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Regulatory Story
Company Sirius Minerals plc
TIDM SXX
Headline Q4 Progress Update
Released 07:00 22-Jan-2019
Number 6993N07

RNS Number : 6993N
Sirius Minerals plc
22 January 2019
 

 

22 January 2019

 

Sirius Minerals Plc

Q4 progress update

§ The stage 2 financing is making progress towards obtaining commitments from lenders

§ Significant construction progress during the period

§ Procurement completed for the major construction packages to support stage 2 financing

§ Completion of the Cibra strategic investment

§ The Company remains on track to achieve first polyhalite and commercial production on time and in line with the cost schedule announced on 6 September 2018

 

Sirius Minerals Plc ("Sirius" or the "Company") provides its latest quarterly progress update.

Chris Fraser, Managing Director and CEO of Sirius, commented:

"2018 was a year of significant progress for the Company.  Completion of procurement to support the stage 2 financing and the signing of an additional 4.8 Mtpa of take-or-pay supply agreements, have been substantial achievements.  Considerable progress has been made across all our construction sites and development activities are advancing at pace.  More than 800 people are now employed on the Project, demonstrating the transformational potential for jobs and growth in the local area.

"Executing our stage 2 financing plan remains our priority.  We continue to make progress towards obtaining stage 2 financing commitments and are working constructively with all relevant parties to achieve this.  The process with the lenders is continuing this quarter as we work through the due diligence reports with the lending group and progress discussions on the revised debt structure."

Safety

The Project's Lost Time Injury Frequency Rate ("LTIFR") stands at 3.54.  The LTIFR is a measure of lost time incidents per million man-hours on a twelve-month rolling average basis.  The Company continues to work closely with its employees and contractors to continually improve safety at all locations.  To date, the total Project working hours exceed 2.5 million.

Stage 2 financing

The Company is making progress with the US$3.0 billion (£2.4 billion) debt component of the stage 2 financing. 

The Company has been engaging with prospective lenders throughout the process and has revised certain aspects of our proposed US$3.0 billion stage 2 senior debt financing to modify the credit risk allocation amongst the various prospective lenders.  The original structure contemplated two equal tranches of debt, one commercial bank tranche and one IPA guaranteed tranche, which would be drawn on a broadly pro-rata basis and also rank senior secure, pari passu.  Our new structure contemplates three tranches of debt, totalling US$3 billion in aggregate, that will rank senior secure, pari passu, but will be drawn sequentially linked to key construction milestones.  The first tranche will be an uncovered debt capital markets tranche, the second a commercial bank tranche, followed by the third being the IPA guaranteed bond tranche.  This structure is designed to reduce both the risk and the quantum of any IPA guaranteed bond tranche to the taxpayer as by this time we will be past the major construction risks and POLY4 sales underway.

A group of lenders and the IPA will be working closely with the Company and the lenders' advisors to work through the due diligence reports and the detailed terms and conditions of the structure and the financing.  The Company is working towards having agreed commitment letters as soon as possible.

Due diligence reports have been prepared by the lenders' advisors and the Company is engaging with prospective lenders and their consultants to address the due diligence matters that have been highlighted.  The Company believes that the due diligence undertaken by the lenders' advisors supports the Company's Project cost estimates announced on 6 September 2018.

The Company is confident of being able to address the due diligence items highlighted by the respective consultant reports through negotiation of the detailed terms of the finance documents.   

In relation to the additional capital the Project requires, the Company continues to progress all options previously outlined with a view to securing the additional capital in a manner which complements the senior debt financing and meets the liquidity requirements of the Project. 

The Company's cash balance as at 31 December was £290 million, of which £230 million is unrestricted, which provides sufficient liquidity to fund project progress in line with the current Project schedule into the second quarter of 2019.  

Project schedule

The Company remains on track to achieve first polyhalite and commercial production on time and in line with the cost schedule announced on 6 September 2018.

Construction progress

Considerable progress has been made at the Company's construction sites in the quarter.  At the Woodsmith Mine site, the service shaft foreshaft excavation is now complete to 44m and is expected to reach the final depth of 45m in January 2019.  The service shaft winder house basement is complete, with the connecting walls to the shaft and upper floor currently being installed.  The service shaft permanent winder has been fabricated ready for delivery to site.

The production shaft D-walls have been installed and excavation of the main production shaft foreshaft has commenced in line with our 2018 milestone.  A total of 7.2km of D-walls have been installed across the production and services shafts. 

The Vertical Sinking Machine ("VSM") being used to construct the Mineral Transport System ("MTS") access shaft was launched in October 2018, consistent with the Company's milestone for 2018.  The MTS access shaft has been sunk to a depth of 63m and sinking activities are progressing smoothly following some initial commissioning issues.  Since late November cutting rates have increased by 25 per cent. and improvements are ongoing.  The current VSM operational performance has provided the Company with further confidence in the assumed advance rates for the shaft boring roadheaders that will be used to sink the main service and production shafts. 

At Wilton, the MTS portal has been completed and tunnelling activities have commenced, satisfying the 2018 Company milestone for this activity.  Current tunnelling activities are progressing using conventional excavation techniques with 13m of tunnel completed.  The drive 1 tunnel boring machine ("TBM") is expected to arrive at site during Q1 2019.  It is anticipated that approximately 125m of drive 1 will be completed prior to commencing tunnelling with the TBM in order to reach competent Redcar mudstone through which the TBM will be launched. 

At Lockwood Beck, preparatory works for shaft sinking are well advanced, with DMC Mining Services preparing to commence initial excavation works in early Q1 2019.  This represents a minor delay against the 2018 milestone of commencing excavation.  Preparatory works undertaken so far include the establishment of the shaft sinking platform and a shaft collar to 20m depth, the installation of a grout curtain to a depth of 60m and the commencement of piling for the temporary headframe and winder house and associated site infrastructure.

Earthworks are underway at the materials handling facility ("MHF") in Wilton, consistent with the 2018 milestone, and site preparation activities are currently progressing on schedule. 

Procurement

One of the most significant achievements during the quarter was the completion of procurement for the major construction packages related to the stage 2 senior debt financing process.  In November 2018, an engineering, procurement and construction contract for the development of the Company's port handling facility on Teesside was entered into with McLaughlin & Harvey Ltd.  The Company also varied its existing MTS tunnelling contract with STRABAG AG to include the engineering, procurement and construction of the fit-out of the Company's MTS.  The signing of these contracts marked the completion of procurement of the major construction packages.  Through its procurement programme, the Company has established strong partnerships with world-leading constructions companies to develop the Woodsmith Mine and associated infrastructure.

Sales and marketing

During the fourth quarter of 2018, the Company completed the acquisition of a 30 per cent. equity interest in each of the Cibra Group Companies for 95,000,000 ordinary shares in Sirius (the "Strategic Investment").  The Strategic Investment is linked to the supply agreement with the Cibra Group Companies for the resale of 2.5 million tonnes per annum ("Mtpa") in peak aggregate volumes of POLY4 into Brazil and certain other South American countries.  The agreement provides the Company with access to a globally important and fast-growing fertilizer market and takes the total peak aggregate take-or-pay supply agreements entered into to 8.2 Mtpa.

The Company continues to progress key commercial discussions in a number of regions across the world.  Negotiations in Europe are well advanced and concluding a European take-or-pay supply agreement remains the Company's current sales and marketing priority.

The Company continues to grow its agronomy programme initiating 44 new agronomy trials in the fourth quarter of 2018 and a total of 110 new trails in 2018.  The trials have continued to demonstrate, in line with previous trials, that POLY4 increases crop yields compared to existing fertilizer practices in a range of conditions.  The total number of trials established by the Company now stands at 382 on 42 crops in 28 different countries. 

Investor webcast

Sirius Mineral's Chief Executive Officer, Chris Fraser will host a webcast for investors and analysts at 9.30am today.

The webcast can be listened to live by clicking on the link below.  A replay will be available on the Company's website in due course.

https://event.on24.com/wcc/r/1912734-1/C52A582538DF5E4A4323798618F09325

For further information, please contact:

Sirius Minerals Plc

Investor Relations

Jennifer Wyllie, Tristan Pottas

Email: ir@siriusminerals.com

Tel: +44 845 524 0247

Media enquiries

Edelman

Alex Simmons, Ed Brown

Email: Siriusminerals@edelman.com

Tel: +44 7970 174 353

Tel: +44 7540 412 298

 

Performance against milestones for 2018

The Company set out key milestones for 2018 at the beginning of that year.  Performance against these milestones is summarised below.

Milestone

Status

Progress

Construction



Complete the installation of the main production shaft foreshaft and commence foreshaft excavation

Complete

·     Diaphragm walling activities complete

·    Excavation for the construction of the capping beam and production shaft winder basement commenced

Complete main service shaft foreshaft construction and excavation

Incomplete

·    Service shaft foreshaft currently excavated to a depth of 44m and expected to be completed to 45m before the end of January

Commence Mineral Transport System ("MTS") access shaft construction at the Woodsmith Mine site

Complete

·    MTS shaft sinking progressed to a depth of 63m

Largely complete construction of MTS portal at Wilton

 

Complete

·     MTS Portal fully piled, and the first two sections of the tunnel boring machine launch ramp constructed

·    Tunnelling activities have commenced with 13m of tunnel constructed

Commence shaft sinking at Lockwood Beck intermediate shaft site

Incomplete

·     Shaft sinking preparatory works are well advanced in preparation for excavation to commence

·    Excavation works will commence early in Q1 2019

Commence early works for the Materials Handling Facility

Complete

·    Site preparation works commenced

 

Finalise harbour facility strategy and complete procurement

Complete

·     Materials handling agreement signed with Redcar Bulk Terminal Limited to provide port and ship loading services for up to 10 Mtpa of POLY4

·    EPC contract signed with McLaughlin & Harvey in November 2018 for the development of the Company's port handling facility at Teesside

Sales and Marketing



Expand global agronomy programme and establish 80 new trials

Complete

·    110 new trials established in 2018 across 21 countries and 32 crops

Execute 2 Mtpa incremental supply agreements

Complete

 

·    Total of 4.8 Mtpa peak aggregate volume take-or-pay supply agreements entered into in 2018 for the supply of POLY4 into Nigeria, China, Brazil and certain countries in South America

Corporate and commercial



Substantially complete project procurement

Complete

·    Procurement for the major construction packages to support stage 2 financing completed in November 2018

Draw down the stage 1 financing royalty instrument

Largely complete

·     US$250 million royalty investment proceeds received in September 2018

·    US$50 million equity component to be provided once stage 2 financing commitments are obtained to fully fund the initial 10 Mtpa development of the Project

Execute stage 2 financing

Incomplete

·     Due diligence is ongoing

·     The Company is working towards obtaining commitments from lenders as soon as possible

 

About Sirius Minerals Plc

Sirius Minerals Plc is focused on the development of the Woodsmith Mine, which will access the world's largest and highest grade polyhalite deposit located in North Yorkshire, United Kingdom.  Polyhalite is a unique multi-nutrient fertilizer, which can be used to increase balanced fertilization around the world.  Sirius Minerals' shares are traded on the Premium List of the London Stock Exchange.  Its shares are also traded in the United States on the OTCQX through a sponsored ADR facility.  Further information on the Company can be found at: www.siriusminerals.com.


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