Sirius changes York Potash construction model

The share price of Sirius Minerals (SXX) went into reverse after the prospective Yorkshire potash producer revealed that it plans to adopt an Engineering Procurement Construction Management (EPCM) model for the construction of its flagship York Potash Project.

The decision is in line with last year’s project study recommendation, but it means that the previously envisaged ‘owner-led’ approach has been discarded, with the effect that mining veteran Alan Watling will now step down as the project’s driving force in favour of an as yet undisclosed project director with extensive EPCM experience.

The news didn’t sit well with some shareholders, particularly as the move to an EPCM model means that the completion of the project’s Definitive Feasibility Study has been pushed back to the tail-end of 2013.

Whatever the market feels about the loss of Alan Watling’s undoubted industry experience, analysts at Liberum Capital make the point that “the EPCM model uses a single Tier 1 group to oversee the project, signing off on development stages and managing all contractors. As such, this method of development management by a single Tier 1 group is viewed positively by credit rating agencies and hence places Sirius in a stronger financing position”.

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