Sirius Minerals : Into Darkness

Captain Black's picture

"Quarter Two : Progress Update

* Comprehensive US$3.8 billion funding solution for stage 2 financing requirements launched on 30 April 2019 and on-track to complete before the end of September 2019

* Successful completion of US$425 million equity offering and US$400 million convertible bond offering

* Long-term, take-or-pay supply agreement signed with IFFCO, one of the largest co-operative societies in the world, for volumes increasing to 1 Mtpa POLY4

* Construction advancing well, and the Company remains on target to achieve first polyhalite and commercial production on time and in line with its cost schedule

 Chris Fraser, Managing Director and CEO of Sirius, commented:

"The successful raising of US$825 million of funding during the quarter marked the completion of the first part of our stage 2 financing.  We are making good progress with the remaining components of our stage 2 financing package, which we expect to complete by the end of September this year in line with guidance, and which will enable us to bring our multi-nutrient POLY4 product to our customers to meet the expanding needs of the global agriculture industry." 


The Project's Lost Time Injury Frequency Rate ("LTIFR") stands at 2.35. The LTIFR is a measure of lost time incidents per million man-hours on a twelve-month rolling average basis. 

Stage 2 Financing

On 1 May 2019, the Company announced that it had successfully raised gross proceeds of approximately US$825 million as part of the US$3.8 billion stage 2 financing package announced on 30 April 2019, expected to fund the Project to the point at which it generates positive operating cash flows.  The US$825 million was raised through a Firm Placing and Placing and Open Offer of ordinary shares for US$425 million (£327 million) and through an offering of guaranteed convertible bonds due 2027 (the "New Convertible Bonds") for new gross proceeds of US$400 million. 

The Company placed US$106.6 million in aggregate principal amount of the New Convertible Bonds with holders of the Company's outstanding US$244 million of Guaranteed Convertible Bonds due 2023 by way of a repurchase.  No new proceeds were received by the Company in connection with the repurchase.

The net proceeds of the New Convertible Bonds have been placed in an escrow account and will be released to the Company upon the issuance of US$500 million senior secured guaranteed bonds (the "Initial Bonds") (or another acceptable US$500 million debt financing) and entry into the proposed US$2.5 billion revolving credit facility with JP Morgan Chase Bank N.A., London Branch (the "RCF"), expected to occur no later than the end of September 2019.  The net proceeds received pursuant to the Firm Placing and Placing and Open Offer provide the Company with sufficient cash to progress the Project in line with key milestones to the end of September 2019. 

The Company is making good progress on all workstreams connected with the proposed US$500 million issuance of Initial Bonds and entry into the proposed US$2.5 billion RCF, which will together complete the Company's stage 2 financing.

Construction Progress

The Company remains on track to achieve first polyhalite in 2021 and in line with its cost schedule.  Construction continues to progress in line with key milestones at each of its construction sites.

Service and Production Shafts

Service shaft works are on target to complete the construction of the foreshafts by year end to enable commencement of excavation of the main shaft using the shaft boring roadheader ("SBR").  The Company's first SBR recently passed its Factory Acceptance Test and is due to commence arrival at the Woodsmith Mine site in August 2019.  The SBR will then be erected on-site.  Assembly of the SBR and installation into the foreshaft is scheduled to be completed in December 2019.

The excavation of the 35-metre diameter service shaft foreshaft to 45 metres was completed in the first quarter of 2019, enabling commencement of the excavation of the inner-main shaft, which will be excavated to a total depth of approximately 120 metres.  The main shaft has now been excavated to approximately 85 metres below ground level, using conventional excavation techniques.  

The service shaft temporary winder building foundations have been completed.  Erection of the temporary and permanent winder buildings, which will house the service shaft hoists, and installation of the temporary and permanent winders is in progress and on schedule.

Production shaft works are on target to complete the construction of the foreshaft and excavation of the main shaft to 120 metres by year end.  The 32-metre diameter production shaft foreshaft, which will be excavated to a depth of 45 metres from surface, has been excavated to approximately 9 metres below ground level at quarter end.  

The production shaft differs from the service shaft in that it already has diaphragm walls installed to a depth of 120 metres in the inner-main shaft.  Once the larger diameter foreshaft has been excavated to a depth of 45 metres and the floor installed, the inner-main shafts will be excavated to a depth of 120 metres using conventional methods inside the existing diaphragm walls.  This is expected to be completed in December 2019.  The SBR for the production shaft is due to commence arriving on-site in October 2019.  The SBR for the production shaft is currently erected in Germany and will be undertaking various cutting optimisation tests prior to being dismantled and shipped to the Woodsmith Mine.

The application of considerable learnings from the service shaft excavation has meant that the production shaft excavations are progressing at a faster-than-expected rate and excavation is on track to meet 2019 targets.

Construction of the production shaft permanent winder building foundations is underway and is progressing ahead of schedule.

Mineral Transport System

MTS Drive 1 - Wilton to Lockwood Beck

The tunnel boring machine ("TBM") being used to construct Drive 1 of the mineral transport system ("MTS") completed its advance to the bottom of the MTS launch portal during the quarter and has successfully commenced mechanical tunnelling.  At quarter end, the TBM has advanced approximately 210 metres into the MTS tunnel, which is ahead of schedule.  The TBM is progressing on target to advance the MTS tunnel excavation to 3km by year end.

MTS Drive 2 - Lockwood Beck towards Woodsmith Mine

The Lockwood Beck MTS shaft pre-sink is well underway and had reached a depth of approximately 37 metres below ground level at quarter end.  The pre-sink will continue to approximately 47 metres to enable installation of the Galloway (the multi-level working platform that will be suspended near the shaft bottom during sinking and raised and lowered as required to allow conventional drill and blast sinking to continue to the final depth of the shaft).  Drill and blast operations are expected to commence during the year.

The Lockwood Beck shaft is scheduled to reach its target depth of 360 metres in the first quarter of 2020.  Once complete, shaft bottom works will be undertaken prior to the shaft being handed over from DMC to STRABAG to begin construction of the launch cavern for the Drive 2 TBM at the 360-metre level. 

MTS Drive 3 - Woodsmith Mine towards Lockwood Beck

The first approximately 115 metres of the MTS shaft excavation has been completed during the quarter using a Herrenknecht vertical sinking machine ("VSM").  The VSM has been removed from the shaft and preparation for the installation of the drill and blast Galloway is underway. 

Civil works for the MTS winder building is complete and building erection is about to commence.  The drill and blast Galloway is on site and under construction and delivery of steelwork has commenced.

Materials Handling Facility

Granulation trials for the materials handling facility ("MHF") test plant, including yield and efficiency optimisation, have been successfully completed during the quarter at the Company's R&D facility in Teesside.  The test plant has now been decommissioned in preparation for conversion to a full R&D demonstration plant to be commissioned during the year.

Port Handling Facility

Procurement of the overland conveyor that will transport our POLY4 product from the MHF to the port, was completed during the quarter.  The cost of the contract is in line with the Company's existing cost estimates.  Site clearance continues at the Redcar Bulk Terminal site and good progress is being made.

Sales and Marketing

During the quarter the Company signed a take-or-pay supply agreement with Indian Farmers Fertilisers Cooperative Limited ("IFFCO") for the supply of POLY4 in India.  Volumes under the agreement will increase to one million tonnes per annum ("Mtpa") in year eight, with an option to increase this to 1.25 Mtpa.  The IFFCO agreement takes the Company's total peak aggregate volumes under contract to 11.7 Mtpa. 

IFFCO is one of the largest co-operative societies in the world with access to over 55 million Indian farmers.  The agreement provides access to one of the top three fertilizer markets in the world with a total nutrient consumption of approximately 30 Mtpa. 

During the quarter the Company initiated 29 new agronomy trials with a total of 48 trials initiated in 2019 to date.  The total number of trials established by the Company now stands at 430 on 48 crops in 30 different countries.  The Company has continued to establish a significant number of on-farm demonstrations with a number of its offtake partners' key and sizeable customers.  The programme of on-farm demonstrations is expected to show to future end-users of POLY4 the benefits of incorporating POLY4 into their fertilizer programmes. "



Captain Qahn's picture

A Mining Renaissance

"The UK (and Ireland) have a rich mining heritage, peaking during bygone days when vast deposits of coal and iron ore drove the industrial revolution and built an empire. A hundred years ago the nation was largely self-sufficient – a far cry from today. 

In fact, to most of the British public, mining itself belongs in this bygone era. When asked to describe mining, most conjure images of Margaret Thatcher, picket lines, and a beetroot-faced Arthur Scargill... Thankfully, that rather blinkered view could be about to change. Recent developments indicate the UK is on the brink of a mining renaissance with several interesting projects at various stages of development, from grass roots, to advanced feasibility, through to operating mines. Many of these projects have been previously worked or known about for years; but as the technological, economic or political landscape changes, so it seems has the viability of previously well-sheltered UK mineral assets.

Globalisation and low-cost competition rang the death knell for many UK mines over 35 years ago, with the closure of the last deep coal mine in 2015 (Kellingley Colliery) seeming to signal the end of the UK’s mining industry. However, a closer look reveals a relatively healthy pipeline of projects currently on offer, due ironically in part to a rejection of globalisation and a general upsurge in protectionist culture. This is not to dismiss the enduringly robust construction and industrial mineral quarry sector or the several soft rock and thermal coal mines (the flagbearer for UK mining for centuries) still in operation, but rather to focus on a new swathe of projects, minerals, methods, investments, and jobs that could potentially arrive as a result of new technology and innovative ways of working...

"Potash and polyhalite projects are thought to be well insulated from choppy price swings as the world population is rising steadily with crop demands expected to increase by 50% by the year 2050. These factors give comfort to long-term forecasters, and lenders, as demonstrated by Sirius Minerals raising funds to develop its high-profile York Potash Project (Woodsmith Mine)purportedly the largest polyhalite project in the world aiming to be in production by 2021.

The scale of capital required to develop the Woodsmith Mine (reputed to be over £2.5bn) means that it can truly be considered a globally important mining development and proves that projects of this magnitude can be funded and advanced in the UK; an important precedent for future companies looking to develop a mineral asset here. The progress made so far demonstrates the appetite to support these projects is certainly there. 

The only active polyhalite producer in the world is the adjacent Boulby Mine, operated by ICL. Having started production in 1976 the mine has shown flexibility in responding to market and deposit pressures to remain profitable, switching focus from potash and salt to polyhalite in response to the geology of the site, and the advancement of a better, multi-nutrient product (Polysulphate). The future of the polyhalite market is an interesting one and the world’s eyes will be on North Yorkshire as the story of the two projects unfolds."

tis like Love Island, innit ;-)

Captain Black's picture

The Spoon Fed

"Simon Sheffield can see the hole into which he poured his money get deeper every day.

The 53-year-old firefighter lives a few miles away from Sirius Minerals’ vast fertiliser mine near Whitby, North Yorkshire. He bought shares in the fledgling company in 2017, at about 17p.

“It’s just over the hill,” said the grandfather, who hopes to retire in a few years. He has held tight through “the biggest helter-skelter you can think of” as the share price has soared and dived, believing in the promise of economic revival for northeast England and jobs “that a whole family could happily live on”.

Sirius’s plan is to mine 20m tons a year of the fertiliser polyhalite and sell it to potato, corn, soybean and rice farmers around the world to boost their crops. Yet Sheffield and the rest of Sirius’s 85,000 retail investors — about a quarter live in Yorkshire and the northeast — now face a potential wipe-out.

Last week, Sirius pulled plans to raise $500m (£414m) in high-yield bonds, thereby preventing it from accessing a $2.5bn credit line and $400m of bonds held in escrow. That leaves Sirius rapidly running out of cash — and throws into doubt the UK’s first deep mine in 40 years.

Bosses blamed market volatility amid US-China trade tensions. Chief executive Chris Fraser and his bankers at JP Morgan are set for some sleepless nights as they gear up to relaunch the bonds next month. They are betting on calmer markets and more attention from holiday-fresh fund managers.

However, success is far from certain, and time is pressing. Sirius is due to run out of cash by the end of September, while the $2.5bn credit line offered by JP Morgan lapses at the end of October if Sirius has failed to raise $500m in bonds.

If bosses are looking at other options, they are not saying so. Previously upbeat on the stock, Berenberg analysts last week said that the risk was now “too high to argue that the shares represent an attractive investment”.

They fell 40% in two days to a four-year low last week before closing at 9.26p, valuing Sirius at £669m.

With cash disappearing fast, the board has yet to order a slowdown on work at the Woodsmith mine — its only project. The 1,000 workers there have made significant progress on one of Europe’s biggest civil engineering projects. It involves two shafts, 20ft wide and a mile deep, linked to a 23-mile tunnel to take fertiliser to Teesside for export. For comparison, the Channel tunnel is 31 miles long.

Sirius’s cheerleaders note that it has had to overcome many hurdles already to get this far. Few thought that Fraser — a driven ex-banker who claims his favourite book is a fertiliser manual — would get planning permission to build a mine under the North York Moors national park.

Despite widespread scepticism about whether there is a big market for polyhalite — the only other producer is the nearby Boulby mine — the 45-year-old has secured buyers around the world for much of the expected output. He and his team raised their first $1.2bn in 2016 with help from Australia’s richest person, mining tycoon Gina Rinehart. The Qatari sovereign wealth fund revealed a 3.3% stake in May.

However, those backers may find themselves outshone by JP Morgan. The bank is set to collect a significant chunk of the $161m transaction fees that Sirius is paying for a total $3.8bn financing package, including the bonds.

JP Morgan, the company’s broker and financial adviser, created the $3.8bn package as Sirius struggled for cash at the start of the year, when a plea for state backing went nowhere. Sirius has already faced a bill for $41m in fees for earlier financing.

“I suspect Sirius will be saying, ‘What the hell?’,” said one analyst.

Investors — many of whom came in as part of a $425m share placing at 15p in May — are trying to keep the faith.

Sheffield is hanging on, but if Sirius asks for more money, he is unlikely to oblige.

“They have got hold of my feet and shook me upside down and got every copper off me,” he said. “I was hoping to retire in two years — maybe I won’t now.”

The Analysts ...

It's not about the mine it's about the product.


A polite reminder :-)

Exciting, innit :-)

"Work continues at pace to deliver the project as safely and as fast as possible."

Thank You.

Meanwhile :

"Addressing a question in the Commons on the issue, Prime Minister Boris Johnson said: "Too often they have been forgotten, their infrastructure has been forgotten, and our programme is to unite this country with infrastructure and technology to not just cities around the country but to rural and coastal communities as well."

We shall see...

Oooh ;-)