Anglo American has said it will step in to save a mining project which promises to be Britain’s largest in decades, as it tabled a £405 million bid to buy the shares of Sirius Minerals.
The decision, which has been on the table since it was first floated by the firms two weeks ago, may safeguard thousands of jobs Sirius claims it could create in the region.
However, it is likely to wipe out most of the cash that up to 85,000 small retail investors sunk into the project. Anglo has bid 5.5p per share in Sirius, making the shares worth a fraction of the 22.38p they were worth a year ago. They hit a high of around 45p in August 2016.
The deal is still subject to shareholder approval.
“We are sensitive to the fact that the price is lower than what some people, or many people, may have invested in the project,” Mark Cutifani, the chief executive of Anglo American, said on a call with reporters.
We acknowledge that to many shareholders our decision as a board to recommend this offer will have come as a shockRussell Scrimshaw, Sirius chairman
Sirius has previously said the project could provide 4,000 jobs to the local community and it would be one of the biggest private investments in the north of England for years.
Mr Cutifani said that Anglo has “no plans to make significant changes” to the jobs figures, but will look at opportunities to improve the project. But, he stressed, “this process is about preserving and creating jobs, not cutting them.”
Sirius was cast into turmoil last year as it failed to reach a fundraising target which would have unlocked a 2.5 billion dollar (£1.9 billion) bank loan to fund the project.
It forced the miner to go back to the drawing board and try to find a new way of paying for its project. In the meantime it scaled back the development.
“Four months ago, following the setbacks in the bond market, we took the difficult decision to slow the pace of development of our project and initiate a strategic review to reassess how best to unlock the long-term value for our shareholders, the community, the UK, and our customers all around the world,” Sirius chairman Russell Scrimshaw said on Monday.
The company searched for a partner who would provide cash in return for a minority stake, Mr Scrimshaw said, but in the end the full acquisition by Anglo was the only “viable proposal”.
“We acknowledge that to many shareholders our decision as a board to recommend this offer will have come as a shock. Your board deeply regrets that we could not deliver the complete stage two financing in 2019 despite a very broad and thorough process,” he added.
The project plans to extract polyhalite from a mile below the North York Moors to use as fertiliser.
It would transport the material on a 17mph underground conveyor belt to Teesside, 23 miles away, where it would be shipped to customers worldwide.
The key seven top executives, including Sirius chief executive Chris Fraser, have committed to staying with the project for at least 12 months, Mr Cutifani said.