Member Info for Cranleigh

Tends to lend credence to the idea that the intended European TorP partner may also be involved in the $4-600m solution - a more complicated and longer negotiation?

The reason it has “become boring” is your umpteen repetitive and unfounded posts. Give us all (and yourself) a break!

You can twist people’s words to your heart’s content, but the “debt/net worth risk” is your own invention, and I for one don’t buy it.

This is essentially a project finance proposition for lenders, not a routine financing package for a business with years of earnings and cash-flow behind it where gearing would be a typical lending consideration. If you look at the recent investor presentations, the ratios SXX highlight are rather DSCR (Debt Service Coverage Ratio - EBITDA/annual repayments) and peak Debt/EBITDA. And quite right too IMHO.

The MLAs have been on board for arranging c$3bn of debt for ages, without any new equity, and the only new factor is the $4-600m requirement for which all 4 possible avenues are still apparently being pursued.

Your continuing campaign on this subject is misinformed at best, book-talking scaremongering at worst.

And terribly boring.

Gordon Bennett, change the record!!

Yes, our gearing ratio will increase as we build the mine and get closer to production. But so what - if the company are able to get the $3bn as debt on reasonable terms (lenders being comforted as to repayment ability by a combination of TorPs and risk transfer to contractors, and with senior security) then that is way better for existing shareholders than issuing shares justo “shore up” our balance sheet.

Some equity issue may anyhow have to form part of the $4-600m....

Nobody on this board is privy to the negotiations and you should stop constantly pretending that you know what the prospective lenders want or their criteria.

I tend to agree, GK, so far as any equity issue to the market generally is concerned....assuming that the wording means what it appears to, and that the plan doesn’t change (again!).

Probably much easier to negotiate a realistic (ie much higher than now!) “completed mine” equity price with a strategic partner or provider of completion support or structured capital, if they take some shares as part of their deal. That could of course be “closed” with as condition precedent the obtention of the $3bn debt.

GK, what scope do you see here for any binding agreements with suitable conditions precedent, so obligatorily the subject of RNS, such that Mr Market sees a “completed mine” and reacts accordingly before any equity component is priced?

Thornback, I agree with others that this diagram represents a planned sequence of events.

As to the words “closed” and “drawn” themselves, “closed” means that legally-binding commitments from the lenders to provide loans or facilities are given to and accepted by the borrower, along with all related terms and conditions, whereas “drawn” means the moment that the borrower draws (or starts to draw) cash from those agreed loans or facilities.

Looks to me from Morningstar like Capital sold half of this slug (64m) in January, and Legal & General bought 60m that month - so the volume probably didn’t even show through the market.

And perhaps a repeat sale and buy this month to take Capital below 5% and trigger a TR1?

IMHO no bad thing that our 10% holder is now down to 5% - bound to happen at some point, and if they have been selling that slug gradually over the recent weeks and months as reported volumes would suggest, partly explains the fall to 19-20p

Rcklessferret, oh, it’s Sunday is it?

Probably I was trying to turn the clock back to before Wales v England....

”Cran et al
NPV is notional. Over the years all present net value predictions have been wronge, however, I’ve no doubt that some future value predictions are far more accurate.”

So, SL:

1. So much for decades of economic analysis and finance theory developed by professors and professionals, then. Because you say so.
2. It’s not “present net value”, it’s Net Present Value. Are you even familiar with the concept?
3. Even if all NPV calculations prove to be wrong, or even wronge if you are perhaps living in Elizabethan times, at least they provide estimates of value at a single point of time of future cash flows based on assumptions. You need to do sensitivity analysis by varying the key assumptions and see what happens to NPV to get comfortable with the range of likely values. As SXX have done in their Prospectus and investor presentations (for assumptions such as capex, volume and selling prices).
4. Whatever do you mean by “however, I’ve no doubt that some future value predictions are far more accurate.”. Have you, despite all odds and thanks only to your decades of experience in financial analysis and management, discovered some new, intellectually rigorous “correct” way of valuing a business? If so, do enlighten us.

Once the present uncertainties around Stage 2 are resolved, what is to stop the J-curve kicking in and some serious increases in Enterprise Value towards the estimated NPV as we get closer to production.....currently it is only around 10% of NPV, which reflects those uncertainties as well as remaining build risk - and very modest II demand at this point for shares in a 100-year annuity proposition.

Sheps, thanks for a good Saturday morning laugh!

If you don’t want to consider the replies, why ask the question?

Simple answer - in the case of a company like SXX, with the prospect of strong earnings for 100+ years, I would finance as much of the build as possible with debt, so that shareholders who have shoulderedthe risks to date enjoy the benefits of gearing.

So for me, no more dilution please!

SL, I think that debt financiers will be more interested in the ability of the company to service and repay the debt (hence their insistence on TorPs, risk transfer to contractors and a hugely conservative price/tonne assumption), and the security that they will enjoy, than the fact that leverage will increase as the company moves towards production.

That is hardly a surprise - this is basically a project finance proposition and opportunity for them, not the routine financing of a mature company with earnings history.

Maybe your years of corporate finance experience say otherwise?!

I couldn’t agree with Sheps more. If there were multiple ticks available....

SL’s understanding of corporate finance is IMHO very lightweight....

Of course the money was on board too - Extensive Entrepreneurial Money Supplies

Thou shalt have a fishy when the boat comes in.

Hey you guys on the top floor of our Scarborough HQ - stop staring out to sea and get back to work!

You are probably right re “independent” in that case - early morning wishful thinking on my part!