Sirius Falls in London as Jefferies Says Potash Mine at Risk

Sirius Minerals Plc, seeking to build a $1.9 billion potash mine in the U.K., fell to the lowest level in almost a year in London after Jefferies Group Inc. said falling prices for the commodity may jeopardize the project.

Sirius fell 9.1 percent to 15 pence, the lowest since Aug. 22 last year, after earlier declining as much as 32 percent. The stock has dropped 29 percent since July 29, the day before OAO Uralkali said it had withdrawn from a venture controlling almost half of the world’s potash exports. Sirius today said it had terminated its brokerage contract with Jefferies.

The unraveling of the marketing group poses a challenge to Sirius’s project and will “significantly alter the industry landscape for years to come,” Seth Rosenfeld, an analyst at Jefferies, wrote today in a note in which he cut his rating to underperform from buy and price estimate to 9 pence from 30.

Recent comments from Uralkali, the biggest producer, have “caused concern and uncertainty in the market,” Sirius said today in a statement after the Jefferies report. The company’s project is “financially robust on a range of pricing scenarios and has an operating cost projected to be at the bottom of the industry cost curve,” it said.

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.

Funding Hurdles

“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,” Rosenfeld said.

Jefferies will cease to be a broker for the company on Aug. 26 at the end of its contractual three-month notice period, Sirius said today.

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