Watchlist
Sirius Minerals #SXX SUSPENDED – Anglo American have reached agreement on the terms of a recommended cash acquisition The scheme of arrangement for the cash offer should become effective tomorrow, 17 March. Sirius Minerals’ listing will be cancelled tomorrow as a result of the offer. Given the developing global situation it is a good that Sirius shareholders did not vote down the offer by Anglo American. Anglo American has sufficient access to capital to complete the development of the Woodsmith mine, though we reckon management will further optimise the project before construction restarts. Todays’ rate cut in the US is helpful for Anglo and other miners which are suffering from significantly lower base metals prices, though iron ore prices which are a key driver rose on Friday to $88.4/t from $86.2/t . Conclusion: Investors should be wary of companies looking to develop large-scale projects with unrealistic financing plans. Sirius was unusual as well as unrealistic in the level of its financing ambitions. Investors should also be wary of companies which are looking to sell significantly more product into a market than it currently supports which we see as a significant risk particularly through commissioning. There are speciality minerals where we expect future demand to significantly outstrip current supply, such as with rare earth minerals, neodymium and praseodymium which are key magnet metals in Electric Vehicles. Nickel and Tin are also seen as beneficiaries of the new Electric Vehicle revolution with new demand expected to outstrip current supply as EV Li-ion battery production ramps up. We also expect Vanadium and Niobium to also see significant increases in demand from new construction and in the case of vanadium new Vanadium Redox Flow Battery demand.
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