Sirius Minerals Plc (LON:SXX) today provided its latest quarterly development update.
Chris Fraser, Managing Director and CEO of Sirius Minerals, comments: “Activity levels at the Woodsmith Mine continue to increase every month and now step up significantly as we commence diaphragm walling activities. Our team, including both employees and contractors, continues to grow as we expand the Company’s execution capability and we are pleased with the progress being made and the positive attitude across the expanding team.”
Safety
Unfortunately, one recordable incident occurred in August during the drilling activities at the Woodsmith site. A thorough investigation has been undertaken from which additional safeguards and procedures have been implemented.
The Company is approaching one million man hours of total project activity and will have completed 12 months of construction activity after the fourth quarter. From 1 January 2018 safety reporting will transition to a recordable injury frequency rate framework, consistent with good industry practice.
Cost and schedule
The Project remains on time and on budget.
Design work has continued to identify simplification and capital reduction opportunities in parts of the Project. These include the redesign of the mine infrastructure between surface and 120 metres below ground, refinement and optimisation of the granulation process in the materials handling facility (“MHF”) and simplification of the mineral transport system (“MTS”) conveyor design. Given the early stage of the overall project development programme, the Company believes it is too early to recognise any of these opportunities as a reduction in total project cost.
The Company had been pursuing the opportunity to accelerate the diaphragm walling (“D Walling”) component of the shaft sinking programme. Unfortunately, this opportunity was not able to be captured due to mobilization and design delays. The opportunity to accelerate the commencement of tunnelling activity continues to be progressed with further design and logistics works to be completed over the balance of this year before a final decision to proceed can be made.
Commercial
The shaft sinking scope of work was formally awarded to AMC in July. As disclosed in the half year results, the commercial arrangement with AMC is one of risk sharing with financial incentives for completing the scope of work under budget and ahead of schedule, and there are also financial penalties should completion be late or above the target price. The target price of AMC’s scope is consistent with the allocated project budget and the target dates are within the dates outlined in the project schedule. The cost of this work is expected to be incurred in a combination of currencies and the Company is in the process of appropriately mitigating foreign exchange exposures. The Company and AMC are continuing to work to finalise the remainder of the detailed aspects of the contract.
In relation to the MTS, the Company has entered into an agreement with the Hochtief Murphy Joint Venture (“HMJV”) for early contractor involvement activities with a view to progressing the engineering and design in advance of negotiating a design and build contract.
Permitting
The Company has made good progress with the relevant authorities in clearing the particular conditions related to each work programme. The minor planning amendments the Company is seeking, as outlined in the previous quarterly development update, are due to be evaluated by the relevant planning authorities during the next quarter.
Site preparation
Site preparation has continued to plan with significant progress being made at both the Woodsmith and Lockwood Beck sites. At Woodsmith, where there are currently approximately 230 people engaged in construction activities, work has continued on the various pads, civil works and site office facilities. Construction of the pad for the MTS shaft is progressing well and the concrete batch plant, to be used across multiple activities on the Woodsmith site, has been commissioned.
At Lockwood Beck, all access works and shaft pad construction are complete.
Geotechnical investigation
The additional geotechnical borehole within the production shaft (SM14B) is progressing with coring and testing completed to the 950m level. Geotechnical and hydrogeological testing work has so far provided positive data confirming the conservative nature of some parameters used in the current shaft design and construction methodology. Opportunities to refine some of these assumptions in the initial project estimate will be explored further once the data is fully processed. The drilling programme has experienced some typical delays over the previous months and the Company is working to ensure these delays do not impact the critical path of the broader construction programme.
MTS related geotechnical activity continues with emphasis in this period on the seismic programme along the tunnel segment between the MHF and Lockwood Beck. The high quality of the data being received so far will be of significant assistance in the detailed design process for the tunnel. In addition, a series of geotechnical boreholes have been drilled to inform the design of the tunnel boring machine launch caverns located at Lockwood Beck and Woodsmith.
Shaft sinking
D Walling equipment is being assembled on site in parallel with the construction of the service shaft guide walls. The bentonite plant, rig workshop and welfare facilities (specific to D walling activities) are also under construction.
The foreshafts for the service and production shafts are 35m and 32m in diameter respectively, with a depth of 60m. Following construction of the foreshafts, D Walling rigs will then complete the main services and production shafts down to the 120m level from surface. The excavation process will commence once the D Walling scope has been completed.
The amendments to near surface components of the mine (larger diameter and deeper foreshafts, removal of a series of roadways at the 45 meter level and removal of the related grouting programme) have resulted in an increase in the scope of the D walling activity required but will ultimately result in a cheaper, simpler and more efficient operational environment.
Other project activities
The Company is working closely with HMJV with a view to evaluating the opportunity to commence preparatory tunnelling activities from the MHF location early in 2018. This opportunity will be assessed with a view to improving the aggregate project schedule and expediting production ramp up.
Test work on major granulating processing equipment has progressed well, allowing the Company to finalise an improved process design. Overall MHF design and site layout work has also been optimised and simplified and these improvements will now be progressed to front end engineering and design.
Sales and marketing
The Company is in advanced negotiations with potential customers in multiple regions to expand its commercial reach into new markets and is hoping to conclude these soon. In addition, other discussions are actively taking place in existing markets to secure additional tonnage via offtake agreements. The Company’s flagship product, POLY4, continues to gain market acceptance globally from both industry participants and experts.
Agronomy
Since the last update the Company initiated 16 new agronomy trials in new and existing regions building upon its past programme success. The overall programme encompasses over 235 trials in 17 countries on 29 different crops.
The Indian product registration process has commenced in partnership with the Indian Agricultural Research Institute. This registration process will facilitate long term sales into the Indian market.
The Company continues to pursue other research and development activities that broaden the market opportunity for POLY4 including application technologies and compatibility testing for inclusion in various complex NPK production processes.
Corporate
The Company’s work on the stage 2 debt financing is progressing well with increasing engagement with HM Treasury’s Infrastructure and Projects Authority (“IPA”). This work is focused on formulating an acceptable structure for the government guaranteed component of the stage 2 debt. Once an appropriate financing structure for the project has been developed with the IPA the Company will recommence the formal due diligence process with the mandated bank group.
