10th Jul 2015 07:07
LONDON (Alliance News) - Sirius Minerals PLC Friday said it is "rapidly moving" to progress what will be the world's largest potash mine in Yorkshire after securing approval from authorities at the beginning of July.
The North York Moors National Park Authority, which regulates the national park in Yorkshire where the potash mine is to be built, gave Sirius the green light to build the UK's first new potash mine in 40 years on July 1. Potash is used primarily for agricultural fertiliser.
Sirius Friday said it is "now rapidly moving to the next phases of financing and construction" of the project, and aims to deliver the definitive feasibility study for the mine before the end of 2015 and secure the first tranche of financing in the first quarter of 2016.
Currently, Sirius is ironing out further issues that may be impacted by the mine, but the company said this was "common for major projects of this nature" and said all of the issues have been previously disclosed in the local authority's development plan.
Those issues mainly relate to the materials handling facility for the project and the temporary construction accommodation and a park and ride facility, and discussions are ongoing with several local authorities.
The construction of a park and ride facility is required, and planning conditions are currently being finalised and agreed between the company and Scarborough Borough Council, whilst legal agreements concerning the material handling facility also are being finalised.
"The Secretary of State for Communities and Local Government currently has the option to 'call-in' the applications and hold a public inquiry if he so chooses. The company does not believe such a course of action is necessary and awaits the notification from the local authorities as to government's decision on this matter," said the company in a statement.
In the meantime, Sirius continues to discuss other matters as a "normal part of the planning process".
Planning conditions and legal agreements for the mine and the mineral transport system are being discussed with local authorities. Those discussions are being held with two separate local authorities comprised of Cleveland Borough Council and the North York Moors National Park Authority.
"The company expects all remaining issues to be dealt with in a timely fashion in order to enable all of the decision notices to be issued before the end of September 2015," said Sirius.
In tandem with settling those matters, Sirius is progressing the definitive feasibility study for the project, which is expected to be completed in the fourth quarter of 2015.
When North York Moors National Park Authority gave Sirius permission to construct the potash mine, the company said it was aiming to construct the project with a scope to produce around 13 million tonnes per year to be constructed over two phases. The first phase was due to be designed to provide a 6.5 million tonne operation with the ability to be expanded to 13 million tonnes per annum over a period of years.
However, on Friday the company said the definitive feasibility study is looking at ways to increase the initial installed infrastructure capacity from 6.5 million tonnes per annum up to 10 million tonnes per annum, and securing the ability to potentially double the infrastructure capacity to 20 million tonnes per annum.
Tenders are currently being accepted by the company for the key construction contract packages for the mine, and said there are currently two leading tender offers on the table.
In terms of financing, Sirius reiterated its plans to fund the project with "multiple financings" through debt markets for the majority of the project "because the underlying economics of the project business model lend themselves to high leverage," it said.
Sirius currently intends to split the financing of the project into two stages. Stage one will focus on the initial construction period where the perceived risks are higher.
"This is likely to take the form of a mixture of development equity, including cornerstone investors, and structured debt. This financing would advance the construction of the project to a point where construction risk, primarily tunnelling and shaft excavation, is reduced and lower cost sources of debt are available," said Sirius.
Sirius is expecting to secure the first stage of financing in the first quarter of 2016.
The miner conceded that the second stage of financing will "account for the majority" of the funds needed for the project and will be 100% debt based.
"Advisers were engaged in early 2015 to advise on structuring and arranging senior debt for this phase, which could ultimately be secured from either the bank or debt capital markets or from a combination of both," said the company.
"The underlying ethos of the company's financing strategy is that any transactions needed to complete construction of the project are ultimately stepping stones to the long-term capital structure. Once material cashflows from the project commence the company can put in place a low-cost long-term capital structure. This will then allow dividends and increased value to be returned to shareholders," it added.
Sirius added that it continues discussions with current and potential customers all around the world in order to secure offtake agreements.
Sirius shares were up 3.5% Friday morning at 22.0 pence per share. The stock closed June 30 at 14.55p, prior to the mine approval being received.
By Joshua Warner; [email protected]; @JoshAlliance
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