Shares in Sirius Minerals tanked on Thursday after the firm warned over the escalating cost of its potash mine.
The group said the funding requirement for construction of a polyhalite mine in the North York Moors – where it is building a 37-kilometre underground tunnel between Woodsmith Mine and Lockwood Beck – is rising by between 400 million US dollars and 600 million US dollars.
This is over and above the 3 billion US dollars that Sirius requires in funding. The miner’s total capital cost estimate is now 4.2 billion US dollars, up from 3.7 billion US dollars in 2016.
Sirius managing director Chris Fraser said: “The expected increased funding requirement coming from this process reflects an optimisation of the mineral transport system 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.”
The company’s stock plummeted over 10% to 28.9p following the update.
The increased costs are due to changes in the tunnel’s design, including an increase in both the internal diameter and lining thickness, the group said.
Sirius has signed two construction contracts for the mine – one for the design and build and another for the materials handling facility.
Around 2,000 construction jobs will be created and a further 2,500 will be employed when the Woodsmith plant is fully operational, expected to be in 2021.
The mine will produce polyhalite, which can be used as a fertiliser.