Shares tanked in fertiliser group Sirius Minerals after bosses said they needed up to £463m to finish its Yorkshire potash mine.
The company said a 23-mile tunnel transporting mined polyhalite to the coast for export needed to be made wider and have its lining thickened, taking total costs to £3.1 billion.
Bosses also flagged a slower ramp up in production at the mine. Shares dived nearly 20 per cent in morning trade, and closed down 16.41 per cent, or 5.36p, wiping £251m off the value of the company
Short of cash: The company said a 23-mile tunnel transporting mined polyhalite to the coast for export needed to be made wider and have its lining thickened
Russ Mould, investment director at AJ Bell, said: ‘One of the worst things to happen to a mining company and its shareholders is the need to revisit calculations for building a new project.
‘Constructing a mine can be costly and it certainly isn’t unusual for miners to lift their capital expenditure requirements by a million dollars or so during advanced development stages.
‘However, when additional funding requirements are a nine figure sum, you’re looking at serious embarrassment.’
Sirius is already trying to raise around £2.3 billion in debt financing this year. It has lenders for around £1.1 billion who will release funds when others commit. It marks a setback for the business which has risen from a hopeful AIM stock to a FTSE 250 business in just seven years.
It got going in 2010 when geologists Dr Rick Smith, Peter Woods, and chief executive Chris Fraser spied an opportunity to mine for the fertiliser polyhalite, a form of potash, in the North York Moors.
There are an estimated 2.6 billion tonnes of polyhalite in the mine and Fraser and his team believe they can sell it to farmers around the world, helping feed millions.
Sirius believes the mine will create thousands of jobs and generate £100 billion for the UK economy over the next 50 years.
Some analysts question whether there is a big enough market for the product, however, and whether the company can open the mine on budget and on time in 2021. With the mine now being built, bosses have struck deals to sell the fertiliser to companies including Archer Daniels in the US and Wilmar Group, which will distribute in South-East Asia.
Announcing the cost upgrades yesterday, Sirius also said it had hired Austrian company Strabarg to build the tunnel at a fixed price. Fraser said: ‘The project’s economics remain extremely compelling and we are confident they support the expected additional funding requirement.’