A decade after securing finance for what has become one of Australia's most successful iron ore mines, Sirius Minerals (SXX) chief executive Chris Fraser looks to have repeated the trick in the UK. This week, his company announced the final pieces of 'stage one' debt and equity financing for the long-awaited polyhalite project in North Yorkshire, just days after a major royalty deal with Australia's Hancock Prospecting.
The equity portion - which is expected to raise between £330m and £400m - will largely come from a firm placing via an accelerated book-building process, although around 10 per cent will be made available to existing shareholders through an open offer and placing. The fully underwritten fundraising will likely be priced between 20p and 30p, based on pre-marketing to clients of JPMorgan and Liberum and representing a discount of up to 46 per cent based on a closing price of 36.8p on 1 November. Hancock Prospecting, which last week agreed to pay Sirius $250m (£203m) in cash for a 5 per cent share of the polyhalite project's future production, will also subscribe to $50m of the equity fundraising on the same terms as other investors.
Separately, Sirius will issue $400m-$450m-worth of convertible bonds with an 8-8.5 per cent annual coupon and seven-year maturity. Under the terms of the bond, Sirius can force the bonds' conversion after three years if the company's shares rise 25 to 30 per cent above the equity placing price. Such an event does not look unrealistic. Sirius' shares have been buoyed by enormous buying momentum so far this year, and there is significant potential for positive newsflow concerning the project's construction and the arrangement of 'stage two' bank financing in 2018.
