Australian billionaire to pump £245m into Sirius Minerals

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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.

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