First drive for UK potash mine awarded to Strabag 05 Apr 2018

Development of the mineral transport tunnel as a vital part of the new potash mine in North Yorkshire, UK, has moved into construction with award of a design-build contract for the first TBM drive of the system to Strabag.

Fig 1. First of three TBM drives of the 37km long MTS tunnel awarded to Strabag

Awarded by mine owner Sirius Minerals, the first drive is the 13km long reach of the 4.7m segmentally lined tunnel from Wilton, at the materials handling facility near the shipping harbour on the northeast coast of the UK, to the intermediate working shaft at Lockwood Beck. A second and third TBM drive, to be awarded under separate contracts, will complete the material transport system (MTS) tunnel from Lockwood Beck towards the Woodsmith mine site and from the mine site towards Lockwood Beck (Fig 1).

The 4.7m diameter x 37km long MTS tunnel will house a continuous conveyor to deliver the high quality polyhalite potash from the deep level mining operation near Whitby to the processing plant near Redcar on Teeside (Fig 2). The underground conveyor system is a low environmental impact alternative to delivering the product by trucks across the countryside and through the North York Moors National Park in which the new minehead is located. The MTS was a major concession for securing planning permission to develop the mine.

The Strabag proposal for its MTS tunnel contract is reported as providing a compelling offer in terms of price, schedule, safety management and risk allocation and that the contract awarded is a lump sum with fixes rates for tunnel advance. A statement by Sirius Minerals adds that the price is based on a defined and agreed geotechnical baseline report (GBR) with firm pricing for a range of expected support classes within the build and that the cost of the work will be incurred in British GBP currency.

Fig 2. Woodsmith Mine will convey potash raw material to the processing plant at Redcar via continuous conveyor in the 37km long transport tunnel

In announcing the contract award, Sirius Minerals confirmed that site mobilisation is to begin immediately and add to work already started on other mine development contracts.

At the main mine head site, excavation is advancing of the 1,500m deep x 6.75m i.d. production shaft to the 70m thick seam of polyhalite, and the 1,500m deep x 6.75m i.d. working shaft to which the MTS tunnel will connect for onward transport of the extracted polyhalite to the planned processing plant and port facility at Redcar.

At the same time, Fugro is continuing geotechnical and geophysical investigations at the mine head and at sites along the route of the MTS tunnel. These add to a series of geotechnical investigations across the project between 2013 and 2016 by the company which included preliminary geotechnical and hydrological investigations at the mine site, seven deep boreholes along the transport corridor and at the export dock, and a challenging deep inclined hole for fault characterisation.

Works advancing at the mine head site as of February 2018

Award of the first TBM drive of the MTS to Strabag cancels out selection by Sirius in mid-2016 of the Hochtief/Murphy JV as the preferred bidder for the 37km long transport tunnel. Strabag was part of the competitive tendering processes for a single MTS development contract in those early stages of the project along with other rivals for the lucrative contract. Under the current round of evaluations, bidders were invited to develop technical solutions and bids for the limited first drive of the MTS and as part of the Phase 1 development funding and financial investment.

In accouncing the preferred bidder status, the 50/50 Hochtief/Murphy JV said it was "to carry out front-end engineering designs over a 12 month period" and enter into contract negotiations for the final design and build contract. "Following award of the delivery contract," it continued, "the joint venture will commence the construction of the mineral transport system."

Sirius is said to be continuing to work closely with a number of parties in relation to the second and third drives of the MTS with a view to having those scopes of work awarded in conjunction with the completion of Phase 2 financing later this year (2018). The mining company is aiming to achieve first product from the mine by the end of 2021 and ramp up to an initial production capacity of 10 million tonnes per annum (Mtpa) by 2024.

Current schedule for development of the new mine and its facilities

Sirius Minerals Plc is a privately owned, publically traded company on the London Stock Exchange. After successful raising US$1.2 billion to finance Phase I construction, Phase II fundraising to raise up to a further US$3 billion is expected to come in the form of debt rather than issue of new equity with a syndicate of six banks - J P Morgan, Lloyds, EDC, Societe Generale, ING and Royal Bank of Scotland – raising a commercial tranche of up to US$1 billion and up to US$2 billion in UK Government guaranteed bonds. Commitment for Phase II funding is targeted for late 2018 for a first drawdown in 2019.

Stage 1 funding of US$1.2 billion was completed in 2016 and comprises £370 million of equity placing, US$400 million in convertible notes and a strategic investment commitment by Hancock Prospecting of Australia of US$300 with a US$250 million revenue royalty paying 5% for up to 13 Mtpa and 1% thereafter, and a US$50 million equity of 200 million shares to be determined by the placement price.