Shares in Sirius Minerals (SXX) spiked over 3.5% to 16.47p after the FTSE 250 potash miner moved onto the next stage of funding for its Woodsmith polyhalite mine in Yorkshire.

Sirius has launched a $500m high-yield bond, which will be crucial to developing the mine as it needs the cash from the bond in order to secure another $2.5bn in lending that’s initially being provided JP Morgan.

'HIGH-RISK' BOND

According to reports, two credit rating agencies have given the bond a single B rating, something which places in it the ‘high-risk’ category but is the rating Sirius had expected.

Bonds are typically rated from AAA to D, and a B rating means the bond is described as ‘highly speculative’ and will be what is known as a ‘junk bond’.

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But depending on the credit rating agency, there are up to seven ratings below a single B rating, and the credit worthiness of Sirius would be that any adverse business, financial or economic conditions could impact its ability to repay the bond, but that as things stand it will have the capacity to repay the loan.

The bond needs to be taken up by investors before the end of September, otherwise Sirius will run out of money, but it has been reported that Sirius anticipates it will complete the bond sale well before the deadline.

LIGHT AT THE END OF THE TUNNEL

In total, the firm says it currently needs around $3.8bn to help build the mine, which is one of the largest civil engineering projects in the UK and has the potential to contribute £2.8bn annually to the UK’s GDP.

Two months ago, it raised $425m from issuing new stock, a common way for miners to raise cash, as well as another $400m from the sale of convertible bonds.

If the launch of this latest bond is successful, there could be light at the end of the tunnel for Sirius in terms of getting the cash it needs to build the mine.

Speaking back in May, Shore Capital analyst Yuen Low said successfully securing the financing it needs is ‘effectively the key to unlocking Sirius’s vast potential’ and should ‘catalyse a major re-rating of the shares’.


Issue Date: 19 Jul 2019