18/09/2019 - 12:56

Rinehart’s $340m potash investment in strife

18/09/2019 - 12:56

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Gina Rinehart’s Hancock Prospecting may have to pour more funds into the severely cash-strapped UK-based Sirius Minerals, after the company shelved a $US500 million bond issue for a multi-billion dollar potash project in the UK, blaming factors such as a lack of government support and Brexit uncertainty.

Rinehart’s $340m potash investment in strife
Gina Rinehart (left) with officials from Sirius Minerals. Photo: Hancock Prospecting

Gina Rinehart’s Hancock Prospecting may have to pour more funds into the severely cash-strapped UK-based Sirius Minerals, after the company shelved a $US500 million bond issue for a multi-billion dollar potash project in the UK, blaming factors such as a lack of government support and Brexit uncertainty.

In October 2016, Hancock struck a deal to pay $US250 million ($A342 million) for a 5 per cent royalty of the first 13 million tonnes of production from the $US4.2 billion Woodsmith potash mine, which would fall to a 1 per cent royalty after this production milestone was met.

Mrs Rinehart indicated she could use the product at her Australian agricultural operations, which include the Kidman cattle properties.

However, last September, the Hancock funding was pushed forward to help pay for a $690 million cost blowout.

Hancock also agreed to purchase $US50 million ($A73m) in Sirius shares, but this investment has not yet been executed.

The lack of investor interest into the now-scrapped $US500 million bond issue also means that a broader $US2.5 billion funding package has been postponed indefinitely.

Additionally, the UK government has refused to give a guarantee over $US1 billion worth of bonds for the project.

About 1,200 current employees are at risk if the project is cancelled.

It's anticipated the project will provide 2,500 operational jobs if it overcomes the financing hurdles and goes ahead.

Sirius’s share price on the London Stock Exchange collapsed by 53 per cent on the announcement.

Sirius chief executive Chris Fraser said poor market conditions and the UK government pulling its support led to the decision to scrap the bond issue.

“Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our stage 2 financing plan,” he said.

“The government has reviewed the case for the provision of the support requested to facilitate the financing of the project and has decided not to provide the support requested. 

“The company believed this commitment would have enabled the company's financing to be delivered as planned.”

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