IT was laudable that Anglo American was attempting to diversify its asset portfolio, including moving away from South Africa, but the proposed purchase of Sirius Minerals and its fertiliser product, polyhalite, still represented a gamble.
Polyhalite accounts for a tiny sliver of the wider potash market, even among low-chloride alternatives, largely because it contains far less potassium. That means the capacity of the Yorkshire mine dwarfs current demand, said Bloomberg News of Woodside, Sirius mine in the Yorkshire moorlands.
Anglo is offering 5.5 pence per share for a stock that traded at four times that less than a year ago. “It’s an affordable option — Anglo can easily support both the cost of the initial deal and a development spend estimated at $300m a year for the next two years,” said the newswire service.
Anglo said in a statement last week that Woodsmith had a JORC reserve of 290 million tonnes, with a grade of 88.8%, and a resource of 2.69 billion tonnes. The resource includes four of the six key nutrients that plants need to grow – potassium, sulphur, magnesium and calcium.
“The use of fertilisers is one of the most effective ways to improve agricultural yields and therefore help to address the anticipated future imbalance between food, feed and biofuel demand and supply caused by a fast-growing global population and limited additional land availability for agricultural use,” the group said.
“Sirius has indicated that the project could operate at an EBITDA margin potentially well in excess of 50% leaving the project well positioned for strong through-the-cycle profitability with a long anticipated asset life,” said Anglo in a statement.