News: 2 June 2016 - Sirius Minerals Plc - Selection of preferred contractors
AMC UK (a joint venture between Thyssen Group and Redpath Group) selected as preferred contractors for mine site development
Hochtief Murphy Joint Venture selected as preferred contractors for mineral transport system development
9 month competitive tender process has delivered refined construction methodologies and cost estimates based on current market conditions
Stage 1 capital requirements for the start of the project are now being adjusted and are expected to reflect a reduced cost in the near future
Sirius Minerals Plc (AIM: SXX, OTCQX: SRUXY) ("Sirius" or the "Company") announces the selection of preferred contractors for key components of its North Yorkshire polyhalite project (the "Project") and the future revision to the Stage 1 capital requirements.
Chris Fraser Managing Director and CEO said: ""This is the culmination of a huge amount of work by both the successful bidders and those that have been unsuccessful and we thank all of the groups involved for their efforts. We are delighted to now be moving forward with our selected partners towards the implementation of the Project."
Preferred contractors: The tendering process for these contracts of work has been underway since October 2014 and run in parallel with the Definitive Feasibility Study ("DFS"). During the preparation of these tenders a significant amount of engineering and estimation has been undertaken. The DFS provided a relevant and quality benchmark from which to compare and analyse the contractors' designs, methodologies and cost and schedule estimates.
Mine site development - shaft sinking
AMC (Associated Mining Construction) UK ("AMC") has been selected as the preferred contractor for the design and build of mine site development ("MSD") works. The MSD package of work includes all of the shaft construction at the mine site and the shaft construction of the mineral transport system ("MTS"). This contract is a critical component of the Project and represents the critical path. AMC UK is a joint venture company formed between Thyssen Schachtbau GmbH of Germany and Thyssen Mining Construction of Canada, both members of the Thyssen Group, and JS Redpath Ltd of Canada and Deilmann-Haniel GmbH, both members of the Redpath Group. AMC is a recognised leader in shaft sinking both around the world and in the potash sector. It is currently constructing the K3 shafts in Canada for Mosaic, two shafts for the Ust Jaiwa Project for Uralkali in Russia and completed the Scissors Creek shaft at Rocanville in Canada for PCS last year.
As a result of the refinement of construction methodology by the tenderers, and the current competitive tender rates and design evolution, a significant saving from the DFS estimate is expected to have been captured through the tender process. This costing is currently being worked through and the market will be updated accordingly in the near future.
The first phase of work for AMC will be a detailed front end engineering and design ("FEED") process where the designs used for the compilation of the tender and the revised budget will be further developed. Some additional geotechnical information will inform this process but work on this element is expected to commence on site soon after the formal award of the contract (once the Stage 1 financing has been secured).
Mineral transport system
Hochtief Murphy Joint Venture ("HMJV") has been selected as the preferred contractor for the MTS. HMJV is a joint venture between Hochtief (UK) Construction Limited ("Hochtief") and J. Murphy & Sons Limited ("Murphy"). HMJV has been successfully constructing major projects and infrastructure in the UK since 2001. Most recently it completed the £250m C310 Thames Tunnel as part of the Crossrail scheme in London.
The MTS scope of work is currently for the design and build of the MTS tunnel to link the mine with the materials handling facility at Teesside. The first phase of work will comprise a FEED process and a detailed geotech programme along the MTS route. From this work a refined estimate based on a full design will be compiled, prior to agreement of the contract sum. This work is expected to take over 12 months to complete and will be funded from the proceeds of the Stage 1 financing. However commitment to the full MTS implementation scope of work will be part of the Company's Stage 2 financing for the Project.
Stage 1 capital funding requirement
The tender returns and ongoing engagement with the preferred contractors is being used to reformulate the Company's implementation budget and its financing plans. Using the DFS, completed in March 2016, the Company is in the process of replacing the DFS estimates relevant to the scope of the contracts with refined estimates and implementation schedules from the contractors. This is currently focused mainly on the Stage 1 capital requirement, given the majority of that funding is for the MSD scope of work. The result of this process is expected to reflect a reduced cost to the Stage 1 requirements but will be released in the near future when ready.
Whilst this is a normal process of evolving a DFS estimate to a control estimate for the management and implementation of a project, this would normally occur much later. The Company is able to do this now due to its previous decision to run the tendering process in parallel with the preparation of the DFS.
As some of the expected reductions in the mine site components of the implementation estimate are contained within the Stage 2 financing, it is expected to result in a reduction of that amount also. However further work through the FEED process is required for all the remaining elements of the Project in order to quantify what, if any, changes are required to the Stage 2 financing amounts.
A key benefit of the two-stage financing approach adopted by the Company is that the detailed and specific estimates of the elements of the Project can be used to formulate the financing requirements for each of the financings.
At the time the Stage 2 financing commitments are required, the Company will have completed all of the FEED work, all geotech work, tendered the MHF and port related assets, and undertaken a revised more detailed risk review for the estimation of appropriate contingencies. This will ensure that the implementation budget for the remainder of the Project is as accurate as possible at the time the senior debt providers in Stage 2 are being requested to provide irrevocable commitments to the Company."
About as native as you can get :-))) Awesome.
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The AGM will be held at 1.00pm on Friday 24 June 2016 at The Royal York Hotel & Events Centre, Station Road, York YO24 1AA.