No Prize: It chews up the stone into gravel, combined with various fluids/chemicals from its digestive tract, and the leavings are left compacted like an aggregate cement along the walls of the tunnel. Either that aggregate is more dense than the original stone, or perhaps some of the mass escapes as vapor in the chemical reactions.
Purple worm ... err ... flatulence might explain some of the rock disappearing. But even compressing sandstone into granite would only be about a 14% reduction in volume (based on weight per cubic cm). So unless it's very porous rock it's not going to buy anything.
I'm okay with just chalking it up to magic. Or extreme flatulence. The smell would explain why they don't ever go back to their old tunnels.
