Mark Cutifani would be an unlikely addition to a pantheon of Yorkshire legends that includes broadcaster Michael Parkinson and controversial cricketer Geoff Boycott. But local retail investors would have the Australian chief executive to thank if Anglo American rescues Sirius Minerals. The big miner may buy the tiny one, whose overambitious scheme to extract polyhalite, a fertiliser rival of potash, ran into predictable trouble.
Hype from Sirius persuaded thousands of small punters to buy its shares, before it started running out of cash. On Wednesday the stock jumped 35 per cent on hopes of a takeover at 5.5p per share that would put a floor under their losses. Mr Cutifani’s own shareholders were less impressed — Anglo shares dipped. But the price tag for Sirius is only £386m, so that thumbs down was harsh.
Anglo is offering a 60 per cent premium to Sirius’s average share price over three months. That is little consolation for investors who bought in over the past five years. Shares barely dropped below 7p in that period and a 2018 peak valued Sirius at £1.7bn.
But a lowball takeover is a more appealing prospect than a debt-for equity swap that would have wiped out shareholders. Sirius had failed to secure financing for the next stage of its folie de grandeur. It had planned to bore a 37km tunnel under the Yorkshire Moors to take its polyhalite to port. Lex dismissed the forecast $1.5bn cost as too low in March.
Financiers also proved sceptical. Prices for agricultural chemicals have slumped and there is no established market for polyhalite.
Anglo has the balance sheet to absorb such uncertainties. Sirius’s modest price means the acquisition would rank as an option on a new commodity, and on a fertiliser price recovery. Rival BHP is betting on the latter. It has already spent some $3bn developing its Jansen potash mine in Canada. A similar investment is needed to make the Sirius mine operational, on top of $1.5bn invested so far.
Small shareholders cannot cover that. Selling to Anglo would be a phlegmatic, defensive move. Sir Geoffrey, famed for his stolid batting style, would surely understand.
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