Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
I await sounds side of the story before I make up my mind whether it's a good move or not. On the face of it I have my concerns but I've learnt my lesson in listening to or reading endless speculation. Mr Lyons has done a decent job so far imo and for me at least he's earned the right to explain the rationale behind the potential deal before I judge.
just remember EVERYONE who posts here has an agenda, and whatever any of them say, NONE of them are posting for anyone's benefit but their own. I include myself in this.
unfortunately, the more i read the more concerned i become... need to stop reading comments here lol
ps200306: well, I’m a sceptic. If the Sound bid doesn’t proceed, I can’t see how the other five will see things differently, assuming my view is correct. The Sound offer doesn’t seem low-ball to me but it’s all relative in a share-only deal, isn’t it?
Thanks again Oofy. That all sounds a bit horrific. Or, at least, insanely risky for SOU (unless they have no other option, which worries me). Anyway, I find it hard to believe that SOU's lowball offer would be accepted, or would beat out the five other potential bidders.
ps200306: I don’t think anyone other than insiders knows the dates and precise value of the individual debt repayments, just that it’s an amortising Debenture, so will be paid down over its life rather than in a final lump sum. The interest is at 12%. The charges are available to view on the Companies House site. The terms were agreed in May last year but the final payment is due at the end of 2024, four years from the date on which they started negotiating (November 2020) so perhaps 31 May is the first repayment date.
Re the hedges, they’re on p. 49 or thereabouts in the Angus revised CPR, 1 October 2021, released later that month. They start this July and carry on until June 2025. The expected volume of gas flow is expected to begin to tail off progressively from the following year. They average at 43p. If Angus fails to meet the gas volume required to meet the contractual obligation of the monthly hedges, they’ll presumably have to buy the shortfall at market prices to meet them - i.e. buy at possibly 200p and sell at 43p. Possibly very costly indeed. Without a sidetrack, it’s unlikely they'll meet the hedge terms in total from September at all. It seems doubtful whether they can drill a sidetrack while producing gas. They said in October they were looking into this. It should have been drilled much earlier but parts were missing and, I suspect, money. One of the Debenture holders, by the way, organised the hedges. It’s unknown whether they are the counterparty to them or just the intermediary, or whether in the former case they’ve incorporated them in some series of forward deals. The Debenture holders are commodity trading firms, not banks.
I realise this is AIM and you have to speculate to accumulate but the risks in this are very high and it’s quite unlikely it will be spinning off excess cash flow any time soon, at best. It needs more money itself currently, has just held an EGM where it got permission for an 80%+ increase in authorised shares, though it would normally do this at its AGM. The AGM is normally at the end of March so naturally people are wondering why they need this permission two months earlier. It’s not really the kind of deal Sound needs, is it? Even for shares.
Thanks for the info Oofy. I understood from some comments that the drop-dead date for coming up with loan payments is July. Also a lot of references to "the hedge" which I understand is some sort of gas delivery commitment for later in the year?
I can see both SOU and ANGS shareholders being disappointed. Optimists on the ANGS board are expecting 5-7p offers for ANGS shares. This seems a tad too optimistic. A CPR from last year puts the NPV10 revenue from Saltfleetby at a conservative case of 25m and a mid case of 38m. That's less than 4p/share, and is probably the only thing that a purchaser looking for a revenue stream would put any value on (SOU has a similar situation with its Tendrara asset). The diluted value of Tendrara would probably be about 6p/share of the combined companies, so ANGS folks could get their payday eventually, but right now the SOU offer is going to look like 38% of a company priced at less than 2p/share. Guaranteed to make shareholders unhappy on both sides of the deal ... but indicative of how cash-strapped SOU must be.
ps200306: their RNS today is talking about a new target for first gas of 20-30 April. It looks ambitious. In any case, “first gas” is not sales gas and they’ll need a whole lot of regulatory approvals by then and National Grid and, presumably, HSE approval after it. Another month seems on the optimistic side of realistic. They borrowed £12mm. in mid-May last year. It’s an amortising 3.5 year Debenture, so interest and the first capital repayment must be due soon thereafter. £4.4mm. probably. They’ve got insufficient cash to get to that point, as I’ve already remarked. Will Sound seriously want to get involved with this - even in an all-share bid? Your price would probably crash under the weight of ex-Angus shareholders’ selling once a deal completed and you'd still be over-borrowed.
Sundance, I fear you are right. It seems pretty clear SOU is interested in ANGS for the cashflow potential: there is no other plausible rationale for giving away 38% of SOU's assets. In fact, both companies desperately need the cash -- from the musings on the ANGS board it sounds like they are in serious trouble with creditors if gas isn't flowing by April. SOU has its own problems looming, as I have a hard time seeing how they can get the LNG flowing in time to both pay off ItalFluid and start amortising the bond by December next year (not to mention the bond payments they have to pay this year and next).
The ANGS discussion board is a bit of a déjà vu from a SOU perspective -- endless delays to get to first gas at Saltfleetby, fifteen months overdue on an already revised timeline. If this is what SOU is pinning their hopes of revenue on, what does it say for SOU's own timelines? If things were to go wrong at ANGS it would be a millstone for SOU.
None of this is a good look for Graham and SOU. The first possibility, as you say, is that SOU is not destined to rise above penny stock status. I think this is unlikely, otherwise the valuation they paid SP Angel for would be fraudulent. More likely is that their short term cashflow situation is serious enough that they have no choice but to give away a significant chunk of their assets. This could be a combination of preparing for a bad outcome on the tax bill, or realising that they can't meet their debt repayment schedule on time with LNG revenue. Either way, it's going to represent a very significant dilution for shareholders which will not, it seems to me, be compensated by the value of ANGS' assets. Obviously this is all rank speculation on my part, but if true it would also make one worry about what happens if SOU are NOT successful in their bid.
Obviously it's understandable why Graham would be staying tight lipped about all this during a commercially sensitive period, but it doesn't make this bolt from the blue any more tolerable. It would be nice to know when this cashflow crisis became apparent, and what is says for the Phase 1 and Phase 2 timelines.
One of the unfortunate facts we may now have to come to terms with is if this goes thru then Lyon thinks this stock will never emerge from the low penny value and is destined to wander in that area for a good 5/10years if not for ever and hes just as devious to get a paid a decent salary at the expense of share holders that he so seemingly wanted to please as the last lot of thieves , 5/10 is a sentance for me ,ive been here for well over 8 already.As stated Lyons explain your self and this utter illogical move
Is this Angus move up for a vote or
I think the Sound management has accepted earlier statements by the Angus Board about the prospects of their getting the Saltfleetby gas plant on stream in time to meet their loan and hedge deadlines, and that thereafter it will be a cash flow machine.
They’re in the data room now, apparently. In the light of today’s RNS from Angus detailing further long delays, I’d be very surprised if Sound will proceed with a bid for it. Angus looks unlikely to get the gas out in time to meet the deadlines (which involve events of default, enabling the Lenders to take over the assets) and they need more money to give themselves a chance of doing so. It would represent a big risk to Sound, not a cash flow machine. The delays detailed today appear to explain fully Angus’s decision to put itself up for sale.
I hope it isn’t because we are the biggest player! :)
I'm not disagreeing with you Joe, don't forget we had a data room at one point and that fancy legal firm, can't remember the name, look where that got us!
We are the only one named...who are the others..?
No RNS?
Board not wanting to shout about this one?
Can’t say I’m surprised
Unfortunately, domestic oil and gas production is facing huge headwinds. I don’t care what prices are like now, or in the medium term as the sorts of figures they are looking at will not propel our own share price should we be ‘ successful ‘ in this distraction. Focus on Morocco........what is happening with Sidi? We paid a small fortune in shares for that! Honestly, it is ridiculous and I now think less of GL. He has done well up to now, but imo, this shows lack of confidence in what we have. If Tendrara is that good why are we wanting to get bogged down with squabbles with councils over drilling and production on such small-scale projects. Reminds me of Italy!
The company need to explain.
After all the pain as lth. I just don't get why he would dilute our Moroccan asset. I'm not remotely interested in angs nor are their holders interested in us. Could this be to stave off other opportunistic vultures our own? A show of bravado?
The same as the other 4?????
.........we are one of five in the data room. What is GL thinking!??!