14th Sep 2018 08:36
LONDON (Alliance News) - Sirius Minerals PLC on Friday said it has agreed a drawdown of USD250 million relating to its royalty agreement with Hancock British Holdings Ltd.
The mining company entered a minerals royalty deed with Hancock back in October 2016, which has a USD250 million royalty component and a USD50 million equity component.
The royalty component will be drawn down by Wednesday next week and will be used to fund development of the company's Woodsmith polyhalite project in Yorkshire until the second quarter of 2019. At that point, the equity component will be provided, forming part of the project's second financing stage.
Under the minerals royalty deed, Hancock is entitled to a 5% royalty on gross revenue from the first 13 million tonnes per annum of production from the polyhalite project, and a further 1% royalty on all excess revenue.
Once the drawdown takes place Hancock has the right to observe all Sirius's board meetings.
Hancock will also have the right to appoint a director to the Sirius board once the equity component is provided. At that point, Hancock will hold a 4% stake in the company. Hancock's retaining of its Sirius stake is a prerequisite for its right to appoint a director to Sirius.
Polyhalite is a type of salt that is used in fertilizer.
"The drawdown of the Hancock royalty is another important milestone as we develop into a leading fertilizer business. We are delighted to have an experienced partner in the mining industry aligned to Sirius and one that has a growing, long term agricultural interest. The long-term nature of the royalty investment is well aligned to the underlying characteristics of this world-class, long-life asset," said Sirius Chief Executive Chris Fraser.
Shares in Sirius were trading up 2.7% at 27.80 pence on Friday morning.
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