viewSirius Minerals PLC

Sirius Minerals says development work is on time and within budget

The key stock catalyst is still the further signing of bankable off-take contracts, where negotiations continue, noted Liberum Capital Markets

Woodsmith Mine
Site preparation at the Woodsmith Mine is ongoing with completed works including site access, groundwater protection and shaft sinking platform construction

Sirius Minerals PLC (LON:SXX), the developer of the York potash project, said development of the Woodsmith mine is on time and within budget.

The company said the shaft sinking contract with Associated Mining Construction (AMC) has been finalised with costs expected to be within the allocated budget.

AMC will be sharing the development risk, and can earn financial incentives for completing the scope of work under budget and ahead of schedule, or pay penalties should completion be late or above the target price.

AMC is busy working on a detailed design of the shafts, including associated surface facilities such as the production and service shaft winder buildings.

Diaphragm walling (D-walling) preparation activities have commenced, including the mobilisation of the rigs and planning for the support infrastructure such as the concrete batch plant, welfare facilities, workshops and offices, Sirius said.

The winding equipment required for main shaft sinking activities has been ordered and delivery is expected in the new year in time for the main sink to commence.

Non-cash writedown sees losses widen

The project is obviously still some way away from producing, and as such the company – recently elevated to the FTSE 250 after moving from AIM – is operating at a loss.

The group's operating loss for the first half of the year was £14.7mln, compared to £4.7mln in the prior corresponding period, reflecting a general increase in activity following commencement of development.

The loss after tax widened to £151.3mln from £4.1mln the year before, as the group wrote down the fair value of derivative instruments associated with its convertible bond issue by £133.3mln.

Sirius deployed £121mln during the six-month period ended 30 June 2017 for project development, of which £48.3mln was capital expenditure.

READ Sirius Minerals' FTSE 250 elevation underlines growing market confidence in the Yorkshire project

"The half year has been marked by excellent progress on the development of Woodsmith Mine and associated infrastructure. With highways and enablement works completed, and site preparation into the latter stages, we eagerly anticipate the commencement of shaft sinking activities. Good progress has also been made at Lockwood Beck, the intermediate site for the mineral transport system,” revealed Chris Fraser, managing director and chief executive officer of Sirius.

"We are continuing detailed dialogue with commercial partners around the world, as interest in future supplies of our POLY4 product remains strong. These discussions are supported by ever-present and expanding research and development work, which will support customers and farmers in the years to come. We also continue to add the skills we need to our team to progress our work quickly, safely and efficiently," Fraser added.

Shares in Sirius were up 0.3% at 27.24p in the first half hour of trading.


Quick facts: Sirius Minerals PLC

Price: 5.2 GBX

Market: LSE
Market Cap: £365.05 m

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