More funding and first TBM ready for UK potash mine 24 Jan 2019

Major progress is reported during the last quarter of 2018 and into the start of 2019 by Sirius Minerals, the company behind development of the potash fertiliser mine in northeast England, signifying commitment to the multi-billion project and its funding and construction. With more than 1,000 workers now engaged across the different project sites and under current contracts, the company announced near finalisation of its US$3.0 billion (£2.4 billion) Stage 2 debt component financing and reported a cash balance of £290 million at the close of 2018, providing liquidity to fund project progress.

Also announced was factory acceptance in Germany ready for shipment to the UK of the Herrenknecht TBM to be used by Strabag on the first of three contracts to complete the 37km long mineral transportation tunnel to carry the product from the Woodsmith minehead at Whitby to the materials processing and shipping facility at Wilton on Teesside. Strabag was awarded the first 13km long reach of the 4.9m i.d. segmentally lined tunnel in April 2018. The TBM is set to start excavation in the second quarter of 2019.

The 6m diameter single-shield TBM will launch from the transition portal at the process-handling site at Wilton in Redcar on Teesside, and will advance on a 24 hr/day, 7 day/week schedule to complete the segmentally lined conveyor belt transfer tunnel to the Lockwood Beck intermediate shaft. Two additional TBMs are planned to launch in 2020 to complete the two final drives of the long materials transportation tunnel under two separate tunnelling contracts that are yet to be awarded.

As further progress on the project, the existing contract with Strabag was varied in December 2018 to include the engineering, procurement and construction of the transportation tunnel fit-out. This will include installation of the long conveyor belt to transport up to 20 million tonne of polyhalite a year from the mine to the processing and shipping facility.

Progress elsewhere on the project includes construction at the Woodsmith Mine site where the foreshaft of the 1,500m deep x 6.75m i.d. service shaft to the potash deposit is excavated to the final depth of 45m and the winder building is nearing completion ready for installation of the permanent winder which has been fabricated ready for delivery to site. For the twin 6.75m i.d. x 1,500m deep potash production shaft, the diaphragm walls of the foreshaft have been installed and core excavation has started.

Also at the minehead side, shaft sinking contractor DMC Mining Services is progressing to construction the 360m deep access shaft to the mineral transport tunnel alignment after the VSM (vertical sinking machine) supplied by Herrenknecht launched in October 2018. More than 63m of the shaft has been excavated and following some initial commissioning issues excavation rates are said to have increased by 25%. Operational performance by the VSM is providing confidence in the assumed advance rates for the VSM shaft boring roadheaders that will be used by DMC Mining Services to sink also the main service and production shafts.

DMC Mining Services is also preparing to commence initial excavation works at the Lockwood Beck working shaft on the materials transportation tunnel. Preparatory works so far include the establishment of the shaft sinking platform and a shaft collar to 20m deep, installation of a grout curtain to 60m deep and commencement of piling for the shaft’s temporary headframe and winder house.

Progress at minehead site with VSM MTS shaft sinking to left, production shaft preparation works foreground centre and advancing service shaft behind

At the potash processing and shipping facility in Wilton on the coast, engaged contractor McLaughlin and Harvey has taken possession of the old Redcar steelworks site and earthworks are underway to start building facilities including storage for 250,000 tonne of product, final product screening facilities, ship loading equipment and infrastructure.

Nearby, Strabag has completed the transition ramp of the materials transportation tunnel and has broken out of the end wall and has started excavation of the tunnel using conventional methods. It is reported that about 125m of the tunnel will be excavated to permit launch of the TBM in competent Redcar Mudstone.

Breakout at Wilton to excavate TBM launch tunnel

In progressing its Stage 2 financing, Sirius Minerals has restructured the debt facility into three tranches totalling US$3 billion. The first tranche will be an uncovered debt capital markets tranche, the second a commercial bank tranche, and the third being a follow on 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 the time of engaging the third tranche, the project is expected to be past the major construction risks and more potash sales agreements will be in place.

During the fourth quarter of 2018, Sirius completed acquisition of a 30% equity interest in each of the Cibra Group Companies for 95,000,000 ordinary shares in Sirius. The strategic investment is linked to a supply agreement with the Cibra Group Companies for resale of 2.5 million tonne per annum in peak aggregate volumes of POLY4 into Brazil and other South American countries. The agreement takes the total peak aggregate take-or-pay supply agreements entered into to 8.2 Mtpa.

Sirius expects to reach the polyhalite seam in 2021 and to be producing 10 million tonnes of fertiliser per annum by 2024.