Member Info for Cranleigh

I haven’t bothered to plough through ww and casa’s calculations.

Anyone who thinks that SXX after successfully financing and building its mine is likely to be valued by the market in 2024 at historic cost (or in casa’s case, a fraction thereof) rather than on the basis of expected future earnings or cash flow IMHO is either being naive or deliberately misleading.

Casa, I will gladly write a 2024 call option on your shares (though maybe you don’t have any?) at historic cost. That way at least you won’t suffer the discount you fear.....

Whether it is a US ton (which I suspect it is, so 907kg) or tonne, $193 ex-mine New Mexico is a long way ahead of SXX’s c$145/tonne, let alone our prospective lenders’ consultant’s hyper-conservative assumption of $125/tonne.

That is where surely a lot of long-term upside lies....

Good to see some small (max 2mtpa) competition helping to create the polyhalite market.

Whether it is ton (which I suspect it is) or tonne, $193 ex-mine New Mexico is a long way ahead of SXX’s c$145/tonne, let alone our prospective lenders’ consultant’s hyper-conservative assumption of $125/tonne.

That is where surely a lot of long-term upside lies....

Good to see some small (max 2mtpa) competition helping to create the polyhalite market.

Casa, I think your understanding of Enterprise Value leaves scope for improvement.

EV reflects NET not gross debt.

So if the company’s Market Cap is, in your example, £100m and it borrows £50m that goes into the bank, there is no increase in net debt....nor in EV.

No we don't, Verde.

In answer to a question CF said (from my memery) that the risks identified and method used by the company were consistent with those of the lenders' technical consultant/s, but that no credit analysis or (for the market debt tranche) rating agencies had yet determined, and they might have a different view.

Or “meets the liquidity requirements of the Project” could be taken that it may well come in the form of a completion guarantee - only providing cash if and when it proves to be needed.

“because Sirius have an upper limit for debt the balance has to come from elsewhere”

Not quite, they have said $3bn is the maximum Senior Debt that they feel comfortable with.

They stated in the 6 Sep 18 RNS that the make-up of the contingency amount, once determined, might include “subordinated debt” or “convertible notes” as well as other possibilities.

Quite apart from the large gap between Enterprise Value and estimated NPV at this point in time, consider also the anticipated tripling in that NPV by 2027 (page 95 of the April 2017 Prospectus) assuming we are headed to selling 20mtpa.

That gives me considerable confidence that, assuming a successful Stage 2 with no or minor dilution, our SP has a very long way to go indeed - the famous J-curve, as risks diminish and the build cash outflows become irrelevant to NPV because they are in the past. An SP no doubt boosted by II demand once the risks become palatable to them.

“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”

More comedy, now Casa implies a takeover could be successful at the current SP. You couldn’t make it up.

I see nothing in the RNS to suggest she can’t use it in her business or sell it on if that is what she wants to do.

Any exclusivity terms would astonish me - the volume is tiny, with no minimum commitment, and exclusivity would be such a material condition that it would/should surely have been declared to the market.

Which in turn makes me doubt that ADM yet have exclusivity for North America....

GK, I’ll go for $300m in new equity, with existing holders given a chance to participate, plus $300m in completion finance from ADM and/or Gina.

The bottom line for moi......IMO all of ST2 funding will be sought via SM issued bonds. Some of that cash will be senior, some underwritten by the IPA

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So you still don't understand that both the commercial and the IPA portions of the $3bn are intended by SXX to be senior debt, and have been for a LONG time (eg 1 Sep 16 RNS).

I thought you had grasped that.

And the final quantity and constitution of the $4-600m contingency sum, also part of Stage 2, is yet to be determined - 4 different possibilities were being actively pursued when last we heard.

Never mind.....

Interesting, Myo - not clear to me that under the existing TorP they would have the right to use Poly4 in Australia - so maybe an incremental volume opportunity?

"How the (UKGS scheme) works
The scheme guarantees the principal and interest payments on infrastructure debt issued by the borrower to banks or investors"

The parlance therein would indicate that the IPA underwrite bonds, not "straight commercial debt" (as opposed to commercial debt)...…

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Rubbish. It says they guarantee debt. No mention of specific forms of debt, such as bonds.

Glad you have now got your debtors and creditors straight

As Monty Python would say, "this is getting too silly!"....but I expect with your acute lastworditis there will be more to come from you.

SL, I can't agree with that:

1. Of course the IPA can guarantee "straight debt" as well as your putative bonds, and you have creditor and debtor confused. The IPA would guarantee to make whole SXX's $3bn creditors - be they straight lenders or holders of bonds - in the event of any default by the debtor (SXX). Simples.

2. I'm not so sure - you mentioned covenant before. Covenants are promises made by a borrower covering such things as interest cover, dividends etc. Senior means senior in the event of liquidation.

3. The company has long since stated their intention that Stage 2 (save the now $4-600m) be in the form of senior debt. Perhaps you have never been a banker, or perhaps never dealt with them?! They and HMG will, as anticipated by the company for several years eg in doing the deal with Gina back in 2016, want to ensure they are senior and therefore have first call on whatever can be raised from a big problem, whether by our BOD or an Administrator or Liquidator.

SL, I think:

1. Your "bonds" is an assumption. There may equally be straight commercial facilities that are able to drawn down over time as required.

2. You are not really agreeing about "senior". Senior is not a covenant, it's a status in the event of liquidation. All the $3bn is IMHO intended to be "senior", ie rank above other debt such as the existing CBs and any other instruments the company may issue in the future, as well as senior to the security relating to Gina's royalty (14 Sep RNS). That way, HMG are that much less likely ever to have to stump up any cash based on their guarantee.

SL In my understanding, the intention is for ALL of the $3bn to be senior debt, half of it underwritten by IPA.

My guess is that the banks that have offered $1.5bn on non-underwritten terms have already indicated that they will loan a similar amount on underwritten terms.

Someone has to do it, Alan (says he from Florida).

Sure - it must be very comforting always to be right (while espousing the benefits of a dialectic BB).

In my understanding, ADM are in the business of making money, not whatever SL chooses dogmatically to define as their “remit”.

With their closeness to SXX over many years, their commitments to Poly4 in North America and Asia, their planned starch plant to service mainly our needs, their enormous liquidity and the points made by Jesse, I would say “why not” to them coming to some deal attractive to them to help with the contingency sum?

Business is business!

This is zip to do with being “partisan”, it’s just what seems to me to be a logical possibility.