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'Exciting times' for Sirius Minerals as it advances Yorkshire mine, says ShoreCap

Ground breaking for the Mineral Transport System portal at the Materials Handling Facility in Wilton has started today, according to Shore Capital
“Mid-2018 represents particularly exciting times for Sirius,” ShoreCap says

It is “exciting times” for Sirius Minerals PLC (LON:SXX) as it progresses its North Yorkshire mine, Shore Capital said on Friday.

The house broker specifically highlighted a tunnelling contract has been signed with STRABAG for drive 1 of the Mineral Transport System (MTS), from Wilton to Lockwood Beck.

The 36.7km-long tunnel will be used to transport product from the Woodsmith site to the Materials Handling Facility (MHS) in Wilton via an underground conveyor system.

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This is in line with the company’s commitment to minimise the impact of the Yorkshire polyhalite project at the North York Moors National Park (NYMNP) by ensuring that minerals do not reach the surface within the Park.

“Mid-2018 represents particularly exciting times for Sirius,” ShoreCap said.

“We understand that the latest development at the company sees ground breaking for the MTS portal at the MHF site in Wilton is occurring today.”

Last month the Redcar & Cleveland Borough Council (RCBC) gave planning approval for amendments to the layout of the transport system, including locating the portal further south and extending its length to 320m from 90m.

'Compelling' offer for Sirius

The ‘design and build’ contract with STRABAG for drive 1 was signed in March following a competitive tender process.

Sirius described STRABAG’s offer as “compelling” in terms of price, schedule, safety management and risk allocation. The group also said the deal fit within its overall project estimate and schedule.

“Once completed, the MTS tunnel would be the second-longest in the UK, we understand,” ShoreCap said.

The broker said it last visited the Yorkshire project in early May when Sirius remained on time and on budget to deliver key milestones that include the first polyhalite and commercial production.

Sirius 'capitalising on opportunities'

“We have previously opined that there will almost always be delays in projects of such magnitude as Sirius’s, and noted that the company has been doing the right thing in seeking and attempting to capitalise on opportunities to accelerate activities where possible,” it said.

“While Sirius is currently at development stage and still some years from becoming a cash flow-generating company, we believe that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production.”

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ShoreCap also noted that Sirius hopes to obtain initial lender commitments for its Stage 2 debt financing in mid-2018, towards execution later in the year.

The company is targeting 6-7mln tonnes per annum (mtpa) of take-or-pay offtake agreements and earlier this week announced that it has now secured 4.7mpta.

“We note that just another three or four similar-sized deals would see Sirius into the 6-7Mtpa target,” said ShoreCap.

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The UK mine developer should have sufficient funds to bring its project through the second quarter of 2019, meanwhile, stage two financing efforts are underway

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