The future of the UK’s York Potash development has been thrown into doubt following an announcement by the Board of Sirius Minerals plc, owner of the mine, that it has failed to deliver its US$500M Stage 2 Financing Plan.
Chris Fraser, Managing Director and CEO of Sirius, said:
“Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our stage 2 financing plan. As a result, we have taken the decision to reduce the rate of development across the Project in order to preserve funding to allow more time to develop alternatives and preserve the significant amount of inherent value in this world-class project.
“The Company will now conduct a comprehensive strategic review over the next six months to assess and incorporate optimisations to the project development plan and to develop a different financing structure for the funds required. This is the most prudent decision to give the Company the time necessary to restructure its plans to move the Project forward. The process will incorporate feedback from prospective credit providers around the risks associated with construction and will include seeking a major strategic partner for the Project.”
In a statement by the Company, it has said that “current reserves of £180M (£117M uncommitted) are available, providing sufficient liquidity to explore all strategic options during the strategic review.This amount however does not provide sufficient liquidity for the Company to continue development of the Project in line with the Company’s publicly articulated development schedule for any significant period of time. The Board has decided that the scope of development works on the Project will now be adjusted to enable the Company to undertake a strategic review of its project development and financing options.”
“The Board considers that a reduced pace of development focused on key areas of the project that will ultimately serve to preserve the most value for the project.
“Under the terms of the Company’s major construction contracts the Company has the right to alter, increase, decrease or omit or otherwise amend the works for various periods of time.
The statement goes on to to expain that a range of optimisation opportunities and acceleration initiatives have been developed by Sirius and its contractors over the last year. These include:
- Optimised Shaft Boring Roadheader (“SBR”) operation and scheduling – maximising the benefits of the upgrades built into the SBR’s purchased by the Company (targeting up to 4m per day long-run sinking average);
- Opportunity to remove the need for a TBM from Lockwood Beck (TBM2) from the development schedule due to the faster than expected tunnelling rates experienced on Drive 1, enabling Drive 1 to continue past Lockwood Beck and connect with Drive 3 from the Woodsmith Mine;
- Opportunity to utilise the TBM mucking system during the fitout of the mineral transport system (“MTS”) to transport up to 6 Mtpa of polyhalite to Teesside – potentially accelerating commercial production earlier than planned.
To be incorporated into the revised financing plan each of these initiatives need to be further developed and engineered and reviewed by the independent technical engineer to the Project. As part of the strategic review process the Company intends to enter into discussions with its contractors to ascertain how these optimisations can be fully incorporated into the development plan and how the savings and benefits will be shared between the contractors and Sirius.”
The Company has said it will now explore alternative financing structures.