Sirius Minerals Regulatory News (SXX)

13 February 2013

Sirius Minerals Plc

Project update

§ Engineering Procurement Construction Management ("EPCM") / Engineering Procurement Construction ("EPC") methodologies confirmed as most likely approach for the York Potash Project

§ Revised Definitive Feasibility Study ("DFS") schedule targeting DFS completion in Q4 2013 but initial project construction works intended to commence following grant of approvals

§ Appointment of new Development Director to lead EPCM/EPC implementation approach and Alan Watling to step down

§ SM11 currently coring the evaporate layers following successful open-hole drilling and wireline surveys of the upper 1,238 metres of the hole

The Directors of Sirius Minerals Plc (AIM: SXX, OTCQX: SRUXY) ("Sirius" or the "Company"), the globally diversified potash development group, are pleased to provide an update to the market on the progress and forward strategy of the York Potash Project (the "Project").

Chris Fraser, Managing Director and CEO of Sirius commented:

"The EPCM/EPC implementation approach adds value to the York Potash Project by matching the contracting implementation methodology to the project design. Moving to this methodology has enabled us to collate more technical data prior to undertaking the major components of the Definitive Feasibility Study.

"The Project Study work led by Alan Watling has put the York Potash Project in a very strong position and on behalf of the Board I would like to thank Alan for his contributions to the Project. Sirius is pleased to have secured an exceptionally high calibre individual to lead the York Potash Project through its next phases and looks forward to providing further details on this appointment as soon as possible."

Development methodology and management change

The Project Study released in December 2012 defined a clear way forward for the development of the world-class York Potash Project. This study delivered a high quality technical study of a simpler, lower cost and higher value project focused on the initial development of York Potash to produce the sustainable multi-nutrient bulk fertilizer potash product - Polyhalite. This simplified project development design delivered:

§ Lower risk and value enhanced initial development;

§ Estimated capital cost to first production reduced to US$1.7 billion from US$2.7 billion;

§ Brought forward first production target to Q4 2016; and

§ Simplified processing to produce 5 million tonnes per annum of granulated Polyhalite.

A key recommendation within the Project Study, and additional engineering work since, is that the most appropriate implementation method for the Project is a more conventional combination of EPCM and EPC contracting strategies. As the critical path for the Project remains the construction and commissioning of the shafts to access the Polyhalite orebody, the Project Study demonstrated that little or no advantage would be gained from the implementation methodology that was initially envisaged, being one led by an owner's team and sub-contractors.

As a result, through mutual agreement, Alan Watling will be stepping down from the Project and is being replaced by a highly qualified and internationally recognised senior project director with extensive experience in EPCM and EPC contracting. The person has been appointed to the position of Development Director with the Company and will assume responsibility for delivery of the York Potash Project. Due to commercial sensitivity, the Development Director cannot be named at this time while discussions continue with the person's current employer regarding appropriate start date confirmation. The Company will release further information about the Development Director as soon as appropriate.

The Development Director is currently in a senior management position at a leading global engineering and project management firm. The person is one of the world's leading EPCM and EPC contract managers and brings unparalleled skills in these project development methodologies. The Development Director's range of experience spans working for operating companies, engineering and project management consultancies and project development companies in the hydrocarbon, fertilizer, and minerals and metals sectors within Australia, Asia, the Americas and the Middle East.

Project schedule amendments

Due to the revised development approach and management changes, the Company has decided to defer the commencement of the majority of the DFS work until Q2 2013. This revised schedule will enable the drilling results of SM11, with respect to the shaft engineering, resource, and mine planning to be fully incorporated into the DFS scope before formal commitment to the majority of the DFS work.

Progress will continue on various work streams to optimise the Project and refine the DFS scope. This includes items such as geotechnical drilling across the mine location and the pipeline route, slurry testwork, granulation, product testing and crop studies. The Company is also intending to undertake a value engineering process to identify and select all capital and operating cost optimisation options so that they can be reflected into the scope of the DFS.

The work completed between now and the commencement of the majority of the DFS will help reduce the cost of the DFS by enabling the scope to be more accurately defined before commitment to the major external engineering costs.

The Company and its consultants believe that due to the simplified project design adopted in the Project Study, it will take approximately six months to complete the DFS from the commencement of the major components. It is also the intention to bring forward detailed design work for the earthworks and civil engineering around the mine head to enable commencement of construction soon after the necessary approvals have been obtained and the selection of the preferred shaft sinking methodology and preferred contractor. This should help mitigate any overall project schedule change from the deferral of some DFS work at this time. 

SM11 drilling update

Drilling at SM11 (at the mine head location) has progressed well and coring of the evaporites has now commenced. Detailed wireline logging has been undertaken in the openhole section down to 1,238 meters. This information is being used to provide a significant amount of geotechnical data for the shaft sinking contractors and SRK to refine their detailed shaft design and mine plan respectively.

For further information, please contact:

About Sirius Minerals Plc

Sirius Minerals is a globally diversified potash development company. Its primary focus is to bring on stream major potash mining facilities through the acquisition and development of projects overlying recognised potash deposits. Today it holds properties in the United Kingdom (North Yorkshire), the United States (North Dakota), and Australia (Queensland). Incorporated in 2003, Sirius Minerals' shares are traded on the London Stock Exchange's AIM market. Its shares are also traded in the United States on the OTCQX through a sponsored ADR facility. Further information on the Company can be found at www.siriusminerals.com.