Plans to develop a world-class potash fertilizer mine in the north of Britain have been dealt a harsh blow by the cancellation of an important bond issue needed as part of a $2.5 billion funding package.
The part-built politically and environmentally sensitive Woodsmith project on the North Yorkshire Moors has been designed to produce a particular type of potash called polyhalite (many salts).
MIDDLESBROUGH, ENGLAND - FEBRUARY 16: Parts of a Tunnel Boring Machine are moved by road convoy to the Sirius Minerals site at Wilton on Teesside prior to being assembled over coming weeks ahead of drilling on February 16, 2019 in Middlesbrough,
Getty ImagesRich in potassium, magnesium, calcium and sulphur, Polyhalite is claimed to be superior in some situations to conventional potash mined in Canada and Europe though the aim of all forms of potash is to boost crop yields.
More than $1 billion has already been sunk into Woodsmith by a small London Stock Exchange-listed company, Sirius Minerals, which has attracted some big-name backers, including Australia’s richest person, the iron ore mine owner, Gina Rinehart.
News that the bond issue had been withdrawn was not a complete surprise for followers of Sirius because the company has been under pressure for much of the past year.
But when the official news broke yesterday the Sirius share price plunged by more than 50% to 4.7 pence (6 cents).
Big Challenges
An ambitious project for a country with limited modern history of mine development, Woodsmith has faced challenge in a number of areas.
Physically, it involves sinking a mile deep shaft to reach the thick bed of polyhalite, and a 23 mile tunnel from the mine to an export facility near Middlesborough, an aded extra forced on Sirius by environmental regulators.
Marketing polyhalite brings its own challenges because while the material is claimed to have superior properties to conventional material such as sulfate of potash not enough has yet been produced to create a market big enough to absorb the 10 million tons a year planned by Sirius.
12 August 2019, Hessen, Philippsthal: In the Hesse-Thuringia potash district, a K+S employee stands in front of the shaft basin with the submersible pump at a depth of about 700 metres. K+S, the Kassel-based potash and salt producer, is now
picture alliance via Getty ImagesCompetition is also a hurdle for Sirius to clear with Canadian and European potash producers comfortably able to satisfy most demand with their conventional material, while a number of small companies are planning a series of small, low-cost potash mines, in Australia.
There is also the potential for a significant new producer in BHP, the world’s biggest mining company, which is in the process of developing a major new mine in the Canadian province of Saskatchewan.
As if those issues were insufficient for a small company such as Sirius there are the complicating factors Britain’s attempts to quit the European Union (Brexit) which has gummed up London’s financial markets, and the uncertainties created by the China v U.S. trade war, and more recently the attack on the oil infrastructure of Saudi Arabia.
Six Months To Find A Solution
With the $500 million bond issue withdrawn Sirius now has six months to find an alternative financial solution, most of which will probably require government support in some form.
But whether the British Government is in any shape to help a mining project, albeit one in a region with high unemployment, is questionable.
https://www.forbes.com/sites/timtreadgold/2019/09/18/tightening-financial-markets-hit-britains-biggest-mining-project/
2019-09-18 07:29:55Z
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