New funding plan throws lifeline to small Sirius Minerals investors

Thousands of retail investors may have cause for cheer, analysts said on Monday after Sirius Minerals announced a cheaper plan to start production at its North Yorkshire mine.

Shareholders had feared their stake in the polyhalite project could be heavily diluted after Sirius failed to reach a bond sale target which would have unlocked a loan of up to 2.5 billion US dollars (£1.95 billion) in September.

It put the brakes on the Yorkshire mine after the announcement, which came as a shock to many retail investors – typically private individuals, rather than professional investors – who had put their money into the company.

But on Monday analysts suggested that a new plan, put forward by boss Chris Fraser, could bring Christmas early for the shareholders, some of whom expected the value of their holding to be seriously damaged.

“There are still many unknowns, but there may be scope for a much less dilutive solution than we had previously modelled,” said Richard Knights, an analyst at Liberum.

His comments came after Mr Fraser revealed that the company was talking to potential partners and investors in a bid to raise 600 million US dollars (£470 million) by April. This would help Sirius push ahead with a scaled-back drive to mine polyhalite in North Yorkshire.

The mineral, which can be used as fertiliser, would be transported to Teesside via a conveyor belt in a 23-mile (37km) long tunnel. There, it would be processed and Sirius would ship its polyhalite-based fertiliser, Poly4, to customers.

Management now hopes that, if the company can get to the mineral deposits, which are buried a mile underground, it will remove the risk that had discouraged investors.

“The value of Sirius is unlocked by reaching production and delivering Poly4 to our customers around the world,” said Mr Fraser.

“This approach allows us to achieve that with less upfront capital while retaining the significant return opportunity it presents for our shareholders and stakeholders.”

The company can then go back to raise a further 2.5 billion US dollars (£1.95 billion) to expand production to 10 million tonnes per year.

Shares rose 16.4% on the news to 3.72p.