Sirius Minerals provides a 4Q18 report, including project updates.
Stage 2 financing
The company is making progress with the US$3.0 billion (£2.4 billion) debt component of the stage 2 financing.
The company has been engaging with prospective lenders throughout the process and has revised certain aspects of the proposed US$3.0 billion stage 2 senior debt financing to modify the credit risk allocation amongst the various prospective lenders. The original structure contemplated two equal tranches of debt, one commercial bank tranche and one IPA guaranteed tranche, which would be drawn on a broadly pro-rata basis and also rank senior secure, pari passu. The new structure contemplates three tranches of debt, totalling US$3 billion in aggregate, that will rank senior secure, pari passu, but will be drawn sequentially linked to key construction milestones. The first tranche will be an uncovered debt capital markets tranche, the second a commercial bank tranche, followed by the third being the IPA guaranteed bond tranche. This structure is designed to reduce both the risk and the quantum of any IPA guaranteed bond tranche to the taxpayer as by this time we will be past the major construction risks and POLY4 sales underway.
A group of lenders and the IPA will be working closely with the company and the lenders’ advisors to work through the due diligence reports and the detailed terms and conditions of the structure and the financing. The company is working towards having agreed commitment letters as soon as possible.
Due diligence reports have been prepared by the lenders’ advisors and the company is engaging with prospective lenders and their consultants to address the due diligence matters that have been highlighted. The company believes that the due diligence undertaken by the lenders’ advisors supports the company’s project cost estimates announced on 6 September 2018.
The company is confident of being able to address the due diligence items highlighted by the respective consultant reports through negotiation of the detailed terms of the finance documents.
In relation to the additional capital the project requires, the company continues to progress all options previously outlined with a view to securing the additional capital in a manner which complements the senior debt financing and meets the liquidity requirements of the project.
The company’s cash balance as of 31 December was £290 million, of which £230 million is unrestricted, which provides sufficient liquidity to fund project progress in line with the current project schedule into the 2Q19.
The company remains on track to achieve first polyhalite and commercial production on time and in line with the cost schedule announced on 6 September 2018.
Considerable progress has been made at the company’s construction sites in the quarter. At the Woodsmith Mine site, the service shaft foreshaft excavation is now complete to 44 m and is expected to reach the final depth of 45 m in January 2019. The service shaft winder house basement is complete, with the connecting walls to the shaft and upper floor currently being installed. The service shaft permanent winder has been fabricated ready for delivery to site.
The production shaft D-walls have been installed and excavation of the main production shaft foreshaft has commenced in line with the 2018 milestone. A total of 7.2 km of D-walls have been installed across the production and services shafts.
The vertical sinking machine (VSM) being used to construct the mineral transport system (MTS) access shaft was launched in October 2018, consistent with the company’s milestone for 2018. The MTS access shaft has been sunk to a depth of 63 m and sinking activities are progressing smoothly following some initial commissioning issues. Since late November cutting rates have increased by 25% and improvements are ongoing. The current VSM operational performance has provided the company with further confidence in the assumed advance rates for the shaft boring roadheaders that will be used to sink the main service and production shafts.
At Wilton, the MTS portal has been completed and tunnelling activities have commenced, satisfying the 2018 Company milestone for this activity. Current tunnelling activities are progressing using conventional excavation techniques with 13 m of tunnel completed. The drive 1 tunnel boring machine (TBM) is expected to arrive at site during 1Q19. It is anticipated that approximately 125 m of drive 1 will be completed prior to commencing tunnelling with the TBM in order to reach competent Redcar mudstone through which the TBM will be launched.
At Lockwood Beck, preparatory works for shaft sinking are well advanced, with DMC Mining Services preparing to commence initial excavation works in early 1Q19. This represents a minor delay against the 2018 milestone of commencing excavation. Preparatory works undertaken so far include the establishment of the shaft sinking platform and a shaft collar to 20 m depth, the installation of a grout curtain to a depth of 60 m and the commencement of piling for the temporary headframe and winder house and associated site infrastructure.
Earthworks are underway at the materials handling facility in Wilton, consistent with the 2018 milestone, and site preparation activities are currently progressing on schedule.
One of the most significant achievements during the quarter was the completion of procurement for the major construction packages related to the stage 2 senior debt financing process. In November 2018, an engineering, procurement, and construction contract for the development of the company’s port handling facility on Teesside was entered into with McLaughlin & Harvey Ltd. The company also varied its existing MTS tunnelling contract with STRABAG AG to include the engineering, procurement, and construction of the fit-out of the company’s MTS. The signing of these contracts marked the completion of procurement of the major construction packages. Through its procurement programme, the company has established strong partnerships with world-leading constructions companies to develop the Woodsmith Mine and associated infrastructure.
Chris Fraser, Managing Director and CEO of Sirius, commented:
“2018 was a year of significant progress for the company. Completion of procurement to support the stage 2 financing and the signing of an additional 4.8 Mtpa of take-or-pay supply agreements, have been substantial achievements. Considerable progress has been made across all our construction sites and development activities are advancing at pace. More than 800 people are now employed on the project, demonstrating the transformational potential for jobs and growth in the local area.
“Executing our stage 2 financing plan remains our priority. We continue to make progress towards obtaining stage 2 financing commitments and are working constructively with all relevant parties to achieve this. The process with the lenders is continuing this quarter as we work through the due diligence reports with the lending group and progress discussions on the revised debt structure.”
Read the article online at: https://www.worldfertilizer.com/project-news/22012019/sirius-minerals-plc-release-q4-progress-update/