Sirius Minerals plc (SXX) Ordinary GBP 0.0025
HL comment (17 September 2019)
Shares in Sirius Minerals fell 62.3% following its half year results and financing update.
The fall comes after the group said it won't be able to issue a $500m bond offering, citing poor bond market conditions - money it needed to continue its projects.
The UK government has also declined to support funding, and the group is now unable to deliver on its stage 2 financing plan.
As a result, Sirius will be slowing the rate of development - and therefore spending - until further funding can be found. Over the next 6 months Sirius will be conducting a comprehensive strategic review, part of which will include coming up with a different financing structure, for the money needed to continue the project.
Half Year Results
Today's announcement was not what investors wanted to hear, and operational performance really does come secondary to the financing issue. But while development on the project is now being scaled back, the group was able to make some progress in the first half of this year.
Construction of key elements of the mine progressed in line with expectations, and progress on service shafts has also been on schedule. Excavation of the main shaft has reached its target depth of 118m.
Work on the conveyor system - which would eventually transport goods out the mine - is ongoing. Mineral Transport System Drive 1 construction advanced ahead of expectations.
Future sales agreements with suppliers increased during the period, and aggregate contracted sales volumes are now 11.7m tonnes per annum, following new European supply agreements. The Agronomy programme, which looks to find the strengths of Polyhalite versus established fertilisers - has continued to expand. There are 49 new trials, making a total of 430 on 48 crops in 30 countries.
While the group struggles for cash, any further progress will be limited. Investors will be somewhat pleased to see sales agreements increased in the half - these are important for attracting future funding.
Sirius continues to be a company that carries significant risks. Investors might be rewarded at the end of the tunnel, but today's announcement is big news, and there's no guarantee the shares won't fall further in the coming months.
Sirius' fortunes now lie in its ability to find the funding it needs elsewhere. The group had previously said it won't ask shareholders to stump up more cash, but after today, it can't be ruled out as an option.
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