Cost of Yorkshire potash mine tunnel soars 70% to £1.1bn

Aaron Morby 4 years ago
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Yorkshire potash mine developer Sirius Mineral this morning confirmed Austrian civil engineering giant Strabag will deliver all three big tunnel drives to transport excavated polyhalite mineral underground to the coast.

Shaft sinking is well underway at the Woodsmith mine head
Shaft sinking is well underway at the Woodsmith mine head

The mine developer also revealed it would be raising a further US$460m for construction after expected tunnel drive costs skyrocketed 70% from an estimated US$858m to over US$1.46bn.

The cost increase has driven by 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.

Strabag has clinched all three contracts for the 23-mile drive from the mine head site at Dove’s Nest Farm near Whitby to a portal near the town of Redcar.

Further geotechnical analysis has also resulted in a decrease in planned advance rates from 25m per day to 17m per day.

There has also been more construction and delivery risk transferred to Strabag pushing up contract costs further. The contract is a lump sum arrangement, with fixed rates for tunnelling advance.

Sirius Minierals also said it had signed an EPC contract with engineer Jacobs to deliver the big materials handling facility planned at Wilton on the Yorkshire coast.

The expected cost of this element has been cut by around £100m to £538m as the overland conveyor installation is deferred until 2025 and will be funded from operating cash flow.

Sirius now estimates the total cost of the massive potash mine scheme has risen from £3.6bn to near £4.2bn.

Chris Fraser, Managing Director and CEO of Sirius, 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 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.”

 

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