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Britain's biggest mining project in peril as Sirius bond aborted

Britain's biggest mining project in peril as Sirius bond aborted
FILE PHOTO: The Sirius Minerals test drilling station is seen on the North Yorkshire Moors near Whitby, northern England July 5, 2013. REUTERS/Nigel Roddis -
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Nigel Roddis(Reuters)
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By Barbara Lewis and Noor Zainab Hussain

LONDON (Reuters) – Sirius Minerals <SXX.L> scrapped a plan to raise $500 million in a bond sale on Tuesday, delaying a project to mine for fertiliser under a national park in northern England and halving the value of its shares.

The company had already suspended the bond issue in August. Sirius blamed market conditions aggravated by uncertainty over Britain’s departure from the European Union for its failure to secure funding.

Sirius said on Tuesday the government had turned down a renewed request for backing in August. The company said it would conduct a six-month review to work out cost savings and would slow development of the project.

“This is the most prudent decision to give the company the time necessary to restructure its plans to move the project forward,” CEO Chris Fraser said, adding that one option was to seek “a major strategic partner”.

The company said 1,200 jobs involved in developing the project would be lost if it failed, but Fraser told a conference call he was confident it could be saved.

Sirius’ shares opened more than 60% lower, before recovering slightly to trade down 56% at 4.5 pence at 1342 GMT.

The plan would create Britain’s biggest mine and add jobs to a part of the country hit by the decline of heavy industry.

The Unite union urged the government to provide backing. “This is a vital project for a region which is crying out for new investment and jobs,” national officer Ian Woodland said.

Many local people have invested in the plan to tunnel under England’s North York Moors to exploit what Sirius says is the world’s largest deposit of polyhalite, a multi-nutrient fertiliser.

Polyhalite is meant to be superior to the traditional fertiliser ingredient potash. But some potential investors are concerned the market for polyhalite is not well established.

Until now, the world’s only producer of polyhalite is Israel’s ICL <ICL.TA>, which has a mine near Sirius’ project, and markets it under its Polysulphate brand.

Although not in production, Sirius has offtake contracts with customers in the United States, Europe, Brazil, India and Africa. It has said it has the potential to generate billions of pounds during half a century of mining.

The company said it had 180 million pounds ($223 million) in cash at the end of August, which would help it explore options.

The company needed to issue a bond of at least $500 million to gain full access to a $2.5 billion revolving credit facility from JP Morgan Chase. JP Morgan Chase declined to comment.

Sirius also repeatedly sought government help and in August had asked for government backing to enable the issuance of up to $1 billion in guaranteed bonds.

A spokesman for Prime Minister Boris Johnson said any request for financing had to weigh “the potential of a project against the need to protect taxpayers’ money”.

Humphrey Knight, potash analyst at business intelligence company CRU, said the project faced many risks, “not least, the market for polyhalite remains very small”.

Sirius Minerals on Tuesday reported an operating loss of 14.3 million pounds for the six months ended June 30 versus a loss of 10.8 million pounds a year earlier.

(Reporting by Barbara Lewis in London and Noor Zainab Hussain in Bengaluru; additional reporting by Abhinav Ramnarayan and Kylie MacLellan in London; Editing by Dale Hudson and Edmund Blair)

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