Anglo American is likely to confirm a deal to buy fertilizer company Sirius Minerals for more than $500mn excluding debt, ahead of an early February deadline to finalise its bid.
Anglo said last week that it was in advanced talks over a 5.5 pence ($0.7138) cash offer for the venture that is Britain’s biggest mining project.
Sirius’ share price rose more than a third when Anglo announced its indicative offer and it closed at 5.4 pence on Tuesday.
Reuters reports that sources close to the matter said that a bid is likely in the coming days. The company has until February 5th to make a firm offer or walk away. Anglo declined to comment and Sirius was not immediately available to comment.
A deal would throw a lifeline to Sirius and is politically resonant as it would save hundreds of jobs in northern England, where the lack of opportunities was an issue in the election that returned Prime Minister Boris Johnson’s government to power.
The deal would also diversify Anglo American’s portfolio and mark its return to fertilizer. It sold its remaining fertilizer project in Brazil in 2016 when it was recovering from a commodity market crash.
Sources said the two companies have been in talks for the last nine months. They said Anglo is unlikely to increase its offer.
“There is significant value that Anglo can capture with the discount that Sirius trades at, because they can bring financing and knowledge on how to push the project forward,” said RBC analyst Tyler Broda.
Anglo will have to invest more than $3bn over five years. This is modest compared with the $8.8bn cost of its Minas Rio iron ore project in Brazil, which it bought at the top of the cycle.