Sirius Minerals has shelved a 500 million US dollar (£400 million) fundraiser, casting a shadow over plans to construct a giant fertiliser mine in North Yorkshire.

Shares in the mining firm plummeted in early trading, shedding more than half of its value, after it said it would be scaling back production at the site near Whitby and launching a strategic review.

The company said it believes its major bond offering cannot go ahead "in current market conditions" and will launch the "comprehensive" review over the next six months to assess different ways to secure the necessary funding for the project.

Sirius also said that, although it has enough cash to cover the review process, it will also have to return 400 million dollars (£322 million) it raised through a bond earlier this year.

Last month, Sirius said it could run out of cash by the end of the year if it did not secure the necessary funds to unlock a 2.5 billion-dollar (£2 billion) credit facility from JP Morgan.

After failing to secure the necessary funds, the London-listed business said the UK Government rejected an appeal for one billion dollars in bonds.

The funding would have "enabled the company's financing to be delivered as planned" for the potash project which would deliver hundreds of jobs, Sirius said.

Chris Fraser, managing director and chief operating officer of Sirius, said: "Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our stage 2 financing plan.

"As a result, we have taken the decision to reduce the rate of development across the project in order to preserve funding to allow more time to develop alternatives and preserve the significant amount of inherent value in this world-class project.

"This is the most prudent decision to give the company the time necessary to restructure its plans to move the project forward."

Redcar MP Anna Turley said the news was a devastating blow for the region.

She said: "The Sirius project is a major global investment providing over 1200 jobs on Teesside and North Yorkshire and is one of the largest infrastructure project in Europe.

"That the government are refusing to step in and secure this enormous project is an absolute disgrace. This failure lays squarely at their feet.

"It seems no finance was being sought from government immediately - just security in 18 months time for Sirius to be able to issue their bonds now.

"Other countries would bend over backwards to support this kind of global project on their doorstep. All projects of this scale need proper support and engagement from governments.

"Boris Johnson’s government is completely clueless and dysfunctional right now. Brexit is damaging Britain’s competitiveness and reputation. And yet again it is the workers of Teesside, and the industry and economy of the north which suffers.

"What is the point of having Treasury ministers on Teesside when the Treasury not supported a project like this? Tory warm words about commitment to Teesside and a Northern Powerhouse are ringing hollow today.

"This is not a government committed to an industrial strategy for Britain or with a vision for the north that includes investment, jobs and prosperity, or they would step in immediately.

"This government owes everyone involved an apology. It’s not too late to change their minds and step in to save this huge project and the jobs and livelihoods that rely on it."

Middlesbrough South and East Cleveland MP Simon Clarke defended the government's efforts to support the business.

He said: “The Woodsmith Mine is a project that has great potential not just for Whitby but for our economy here on Teesside.

"Today’s news is clearly unwelcome but it will keep all options open as the company seeks to unlock the credit it needs.

"The Government will always work to support businesses where there is a way to do so that meets the rules which exist to protect taxpayers’ money. We have seen that already this summer with British Steel.

"Sadly in this case that was not possible. I know how hard the Government has worked to find a way forward. No stone has been left unturned.

“Everyone in the Tees Valley will wish the project every success and hope it can overcome these challenges.”

And Tees Valley Mayor Ben Houchen added: "I have been working extremely closely with Sirius and have been speaking with them on a daily basis to help them through this difficult time. I will continue to do so to ensure that this unique project become the success we all know it can, and will be.

“Clearly today’s news is disappointing, however I remain confident in the project and the huge benefits it can bring the Tees Valley and I believe the team at Sirius will be able to secure the funding they need to continue this major development. As a great local business Sirius has the resilience and grit to get through this.

“Make no mistake this is a unique, long-term and complex project. This is the biggest private investment in the north of England and any project of this type is going to have its ups and downs, but there is still a future for the mine, and it will continue. This is far from the end.

“I’m in daily contact with Chris Fraser, Sirius’ Managing Director, and remain confident that the truly transformational benefits this project can deliver for our region can and will be delivered. I will continue to do all I can to support this once in a generation development.”

Graham Spooner, investment research analyst at The Share Centre, said: "The long-awaited news from Sirius Minerals regarding its future financing this morning will have made difficult reading for the raft of private investors who were attracted to the first major mine in England for a long time.

"With cash running out fast, investors will be fearing for the future of the mine and remain cognisant that the recent history of mining in the UK has been littered with failures."

Shares in the company fell 55% to 4p in early trading.