Australia’s richest woman is investing £245m in Sirius Minerals, the company behind the £10bn North Yorkshire polyhalite mine.
Hancock Prospecting, which is controlled by Australian billionaire iron ore magnate Gina Rinehart, said Sirius could become one of the world’s leading producers of multi-nutrient fertiliser and the mine could have a life of 100 years.
The investment was welcomed by the market and Sirius saw its share price rise nearly 4 per cent to 35.5p following the news.
The group has a large number of private investors in North Yorkshire who are keen to see the mine succeed.
Sirius will become a big employer in North Yorkshire once the mine gets underway, employing over 1,000 long-term workers at full production and a further 1,500 workers will be employed indirectly.
Sirius chief executive Chris Fraser welcomed Hancock’s investment, saying it will bring mining and agricultural sector expertise to the operation.
“We are delighted to have signed this agreement with such an experienced party in the mining industry, as well as one that has very successful and strong leadership and a long-term and growing agricultural interest,” he said.
Sirius, which has been given planning permission for the potash mine, has previously said the mine will deliver a huge boost to North Yorkshire and Teesside and could have a value of over £10bn, rising to £19bn when production starts.
It said that at full production, the mine’s annual contribution to UK GDP would be £2.3bn, with £2.5bn of exports helping to decrease the 2015 balance of trade deficit by 7 per cent.
The mine will produce 20 million tonnes of potash a year and production is scheduled to start in 2021.
The mine’s potash is a multi-nutrient fertiliser called polyhalite, which is a naturally occurring mineral containing four of the six nutrients key to plant growth – potassium, sulphur, magnesium and calcium.
On signing the deal, Ms Rinehart said: “This fits with my approach of investing in strategic areas for the long term, and I hope the product is of assistance to many Australian farmers.“
Analyst Yuen Low at Shore Capital said: “Sirius is developing the paradigm-shifting North Yorkshire polyhalite project in England.
“The company has devised a two-stage construction financing plan, and the first pieces of Stage 1 have fallen into place today. Australian billionaire Gina Rinehart’s Hancock Prospecting has agreed to provide US$300m of the US$1.09bn Stage 1 requirement, comprising US$250m in royalty financing and US$50m in equity funding.
“We see this as a resounding endorsement of the project, given that Hancock (as Sirius puts it) is such an experienced party in the mining industry and also one with a strong agricultural interest.”
Under the agreement, Hancock has agreed to purchase a royalty on the project of 5 per cent of gross revenue on the first 13 million tonnes per annum of sales produced each year and 1 per cent for sales volumes above 13 million tonnes per annum in return for £204m.
Hancock will subscribe for new ordinary shares in the company for £41m subject to certain conditions. The deal is similar to the arrangements with mineral rights holders and runs for the life of the project or 70 years, whichever is longer.
Mr Low at Shore Capital said: “We continue to anticipate the conclusion of Stage 1 financing during the autumn of 2016. If all goes to plan, there would be no further need to raise equity thereafter, dilution would cease to be a concern, and we believe the resulting improved clarity on potential equity returns could trigger a significant re-rating.”
Shore Capital reiterated its ‘buy’ recommendation on Sirius.