Sirius Minerals PLC: Mineral Transport System (MTS)
February 26, 2014 (Source: Sirius Minerals PLC) — Highlights:
- Following a detailed engineering review the Company has decided to replace its previously proposed pipeline for transporting polyhalite between the mine and the port with an underground conveyor based system (MTS)
- Construction disturbance reduced by 70% with no construction in any designated sites and buildings required in the National Park reduced by 70%
- Significant improvement to project value through operating cost reductions, increased capacity, reduced construction disturbance, reduced risks and additional product options
- Estimated operating cost reduction of approximately US$10 per tonne (~25% reduction), total project capital cost expected to increase by approximately US$280M (~15% increase)
- Potential increased Phase 1 capacity to 6.5 mtpa and 13 mtpa in Phase 2
- Simplified approval process with two local planning authorities to be responsible for determining the vast majority of the Project – no change to expected mine application timing
The Directors of Sirius Minerals Plc (AIM: SXX, OTCQX: SRUXY) (“Sirius” or “the Company”) are pleased to announce the new Mineral Transport System (“MTS”) for its York Potash Project (“the Project”). The MTS will significantly increase project value, reduce the construction footprint and environmental impact of the project and deliver a more efficient and sustainable operation.
Chris Fraser, Managing Director and CEO of Sirius, commented:
“To be able to make such a positive change that increases project value at the same time as dramatically reducing construction impact is an exciting outcome of our long-term commitment to sustainable development.”
“Combined with the strong international demand for polyhalite, the change to the MTS in terms of the lower operating costs and an increase in Phase 1 production could result in an increase to the initial project value by over US$1bn.”
“The new Mineral Transport System is a combination of well proven and well understood systems and operating concepts that reduce project risks, increase stakeholder value and unlock further project development opportunities for the future.”
Since the deferral of the Company’s mine planning application in 2013 all aspects of the project have been re-evaluated to address concerns raised and to further progress its long standing commitment to reduce impacts wherever possible. Efforts to reduce the impact of the pipeline – specifically around avoiding designated sites during construction and building in extra production contingency and operational redundancy measures – resulted in a concept with an increased capital cost, greater level of above ground infrastructure and increased construction activity.
Following a detailed review by external engineering consultants, the Company has decided to replace its previously proposed pipeline scheme for transporting polyhalite between the mine and the port with the MTS. The MTS will consist of a series of linked conveyors located within a mining style tunnel located mostly at depths of around 120 to 360 metres, moving product from the mine site to the granulation facilities to be built at Wilton on Teesside.
Although a ‘cut and cover’ conveyor system and traditional transport-style tunnels had been considered previously, they had been discounted as options by the Company due to their increased construction impact and the disproportionate cost and time for construction. However further study work from the engineering and mining teams lead them to the MTS solution which is a standard mining style tunnel (rather than traditional infrastructure or civil tunnel), that will follow a consistent, good quality geological sequence from the mine that naturally comes to surface in Teesside.
The construction of the MTS is planned to be completed by five linked mining tunnels or roadways, each of approximately 7.5 kilometres in length. These will be accessed from either end of the route and from three intermediate access points where shafts will be sunk to the MTS depth. This method of construction removes the need for widespread excavations which were a dominant feature of the pipeline construction and the largest area of construction disturbance for the whole project.
Access point locations are being selected for natural screening and their ability to absorb the excavated material into the landscape with minimal impact and disturbance. Once construction is complete the access shafts will be covered by small agricultural buildings and used for ventilation, occasional maintenance and emergency access. Excavated material will be used in re-contouring and landscaping at these locations. The sites will be subject to management plans that either return the sites to their current use or enhance them to increase biodiversity and add to the ecological value of the surrounding areas.
MTS value benefits
The MTS simplifies the operation and removes the largest energy consumption aspect of the Project (the pipeline). This results in reduction in the estimated operating cost by approximately US$10 per tonne (representing a ~25% reduction in the total project operation cost estimate). The total capital cost of construction (pre-contingency) after removal of the pipeline costs and adding in the MTS costs is expected to increase by approximately US$280M. In net present value terms, the increase in capital cost is more than offset by the value created by the operating cost reduction.
In addition to the expected reduction in operating costs, the MTS potentially enables the hoisting capacities of the main rock shaft at the mine to be increased to 6.5 mtpa for Phase 1 and 13 mtpa for Phase 2 with no material additional capital cost. Further studies will be conducted on this as part of the Company’s detailed feasibility studies.
The change to dry transport also enables the Company to consider the potential opportunities from the de-icing salt market in the UK where there is a national need for secure supply in severe winters. The dry transport method also opens up the opportunity to explore the known potassium chloride (MOP) deposit that exists above the polyhalite resource. Previous exploration in the 1960-70s defined a historical non-JORC resource of 380Mt in the immediate vicinity of the Company’s polyhalite resource. This deposit can only be effectively explored and defined from underground workings due to its known variability but could represent a significant value addition in the future for the York Potash Project.
A significant component of the MTS capital cost relates to the equipment used for tunnelling and the conveyor system itself. A significant proportion of the tunnelling equipment such as continuous miners, rock bolters, flexible conveyor trains and ancillary vehicles are equipment required for the mining operation. The MTS enables the Company to bring forward the purchase of this equipment which can then be used in the mining operation and therefore result in reduction in the mining capital cost. In addition, this mining equipment and the MTS conveyor (approximately US$250M) are suitable for equipment leasing as a source of finance and the Company is in early discussions with suppliers about this opportunity.
Significant further impact reduction
The MTS will result in a dramatic reduction in the environmental impacts of York Potash Project.
· Construction footprint would be reduced by 70%. The MTS only requires approximately 60 hectares as compared to approximately 350 hectares required for the pipeline construction.
· The construction of the MTS removes all direct construction from designated and protected habitats. This is compared to the 13 hectares required for the construction of the pipeline.
· At the mine site the MTS will result in a removal of the buildings that were required for crushing and grinding, slurry preparation and pumping. This will result a 70% reduction in the buildings at the mine. In addition the reduced number of buildings increases the area available for landscaping the excavated material at the mine into more natural landforms. Importantly, the total excavated material at the mine is approximately the same as before with the MTS tunnel material replacing the pipeline building excavations.
· The pipeline would have resulted in the removal and subsequent restoration of a total of approximately 9.5 kilometres of hedge rows, traditional stone walls and fences. The MTS requires only 0.2 kilometres of hedge rows to be removed with no disturbance to stone walls.
Approval for the MTS will be sought via the standard planning application route with a ‘straddling application’ submitted to the North York Moors National Park Authority (“NYMNPA”) and Redcar and Cleveland Borough Council (“RCBC”). The Company will seek to enter into Planning Performance Agreements (“PPAs”) with both authorities to assist with their resourcing. An application for the MTS is scheduled to be submitted in November 2014. It is anticipated that a determination could be realised within the statutory 16 week period from the date of application. This compares favourably to the pipeline Development Consent Order approval process that would result in a determination by April 2016.
The change to the MTS scheme results in a simplified approvals approach for the whole Project with the vast majority of the Project now being determined by two local authorities:
· Mine and underground mining requires a planning application to the NYMNPA. To simplify the planning process and act on concerns from the NYMNPA regarding added complexity, areas outside the National Park will now be excluded from the new mine application that is to be submitted in July 2014.
· The MTS application, which will include the materials handling plant (granulation and storage) at Teesside, will require a straddling application to the NYMNPA and RCBC.
· The berth facility in Teesside will require an application for a Development Consent Order from the Planning Inspectorate as it is a bulk facility for over 5 mtpa of export.
All aspects of the above approvals are progressing well, with key environmental study work having been underway for a substantial period of time. With regard to the mine application, the Company’s consultants are engaged in on-going and extensive pre-application meetings with the NYMNPA and its consultants and associated statutory consultees.
These meetings are taking placing under the remit of the previously announced PPA and are allowing study methodologies to be agreed in advance of the application as well as cementing the opportunity to obtain pre-application advice from the NYMNPA.
The mine application is currently on target to be submitted in July and will be accompanied by a cumulative assessment that assesses the environmental impact across the entire project including the MTS, as previously announced.
About Sirius Minerals Plc
Sirius Minerals is a globally diversified potash development company. Its primary focus is to bring on stream major potash mining facilities through the acquisition and development of projects overlying recognised potash deposits. Today it holds properties in the United Kingdom (North Yorkshire) and the United States (North Dakota). Incorporated in 2003, Sirius Minerals’ shares are traded on the London Stock Exchange’s AIM market. 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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