(Bloomberg) — A decade ago, a UK startup’s plan to build a $4 billion mine more than a mile under the North Sea caught the nation’s imagination. It became a retail shareholder sensation and promised riches for many landowners. But when the company failed to raise the last piece of financing, it all came crashing down.
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For the last three years, the giant fertilizer project — which would be the UK’s biggest mine in more than four decades — has largely sat on ice, drifting from the public consciousness as its new owner Anglo American Plc figured out what to do with it.
Today it provided the answer. After taking a $1.7 billion writedown on the mine, Anglo unveiled its plans to spend almost $5 billion to bring the project into production by 2027, a decision that will likely secure thousands of jobs in one of the country’s poorest regions and become a major engine of growth for the company.
One of the world’s top mining companies, Anglo was attracted by the huge size of the deposit combined with the longer-term prospects for fertilizer demand. About 1.8 billion tons of a fertilizer called polyhalite are sitting more than 1.5 kilometers below the surface, and stretching out under the sea, which could be mined for more than 40 years. Demand for crop nutrients is expected to keep growing as a rising global population boosts food consumption.
“This resource is so unique, it’s one of a kind in terms of its size and shape,” Anglo Chief Executive Officer Duncan Wanblad said in a Bloomberg TV interview on Thursday. “We will be able to bring some very, very profitable fertilizer on to the market.”
Sirius Minerals Plc, the mine’s previous owner, became a retail investor darling when it started fundraising for the project. Across the UK, regular people poured money into the company while the planned mine gained an almost cult-like following in North Yorkshire — in addition to buying shares, many locals saw the prospect of life-changing royalties on the mineral rights that fell on their land. Others simply hoped for jobs.
The overwhelming support helped Sirius win a license to build the project despite being in a National Park and overlooking the seaside town of Whitby, the setting for part of Bram Stoker’s “Dracula.”
But then Sirius ran out of money, and Anglo eventually stepped in with an offer.
While investors lost out — the takeover price was well below the heights at which many had bought their shares — Anglo’s decision to press ahead will be a major boon for the region and the wider UK. The project will likely employ more than 1,000 people once in full production and become a major exporter.
A $4 Billion Mine Was Meant to Lift Northern England. Instead Locals Lost Big
The investment in the Woodsmith project also forms part of a wider shift at the world’s biggest miners, as they retreat from fossil fuels and seek growth in commodities like fertilizers and metals that are needed for the green-energy transition.
Anglo has written down the value of the project to reflect a change in the way it will be developed, compared with Sirius’s plans.
When Anglo bought Sirius in a half a billion dollar deal it was always likely the project would be delayed and changed. The smaller firm had been rushing to get into production as fast as possible, and Anglo has spent the last three years looking at ways to develop the project more strategically.
The result is that Anglo will now look to start production in 2027 after spending about $1 billion a year on top of the $2.6 billion it has already spent. That will allow it to target annual production of 5 million tons of fertilizer a year, with the capacity already built into crucial infrastructure such as the shafts, and to ultimately expand it to 13 million tons a year.
Polyhalite, or Poly4, is a type of potash found under the North Sea. It’s a relatively unknown type of fertilizer, so Anglo faces the additional challenge of proving how big the market will ultimately be.
Anglo’s plans also come at a time of massive volatility in global fertilizer markets. Prices spiked last year after Russia’s invasion of Ukraine threw the world’s crop-nutrient sector into disarray. While prices have since eased, the long-term outlook remains strong as the global population and its demand for food grows.
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