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Sirius ups CapEx estimate for North Yorkshire polyhalite project by US$496M

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Sirius ups CapEx estimate for North Yorkshire polyhalite project by US$496M

Sirius Minerals PLC expects the second-stage development of its North Yorkshire polyhalite project in the U.K. to cost an additional US$496 million over the November 2016 estimate, taking the total to US$4.2 billion, including contingency.

The CapEx revision bumped up stage-two capital funding requirements by a further US$400 million to US$600 million to between US$3.4 billion and US$3.6 billion due to finalizing procurement and the associated risk allocations.

"The expected increased funding requirement coming from this process reflects an optimization of the mineral transport system tunnel design and a significantly improved risk allocation for Sirius to support the senior debt financing," Sirius Managing Director and CEO Chris Fraser said.

The company signed two contracts, one with a STRABAG SE subsidiary to build two drives of a planned mineral transport system and a second with a unit of Jacobs Engineering Group to build a materials handling facility.

The plant was scoped to include 7 million tonnes per year of granulated product and 3 Mt/y of coarse product in its first phase of development, with expansion capacity up to 20 Mt/y of granulated product.

Sirius said Sept. 6 that it received detailed responses from potential lenders supporting a commercial debt tranche of approximately US$1.5 billion, subject to due diligence.

The company will outline a revised financing plan to the lenders in the fourth quarter after an assessment of overall capital funding requirements of the project. The financial close of stage-two financing is anticipated in the first quarter of 2019.

In early March, the company was seeking US$2 billion in debt guaranteed by the U.K. government, saying the funds were important to its financial plan. It also aimed to secure about US$3 billion in bank loans.

In its latest release, Sirius said it believes that US$3 billion in senior debt financing is an appropriate debt level, and it will not try to secure an increase. The company noted that all sources of incoming capital will be raised conditional on the project having a complete financing package.

The company also revised its production capacity expansion plan, with the 10 Mt/y level anticipated in 2024, compared to 2023 as outlined in the 2016 definitive feasibility study. Accordingly, the expansion to 13 Mt/y is now expected in 2026, compared to 2024 previously, while the expansion to 20 Mt/y was pushed back to 2029 from 2026.

"The company has revised its production capacity expansion plan to incorporate expected senior debt facility terms that would restrict the ability of the company to use cash flows from operations to fund expansion of the project to 13 Mt/y production," Sirius said.

The 50-year mine life estimate and the 2021 target for initial production remained unchanged.

Sirius is working on concluding agreements in Europe and Brazil representing more than 3 Mt/y of peak aggregate supply volume.

The company recently signed binding take-or-pay agreements to supply POLY4 fertilizer to Chinese agriculture companies Guangzhou Eiliseng Biotech Co. Ltd. and Yantai Service Agricultural Science and Technology Co. Ltd. for 10 years.

Eiliseng is expected to buy 1.2 Mt/y to 1.3 Mt/y of POLY4 and supply it to the Yunnan and Sichuan provinces in southern China.