Agree with your point about being tied to a Market Cap covenent - we could also be vulnerable to shorters etc.
Appreciate your points derived from brokers reports. I suppose the question that it raises is whether they see the sp rising gradually over the 5 year period to 138p etc (as project risk reduces through the development). However, the fact that we get funding is a huge de-risking (because it means that the project is actually happening) and the actual building of the mine (oddly) seems smaller de-risking in comparison. For these reasons, I believe that current shareholders deserve something in recognition of the greater risk they have taken. Although the you quote 16.5p as an example price for raising equity, there is nothing to stop them going for a sp of 50p for example?
As pedantry seems to be a requirement for this bb, can I ask you whether you really meant 'if we get a mirror image of today's rise tomorrow it will be close enough to claim a wee victory'? Surely it depends on how you look at this?
As an experienced banker I can not believe that CF would agree to a Market Cap covanent as that is totally outside his control - SXX could be on target but caught up in a stock market crash. Also, I don't see that the thin cap rules would apply - the more debt the better as I see it.
That is if you accept that they used the pertaining price then of 16.5p as the price the new issue goes at and also using their estimate of a £12.2bn NPV (£8.6bn), so giving a stated target of 138p NPV per share, it comes out as a rather eye-watering 4bn new shares. But more interestingly they appear to be estimating £650m of the £1.1bn St1 requirement is to be raised from new equity. 60% E, 40% D.
But does that new issue go at 16.5p? The fact that this is rising from then and seems bent on still rising still further above that 16.5p suggests not. For a fixed amount to raise, each penny higher above 16.5 takes 225m shares off the volume of new issue. At 25p it 's not 4bn but 2.6bn. From that the NPV/share is not 138p but 176p. At 30p 2.17bn and 193p.
30p with a NPV/Sh of 5x ? That seems a bargain to me.
PS: that 'wishing for' (I hope you are not btw)......
If St1 were to be all debt - $1.7bn of debt - and Sirius got into difficulties, even not too onerous difficulties, during the build phase and the Mcap went below $1.7bn, would those creditors file and regardless of all the years of hard work, take it all away from the loyal and patient share holders? Would that be fair? Discuss. Would that be legal? You bet. FMU this debt finance deal is very likely to come from Wall st. luckily there is something legal on lending out there called Thin Capitalization Rules, best hope they apply.
Well we are currently valued at 18.75p and ~£430m.
38p = £870m 65p = £1.49bn
According to CF interview recently he was putting us at $10-15-20bn at production. At current exchange rate (0.69) $/
£3.00 a share = £6.9bn ($10bn) £4.51 a share = £10.35bn ($15bn) £6.13 a share = £13.8bn ($20bn)
So if my fag packet maths is correct the 38p-65p is still a large downside on production ready price which we would get closer to as the build continues.
I guess then the move towards those figures would occur over time and it would be a matter of appetite for risk during the build V potential growth.
A price of £1 would still leave a 200% upside at the lower end of the estimated valuation.
I'm not sure what risk % would be removed by the markets with complete funding sorted, but if the broker estimates are 38p-65p and include some dilution I'm guessing £1 wouldn't be out of the question with none?
Please forgive my calculations if out, I've just typed this on train home to pass the time!
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