• Terratec

Anglo American confirms offer for Sirius Minerals 23 Jan 2020

Karen Martin, TunnelTalk

Following advanced discussions and a proposed offer earlier in January 2020, Anglo American has made a firm offer for Sirius Minerals. Under the agreement, Sirius shareholders will receive 5.5 pence per share, valuing the share capital of Sirius at about £405 million.

Firm offer made in rescue bid for Woodsmith Mine project
Firm offer made in rescue bid for Woodsmith Mine project

Russell Scrimshaw, Chairman of Sirius, acknowledged that the returns that the offer would represent are “not what either our shareholders or the Sirius board had previously hoped for,” and the decision as a board to recommend the offer would “come as a shock” but that the Anglo American offer is “the only feasible option.

“We now face a stark choice,” he said. “If the acquisition is not approved by shareholders and does not complete, there is a high probability that the business could be placed into administration or liquidation within weeks thereafter. This outcome would most likely result in shareholders losing all of their investment, as well as put the future of the entire project, and its associated benefits for the local area and the UK, at risk.”

Following setbacks in the bond market towards the end of 2019, Sirius initiated a strategic review and received an alternative financing proposal in December 2019 that was subsequently revised and presented to the company shortly after the Anglo American offer at the beginning of January 2020. However, the board and its advisors concluded that the terms of the proposal received and the conditions attached were not acceptable in their current form and it was highly unlikely that acceptable revisions could be delivered and implemented by the end of March 2020, when finances are due to run out.

“The only viable proposal was received from Anglo American in early January, who were only interested in pursuing a 100% control transaction,” explained Scrimshaw.

Mark Cutifani, Chief Executive of Anglo American, said that the offer provides greater certainty for Sirius shareholders, employees and wider stakeholders, while bringing the prospects for the development of the project closer to reality. “We intend to bring the financial, technical and product marketing resources and capabilities of Anglo American to the development of the project, which of course would be expected to unlock a significant and sustained associated employment and economic stimulus for the local area,” he said.

A majority of at least 75% of votes at a general meeting in favour of the takeover are needed for the deal to go ahead.

References

Anglo American considers Sirius Minerals takeover 09 Jan 2020

Karen Martin, TunnelTalk

Global mining company Anglo American is in advanced discussions with Sirius Minerals over a potential takeover, offering a lifeline to its UK potash mine project, the future of which was uncertain after failing to raise the finance it required from bond investors at the end of 2019.

The proposed offer price of 5.5 pence per share values the share capital of Sirius at about £386 million, representing a 34.1% premium to the closing price of 4.1 pence per share on 7 January 2020, the last business day prior to the announcement.

Woodsmith Mine site at the centre of takeover talks
Woodsmith Mine site at the centre of takeover talks

The proposal follows the announcement in September 2019 that Sirius was undertaking a strategic review to assess the development plan for its Woodsmith polyhalite mine project and an appropriate financing structure to provide relevant funding. Sirius also announced that the review would include a process to seek a strategic partner in the project.

Sirius has progressed the project to an advanced stage, with construction now underway for more than two years. A significant amount of further financing is required to develop and commission the operation, which has proven challenging to procure on an economic basis. Anglo American has the resources and capabilities to help build on the achievements of the Sirius team. In a statement, Anglo American said it had identified the project as of interest some time ago, due to the quality of the underlying asset in terms of scale, resource life, operating cost profile and the nature and quality of the product.

The takeover would mark a return to fertiliser mining for Anglo American and provide certainty to Sirius shareholders as well as to its employees and customers.

Should an offer be successful, development work during the first two years would be broadly in line with the revised development plan by Sirius, with Anglo American updating the development timeline, optimising mine design and ensuring appropriate integration with its own operating standards and practices.

A statement from Sirius said that, subject to the successful outcome of ongoing discussions, the Board expects to be able to recommend a firm offer to its shareholders. Anglo American is now required to announce by 5 February 2020 if it intends to make a formal offer for Sirius.

References

Funding overshadows progress at UK potash mine 19 Sep 2019

Karen Martin, TunnelTalk

Construction continues at Woodsmith Mine, despite a six month financial deadline now hanging over the project. Project owner, Sirius Minerals, has announced that, as a result of global market conditions, plus the political environment and ongoing uncertainty surrounding Brexit in the UK, raising the finance it requires from bond investors is now unlikely. The scope of construction activities on the project will now be adjusted, while the company undertakes a strategic review of its options.

VSM being removed from Woodsmith Mine MTS shaft
VSM being removed from Woodsmith Mine MTS shaft

Sirius secured a commitment letter with global financial provider JP Morgan in relation to a US$2.5 billion rolling credit facility (RCF) in April 2019, drawdown of which was subject to a number of conditions, the most significant of which was the successful issuance of US$500 million of senior secured notes. Satisfaction of the RCF conditions would also have given Sirius unrestricted access to the proceeds of the US$400 million of new convertible loans that were issued in May 2019, which are reported as restricted cash at 30 June 2019.

On 16 September 2019 the company Directors concluded that it was unlikely that it would be possible to complete the financing to satisfy the terms of the RCF commitment letter before it expires at the end of October. The company therefore intends to terminate the RCF commitment letter and to repay the proceeds of the $400 million escrow loans to loanholders as required.

At the same time, the decision has been taken to reduce the pace of development to focus on key areas of the project and provide a period of up to six months to review all available options for moving forward. Current cash flow forecasts indicate that it expects to have sufficient liquidity to continue to operate and meet its liabilities as they fall due until at least March 2020.

Fig 1. Three TBM drives planned for the 37km long mineral transport system
Fig 1. Three TBM drives planned for the 37km long mineral transport system

Meanwhile, construction to date has progressed in line with 2019 milestones at each of several construction sites.

In June 2019, drives 2 and 3 of the mineral transport system (MTS) were awarded to Strabag Tunnelling expanding its current involvement to a €1 billion contract to construct the remaining 24km of the 37km MTS, between the shaft at Lockwood Beck and the Woodsmith Mine. Strabag was contracted to the project in early 2018 and has started design and excavation of the Drive 1 contract, a 13km section from the tunnel portal at Wilton to Lockwood Beck.

The MTS is being excavated at a depth of 360m entirely within the essentially dry Redcar Mudstone, which extends from Woodsmith Mine to Teesside. Its alignment avoids water-bearing rock and abandoned mine workings, which overlay the Redcar Mudstone. The first TBM launched from Wilton, Teesside, in April 2019 and has advanced ahead of expectations. According to Sirius, Drive 1 has advanced 1.2km and is more than two months ahead of schedule, having cleared the Wilton International site boundary and passed under all the neighbouring industrial infrastructure towards Lockwood Beck. The 6m diameter Herrenknecht TBM is now averaging 17m/day, including planned technical stops and despite the relatively difficult shallow ground that exists through the first 3km of the tunnel. The average advance rate is expected to increase as the TBM exits the shallow alignment, allowing the machine to run at higher cutting speeds and with fewer interventions.

VSM at top of MTS shaft
VSM at top of MTS shaft

Two further machines were due to be launched from Woodsmith Mine and Lockwood Beck in early 2020 to complete the remaining 24km of the 6m i.d. tunnel. The faster than expected advance rates experienced on Drive 1, however, could remove the need for the planned TBM2 from Lockwood Beck, enabling Drive 1 to continue through Lockwood Beck to connect with Drive 3 TBM from Woodsmith Mine (Fig 1).

The 360m deep intermediate access shaft at Lockwood Beck has been excavated and lined to 51m deep. A grouting process has now commenced to prepare the ground ahead of the main shaft sinking to depth using a drill+blast Galloway. The temporary headframe is being erected and construction of the winder house has progressed on schedule. These operations are expected to complete in early 2020. Should TBM2 still be required, shaft bottom works will be undertaken before the shaft being handed over from shaft sinking contractor DMC to Strabag to begin construction of the launch cavern for Drive 2 towards Woodsmith Mine.

At the Woodsmith Mine site, a Herrenknecht vertical sinking machine (VSM) has excavated the first 115m of the 360m MTS shaft. This is claimed as a world record for this type of excavation, surpassing the previous record of 84m set in St Petersburg, Russia. The Galloway has now been installed and is being prepared to begin drill+blast excavation to the 360m depth. The temporary headframe and winder building are being erected on site and mechanical fit out is underway for start of excavation operations later in 2019. Once the shaft is complete, the Drive 3 TBM can be lowered to its base and assembled in a cavern to drive northwest towards Lockwood Beck (Fig 1).

VSM after excavation
VSM after excavation

The main production and service shafts at Woodsmith Mine are being constructed to a depth of 1,600m.

Excavation of the 35m diameter service shaft foreshaft to 45m was completed earlier in 2019, while excavation of the 6.75m i.d service shaft has reached its target depth of 118m using conventional excavation techniques, and a Herrenknecht shaft boring roadheader (SBR) will be used to excavate both shafts to their full depth. The first components of the machine began arriving on site in August 2019 and pre-assembly on the surface has commenced. Preparatory works are almost complete to enable construction of the SBR headframe and installation of the machine into the foreshaft, scheduled to be completed during December 2019. All major components of the permanent winder for the service shaft are also now in place. The temporary winders, which connect to the SBR during shaft construction to the 1,600m deep mining level, have also progressed on schedule.

Excavation of the 32m diameter production shaft foreshaft has progressed faster than expected and is almost at its target depth of 45m. The production shaft differs from the service shaft in that it has diaphragm walls installed to a depth of 120m. Excavation can therefore occur faster than seen in the service shaft. Along with excavation of the 6.75m i.d production shaft, construction of its permanent winder building is almost complete. It will hoist excavated muck to the surface from the shaft sinking SBR operations, and in full operation will hoist polyhalite for many decades to come.

Continuing development of the project beyond 31 March 2020 now depends on Sirius Minerals securing additional external financing.

References

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