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Berenberg slashes target price on Sirius Minerals as funding woes continue
1st Oct 2019 11:32
(Sharecast News) - Analysts at Berenberg slashed their price target on fertilizer development company Sirius Minerals from 17p all the way down to 4p on Tuesday, citing increased uncertainties regarding the firm's finances.
Sirius Minerals revealed in August that the timescale previously given for its proposed $500m high-yield bond issue would no longer be maintained and Berenberg pointed out that offering had been key to the group unlocking a $2.5bn revolving credit facility that would have secured financing for its Woodsmith mine project.
With the company now indicating that it will pump the brakes on its pace of construction in order to satisfy current liquidity constraints and initiate a process to secure strategic investment, Berenberf said a strategic investor appeared to be "the only lifeline left for the company".
Berenberg, which reiterated its 'hold' rating on Sirius, also noted that financial backing from the UK government appeared "unlikely".
"It appears that government guarantees or backing are unlikely for the foreseeable future, especially if the current political uncertainty persists," said Berenberg.
"Given the increased uncertainty about financing, we reduce our assumption about the probability of completion of the mine to 25% (from 50%) and assume further delays to start-up."
Sirius Minerals revealed in August that the timescale previously given for its proposed $500m high-yield bond issue would no longer be maintained and Berenberg pointed out that offering had been key to the group unlocking a $2.5bn revolving credit facility that would have secured financing for its Woodsmith mine project.
With the company now indicating that it will pump the brakes on its pace of construction in order to satisfy current liquidity constraints and initiate a process to secure strategic investment, Berenberf said a strategic investor appeared to be "the only lifeline left for the company".
Berenberg, which reiterated its 'hold' rating on Sirius, also noted that financial backing from the UK government appeared "unlikely".
"It appears that government guarantees or backing are unlikely for the foreseeable future, especially if the current political uncertainty persists," said Berenberg.
"Given the increased uncertainty about financing, we reduce our assumption about the probability of completion of the mine to 25% (from 50%) and assume further delays to start-up."