Q2 2019 Progress Update
2 July 2019
Sirius Minerals Plc
Q2 progress update
§ Comprehensive US$3.8 billion funding solution for stage 2 financing requirements launched on 30 April 2019 and on-track to complete before the end of September 2019
§ Successful completion of US$425 million equity offering and US$400 million convertible bond offering
§ Long-term, take-or-pay supply agreement signed with IFFCO, one of the largest co-operative societies in the world, for volumes increasing to 1 Mtpa POLY4
§ Construction advancing well, and the Company remains on target to achieve first polyhalite and commercial production on time and in line with its cost schedule
Sirius Minerals Plc ("Sirius" or the "Company") provides its latest quarterly progress update.
Chris Fraser, Managing Director and CEO of Sirius, commented:
"The successful raising of US$825 million of funding during the quarter marked the completion of the first part of our stage 2 financing. We are making good progress with the remaining components of our stage 2 financing package, which we expect to complete by the end of September this year in line with guidance, and which will enable us to bring our multi-nutrient POLY4 product to our customers to meet the expanding needs of the global agriculture industry."
The Project's Lost Time Injury Frequency Rate ("LTIFR") stands at 2.35. The LTIFR is a measure of lost time incidents per million man-hours on a twelve-month rolling average basis.
Stage 2 financing
On 1 May 2019, the Company announced that it had successfully raised gross proceeds of approximately US$825 million as part of the US$3.8 billion stage 2 financing package announced on 30 April 2019, expected to fund the Project to the point at which it generates positive operating cash flows. The US$825 million was raised through a Firm Placing and Placing and Open Offer of ordinary shares for US$425 million (£327 million) and through an offering of guaranteed convertible bonds due 2027 (the "New Convertible Bonds") for new gross proceeds of US$400 million.
The Company placed US$106.6 million in aggregate principal amount of the New Convertible Bonds with holders of the Company's outstanding US$244 million of Guaranteed Convertible Bonds due 2023 by way of a repurchase. No new proceeds were received by the Company in connection with the repurchase.
The net proceeds of the New Convertible Bonds have been placed in an escrow account and will be released to the Company upon the issuance of US$500 million senior secured guaranteed bonds (the "Initial Bonds") (or another acceptable US$500 million debt financing) and entry into the proposed US$2.5 billion revolving credit facility with JP Morgan Chase Bank N.A., London Branch (the "RCF"), expected to occur no later than the end of September 2019. The net proceeds received pursuant to the Firm Placing and Placing and Open Offer provide the Company with sufficient cash to progress the Project in line with key milestones to the end of September 2019.
The Company is making good progress on all workstreams connected with the proposed US$500 million issuance of Initial Bonds and entry into the proposed US$2.5 billion RCF, which will together complete the Company's stage 2 financing.
The Company remains on track to achieve first polyhalite in 2021 and in line with its cost schedule. Construction continues to progress in line with key milestones at each of its construction sites.
Service and production shafts
Service shaft works are on target to complete the construction of the foreshafts by year end to enable commencement of excavation of the main shaft using the shaft boring roadheader ("SBR"). The Company's first SBR recently passed its Factory Acceptance Test and is due to commence arrival at the Woodsmith Mine site in August 2019. The SBR will then be erected on-site. Assembly of the SBR and installation into the foreshaft is scheduled to be completed in December 2019.
The excavation of the 35-metre diameter service shaft foreshaft to 45 metres was completed in the first quarter of 2019, enabling commencement of the excavation of the inner-main shaft, which will be excavated to a total depth of approximately 120 metres. The main shaft has now been excavated to approximately 85 metres below ground level, using conventional excavation techniques.
The service shaft temporary winder building foundations have been completed. Erection of the temporary and permanent winder buildings, which will house the service shaft hoists, and installation of the temporary and permanent winders is in progress and on schedule.
Production shaft works are on target to complete the construction of the foreshaft and excavation of the main shaft to 120 metres by year end. The 32-metre diameter production shaft foreshaft, which will be excavated to a depth of 45 metres from surface, has been excavated to approximately 9 metres below ground level at quarter end.
The production shaft differs from the service shaft in that it already has diaphragm walls installed to a depth of 120 metres in the inner-main shaft. Once the larger diameter foreshaft has been excavated to a depth of 45 metres and the floor installed, the inner-main shafts will be excavated to a depth of 120 metres using conventional methods inside the existing diaphragm walls. This is expected to be completed in December 2019. The SBR for the production shaft is due to commence arriving on-site in October 2019. The SBR for the production shaft is currently erected in Germany and will be undertaking various cutting optimisation tests prior to being dismantled and shipped to the Woodsmith Mine.
The application of considerable learnings from the service shaft excavation has meant that the production shaft excavations are progressing at a faster-than-expected rate and excavation is on track to meet 2019 targets.
Construction of the production shaft permanent winder building foundations is underway and is progressing ahead of schedule.
Mineral Transport System
MTS Drive 1 - Wilton to Lockwood Beck
The tunnel boring machine ("TBM") being used to construct Drive 1 of the mineral transport system ("MTS") completed its advance to the bottom of the MTS launch portal during the quarter and has successfully commenced mechanical tunnelling. At quarter end, the TBM has advanced approximately 210 metres into the MTS tunnel, which is ahead of schedule. The TBM is progressing on target to advance the MTS tunnel excavation to 3km by year end.
MTS Drive 2 - Lockwood Beck towards Woodsmith Mine
The Lockwood Beck MTS shaft pre-sink is well underway and had reached a depth of approximately 37 metres below ground level at quarter end. The pre-sink will continue to approximately 47 metres to enable installation of the Galloway (the multi-level working platform that will be suspended near the shaft bottom during sinking and raised and lowered as required to allow conventional drill and blast sinking to continue to the final depth of the shaft). Drill and blast operations are expected to commence during the year.
The Lockwood Beck shaft is scheduled to reach its target depth of 360 metres in the first quarter of 2020. Once complete, shaft bottom works will be undertaken prior to the shaft being handed over from DMC to STRABAG to begin construction of the launch cavern for the Drive 2 TBM at the 360-metre level.
MTS Drive 3 - Woodsmith Mine towards Lockwood Beck
The first approximately 115 metres of the MTS shaft excavation has been completed during the quarter using a Herrenknecht vertical sinking machine ("VSM"). The VSM has been removed from the shaft and preparation for the installation of the drill and blast Galloway is underway.
Civil works for the MTS winder building is complete and building erection is about to commence. The drill and blast Galloway is on site and under construction and delivery of steelwork has commenced.
Materials Handling Facility
Granulation trials for the materials handling facility ("MHF") test plant, including yield and efficiency optimisation, have been successfully completed during the quarter at the Company's R&D facility in Teesside. The test plant has now been decommissioned in preparation for conversion to a full R&D demonstration plant to be commissioned during the year.
Port Handling Facility
Procurement of the overland conveyor that will transport our POLY4 product from the MHF to the port, was completed during the quarter. The cost of the contract is in line with the Company's existing cost estimates. Site clearance continues at the Redcar Bulk Terminal site and good progress is being made.
Sales and marketing
During the quarter the Company signed a take-or-pay supply agreement with Indian Farmers Fertilisers Cooperative Limited ("IFFCO") for the supply of POLY4 in India. Volumes under the agreement will increase to one million tonnes per annum ("Mtpa") in year eight, with an option to increase this to 1.25 Mtpa. The IFFCO agreement takes the Company's total peak aggregate volumes under contract to 11.7 Mtpa.
IFFCO is one of the largest co-operative societies in the world with access to over 55 million Indian farmers. The agreement provides access to one of the top three fertilizer markets in the world with a total nutrient consumption of approximately 30 Mtpa.
During the quarter the Company initiated 29 new agronomy trials with a total of 48 trials initiated in 2019 to date. The total number of trials established by the Company now stands at 430 on 48 crops in 30 different countries. The Company has continued to establish a significant number of on-farm demonstrations with a number of its offtake partners' key and sizeable customers. The programme of on-farm demonstrations is expected to show to future end-users of POLY4 the benefits of incorporating POLY4 into their fertilizer programmes.
Sirius Mineral's Chief Executive Officer, Chris Fraser will host a webcast for investors and analysts at 9.30am today.
The webcast can be listened to live by clicking on the link below. A replay will be available on the Company's website in due course.
For further information, please contact:
Sirius Minerals Plc
Jennifer Wyllie, Tristan Pottas
Email: [email protected]
Tel: +44 845 524 0247
Alex Simmons, Ed Brown
Email: [email protected]
Tel: +44 7970 174 353
Tel: +44 7540 412 298
About Sirius Minerals Plc
Sirius Minerals Plc is focused on bringing large-scale volumes of POLY4 to the global agriculture industry. POLY4 is the Company's trademarked name for its unique multi-nutrient fertilizer to be produced from the world's largest and highest-grade known polyhalite deposit located in North Yorkshire, United Kingdom, which can be used to increase balanced fertilization around the world. Sirius Minerals' shares are traded on the Premium List of the London Stock Exchange. Its shares are also traded in the United States on the OTCQX through a sponsored ADR facility. Further information on the Company can be found at: www.siriusminerals.com.
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