"29 March 2018 Sirius Minerals Plc Quarterly progress update
§ The project remains on track to deliver first polyhalite and commercial production on time and on budget
§ Tunnelling contract signed with STRABAG for drive 1 of the Mineral Transport System from Wilton to Lockwood Beck
§ Shaft sinking contract signed with DMC and the contractor handover process is largely complete
§ Opportunities to accelerate the production of first polyhalite by up to six months are being progressed with DMC
§ Production shaft bore hole intersected a total of 53m of polyhalite and demonstrated consistency with previous holes
Sirius Minerals Plc ("Sirius" or the "Company") provides its latest quarterly progress update. Chris Fraser, Managing Director and CEO of Sirius, commented:
"It is an exciting time for the Company as we continue to construct our game-changing Woodsmith Mine which represents the largest private sector investment in the North. The infrastructure we're building will allow us to create thousands of jobs, deliver economic benefits for the local and national economies for generations to come, whilst at the same time both delivering value for our shareholders and playing our part in improving fertilizer practices around the world.
"STRABAG brings with it world-leading tunnelling experience, a can-do attitude and another significant, well-aligned partner committed to the success of our project. We are now looking forward to adding progress on our mineral transport system to the impressive progress we have already made on early works and mine shafts."
The project's Lost Time Injury Frequency Rate ("LTIFR") stands at 2.4. The LTIFR is a measure of lost time incidents per million man-hours on a twelve-month rolling average basis. The Company is working closely with its contractors to continually improve the safety culture at all locations.
The Company has entered into a design and build contract with STRABAG AG, a subsidiary of STRABAG SE ("STRABAG"), for the construction of the Mineral Transport System ("MTS") drive between Wilton and Lockwood Beck. STRABAG is one of the world's leading civil engineering and tunnelling contractors.
Sirius has undertaken a competitive tender process in respect of drive 1 of the MTS, from Wilton to Lockwood Beck, to ensure that the best tunnelling option was developed. STRABAG provided a compelling offer in terms of price, schedule, safety management and risk allocation. The commercial arrangement with STRABAG is lump sum, with fixed rates for tunnelling advance. The price is based on a defined and agreed geotechnical baseline report, with firm pricing for a range of expected support classes within the build. The cost of this work will be incurred in GBP. Both the cost and schedule of this scope of work fit within the overall project estimate and schedule.
The Company continues to work closely with a number of parties in relation to the second and third drives of the MTS (Lockwood Beck towards Woodsmith and Woodsmith towards Lockwood Beck respectively) with a view to having these scopes of work awarded in conjunction with the completion of the stage 2 financing.
All stage 2 debt financing workstreams are progressing well with the past three months spent finalising due diligence materials, undertaking discussion with key stakeholders and working with lenders' consultants and our advisors. The Company will commence re-engaging with potential lenders over the coming weeks and into the second quarter. This is the first major milestone in the 2018 timetable which is aiming to have commitments in place during the second half of 2018.
Cost and schedule
The Company remains on track to produce first polyhalite and commercial production on time and on budget. The Company has undertaken a number of initiatives to improve D-walling scope productivity and return to schedule following delays arising from issues including adverse weather conditions. The change in shaft sinking contractor and using the Herrenknecht Shaft Boring Road header has provided the Company with an opportunity to accelerate the delivery of first polyhalite production by up to six months.
Site preparation and infrastructure
The connection of construction power supply to all construction sites is progressing smoothly. All ducting work associated with the Woodsmith Mine site is now complete and cable pulling is underway. Ducting work associated with Lockwood Beck is ongoing. The 11kV cable for the Wilton site has been installed at the site boundary ready for termination. Primary switchgear manufacturing has commenced, and multiple factory acceptance tests have been undertaken. In addition, the tender process for on-site generation is nearing completion.
Site preparation works at the Woodsmith Mine site and Lockwood Beck are now complete. At Wilton, vegetation clearance has been completed.
The production shaft borehole, SM14B, reached total depth of 1,627m during the period. A total of 53m of polyhalite was intersected with very similar characteristics to the intersection recorded at the service shaft. The process of drilling a side track has now commenced with a view to obtaining an additional intersection of polyhalite.
The shallow ground investigation for the Wilton portal and MHF site is nearing completion. The MTS tunnel ground investigation programme is also progressing to plan. Information pertaining to the first drive, from Wilton to Lockwood Beck, has already been incorporated into the procurement process while additional information for the other drives is being collected and analysed.
D-walling activities are continuing on the services shaft. 20 panels are in progress or have been completed with a total of 48 panels required to complete the foreshaft for the service shaft. The Company has undertaken a number of initiatives to improve D-Walling productivity. These include changing the cutting head design and increasing operating hours. The Company is confident of recovering the lost time over the remainder of the project schedule.
Once D-walling activities are complete, excavation and fit-out of the foreshafts and surface basements will commence. The Company has contract terms agreed with its preferred contractor for the civils works to excavate the foreshafts, and with Arup for engineering and design.
The shaft sinking contract with DMC Mining ("DMC") was executed 13 February. Activity on the DMC side is progressing well with orders for the Shaft Boring Roadheaders having been placed within a week of the contract being signed. Adopting this improved shaft sinking methodology opens opportunities to accelerate first polyhalite production by up to six months. The transition from AMC to DMC has progressed smoothly with all practical aspects complete. All on-site works associated with AMC will be completed in the second quarter, which is largely driven by the timing of the completion of the production shaft borehole scope of work.
Agronomy, Sales and Marketing
The Company is progressing key commercial discussions with a view to delivering on the 2018 milestone of entering into additional supply agreements. These discussions are with significant participants in key regional markets globally as we look to build on the tier one customer base we have already secured, including Wilmar International.
The Company has initiated 14 new agronomy trials so far in 2018. These new trials include a number of on-farm trials in Europe and the USA. Trial results from Europe, China and Africa were processed during the quarter. The results reinforced POLY4 as a unique, natural, multi-nutrient fertilizer which boosts quality and yields more than common alternatives currently used by farmers on a wide range of crops across different geographies and climates.
Other project activities
Front end engineering and design ("FEED") work for all other scopes of the project are progressing well with partners identified and commercial engagement occurring in parallel with FEED activities.
The Company is on track for procurement to be substantially complete by the middle of 2018 to facilitate the completion of the stage 2 financing process.
About STRABAG SE
STRABAG SE is a publicly listed European-based technology group for construction services and a leading international transportation infrastructure, building construction and civil engineering contractor.
STRABAG SE is a global leader in tunnelling technologies and a specialist in providing technically optimized end-to-end tunnelling solutions worldwide. Their extensive experience and track record on some of the world's largest and most technically challenging projects includes the excavation of tunnels and caverns, TBM operations of all kinds including soft ground and hard rock, and long, deep tunnels.
Further information can be found at https://tunnel.strabag.com/
Sirius Minerals' Finance Director, Thomas Staley, will host a webcast for investors and analysts at 10.00 am 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."
The important bit:
"The production shaft borehole, SM14B, reached total depth of 1,627m during the period. A total of 53m of polyhalite was intersected with very similar characteristics to the intersection recorded at the service shaft."