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Sirius ups Woodsmith capex by $500M

Sirius Minerals (LSE:SXX) has upped the expected the capital estimate for its massive Woodsmith polyhalite project in North Yorkshire up by 13.5% and signed two major construction contracts.
Sirius ups Woodsmith capex by $500M Sirius ups Woodsmith capex by $500M Sirius ups Woodsmith capex by $500M Sirius ups Woodsmith capex by $500M Sirius ups Woodsmith capex by $500M

Sirius has increased the capital costs estimate for its Woodsmith mine by 13.5%

The capital costs estimate was increased to US$4.2 billion, up from the $3.7 billion forecast in November 2016.

Although mine development, materials handling facility (MHF) and port expenses were forecast lower, due to deferment of the overland conveyor until 2025 and funded from operating cash flow, there were increases in mineral transport system (MTS), other infrastructure and facilities, and owners costs.

Sirius also cited the impact of an updated mine plan and an increase in power rates for the increased cost estimate.

It said it estimated that its revised stage two capital funding requirements would be $3.2-3.6 billion, a $400-600 million increase.

Sirius CEO Chris Fraser said the increased funding requirement reflected the 'optimisation' of the MTS tunnel design and supported the senior debt financing.

"The project's economics remain extremely compelling and we are confident they support the expected additional funding requirement," he said.

However, the market did not take kindly to the higher capital costs estimate, with Sirius' shares tumbling 15.46% Thursday to 27.61p (US36c).

Meanwhile, the company also signed a design and build contract with STRABAG for the construction of tunnel drive two and three of its MTS between the mine and Lockwood Beck, as well as an EPC contract for the MHF at Wilton to Jacobs Engineering Group's UK subsidiary.

Sirius said the plant had been scoped to include 7 million tonnes per annum of granulated and 3Mtpa of coarse product in its first phase of development, but with a footprint for up to 20Mtpa of granulated product.

The company said it still needed to complete the procurement process for other major packages and is in the final stages of negotiations for the MTS fitout and port facilities, with the latter requiring the construction of the outload circuit, wharf and product storage facility.

For the MTS fit out, STRABAG was identified as the preferred contractor.