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Sirius eyes early 2019 for debt funding

The polyhalite miner still needs more than $3bn to produce its first potash
September 27, 2018

Given the volume of post-period developments, half-year numbers for Sirius Minerals (SXX) are somewhat immaterial. Since June, the prospective potash miner has raised its capital estimate for the Woodsmith mine by up to $600m (£456m), signed deals to design and build a minerals transport system to Redcar and another to handle materials at port, and take-or-pay offtake arrangements with Chinese and South American distributors.

IC TIP: Buy at 29.9p

In particular, this month’s receipt of a $250m royalty funding commitment from Hancock Prospecting has reduced some of the pressure on liquidity over the next year. But not by much. Though Sirius now has enough cash to carry the project through to the second quarter of 2019, crunch-time for stage two financing is fast approaching.

Accountants at PwC emphasised the uncertainty of the “timing and outcome” of the senior debt package, though Sirius expects bank commitment letters before the end of 2018, and will not seek to increase the $3bn initially sought. No date was given for an expected commitment from the UK’s Infrastructure Project Authority, though “financial close” of the financing in the first three months of 2019 will incorporate the $400-600m extra capital needed, once “the most cost effective and efficient sources” of funding have been identified.

The two analysts offering one-year price targets for the stock have a median target of 50p.

SIRIUS MINERALS (SXX)  
ORD PRICE:29.9pMARKET VALUE:£ 1.41bn
TOUCH:29.8-30p12-MONTH HIGH:39.9pLOW: 20.7p
DIVIDEND YIELD:NILPE RATIO:N/A
NET ASSET VALUE:10pNET DEBT:10%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2017nil-151-3.60nil
2018nil-96.3-2.10nil
% change----
Ex-div:na   
Payment:na