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HI scotman Report by Neil Hume. who is the FT's mining man,in a piece this morning - unattributed which is why I put the inverted commas in the heading.It is very unlikely however that he just plucked the numbers out of the air. All the estimates of financial effect are mine, based on a knowledge of current business loan costs (the source of which I am not going to divulge!!)

Apols. if this is already posted but I couldn't face ploughing through 200+ posts.
The FT is reporting that the three tranches will be:
1 $500-700m of "high yield bond"
2 $1.5 bill "straight " bank debt.
3 $800-900 of IPA backed loans. (expected to be drawn down after production starts, and revenue is flowing.
Quick analysis suggest that the bonds may cost the co. $20-30 mill pa more for their duration(assuming a coupon 2/3/4% higher than anticipated
The fact that there will be twice as much straight debt as IPA backed probably also adds a debt service cost of some tens of mills.(assume 2% more than anticipated equals about $30 mill pa. )
Thus likely funding costs for ST2 (leaving aside any implications from the $400-$600 mill additional costs)suggest something in excess of $200 mill more.over five years.

Hard to determine at the mo what that does to the NPV but it may well take 10-20% off the Sp before ST2 is finalised.

Just read the RNS briefly , will do a deeper dive later BUT I was wrong . This government are incompetent enough to publicise in the commons, a project , the funding of which, they are seeking to wriggle out of !!See "reduce both the risk and the quantum of IPA guarantee..."bad news in the short term for the SP.

WWGUK
I will respond in detail to your posts, later in the day.

Hi Sipp Did get it - sorry haven't got round to replying, will by mon latest.

thanks

casa

Hi WWG just assembled my thoughts in response to your midnight post.
While it is true that the EV of SXX might become £5 billion as a result of the funding there are several reasons why that does not directly affect the SP. First is that the ST2 funding will be a COMMITMENT to lend from the banks (some part of which will be subject to IPA Guarantee), NOT a deposit in the SXX bank account.It will be drawn down as and when needed to fund the mine engineering activities, so SXX Enterprise value does not immediately rocket to $4-5 bill.
Second is that while Enterprise Value would essentially be the value if , for example, a takeover bid were mooted because a putative buyer would be expected to buy the equity in SXX (ie the market cap) AND accept the debt burden.SO yes a prospective buyer would need to fork out for the value of all the shares and the debt ie ~$4-5 bill.That , though does NOT imply that the company's market cap equals $4-5 bill.Money committed or lent does not immediately enhance the market cap and thus the SP, you wouldn't for example count your mortgage as an asset(though of course the house you bought with it is)
My calculation is based on the standard City way of calculating the "mechanical " effect of a share dilution through either a placing to "new " investors or an open offer to existing investors.What it cannot do is to measure the " sentiment " effect of such a fund raising. That depends to some degree on the reason for the cash call , if its a "distressed" call either because a company has short or long -term cash problems raising new cash is seen , usually as negative, in this case as it is planned and to pursue a hoped for profitable mine it should(eventually) have a positive effect on the SP.
My post back in dec was a simple way (or so I thought ) of illustrating why I felt the SP had fallen sharply in recent months, and why it would remain depressed until the full details of ST2 were public.
My estimated SP of 16.4 p was, and is , based on a simple mathematical , knowable and standard calculation of a possible outcome - I am glad you included my "IF " before it and would also stress that i said "leaving aside sentiment effects" which might be positive and thus ameliorate any SP fall.
I hope that my summary above illustrates why your arithmetic calculation is based on a misconception,and that it is far less likely that the SP will head straight for your figure of 48p than my estimate of 16.4.
It is quite conceivable that a very positive outcome to ST2 will drive the SP upwards but that would be by way of "relief" rather than the arithmetic outcome you describe.
Finally , let me encourage you again , IIRC this is the second thoughtful and analytical post of yours I have addressed and it makes a pleasant and positive change from some of the less well- considered and wildly optimistic chatter which fills this board.
If anything I have written is unclear or if you disagree fire away , I will respond (event

Hi WWG have read your post , busy today but will respond later this am or late afternoon.

HI albi re your 16.48 an interesting link , supports my view of a "free trial " from NEX.
The obvious long term benefit would be markedly lower dealing costs. The actual cost of a stock exchange transaction is a small fraction of a penny, there is no human intervention and the software once developed has an infinitesimally small unit cost ,
.Nowadays more than 50% of all transactions are HFT or quant driven and there high frequency strategies that just couldn't support high dealing costs , so the hedgies, asset managers etc pay a tiny sum per transaction and charge us a thousand times that .
The costs of running a personal portfolio have fallen dramatically since I started and that will continue, there are asset managers offering deals for free if you agree to lend them your stock for shorting and it think the trend will continue, Degiro, offer dealing costs less than most(though i don't use them ) So longer term it will be good news , either NEX will undercut aim and become the dominant player or aim and its brokers will respond by lowering dealing costs win:win!

Hi ADUK i'll forgive the misspelling (unless you deliberately want to to compare me to a star?).
Q1 NEX is just a stock exchange(which actually means a computer running appropriate software) so you are right they need to appeal to market makers and brokers without which they can't function, I guess they will be offering similar discount terms for access to their platform as they are to end-users ie listed companies.
Confidentiality means we do not know how many mm's and brokers they have recruited, bu they will likely have a few on board to deal for selected institutional clients.
It's a bit chicken and egg ,they have no scale so few customers BUT if they can demonstrate that their service is better , cheaper, more reliable and I think crucially, not tainted with Aim 's reputation for fraud, misrepresentation, incompetence (see Pat Val, Quindell, Mysquare .....) they could take off and become the primary junior market, they do have backers with deep pockets.
Q2As a PI there is nothing we can currently do but watch. One day your bank, broker whoever, might announce that they are migrating to NEX and that your trades will be executed there, after all i have made trades on Nasdaq,ASX,LSE and AIM in recent years without much trouble (excepting FX cost)
FWIW i don't think the venture would have been undertaken without a belief that it can in time, rival or overtake Aim and maybe the Russell 2000 (the small co exchange in the US)

Hi albi nex is a "new " stock exchange formed out of a merger? between CME which is primarily a derivatives exchange and the old NEX. The integration of the two (who are well-backed(Goldman sachs among others)) and appear to be aiming to rival AIM, was completed late last year.I suspect they will be offering generous terms to companies who list in order to bulk up their offering. Running a stock exchange can be a very profitable business and they may well be seeking to steal away AIm members because of the bad rep. as a result of a number of high-profile company failures on aim.
The wide "spread " on NEX as compared to aim is because of"liquidity" ie a busy market with lots of customers competing to buy and sell creates a very small spread, as NEX is still in its early stages there will be far less transactions and low volume leads to large spread. If you want to check look at the spreads on HSBC,LLOY RDSB etc.
For HUR the costs are probably negligible , the effort needed nil it offers a little more public exposure and it's insurance against the time at which NEX grows to overtake aim and becomes a dominant player (maybe)

ffc I do think some of the stars are aligning, but as stated i will probably not buy before the ST2 announcement.The SP reaction to that may be 30-50% either way , if its down and the announcement contains a sound basis for project completion , I will buy. If its up, even by 50% I will buy,probably after waiting for the initial euphoria to fade (that may still be below my last exit price).
News from the garden shed for Scotman. Purdah would certainly apply to an announcement of IPA support if an election were to be called(and would incidentally screw up SXX planning and put a cash crisis in the frame), but the FTPA of 2011 makes that highly unlikely.Nonetheless you may be right that the timing was precautionary, ie lets get out a positive spin which could be used in electioneering in the region.

HI VIn , despite the likelihood of the usual prolific posters ignoring the contents of this post in favour of bad-mouthing the messenger , i'll offer some relevant facts.
We are pretty sure that 75%+ of SXX shares are in the hands of PI's.
We know that last calendar year the volume of share transactions recorded for SXX was ~4 billion , ie the entire share capital of the co. was traded by someone sometime.
We know from the requirement to record holdings above specified levels that no major player either substantially increased or decreased their holdings(there are few moves but most of it reflects asset managers holdings for PI's)
We know , if we can believe all we read here , that there are many LTH committed to the stock with "tightly held " shares.
Therefore we can conclude that most of the activity here is less committed PI's adding or subtracting from their holdings dependent upon whim , personal circs, optimism/pessimism , response to news, macroeconomic situation etc etc....

It is a situation which IMV won't change until post ST2, maybe then or gradually as build carries on without major mishap , or nearing production there will be the (gradual?)rise you are expecting.

Hi Mikkjo where to start? I'll offer a few observations but as you say investing successfully is not easy and only repays a lot of hard work.

1 Fixed Interest(FI) investing is for those who want to avoid the risks of the volatility of equity investment, in theory FI should normally go the opposite way to equities.
2 FI works best for those with a long-time scale, the benefit of slow response to change means both gains and losses accrue more slowly.
3 I hold FI as a part of a long-term , low risk(!) portfolio, my personal target is ~10% pa growth , and has been for a couple of decades.
4 if that's not for you then maybe FI isn't.
5 you are right in that FI encompasses a wide range of products from Gilts(UK gov debt) and treasuries(US gov debt)to company debt, bank debt, pref shares,......
6 at the mo. it is possible to get 5-8% interest but as ever the higher the interest the greater the risk, but debt ranks above equity in the hierarchy so if a company goes bust debtors are more likely to get something back than shareholders.
7 I currently hold investments in ELLA, LLPC,BBYB,GACA....have a look at those as examples, though of course i am not recommending them (as in some cases i bought some years ago at much lower levels.)

I will attempt to answer more questions , within my scope , if you post or you can find me by using my screenname with a well-known(warm) email server!!

I think you're Spanish!

Knockin FWIW - I worked for a couple of years close to, but not in, a Ministers private office and almost everything they do is designed to seek to polish their image , all ministers are essentially PR for their department - you don't think they actually manage anything do you??
All questions are vetted by Private office, the whips, the entire Gov. "spin machine"to evaluate whether they are"safe"and whether they offer a positive spin. It would NOT have been asked if it were to subsequently highlight a GOV. decision which proved unpopular

Not yet ffc, IMO it almost certainly clears the first ST2 question ie "will the Gov. offer support?", the second is "what will the balance of supported and unsupported debt be?"(and at what interest rate) and the third is "how will SXX raise the rest of the cash ?"
The good news is that it is now likely that whatever happens, ST2 will be achieved, all that remains is what effect will the outcome have on the SP in the short term?I am still on the sidelines for the mo. but watching with more confidence than before.

The question would be one of a series "planted " to be asked by tame Tory backbenchers to do two things , first as a distraction from the real issues of the day where the PM is in so much trouble and second , generally, to highlight some good news for which the government can take credit.Given the obvious need for the PM not to divulge any commercial -in - confidence news , it suggests to me that they will support the funding. It would be beyond even this governments incompetence to tee up such an open goal for the opposition if they were , having raised it in the commons, to subsequently fail to support funding .

Johnpwh I am not by nature a trader , holding ,in the main , boring FTSE stocks and fixed interest assets, generally for years, BUT I have a secondary portfolio of higher-risk shares, of which HUR has ben one., and is again. I have twice sold at ~60p and rebought lower, the last time I sold was early august , at which time I said I thought the SP would drift until post-FOIL . Additionally, I have noticed that the markets are more and more volatile, movements more extreme and sharper .The causes seem to be the emergent quant and HFT strategies( a recent FT article said that more than 50% of all trades are now HFT/quant algos),
Several shares I have dabbled in show a sharp upward movement on news followed by a subsequent decline and diminishing bounces until stabilising (for those mathematically minded its a sort of damped oscillation). I have utilised this phenomenon a few times now with success and hope to do it again here.
FWIW i am describing investments which never exceed more than a low single figure %age of my assets , as I say frequently, I am a boring, conservative investor and this sort of investing is almost a hobby , it is far from critical to my personal financial well-being.This is not financial advice merely an abbreviated explanation of my intentions.

#Me too(and that's not a reference to any unwanted sexual advances made on me!!)
While I have said for a while that the real SP action here may be after oil has flowed for a while, i think it quite probable that Hook-up will create a 10/20/30% bounce and that while the SP may fall back, after the news is digested and until reports of flow rates etc are issued, I think it may not see the lower forties again.(excepting some major bad news). Accordingly, I have dabbled a little lately and will hold for the hook up, sell a few on the likely euphoria and start to add after that.My strategy is independent of whether hook up is this week, next week or next month.

Saudi Oil reserves have been stated as 266 bbbls for many years, as a state run enterprise they have not been required to declare auditable reserves. The problem is that if they want to float a part of Aramco they are going to have to come clean. There is some suggestion that this is the reason for delay, and/or the fact that MBS' original estimate of the value (at $2 trillion!!!) was ludicrous regardless of POO.
In addition , of course, is the risk of "stranded assets" ie still having billions of barrels in the ground when oil is no longer in demand for energy(though burning it is the least sensible use). They are between a rock and a hard place: pumping fast drives the price down, pumping slow risks being left with oil no longer wanted.All the gulf states are planning for "post oil"by building airlines, tourist resorts, conference facilities sporting venues etc etc .But IMV long after widespread use of oil as an energy source is outdated we will still be extracting it for chemical usage, as the feedstock for many valuable materials in building, manufacture, transport lubricants,packaging waxes, tars etc etc.

HI MYO absolutely , both in the formal presentation and after (with a couple of Camborne institute fellow students)it was made clear that the vertical shaft was regarded as significantly more challenging than the horizontal, because of variations between (and within ) the layers to be penetrated, the use of varying technologies and the boundary issues between them.