Sirius Minerals in royalty financing agreement

Sirius Minerals has entered into a royalty financing agreement for its North Yorkshire polyhalite project with Hancock British Holdings, a subsidiary of Hancock Prospecting Pty.

Under the agreement, Hancock has agreed to: purchase a royalty on the Project of 5% gross revenue on the first 13 million tonnes per annum (mtpa) of sales produced in each calendar year and 1 per cent for sales volumes above 13 mtpa in return for $250m.

It had also agreed that upon drawdown of the Royalty purchase amount, Hancock would subscribe for new ordinary shares in the Company in an amount of $50m, subject to certain conditions.

“The structure of the Royalty Financing Agreement is similar to that of the arrangements with mineral rights holders and runs for the life of the Project or 70 years, whichever is longer,” said Sirius in a statement.

“The funding obligations of Hancock under the Royalty Financing Agreement are guaranteed by Hancock Prospecting Pty Ltd.

“The Royalty Financing Agreement is conditional upon the Company completing its Stage 1 financing (taking into consideration amounts received under the Royalty Financing Agreement) and two confirmatory due diligence items which will be satisfied prior to the Stage 1 financing being finalised.

“Once completed, drawdown of funds under the Royalty Financing Agreement is conditional on, inter alia, notice having been given to Hancock that the Company has expended $630 million of the total amount of its stage 1 financing; creation of the royalty interest including the granting of certain obligations and arrangements to secure such obligations in favour of Hancock, to ensure that the Royalty attaches to certain assets which comprise the Project; all material permits, commercial arrangements and authorisations for the Project remaining in place; and other drawdown conditions typical for an agreement of this nature.”

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