Shares in potash miner Sirius Minerals (LSE: SXX) fell by more than 25% when markets opened this morning.
The fall was triggered by the publication of the North York Moors National Park Authority Planning Committee Report on Sirius’s York Potash mine application.
The national park’s planning officers have concluded that the York Potash application does not demonstrate the exceptional circumstances needed to justify a large industrial development in the national park.
The report says that while there is a very strong economic case for the mine, “the application has a clear and fundamental conflict with both local and national policies”.
Today’s report has been published ahead of a June 30 meeting when the application will be debated by the park’s Special Planning Committee.
Major clash
Because the mine would be located in a national park, it is subject to stricter planning requirements than most other locations.
As you’d expect, building a large mine in a national park clashes with national and local policy guidelines. The park’s planning officers have highlighted this in their report:
“… the economic benefits and extent of the mitigation/compensation offered through planning obligations do not outweigh the extent of the harm and clear conflict with the development plan”.
However, it’s clear that the park’s planning committee recognises the weight of opinion on both sides of the argument.
In their report, they emphasise “very strong local support” for the mine and say that the mitigation plans put in place by Sirius “go a long way towards moderating the impacts” of the mine.
The committee also says that the scale of the economic benefits could be of “national significance”.
No recommendation
What the national park’s planning officers are really saying, in my view, is that this is a decision above their pay grade.
Planning reports usually contain a recommendation to accept or refuse an application, but today’s report contains no recommendation.
The decision will be left to the park’s Special Planning Committee on 30 June. However, it’s possible that they will also avoid making a decision and refer the application to the Secretary of State.
Still some hope?
I suspect that the York Potash application will eventually be approved. The strong economic benefits and local support are likely to translate into strong political support at higher levels.
If the Special Planning Committee does not approve the application on 30 June, Sirius has already said that it will appeal any refusal, which means that it will be referred to the Secretary of State for consideration.
Sirius believes that such an appeal would take around nine months. I suspect that the firm would run out of cash during that time and be forced to resort to a small placing, but in the scheme of things this wouldn’t be a disaster.
However, there’s no certainty that York Potash will go ahead, and if it is eventually refused, Sirius shares will, in my opinion, be pretty much worthless.
Sirius remains a very speculative buy, and while the company is now cheaper than it was on Wednesday, the risks remain high.
