25th Oct 2016 06:49
LONDON (Alliance News) - Sirius Minerals PLC on Tuesday said it has entered into a royalty financing agreement for its vast polyhalite project being advanced in North Yorkshire, forming an important part of the miner's financing needs for the first phase of development.
The polyhalite project is being financed and developed in two stages by Sirius in order to minimise the financial requirements of the huge development, which will produce product used in agricultural markets once up and running.
Sirius has signed the royalty financing deal with Hancock British Holdings Ltd, part of Hancock Prospecting Pty Ltd, a privately owned company which operates in the mining and agricultural sectors.
"We are delighted to have signed this agreement with such an experienced party in the mining industry, as well as one that has very successful and strong leadership and a long term and growing agricultural interest," said Sirius Managing Director and Chief Executive Chris Fraser.
Under the agreement, Hancock will purchase a 5.0% royalty on the gross revenue generated by the project through the first 13.0 million tonnes of production each year, with that royalty dropping to 1.0% on production past that 13.0 million tonne mark.
In return for the royalty, Hancock will provide Sirius with cash of USD250.0 million, and will also subscribe to new shares in Sirius worth a further USD50.0 million.
Sirius said the deal will run for "the lift of the project or 70 years, whichever is longer".
The London-listed miner will have to secure the necessary funding needed for the first phase of development for the agreement to be finalised. Sirius said it can only drawdown the funds from Hancock once it has proven it has spent at least USD630.0 million of its stage one financing.
Sirius said the royalty financing agreement is an "important component" of its capital funding plans, and said a further announcement will be made when appropriate.
By Joshua Warner; [email protected]; @JoshAlliance
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