Construction News

Sat October 19 2019

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Sirius fertiliser project faces funding crisis

18 Sep One of the UK’s biggest infrastructure projects is at risk of collapse due to financing difficulties.

Current state of the Woodsmith mine
Current state of the Woodsmith mine

Sirius Minerals is building a potash mine in North Yorkshire and a tunnel to convey material from Woodsmith potash mine, near Whitby, to Redcar harbour. Woodsmith has the world's largest and highest grade polyhalite deposit and Sirius is extracting it to make fertiliser.

However, the £4bn project is on the brink after a £400m bond issue had to be pulled due to unfavourable market conditions and the government refused to step in and provide any guarantees. It is now having to rethink its plans.

As at 31st August 2019 Sirius had approximately £180m of unrestricted cash, which included over £117 million of uncommitted capital.  This does not provide enough liquidity for the company to continue development of the project as planned, the company disclosed yesterday

Sirius is now working with its contractors on scaling back or re-phasing the plans.

Chief executive Chris Fraser said: "Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our stage two financing plan.  As a result, we have taken the decision to reduce the rate of development across the project in order to preserve funding to allow more time to develop alternatives and preserve the significant amount of inherent value in this world-class project.”

He added: “The company will now conduct a comprehensive strategic review over the next six months to assess and incorporate optimisations to the project development plan and to develop a different financing structure for the funds required.  This is the most prudent decision to give the company the time necessary to restructure its plans to move the Project forward.  The process will incorporate feedback from prospective credit providers around the risks associated with construction and will include seeking a major strategic partner for the project." 

A range of ‘optimisation opportunities and acceleration initiatives’ have been developed by Sirius and its contractors over the last year.  These include:

  • Optimised shaft boring roadheader operation and scheduling
  • Using the first tunnel boring machine to do more work so as not to need another
  • Using the TBM mucking system during the fit-out of the mineral transport system to transport polyhalite to Teesside - potentially accelerating commercial production earlier than planned
  • Resizing key components.

An intermediate shaft site is being constructed at Lockwood Beck to act as a transfer point along the mineral transport system route
An intermediate shaft site is being constructed at Lockwood Beck to act as a transfer point along the mineral transport system route

Where it’s at

Sirius has supplied a comprehensive update on project progress, and a lot has been achieved. Construction started at Woodsmith in May 2017 and is scheduled to start producing first polyhalite in 2021.

Two shafts are being constructed, to a depth of 1600 metres, to access the polyhalite resource.

Construction of the 35-metre wide foreshafts of both the production and service shafts was completed in late 2018. Once fully excavated and operational, these will house the winding gear which is sunk partially below the surface to reduce the visual impact of the mine.

DMC Mining Services, the shaft sinking contractor, is using a Herrenknecht Shaft Boring Roadheader (SBR) to construct the two main shafts. A third 360m deep shaft is also being sunk, using traditional shaft sinking techniques, from which we will launch a tunnel boring machine to support construction of the mineral transport system.

Service and production shafts

Excavation of the main service shaft has reached its target depth of 118 metres using conventional excavation techniques. Construction of the main shaft to depths exceeding 118 metres will be excavated using the shaft boring roadheader. The components of the shaft boring roadheader started to arrive at the Woodsmith Mine site in August this year and pre-assembly on surface has started.

In the service shaft foreshaft, preparatory works to enable the construction of the shaft boring roadheader (SBR) headframe, the structure from which the shaft boring roadheader will be suspended during shaft construction, are now substantially complete.

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All major components of the permanent winder for the service shaft are now in place. The temporary winders, which connect to the SBR during shaft construction to the mining level, have also progressed in line with schedule.

The excavation of the production shaft foreshaft has progressed faster than expected and is expected to reach its target depth of 45 metres in the coming days. The production shaft differs from the service shaft in that it already has diaphragm walls installed to a depth of 120 metres in the main shaft and because of this excavation can occur at a faster rate than seen in the service shaft. In parallel with excavation of the production shaft, construction of the permanent winder building has progressed on schedule.

Mineral Transport System (MTS)

MTS Drive 1 - Wilton to Lockwood Beck

MTS drive 1 tunnel construction has advanced ahead of expectations. The first tunnel boring machine (TBM) Stella Rose has completed 1208 metres of tunnelling and is now more than two months ahead of schedule. Stella Rose has now cleared the Wilton International site boundary, has passed under all neighbouring industrial infrastructure and is driving towards Lockwood Beck with advance rates that are better than expected. The TBM is now averaging 17 metres a day (including planned technical stops). The fastest rate achieved to date is 29.5 metres in 24 hours which exceeds the long run average advance rate assumptions for the construction of the MTS tunnel.

MTS Drive 2 - Lockwood Beck towards Woodsmith Mine

At Lockwood Beck, the intermediate access shaft has been excavated and lined to 51 metres. A grouting process has commenced to prepare the ground ahead of commencement of the main shaft sink using 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). The temporary headframe is being erected and construction of the winder house has progressed on schedule.

MTS Drive 3 - Woodsmith Mine towards Lockwood Beck

Following the initial excavation to 115 metres of the MTS access shaft using the Herrenknecht vertical sinking machine (VSM), the Galloway has now been installed and is being prepared to begin conventional, drill and blast shaft excavation to the MTS level. To enable conventional shaft sinking operations to begin, the temporary headframe and winder building is being constructed on site and mechanical fit out is under way.

Materials Handling Facility

Worley, the contractor for the Materials Handling Facility (MHF), has completed the optimisation engineering phase of early works and preparation works are under way ahead of piling. Long lead procurement orders for certain key component parts of the MHF, including the granulators and dryers have been placed.

Construction of the full R&D demonstration facility at Wilton is advanced, with all key components now being assembled on site. The construction of the plant is expected to be completed in November, when it will be available for the production of demonstration granules.

Port Handling Facility

On 1st September 2019, Sirius amended the existing design and build contract for the overland conveyor with contractor PJ Carey, to include the scope of work for its port handling facility at Teesside.  The award of the port handling facilities contract to PJ Carey has the benefit of removing a construction interface between the port handling facilities and the overland conveyor works, Sirius says. 

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