The Hochtief Murphy Joint Venture has been selected as preferred contractor for the UK’s 37km long, 6m diameter York Potash mineral tunnel transport system development. AMC UK – a joint venture between Thyssen Group and Redpath Group – has been selected as preferred contractors for mine site development.
A 19 month competitive tender process has delivered refined construction methodologies and cost estimates based on current market conditions, according to Client, Sirius Minerals Plc.
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.
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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.”
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.
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 MTS will run at depths of 120m to 360m and will be constructed using a combination of TBM and conventional mining equipment. It will contain a series of in-line conveyors capable of transporting at least 12M tonnes per annum of polyhalite and will be bored in five approx 7.5km long drives from 5 access shafts. 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.
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.