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Mid. From the company's own May '18 info.
Mid or End of 2021?
"The Company is aiming to achieve first product from the mine by the end of 2021"
https://siriusminerals.com/our-project/
Beyond trying to second-guess the ramp-ups of the TorPs and the operating cashflows they might produce (remembering that first polyhalite is intended for mid-2021), the company’s own forecasts assume it can ramp up to full 10 mpta production and sales by mid-2024, and expect approx. the following yearly cashflows to mid-2025 BEFORE the costs of financing to be as follows:
To mid ’19: -$450m
To mid ’20: -$750m
To mid ’21: -$800m
To mid ’22: -$350m
To mid ’23: Breakeven
To mid ’24: +$500m
To mid ’25: +$800m
These cashflows intended to provide a 2.0 debt service coverage ratio, assuming $3bn available for drawdown from Q4 ’18, and assuming the $3 bn loan at 6-7%, and FOB $125/t.
Hope that helps with the number-crunching 😉,
LITC
That’s $178USD today.
SL, a very nice man at the tattie show in Dundee told me Polysulphate was costing farmers £140 Gbp per tonne for the anti slip stuff.
GK
The extremely conservative numbers within your posts deftly demonstrate the ease and wiggle room that we will have in paying off estimated debt and thereby the limited chance that there is of any further dilution.
Ta.
Prost
SL
Morning Casapinos
To detail (tnx Myo): total build money required re 24/6/16 rns = $2.91bn. $1.09bn of that has already been raised via St1 leaving a $1.82bn remaining need. The co first proposed the St2 raise to be $2.6bn tot, so $0.78bn is also borrowed above the $1.82 capex need to cover paying off interest before there are earnings from sales. Note also money will be taken as drawdown, so that not yet taken does not incur interest.
Later St2 tot was raised to $3bn as an extra est of $0.4bn was added because the port facility is now not planned to be farmed out.....but of course this may now again change...as may other figures.
Myo/Lives/SL
Basic calc is conservative, an est from expected ramp up and excludes arisings not scheduled to go to TorP customers - they may not get sold (and reasonably concurs with the co's: "Capable of servicing ~US$2.8bn of dividends and/or debt repayments within 5 years of full production"). ....That also deliberately conservative (based on $125/t). The calc is so as to illustrate the particularly low risk the banks will be taking on if full $2bn cover is gained from IPA. From that in my mind there is a big gap to play with re level of cover whilst still firmly remaining within an all debt structure ...............Which afterall is what has been proposed and comprehensively adhered to all through the process.
Having to resort to new issue to cover this modeled St2 requirement would be perceived as a spectacular failure by this BoD since they have put so much credibility 'skin' into it. The resultant rout would crushing for holders - think July through Nov '13.
It's not a risk I give any credit to (nor have done since its inception), but if they do spectacularly fluff this then regardless the project would continue.
GK.
Hi Scotman, my post from 13:07 yesterday (re equity authorised for issue):
For the purpose of this topic I thought I would re-read the resolutions that were passed at the AGM and the first point is that the allotment of shares is limited to a nominal value of £7,452,370 (seemingly two tranches of £3.725m) which equates to 2.98billion shares. (Nominal value is £0.0025). Accordingly for equity to provide funding the placing must be at £1 to raise sufficient cash (if 100% equity) or, a general meeting will be required for further resolutions to be passed (if 100% equity). Secondly, there is a limitation on the dis-application of pre-emption rights of £558,927 which would only allow for 223m shares to be issued without offering them to existing shareholders on a pro-rata basis. That is my reading of the resolutions but please feel free to correct me.
link to notice of AGM and the resolutions:
http://tools.morningstar.co.uk/tsweu6nqxu/globaldocuments/document/documentHandler.ashx?DocumentId=169310225
Any placing over and above 223m shares would require shares in excess of 223m to be offered to existing shareholders on a pro rata basis.
I remain bullish on ST2 being 100% debt. Happy to be corrected if anyoe cosndiers that I have misinterpreted the operation of the resolutions.
GLA.
Myosotis, good morning.
For me the sums are rather futile at this moment. IMO, (for all that is) is that any revised budget is very unlikely to be broadly in line with the DFS. So many parts, in fact every part of this project has changed in either design, method of construction or contractors for construction. The port facility being outsourced to now in house then there is the additional cost of the construction required as part of the ADM partnership.
The sum to borrow may be less, may be more or may be $3billion dollars. We don’t know!
On the heavily debated subject of debt/equity for stage 2, no one knows 100% either way. What we do know is what the company have told us and that is “intended” to be 100% debt. Do we run with that? That’s each individuals own decision.
What we need to look at is what new equity is authorised for issue, how long is it til end Q3 (company’s target for commitment letters) & how much time has to be given by the company for an EGM to approve an alternative method of funding?
As I’ve stated many times, the risks here are still large. There is undoubtedly a huge amount of work completed but equally, there is still a huge amount of work to be done.
At last though, we have a concrete project. The loose ends are tied up. Just need the final sums.
GK first off well done for trying to get a handle on whether or not SXX can handle the repayments on the borrowing - that's exactly what the lenders will be doing .
Second your figures are(almost) as good as any for the purpose BUT you forget that during those first 7 years the sum lent will have accrued almost a further debt of~$1bill as the interest on the outstanding amount is added back each year . It's a bit like your mortgage in that you end up paying almost twice the initial sum (or even more depending on duration interest rates etc )
there are other factors like the fact that rates of inflation might drive up labour costs, suppliers might want to renegotiate initial estimates as work specs change (and they undoubtedly will - no project planner ever anticipates all eventualities.
BUT the broad thrust of your argument is valid- at projected rates of extraction and sales SXX have the capacity to fund the loan , the question as we all know is whether the terms will be near the companies expressed hopes(oops I nearly wrote "plans" there!!).There is also the expressed desire to fund dividends , which we , and more importantly, what i would like to see as a growing number of II's, on the register, are expecting.Every dividend penny costs 2p(ish) in deferred debt clearance.
What was the point of your sum GK? That the project grosses the loan money in 7 yrs?
Any sums including interest payments? 16 yr amortisation or as you mentioned previously, early divs? I’m a better bully than sumy. ;-))
GK
Whilst I agree with your "the co having to resort to any issuance associated with St2 seems to be in no circumstance desirable and as important, in no way necessary" your "full 6.5mt/y rate by year 4" and your "year1=1.6mt, y2=3.2, y3=4.9, y4=6.5 as also years 5,6,7. Total to TorP customers = 35.7t" production assumptions seem to look rather tepid to me.
Raise the bar a bit mate ffs.
Prost
SL
Data. From Sxx wsite:
" Sirius Minerals has signed major offtake agreements.. totalling 5.7 Mtpa...These agreements are for between 5 - 10 years. "
Assuming they can take this to 6.5mt with further TorP. Then assume for the various contracts an av time to the full delivery rate at 7 years and they have a steady run up to the full 6.5mt/y rate by year 4.
With that est the total tonnage delivered to TorP customers would be: year1=1.6mt, y2=3.2, y3=4.9, y4=6.5 as also years 5,6,7. Total to TorP customers = 35.7t. Note it has been stated TorP can go beyond 7mt/y if needed, so that 35mt has upside potential.
Assume Poly4 selling at a bit above the bank est price of $125/t, say $130/t (the co has stated the av TorP agreed price is at $145/t), assume opex + other costs at $45/t. That gives summed earnings over those first 7y of $3.0345bn.
Note from May pres:
"Up to US$3bn total debt
>US$1bn commercial tranche
Up to US$2bn UK government guaranteed bond tranche"
It appears the banks have laid out a condition that Sirius offer earnings cover of at or over 3x the low figure of unprotected lending of $1bn, if they are actually pushing for the max $2bn covering guarantee. To me 3x looks like a lot of surplus cover. So I expect in reality there is considerable leeway in the level of that cover despite Scimmy's "essential" comment last March.
Full quote:
" In order to fully realise this
transformational opportunity for the
UK, a partnership with the UK
Government, in the form of a Treasury
Guarantee under the Infrastructure
Project Authority’s scheme, is essential."
No actual number put in there.
I expect the only negotiation that will be going on post the final TorPs coming in and the subcon's contracts being detailed to the lenders, will be 3 way bargaining over the level of guarantee. With singed up TorP giving future earnings cover above all the $3bn requirement, the co having to resort to any issuance associated with St2 seems to be in no circumstance desirable and as important, in no way necessary....... on this modeled build budget.
But it keeps the board a'buzzin eh!! ;-))
ATB.
GK.