Sirius Minerals reassures over fertiliser mine plans as losses grow
(ShareCast News) - In its first results as a FTSE 250 company, Sirius Minerals reported a larger loss as its development of its Woodsmith polyhalite fertiliser mine under the Yorkshire Moors prepares to move to sinking of a first shaft in the new year.
At the end of June, Sirius had £584.6m of bank funds available, having spent £121m during the first six months of the year, of which £48.3m was capital expenditure.
With no revenue coming in, a £14.7m operating loss was reported, all from operating costs.
This rose to a loss of £151.3m before tax, resulting from £137m accounting losses that were principally from a £112m loss from the fair value re-measurement of the derivatives associated with a convertible bond, plus £21m losses from royalty financing derivatives and £15m of interest.
"With the share price increasing by 57% over the period, the size of the loss attributable to the derivatives has increased materially," the company explained.
"As the convertible bonds are converted and the royalty financing is drawn, these derivative liabilities will be reclassified from liabilities to equity and require no cash settlement by the group."
Planning ahead the company has continued to expand its sales and marketing team in North and South America, Asia and Europe, where commercial discussions are continuing regarding sales of the POLY4 fertiliser product, as well as in key growth markets such as Africa.
"Each of these opportunities represent material volume prospects in key markets for Sirius."
In July, a shaft sinking scope contract was awarded, with the scope encompassing roughly three quarters of the mine site development from the initial financing plan, with the remainder of the funds to be used for preparation work, provision of utilities to site and shaft bottom development.
Sirius, which was promoted to the FTSE 250 in June's reshuffle after moving up from AIM in March, six years after acquiring the potash project, has publicly announced its intention to conduct another fundraising round in 2018 in order to raise further funds to complete development and reach commercial production.
Chief executive Chris Fraser said the half year has been "marked by excellent progress" on the development of the mine and associated infrastructure.
"With highways and enablement works completed, and site preparation into the latter stages, we eagerly anticipate the commencement of shaft sinking activities. Good progress has also been made at Lockwood Beck, the intermediate site for the mineral transport system."
He said interest in future supplies of the polyhalite product "remains strong", with marketing discussions "supported by ever-present and expanding research and development work, which will support customers and farmers in the years to come".