government has reviewed the case for the provision of the support requested to facilitate the financing of the project and has decided not to provide the support requested. The company believed this commitment would have enabled the company's financing to be delivered as planned,' Sirius said.

There may still be hope for Sirius. There is still some political pressure being applied, mainly by local politicians. The Labour MP for Redcar, Anna Turley, for example, has said the project is 'as important for Teesside in terms of jobs created as Crossrail is for the South' and warned it threatened the country’s reputation as a sound place to invest in major infrastructure projects.

It seems very unlikely that Sirius will secure the support of the government. However, there is widespread expectation that a general election will be held sooner rather than later. The government’s tune toward the project could change depending on the result.

Option 2: an alternative financing arrangement

Sirius is also looking for other lenders and considering alternative forms of funding to get the project back on track. It has said that 'a number of different investors and advisers have indicated the potential for a range of alternative approaches'.

This opens up the risk that any new financing package could be materially different to the previous one, or possibly more expensive if lenders decide to charge more to account for the added risk now attached to the company.

Debt will have to remain the main source of any new funding package because issuing equity now would be ineffective considering how much shares have slumped. But the main reason Sirius decided not to issue the bonds is because the poor market conditions meant it may have had to offer a yield of over 15%. That would have been regarded as too high to satisfy the conditions to access the larger pool of debt from JPMorgan. This initially casts doubt over the ability to raise money through debt or equity.

However, Sirius said it has received feedback that issuing loan notes 'could potentially be successful should the offering include warrants', but said this would also would have failed to meet the conditions needed to secure the support of JPMorgan. Sirius asked JPMorgan to waive the condition, but was rejected by the bank. This suggests that any new financing arrangement could cause further dilution to existing investors, which is clearly a concern to existing investors.

There is good reason to doubt Sirius will find an alternative lender, or that JPMorgan will change its tune. It already stepped up to save Sirius when its original funding plan fell through and seems unwilling to budge, and if JPMorgan, which is already invested in the project, considers it too risky then there is little reason to think another major lender will think otherwise.

Option 3: cut the risk to make the debt more attractive

A more likely option is that Sirius can restructure the financing to reduce the risk for potential lenders. The company has said that one shared concern amongst most potential lenders, it has spoken to over the last three years, is the perceived risks with sinking the deep shafts of the mine.

'During the strategic review the company will explore how the development of the shafts and the other major aspects of the construction programme can be rescheduled in a way that reduces this perceived risk and delivers better cost and scheduling certainty for debt providers across the project,' Sirius said.

It also says it will also look to lower costs by optimising the project, such as possibly removing one of the tunnel boring machines, or try to bring forward commercial production (which is not currently expected until 2024) to make it more appealing


Option 4: find a strategic investor or buyer

The fourth option somewhat ties into option three. If Sirius believes lenders will bite if the riskier parts of the project are removed, then it has to find another way to fund the likes of the shafts. The company has said it has drawn up a list of potential partners that could invest in the project. This would raise funds to construct the shafts and other riskier elements of the project and make it easier to raise debt to fund the rest.

Any company that did decide to help Sirius is likely to demand a large chunk of the project, possibly a controlling share. But the project’s survival will be materially enhanced if Sirius can find a partner. It could completely change the finances of the project if it can self-fund the most expensive and riskiest part of construction, and a new experienced partner could also find new ways to develop the project going forward, and bring the overall risk of the project down.


There is also the possibility that Sirius could be acquired outright or that the project is sold altogether, allowing a larger, more experienced and financially stable business to takeover. Either way, the valuation that Sirius earns as part of any investment or takeover bid will be interesting. Sirius is right to boast about the unique nature and huge potential of the project, but the market was also right to punish the share price when it failed to deliver. Any potential investor or bidder will have to judge a valuation along that scale, and Sirius’s weak position suggests it could be at the lower end.

Option 5: collapse and enter administration

If Sirius fails to find the funding it needs by the end of March 2020 then the company is at risk of collapsing and entering administration. This could see administrators try to sell the project at a much lower valuation and it would be highly unlikely that investors would receive anything, as lenders take precedent over shareholders in such a situation.

Who could be the saviour of Sirius?

A string of big names have already been touted to rescue Sirius. It has already secured significant support from wealthy investors – with Australian mining billionaire Gina Rinehart and the sovereign wealth fund of Qatar among its largest shareholders. Those that have an interest in the project are more likely to come to the company’s aide if their investment is at risk. However, Rinehart has already contributed to previous funding rounds and, like other investors right now, could be considering cutting her losses.

Other potentially interested parties include one of the handful of mining companies that produce fertiliser, such as ICL or K+S. ICL currently operates 'the world’s only polyhalite mine' not far from Sirius’s project, while K+S is a large European firm already interested in fertiliser.

BHP Group or Rio Tinto have also been touted by Sirius’s house broker, Shore Capital. Shore has also said Archer-Daniels Midland could be interested because it has already signed offtake deals for Sirius’s product and agreed to supply the binding agent used in Sirius’s granulation process.

Fortescue Metals Group could be another contender. The current chairman of Sirius, Russell Scrimshaw, used to be an executive of the Australian mining firm and Fraser’s relationship with the company stretches back to his days as an investment banker.

What should investors do now?

This is not the first hiccup that Sirius had had, but it is the biggest. Even if Sirius survives, the entire investment case and valuation of the company will have to be reset, and it is the early investors that could be punished. The threat of more equity being issued as part of a new financing deal means existing investors could be significantly diluted, while the possibility that a partner will buy a chunk of the project means existing investors will ultimately own less of the asset that gives the company value.

If the project does go ahead then it could be dramatically different to the one currently planned. A new financing package or major investment could severely effect the economics of the project and investors should prepare for the numbers to change, everything from when commercial production will start, to the operating costs, to the volume produced each year.

For existing investors, the question is whether to take a bullish or bearish view. Those that remain confident can take advantage of the plunge in Sirius shares and build-up their position while those that have lost faith can cut their losses and redeploy what they have left somewhere else. The Times quoted Fraser following the news as saying: 'I read stories where people seem to have over-invested or probably not taken the right advice. I feel very bad for those situations, but we have been clear about the opportunities and also the risks.'

For those looking at Sirius as a fresh opportunity, the investment opportunity remains risky but potentially rewarding. Liberum had a price target of 40p on Sirius before the financing fell through, nearly ten times the current share price, suggesting shares could rocket if it finds a solution to its funding woes. Still, Liberum sees upside even in the current situation after striking a 9p price target on the stock after the bond issue was cancelled.

Gutwrenching': How the dream of a Sirius Minerals goldrush became a nightmare for investors. What next for the Sirius Minerals shareholders who have lost a fortune?

By Kelley Price 29 SEP 2019

Teeside Live

Pat Earnshaw ploughed all his cash into the world's largest fertiliser mine - and watched his holding soar by as much as £2,000 some days. But the "Sirius dream" quickly turned into a "gut-wrenching" nightmare for him and thousands of other small-time investors.

Sirius Minerals' share price went into freefall on September 17, after the firm pulling a £400m fundraising attempt for its world-leading mine project. It has left a financial black hole way bigger than the one they're digging just south of Whitby.

But the boss behind it all, Chris Fraser, says he is "confident" the project "will get through this." The company, he says, takes its responsibility to shareholders "incredibly seriously" and he "feels bad" for those people who have invested their hard-earned cash in the North York Moors gold rush.

It's cold comfort for Pat, a 47-year-old metalworker from York, but he's certainly not alone in his pain. Half a dozen of his own close friends have also invested £20,000 each. "It's gut-wrenching, seeing your holding drop and drop," he says.

"I'm on the forums all day, every day. "I watch the share price all the time, but sometimes you don't want to chance it. You don't want to see that paper loss."

Pat sank a small pension into Sirius Minerals stock in 2016, also using £40,000 of his own money. He was recently divorced and invested some of the resulting cash into the project thinking "eventually, one day I'll get back on my feet." All told, he put in £65,000. "Some days it was going up 5p," he says. "At that point, every penny it went up I was seeing my holding increase by £400. You think 'God this is great. We're all hanging on, hoping and praying. I first invested when all Sirius had was a bit of planning, no finance. The next minute, they're building it - then the share price just disappears. It's just gone to next to nothing. You think you are supporting a good company. At the moment my holding is around £7,000, it's not worth selling. It's a waiting game now, we're all just hanging on, hoping and praying."

One investor Pat knows from a WhatsApp group is in "dire straits", he adds. "I don't know him personally but he invested £21,000 and he doesn't have anything apart from that. "He actually borrowed money to plough in. "Sirius sold us the dream and we've all invested, along with 85,000 others. I've had sleepless nights in the past but we've all sort of got used to it. It's out of our hands now. I'm not a rich person by any means, I run my own business and just plod along. None of us in the group are gamblers, we're not even investors really. There is risk with everything, but I don't think a lot of us actually realised the risk. The Sirius dream is over. You have no chance of getting your money back."Sirius is currently "slowing down" the project with construction workers leaving sites last week. But the company has said it wants to retain "as many of its people as it can" so the project is "ready to go" as soon as a solution is found. Mr Fraser may empathise with its army of smaller investors, yet also claims the firm has been "very clear about the opportunities and also the risks." But the Australian mining boss is also adamant they have an "excellent project". "We have been very successful in overcoming some significant milestones along the way," he is quoted as saying, "and we remain confident that we will overcome this one.”

Awful news for long suffering Sirius Minerals shareholders as financing efforts fail

Sirius minerals logo

The future of Sirius Minerals (SXX) is firmly in doubt after a 7am RNS that stated it could not raise the $500m (£400m) it needed to start the next phase of construction at its fertiliser mine in Yorkshire. The Woodsmith Mine is located on the North York moors and was due to produce the fertiliser, polyhalite in the U.K.’s deepest mine in 2021. The Woodsmith mine as envisaged would have two mile-deep shafts and a 23-mile long underground tunnel that would connect the mine to the port at Redcar. Sirius had planned to use the loading dock previously employed by the former steelworks to ship its fertiliser. To date around $1.5 billion has been spent on construction and now hundreds of jobs in Yorkshire are at risk.

Hundreds of local investors have ploughed life savings in Sirius Minerals to support the project and now face financial ruin as the project moves into a new phase of uncertainty after a series of setbacks.

SXX  share price sep 17

The Shares dropped around 60 percent at the open and they closed at 4.67p yesterday, a fall of 53%, with a market cap of £326 million, a fall of over £400 million overnight.

Funding problems

On 29 April 2019 the Company entered into commitment documents in respect of a US$2.5 billion Revolving Credit Facility (RCF) to enable its proposed stage 2 financing with JP Morgan. One of the conditions of the RCF Commitment, was the issuance of senior secured notes in a minimum amount of US$500 million and meeting certain criteria by no later than 29 October 2019.

On 6 August 2019 the Company announced that it had postponed the proposed note issuance due to market conditions, blaming poor bond markets.

Woodsmith mine yorkshire

To meet the terms of the RCF Commitment the note issuance must have an all-in effective yield not exceeding 15%. The Company received feedback from a number of potential investors which indicated that a note issuance could potentially be successful should the offering include warrants (the rights to ordinary shares in Sirius). However, a note with warrants attached would not satisfy the conditions set out in the RCF Commitment due to the expected returns of the warrant component of the offering. The Company requested, but did not obtain, a waiver of this condition to enable it to issue warrants as part of the note offering. As a result, SXX was forced terminate the RCF Commitment.

Government funding

Following the postponement of the proposed senior secure notes offering in August, the Company re-engaged with the UK Government. The Company had requested Government provide a commitment to enable the issue of up to US$1bn of guaranteed bonds in the event the Company was unable to issue unguaranteed bonds to refinance the RCF (after approximately at least a further 18 months of development activity and up to an additional US$2bn being invested in the Project). The Government has reviewed the case for the provision of the support requested to facilitate the financing of the Project and has decided not to provide the support requested. The Company believed this commitment would have enabled the Company's financing to be delivered as planned.

Sirius will now launch a strategic review and will slow down work at the Woodsmith mine near Whitby to conserve cash.

Polyhalite fertiliser

The demand for polyhalite remains uncertain because only one company, ICL, sells it, an Israeli chemicals company. In 2018 it sold 300,000 tonnes of their fertiliser and forecast sales of 1 million tonnes in 2020, with long term estimates of 3 million tonnes. Potash remains the largest fertiliser product with sales of 65 million tonnes per year.

To date, Sirius has 5.7 million tonnes contracted for offtake agreements on a take or pay basis.

Cash position and strategic review

As at 31 August 2019 , SXX had around £180 million of unrestricted cash which included over £117 million of uncommitted capital. This amount does not provide sufficient liquidity for the Company to continue development of the project and therefore recommended a reduced pace of development focused on key areas of the project that will ultimately serve to preserve the most value for the project and will provide the Company with a period of up to six months to review all available options for the Company to move forward.

During the strategic review SXX will explore how the development of the shafts and the other major aspects of the construction programme can be rescheduled in a way that reduces this perceived risk and delivers better cost and scheduling certainty for debt providers across the project.

The Company also intends to explore alternative financing structures with other companies and sovereign wealth funds.

What went wrong for Sirius Minerals?

SXX CEO Chris Fraser has been at the company for 9 years and has overseen the planning and initial funding of the project. For now he seems to have hit a brick wall to complete the mine and has blamed bond markets and Brexit. Ultimately SXX has suffered because of perceiced risk. The nature of this huge construction project and its complexity and the uncertain market for polyhalite have all raised investor concerns and those buying bonds wanted a large coupon to offset this risk. In the end at a level that jeopardised the JP Morgan deal that had a ceiling of 15%.

Chris Fraser SXX

Whether Fraser can pull off a deal with another party is very uncertain in the months ahead as even the government refused to guarantee loans because of the visibility of investor returns and risk. Who knows, but the company looks in a precarious state for now and certainly needs a severe dose of luck to bring in a partner to finish this mine for production in 2021.