Sirius had planned to secure a debt financing package for the $3 billion (£2.3 billion) Woodside project - one of the largest mines to be built in Britain for years - from the government, with the rest funded by the market.

The mine has been touted by British Prime Minister Theresa May as the kind of project that fits "the northern powerhouse" -- a government scheme to boost investment and jobs in the north of England. In January, finance minister Philip Hammond said discussions on government backing for the project were ongoing.

But uncertainty over the timing of government funding prompted Sirius to turn to the market for a more expensive financing package, the source said, asking not to be named as he is not authorised to speak publicly.

On Tuesday the company launched a $3.8 billion (£2.9 billion) financing plan provided by J P Morgan Cazenove, which includes a share offering, a convertible bond issue, a senior secured bond deal and a revolving credit facility to fund the project, which would access a deposit of potash in the form of polyhalite.

"The funding costs are higher, but the timing was uncertain on the project financing, and the company needed to conduct the project as fast as it possibly could. This provides a solution," said the source.

"With the project financing, there was a risk it could take too long and the company would have to pause the project, so it was decided to go with the option that was more expensive but more timely."

The company had revised the expected project costs including financing to $3.4-$3.6 billion in September. As a result of the banks requiring a larger contingency, and the additional financing costs, the company plans to raise $3.8bn.

Market funding also gives the company more flexibility, he said, as the company could draw down the funds in stages, rather than have one amortising loan maturing at a specific date.

"It looked like effectively the government was dragging their heels and because of the pressures of the time lag, Sirius decided to go down this (markets) route," said Richard Knights, an analyst at Liberum Capital.

He added that the extra cost is almost irrelevant given the size of the project and the potential margins involved.

Sirius shares were down 26 percent on the week at 16.11 pence.

Britain's decision to leave the European Union stoked expectations among some in the mining sector that they would be in line for support from a government keen to build Britain’s own mining and manufacturing base, but so far government support has been largely limited to words, not cash.

The mining sector can struggle to raise finance for its capital intensive projects that usually take years to deliver returns and sometimes resorts to exotic financing solutions.

Sirius has the added difficulty that its project is based on a product largely untested in a market used to other forms of fertiliser.

It says its polyhalite, which contains four of the six nutrients that ensure plant growth, is superior, but farmers can be conservative and reluctant to pay a premium for an unfamiliar product.

"Sirius faces more challenges than most. Principally, this is because polyhalite remains a niche fertiliser product, the market for which in 2018 was around 30 times smaller than Sirius' planned production," said Humphrey Knight, potash analyst at business intelligence company CRU.

Polyhalite can be used as a fertiliser and has other potential industrial applications. Sirius has signed supply deals to buyers in Europe, South America, China and Africa.

Chris Fraser, chief executive officer of Sirius said in a statement earlier this week the financing package "provides a clear pathway to a fully financed project in the months ahead while enabling us to progress construction at full speed".

The company was not immediately available for further comment.

(Reporting by Abhinav Ramnarayan, Additional reporting by Barbara Lewis and William James; Editing by Sujata Rao and Louise Heavens)