April 30 (Bloomberg) -- Sirius Minerals Plc plans to begin production in 2017 at a proposed $2.7 billion potash mine that’s set to become the largest in the U.K., and is in talks with lenders on helping to finance the development.
“What we’ve shown is the project has the potential to be one of the most significant mining and fertilizer developments in the world,” Chief Executive Officer Chris Fraser said by telephone. The company today released a preliminary development study showing the mine may also produce gypsum and epsomite.
Sirius may seek to raise about $2.5 billion in debt from banks to help fund the mine on the Yorkshire coast in northeast England, according to the CEO.
“We are going to continue to analyze and explore all avenues of finance,” said Fraser, the former head of metals and mining investment banking at Citigroup Inc. in Australia. This includes the possibility of bringing in potential customers, as well as current potash producers, as partners, he said.
The project, called York, may host the world’s largest estimated resource of polyhalite, used to make sulfate of potash, the rarer and more valuable of the two main forms of the fertilizer, Fraser said in February. The U.K.’s only potash mine, Boulby, is immediately north of York.
With production of gypsum and epsomite at the mine, potash output costs will be about $65 a metric ton, Fraser said. The company used a sale price of $550 a ton to model the business.
Sirius, continuing to drill the deposit to boost estimated mineral resources, plans to produce an annual 1.4 million tons of potash from 2017 and is studying an expansion to 4.1 million tons a year by 2024 at an additional cost of about $3.3 billion. Potash is used by farmers to strengthen plant roots and defend against drought.
The company will be able to fund the extra spending with cash-flow from the initial phase of production, Fraser said.
Sirius raised 55 million pounds ($90 million) in a share sale at 18 pence apiece in January to accelerate its study, including drilling at the deposit, after buying the project a year earlier in a deal valued at about 25 million pounds. “We are fully funded through to the end of 2013,” Fraser said.
“The project that we’ve designed here is one of very low impact, which is a very important thing given where we are in the national park,” he said. “We are feeling pretty good.”
Sirius rose 11 percent to close at 22 pence in London trading on April 27, valuing the company at 295 million pounds.
To contact the reporter on this story: Jesse Riseborough in London at email@example.com
To contact the editor responsible for this story: John Viljoen at firstname.lastname@example.org