Sirius Minerals Plc (SXX), seeking to build a $1.9 billion potash mine on the Yorkshire coast, fell to the lowest in 1 1/2 years in London trading after Jefferies Group Inc. said declining prices may jeopardize the project.
Sirius slumped as much as 32 percent to 11.25 pence, the lowest intraday since Oct. 26, 2011. It traded at 12.5 pence at 10:51 a.m. The stock has dropped 39 percent since July 29, the day before OAO Uralkali said it had withdrawn from a venture controlling almost half of the world’s potash exports.
The unraveling of the marketing group poses a new challenge to Sirius’ project and will “significantly alter the industry landscape for years to come,” Seth Rosenfeld, a London-based analyst at Jefferies, wrote in a report today in which he cut his rating from buy to underperform and reduced his share-price target to 9 pence from 30 pence.
Sirius is seeking approval from a local planning authority to build a potash mine in the North York Moors National Park in England and is yet to secure funding for the project, where it’s seeking to start production by 2017. Last month the company was granted a deferral of a critical ruling by the authority to allow it more time to respond to environmental concerns.
“With major funding hurdles on the horizon, we fear that Sirius faces a rising challenge as potash markets and prices re-set in a post-cartel world,” Rosenfeld wrote. “Coupled with delays to securing project development approval, the risk/reward balance has turned against Sirius in recent weeks.”
Potash is a key crop nutrient used to strengthen plant roots and protect them against drought. In the U.S., potash accounts for 21 percent of fertilizer used by farmers.
The price may fall below $300 a metric ton, the lowest level in at least three years, Uralkali Chief Executive Officer Vladislav Baumgertner said last week.
“Sirius will need to raise money in the near future, and with the potash price volatile, share price weak and approvals outlook uncertain, now is not a great time to do so,” Jefferies’ Rosenfeld said.
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