Sirius Minerals has reported that the cost of developing its new polyhalite mine in North Yorkshire will rise by up to US$600M (£464M) due to increased scope of the tunnelling work.
The cost of the Material Transport System (MTS) has risen from US$858M (£664M) to US$1.46bn (£1.13bn) due to the addition of caverns to the tunnelling design and transfer of risk to the tunnelling contractor.
Sirius made the announcement about costs with the new that it has awarded the contract for the remaining two tunnel drives for the project to Strabag.
Strabag was awarded the contract for the first section of the MTS tunnel in March and the tunnel boring machine is on site being prepared for launch.
Sirius also announced that an EPC contract for the materials handling facility at Wilton docks has been signed with Jacobs.
Sirius managing director and CEO Chris Fraser said: “The signing of the contracts for the remaining tunnel drives and the materials handling facility at Wilton are significant steps forward for the business with almost all procurement now complete. The expected increased funding requirement coming from this process reflects an optimisation of the MTS tunnel design and a significantly improved risk allocation for Sirius to support the senior debt financing. The project’s economics remain extremely compelling and we are confident they support the expected additional funding requirement.”
Sirius said that the contract with Strabag for the MTS tunnel is effectively a lump sum arrangement, with fixed rates for tunnelling advance. The price is based on a defined and agreed geotechnical baseline report, with firm pricing for a range of expected support classes within the build.
The company has said that the cost of the MTS work is higher than originally anticipated by the Company in its previously announced optimised definitive feasibility study (DFS) estimates announced in 2016.
In a statement, Sirius said: “Since the DFS estimate, the company’s understanding of the geotechnical characteristics of the strata within which the MTS will be excavated has increased following further ground investigation and seismic work. This exercise has led to a refinement of the parameters set out in the geotechnical baseline report upon which the tunnelling contract has been determined.
Sirius said that the MTS cost increase is driven by a combination of design and commercial factors.
Factors cited by Sirius include the optimisation of the tunnel design including an increase in the planned internal diameter of the tunnel from 4.3m to 4.9m and an increase in lining thickness from 250mm to 350mm. Sirius also said that there has been a decrease in advance rates as compared from 25m per day to 17m per day.