"2 July 2018 Sirius Minerals Plc Quarterly progress update
* The project remains on track to deliver first polyhalite and commercial production on time
* The fully procured and financed capital estimate will be provided to the market once binding financing commitment letters have been executed
* A supply agreement for Nigeria was signed during the period taking peak aggregate contract volumes from 4.4 Mtpa to 4.7 Mtpa
* Active engagement on multiple commercial discussions for new supply agreements in Brazil and Europe
* Initial responses received from banks participating in the stage 2 financing process are positive
Sirius Minerals Plc ("Sirius" or the "Company") provides its latest quarterly progress update. Chris Fraser, Managing Director and CEO of Sirius, commented:
"It has been a quarter of good progress as we continue to construct our Woodsmith Mine, as well as breaking-ground on Teesside. Work to deliver the stage two financing continues at pace and we are delighted to add a new, well established customer, in the high potential African region, to our growing list of partners.
"The economic and social benefits to our nationally significant infrastructure project are vast, as recently illustrated by QUOD's independent economic impact assessment, and we look forward to delivering these important and long-lasting benefits to both national and local economies.
"With commercial momentum and the development of our world-class mine continuing to progress well, we remain confident of delivering on our key milestones for 2018 and ultimately delivering on our vision to be a world-class fertilizer business."
The project's Lost Time Injury Frequency Rate ("LTIFR") stands at 4.4. 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.
Sales and Marketing
The Company signed a seven-year supply agreement with Intercontinental Trade DMCC Dubai, a global trading company with an active presence in Europe, Africa, the Middle East and Asia, for volumes of POLY4 ramping up to 350,000 tonnes per annum in year four. Taking this agreement into consideration the Company's aggregate peak contracted volumes has increased from 4.4 Mtpa to 4.7 Mtpa.
The Company has undertaken to achieve a target level of circa 6.5 Mtpa of supply agreements in 2018. Sirius' current priority is to conclude agreements in the key markets of Western Europe and Brazil. Commercial discussions are well advanced with multiple customers in each of these regions and the Company is confident of delivering on this milestone. A number of opportunities in other regions of the world are also being progressed.
A total of 56 new crop trials have been initiated during 2018 bringing the total trials to over 320 covering 35 different crops in 23 countries.
Stage 2 financing
The initial bank due diligence process commenced early in the second quarter and has been ongoing with potential lenders reviewing the Company's information package and engaged with their independent consultants. A number of bank responses have been received with further responses due to be received over the coming weeks. The quality of the responses received so far has been positive. Once all responses have been received the Company will progress discussions with both potential lenders and the Infrastructure and Projects Authority to finalize the financing. The Company is on track to achieve financial close in 2018.
The Company is currently in the process of evaluating proposals for each of the outstanding major scopes of work for the project. These include the materials handling facility, port infrastructure, MTS fit out and drives two and three of the MTS tunnel. The evaluation and optimisation exercise is now ongoing in conjunction with the commercial discussions associated with each package. These processes will continue into the next quarter and feed into the stage 2 financing process.
The opportunity to utilise the Redcar Bulk Terminal continues to be progressed in parallel with the option of developing a greenfield port facility at Bran Sands.
At the Woodsmith Mine site, diaphragm walling activities on the service shaft are complete and have now commenced on the production shaft. The excavation of the service shaft is scheduled to commence in the coming weeks. The initial 120m of the MTS shaft will be sunk using a Herrenknecht Vertical Sinking Machine ("VSM"). Preparation works, such as excavation of the guide collar, are in progress with sinking to commence during the coming quarter.
A ground-breaking ceremony, attended by the Northern Powerhouse Minister Jake Berry MP, was held at the Company's Wilton site on Teesside in late June to mark the commencement of piling work for the MTS tunnel portal. In addition to the portal construction, earthworks for support infrastructure such as power supply and welfare buildings is progressing. Tunnelling activities will commence once the portal construction is sufficiently advanced.
Cost and schedule
The project remains on track to deliver first production and commercial production on time. The Company has now entered the final phase of the procurement process involving cost and risk estimation which involves an iterative process of evaluating contractor scopes of work, commercial risk allocation and contingency requirements. In addition to this, the outcomes of this process are subject to review by the lender's technical consultant as part of the stage 2 financing process. The Company intends to provide the market with an updated estimate including contingency once binding financing commitment letters have been executed. This is anticipated to occur around the end of the third quarter of 2018.
Sirius Minerals' Chief Executive Officer, Chris Fraser, will host a webcast for investors and analysts at 10.30 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 Fully Procured?