Tag Archives: Chris Fraser

Anglo American eyes polyhalite potential with Sirius Minerals bid

Anglo American has gone public with a bid to buy Sirius Minerals and its North Yorkshire polyhalite project in the UK.

The all-cash bid, which values Sirius at £386 million ($507 million), comes shortly after Sirius announced a strategic review for the project that included a broader process to seek a major strategic partner for the asset.

Anglo says it identified the project as being of potential interest some time ago, given the quality of the underlying asset in terms of scale, resource life, operating cost profile and the nature and quality of its product.

The North Yorkshire polyhalite project, which is spilit into two stages, will see product extracted via two mine shafts and transported to Teesside, in the northeast of England, on a conveyer belt system in an underground tunnel. It will then be granulated at a materials handling facility (MHF), with the majority being exported to overseas markets.

Infrastructure development on the project includes sinking the shafts at the Woodsmith mine to access the polyhalite deposit (using Herrenknecht’s Shaft Boring Roadheader); developing a 37 km-long underground mineral transport system using tunnel boring machines; constructing a MHF in Teesside for granulating or chipping the mined material into the final product; and harbour facilities comprising an approximately 3.5 km-long overland conveyor, a ship berth and a ship loader located adjacent to the harbour on the River Tees.

In its announcement this morning, Anglo said: “The project has the potential to fit well with Anglo American’s established strategy of focusing on world-class assets, particularly in the context of Anglo American’s portfolio trajectory towards later cycle products that support a fast-growing global population and a cleaner, greener, more sustainable world.”

Anglo is not new to the fertiliser market having, until 2016, a phosphates business in Brazil. It sold the mine, beneficiation plant, two chemical complexes and two further mineral deposits that made up this business that year to China Molybdenum in a $1.5 billion deal that also included its niobium assets.

Sirius announced its strategic review back in September 2019 after it had to terminate a $2.5 billion revolving credit facility stage 2 financing for the project (to get it to 20 Mt/y capacity) due to a worsening of market conditions for a required bond raising.

This led to the company slowing 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”, Chris Fraser, Managing Director and CEO, said at the time.

This saw the company lay out a pathway that would still see first polyhalite production in the June quarter of 2022, but could see the ramp-up to stage one 10 Mt/y polyhalite capacity reached in the September quarters of 2025 or 2026, depending on if there was a 12 or 24 month deferral of the planned development scope.

Anglo said, during the first two years after an offer is successfully completed, development work on the project is expected to be broadly in line with Sirius’ revised development plan “although Anglo American intends to update the development timeline, optimise mine design and ensure appropriate integration with its own operating standards and practices”.

It added: “Anglo believes that the project has the potential to become a world-class, low-cost and long-life asset. Sirius has progressed the development of the project to an advanced stage, with construction now under way for over two years.

“Sirius has indicated that this is currently the world’s largest known high-grade polyhalite deposit with a JORC reserve of 290 Mt, with a grade of 88.8%, and a resource of 2,690 Mt. The resource indicated by Sirius has the scale, thickness and quality to be mined efficiently using bulk mining methods through a relatively simple, low-energy, non-chemical production process.”

In addition, Sirius has indicated the project could operate at an EBITDA margin potentially well in excess of 50%, according to Anglo, leaving the project well positioned for strong through-the-cycle profitability with a long anticipated asset life.

“At this stage, the project requires a significant amount of further financing to develop and commission the operation that has proven challenging for Sirius to procure on an economic basis,” the diversified miner said. “Anglo American, as one of the world’s leading mining companies, has the resources and capabilities to help build on the achievements of the Sirius team. Anglo American remains committed to its disciplined capital allocation framework.”

Anglo explained that there is potential long-term benefits in applying its technical expertise in both the development and operational phases, as well as utilising its recognised Operating Model to drive safety and productivity to “world-leading standards”.

“Integration into Anglo American’s global marketing network would provide full mine-to-market capabilities and build on Anglo American’s institutional experience in the world’s major fertiliser markets,” it added.

Sirius’ polyhalite product, POLY4, is a multi-nutrient fertiliser certified for organic use and has the potential to generate demand at a competitive cost that supports a strong margin, according to Anglo.

“POLY4 is an attractive low-chloride alternative to traditional potassium-bearing mineral products on a cost-effective basis. It includes four of the six key nutrients that plants need to grow – potassium, sulphur, magnesium and calcium,” it said. “The use of fertilisers is one of the most effective ways to improve agricultural yields and therefore help to address the anticipated future imbalance between food, feed and biofuel demand and supply caused by a fast-growing global population and limited additional land availability for agricultural use.”

STRABAG wins MTS contract for Sirius UK polyhalite project

Sirius Minerals has varied its existing mineral transport system (MTS) tunnelling contract with STRABAG AG to include the engineering, procurement and construction of the fit-out of the system at its polyhalite project in Yorkshire, England.

The MTS fit-out scope includes the fit-out of the MTS conveyor, the maintenance railway, electrical and communications infrastructure, and all other services in the tunnel essential to the operation of the MTS.

Sirius said the price of the MTS fit-out was in line with the company’s capital re-estimate announced on September 6.

The MTS will carry the company’s mined polyhalite from 360 m underground at the Woodsmith mine site to the materials handling facility at Wilton, Teesside, on a 37 km underground conveyor system. The tunnel will be constructed by three tunnel boring machines and the conveyor system in the MTS will be designed to handle 20 Mt/y of throughput. It will also contain maintenance rail and services, including a 66 kV power feeder from Wilton International industrial complex.

More than 50% of the MTS fit-out price is on a fixed rate or lump-sum basis, with the remainder based upon estimated prices to be converted into fixed prices prior to completion of stage two financing. The proposed schedule for the MTS fit-out is in line with the company’s overall project schedule, Sirius said.

This is a significant step forward for the project, with Sirius saying it has now completed its procurement for the major construction packages related to the stage two senior debt financing process.

Chris Fraser, Managing Director and CEO of Sirius, said the company’s efforts were now focused on the successful execution of its financing plan to fully finance the construction of its polyhalite project.

As previously announced, the company expects the capital funding requirement of the project to be $3.4-$3.6 billion (previously $3bn), with a $3 billion senior debt financing being the appropriate level of debt.

Given the timing of completion of the final procurement contracts, final lender commitment letters are expected to be received in December and January. The company is targeting financial close of stage two financing in the March quarter.