Anglo American has made a takeover bid for Sirius Minerals, throwing a potential lifeline to the UK-listed group battling to build a giant potash mine below a national park on the North York Moors.
The FTSE 100 company said it was in advanced discussions with Sirius over a 5.5p a share cash offer that would value the company at almost £386m and save it from collapse. Shares in Sirius, which closed at 4.1p on Tuesday, jumped 34.6 per cent to 5.4p on Wednesday.
The company, which has been backed by tens of thousands of retail investors, many of whom will have paid more than 20p for their shares, has been struggling to raise the billions of dollars it needs to complete the ambitious project, from sceptical investors and bankers. In November, Sirius said it was seeking a backer to help fund a revised development plan.
Anglo’s finance director Stephen Pearce said Sirius was a rare opportunity to buy a “tier one” mining asset at the bottom of the market.
“We are unashamedly transitioning our portfolio to later cycle products that we believe the world will need,” he said.
Demand for potash — a crop nutrient — is tipped to rise over the next decade as farmers try to satisfy the changing diets of a rising global population with less arable land.
Sirius said it was prepared to recommend the offer from Anglo if it was able to secure satisfactory assurances around jobs and other “stakeholder interests”. If the deal goes ahead, it could save more than 1,000 jobs in one of the poorer areas of the UK.
However, some of Sirius’ investors questioned the offer. Richard Godley, a pensioner from Whitby, said the board should hold out for a higher bid. “It’s just an opening salvo. I can’t see they are taking it seriously.”
He believed Anglo would flush out other bidders or that the government would step in with a loan guarantee.
Another shareholder, who faces losing about £160,000 if the deal goes through at 5.5p, said: “The price seems ridiculously low. They would be getting it for a song. I was hoping someone would come in as a partner rather than buy the whole thing.”
Sirius chief executive Chris Fraser, a former Citigroup banker, has also invested heavily in the company. He owns almost 1.8 per cent and will suffer a substantial loss if the deal goes ahead.
The potash mine, approved in 2015, was thrown into doubt last year after Sirius was forced to pull a $500m bond deal, which was needed to unlock a $2.5bn funding package.
Big investors in the City of London have never warmed to the project, given the difficulty of building a global market for the type of potash it will produce and the risk of delays and cost overruns. Environmental groups have said the mine could harm precious moorland.
The bid marks a return to fertiliser for Anglo, which sold its phosphates business in 2016. However, the offer may surprise some shareholders who thought the group was focused on developing a $5bn copper mine in Peru and not seeking further diversification. The company’s mining portfolio spans copper and iron ore to platinum and diamonds.
“We can see how the project fits in the Anglo portfolio of late cycle, green commodities, but given that this is a new commodity for Anglo, and given the market’s strong focus on shareholder returns, it is likely to take some investor education as to exact market dynamics and outlook,” said analysts at Berenberg. Shares in Anglo fell 1 per cent to 2,136p.