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.
Superb couple of posts Sorceror and while it aligns with my thinking/hope, I just couldn't see the company giving up almost a fifth of the profits although I certainly would be delighted if the company takes more pain rather than the shareholders. Have previously posted that Chris SHOULD look at maximising his worth, rather then the profits of the co once he's moved on/retired. If the company keeps 94% of revenue, it benefits him not a jot. Higher SP benefits him exponentially.
Sorcerer I too would like something that doesn't increase the share base any more than needed , I'm not to sure that's the plan though, if I heard correctly that they are looking for investors that "bring more than money to the table " I first thought that meant either someone in mining or the fertilizer industry ? but maybe it could be anyone that have a capital base that could provide warrants going forward maybe ???
One thing is for sure is that things are looking better today than they were on friday ... yes "Bashers" there is still a long way to go ! but the pathway seems to be there and a very plausible pathway at that .aimo
I've posted previously about what a deal with a strategic investor might look like, but it's worth updating the numbers in light of the knowledge we now have about the next phase of funding. My view remains that the best deal for the company and shareholders (including the influential investors already on board) would be a royalty deal with some equity to help de-risk the investment for the strategic partner. I've set out how this might work below. It's important to note that the real value for the strategic investor in this scenario comes from the return provided by the royalties - the equity provides some additional value for them, but with the SP where it is currently, the purpose of the equity is to de-risk the investment as early as possible for the investor.
Looking at Gina's royalty deal, for $250m she gets a 5% royalty on the first 13m tonnes each year and 1% on anything above that. On the company's base case of $140/tonne, that's $65m in royalties annually at 13MTPA, rising to $72m annually for 20MTPA. So, yes she took a massive risk with her $250m, but if the mine gets to production she’ll receive a whopping 26% - 29% annually.
So, there could be, for example, a $600m capital injection plus $35m of new equity at 3.5p (1Bn new shares issued). If the $600m was on the same terms as Gina’s deal, that would mean a 12% royalty, which would give the new investor a return of $156m (rising to $170m) annually, in perpetuity. In addition, they would have immediate upside on the new equity - let’s say that (conservatively) the sp jumps back to 15p on the news, then they’ve made £115m overnight, which reduces their exposure by about a quarter immediately. As the build progresses and assuming the deferred phase gets financed (which it is now reasonable to assume will be senior debt, as the risks are more akin to civil engineering risks rather than mining risks, so no further dilution), then we would expect the SP to rise progressively. At an SP of 50p, the strategic investor would recoup their entire investment and can then sit back and watch the (very significant) royalties roll in.
There could, of course, be many variations of the above, but the key thing is that the terms of the deal are focused on the future value of the project, not the current SP, so dilution is kept to a minimum.