Speaking about commodity markets and prices, just read that FMG's Cloud break mine is 88% down on profits compared to two years ago while they have only managed to get cost down by 21% (which is still impressive by the way).
Now this mine itself is already built so different pool. However, other mining projects may be affected by the news on this project if these commodity price levels persist. Same with crude oil projects, now that we are at $42/barrel.
It makes sense to direct funds to a project that will always (hmmm) have demand due to growing populations.
LL/GL, I get you logic but I look at it this way, who could cast iron guarantee that planning consent would be given. Now ask yourself the same question of finance. We might believe that both would be given but in reality there is absolutely no guarantee. Both were at one stage a terminal risk. Financing remains such a risk until, as GK put it, the bottom line is signed. Your analogy is the wrong way round GL, you would have the car and not the money and you would be trying to sell it not buy it. An altogether different prospect.
Good stuff Mr Easy (er… does that sound a bit rude?), and well articulated.
My point on the project being considered low risk is a relative thing not intrinsic to the project, but the macro economics of commodities projects around the world at this dip in the commodities sector – a project looking for $1bn for an Iron Ore mine may just struggle at this point in time for example. The point I am making is that the project being offered is very attractive albeit with inherent risk associated with construction yes, but that is a given for any project where construction is involved. Moreover, with the work tendered out to contractors who will be taking the risks for a nice hefty sum of money, the risk to the company is reduced as I see it.
I am well aware of the Government Infrastructure Guarantee Scheme and alluded to the fact it would be forthcoming Stage 2 in my comment – “stage 2 is re-structured with significant Government lending under the Infrastructure Guarantee Scheme, bonds/coupons etc”. Confirmed in July presentation here – pages 20 & 21
But really what really matters is that from here on in, we are at the start of a very steep value curve for investors. You rightly point out that this has come from the horses mouth Mr. Easy. I doubt Fraser would have made that statement lightly and if there was to be no significant newsflow following final certificates, perhaps he would have made that statement post financing and FTSE listing in Q1 16.
Ps - I think GK has a date with the 'Bishop's Finger' tonight, so we may not be graced with his presence! *Cough*, Er.... more tea Vicar?? :-/
Noteasy you said PP was the biggest de-risking event this share will ever faceâ€™ is not right. It was simply the first terminal risk this share faced. Isn't the difference,though, that planning could only be obtained from one place but financing can be had from many places, so it's not quite the same risk?
Glad you threw your hat into the ring Q some good stuff there.
The bit about 'this project therefore will be considered low risk by financiers although the stage 1 financing will attract the higher rates of return for financiers as until the construction risk diminishes' , if I have read you right, is a bit I couldn't quite get my head around though.
If the risks are high for construction they will be high for the financiers. That is alluded to in the Sirius Investors presentation with the funding graph. Follow that graph line and we should see at some point the SP and risk pass each other going in opposite directions.
You touched upon the government guarantee scheme and the reason the company will not be applying for the scheme for Phase 1 funding is because the due diligence required for that scheme would need to see the risk reduced and it will be but not until Phase 2. Get that guarantee then and financiers will be falling over themselves to bid for Phase 2 as its a no lose situation regarding default on payments.
There will definitely be higher costs attached to Phase 1 financing as you rightly point out and that is why the company has already taken every opportunity to tell shareholders that Phase 1 funding arrangements are but a stepping stone. There has been great communication from them on both the risk and cost. I personally couldn't ask for anymore.
Nothing has changed with this project and your positive views are well supported. I can only say what I feel, I don't have the access to the vast amount of understanding eld by the company but one man certainly does and he's happy that we are at the beginning of a very steep value curve. He also happens to know the valuation progress of a high grade mining project better than most and has insider knowledge. If he is right and this is the beginning of that curve, we are invested and we are 'the smart money'.
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