Market Report: Potash price war scares off investors

 

Investors in the AIM-listed Sirius Minerals who had hoped to cash in on fertiliser production from underneath the North Yorkshire moors took fright yesterday after one of its house brokers warned that a potash price war could make the project unviable.

Analysts at Jefferies rated the group underperform and slashed the price target from 30p to just 9p as they warned on the potential new risks for the proposed potash mine under the national park. When the note was released Sirius plunged more than 30 per cent. Later in the afternoon, Sirius issued an update on its position and said the brokerage contract with Jefferies had already been terminated. The broker’s three month notice period ends on 26 August.

Sirius – which has attracted hundreds of small investors and first-time shareholders from around the site of the proposed mine – faces "major funding hurdles" and a "rising challenge" as potash prices reset, Jefferies said in its note.

Changes in the crop nutrient market, caused by the split of specialists Belaruskali and Uralkali – who were partners for eight years in a venture that held 43 per cent of global potash exports – spells bad news for others, the analysts added. The end of the partnership could mean a price war.

Experts predicted the price of potash could drop 25 per cent to below $300 a tonne. Jefferies argued that the price war, coupled with delays in securing project development approval means "the risk/reward balance has turned against Sirius in recent weeks".

The mining company has also experienced a difficult time of late as it seeks approval from the local planning authority. It plans to get approval to start production by 2017. Last month it got a deferral of a critical ruling by the authority to allow it more time to respond to environmental concerns.

Sirius defended the situation and said that "there are no significant or fundamental environmental issues… that cannot either be addressed or mitigated". But many investors decided not to take risks and shares dropped 1.5p, or 9 per cent, to 15.38p – its lowest in a year.

The wider market was in the red as traders worried that the US might change its monetary stimulus programme this year, prompting the FTSE 100 to drop 15.37 points to 6,604.21.

Contrasting news over dividends dominated the top and the bottom of the benchmark index.

Investors were rushing to check into the giant Intercontinental Hotels Group after it announced a return of $350m (£227.8m) to shareholders.

Punters had been expecting Intercontinental to return cash after a $500m buyback announced last year, but not this soon or so much. Consequently, shares in the group climbed 122p to 2,030p, bolstered in afternoon trade when the US market opened.

News of the special dividend came as the business also provided a set of first-half results that were ahead of City expectations on both sales and margins.

At the other end of the Footsie, bad news on a payout left the Mexican gold and silver miner Fresnillo buried in last place. It fell 112.5p to 924.5p after announcing a half-year dividend much lower than last year and at the same time reporting a drop in first-half profits.

One strong performer was the testing and inspection specialist Intertek after analysts at RBC Capital raised its rating to "sector perform" from "underperform" with a 3,050p price target for shares that added 73p to 3,158p.

The British aircraft parts-supplier Meggitt said its first half is in line with expectations but analysts at Jefferies said they remained "wary" and rated the Airbus and Boeing parts supplier a hold with a 365p price target for shares, which slipped 10.5p to 544p.

The mid-cap online gambling outfit 888 Holdings struck a deal to provide online gaming with Caesars Interactive Entertainment when the US state of New Jersey relaxes its gambling rules. Numis said 888's "routes to enter the US poker markets are now clear in Nevada, Delaware and New Jersey". 888's shares were up 3.6p at 165.9p.

The AIM-listed e-commerce software provider @UK said its half-year results will be in line with expectations and it produced a 2.75p gain to 13p. Walker Greenbank, the wallpaper group, reported an upbeat set of half-year results and it advanced 2.5p to 138p. The animal food supplier NWF rose 4.5p to 120p after revealing record profits.

Newly listed financial trading platform group Plus 500 got a boost from its advisor Liberum Capital which rated it a buy with a 180p target price for shares that were 3p better at 135.5p.

Start your day with The Independent, sign up for daily news emails
News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
News
politicsIs David Cameron trying to prove he's down with the kids?
News
Businessman at desk circa 1950s
news
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea