Anglo American stock slid on Wednesday as the mining giant said it was considering a £386 million bid to buy troubled fertilizer miner Sirius Minerals.
The 5.5p per share rescue bid, being mulled by Anglo American, comes as Sirius Minerals needs funding to complete construction of its potash mine in North Yorkshire, in the north of England.
Sirius Minerals shares jumped 35% to 5.5p in early trading as the offer came at a premium of around a third of Tuesday’s closing price.
The stock plunged in September when Sirius Minerals said it had failed to secure the £2.5 billion needed for the rest of the project. Despite the sharp rise on Wednesday, shares have fallen 75% in the past year as investor confidence in the project has vanished.
The uncertainty over the project, and the funding needed for completion, concerned Anglo American investors as the stock fell 0.9% in early trading.
“Anglo American believes that the project has the potential to become a world-class, low-cost and long-life asset,” the company said in a statement.
It added that the project suited the company’s shift toward later cycle products that “support a fast-growing global population and a cleaner, greener, more sustainable world.”
The company has until February 5 to make a formal offer for Sirius Minerals.
Looking ahead
The North Yorkshire mine is still in the development stage and needs significant investment but Anglo American has spotted an opportunity and it has the financial strength to see it through. The multinational miner has swooped in to get a potentially lucrative project on the cheap.
With the industry under scrutiny over diversifying away from coal, a move toward a fertilizer would also help the company’s green credentials. The low offer may also be tough for Sirius shareholders to turn down, with no guarantee of an improved offer and the company in desperate need.
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January 08, 2020 at 06:06PM
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Anglo American Slips as Mining Giant Mulls Bid for Struggling Sirius Minerals - Barron's
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