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Scotman,
That was bad, sorry. I read it back after posting and tried to delete it for that sentence alone.
Honest mistake. What I meant was my *guess* is that all the bond funding *will* fall into place. There are no noises currently that suggest there is any obvious problem anyway. Sure, something could come up (the asteroid) but the sentiment of people on here seems pretty unanimous.
P.s. Spike, no worries, I'm probably far less experienced than many on here. Myo and several others have provided all the info I've needed so far.
Re dilution/marcap, the extra bond sales will dilute the shares by a significant % (figure plucked out of my bad memory ~30%) with the marcap of around a billion remaining flat, of course. It'll take reduced risk and/or more obvious short-term capital gains for additional capital to flow into that marcap figure, and for the bigger institutional investors I guess that'll be closer to when polyhalite starts shipping (or entering the FTSE100 or some other symbol of reliable investment). For smaller investors, I reckon it'll be September when the risks from the funding not being secured (already small) fall away further.
Spike.
I'm a layman too. My understanding is they need to sell 400m worth of bonds at 15p by end of Sept-ish. It is on track and looks likely this will be fine. In my head, there really isn't any risk of this not going ahead. The only risk, to my mind, is in terms of financial institutional-type risk where there is no way fund and pension managers could be seen to be putting average punters' savings into a business with no divvies, no profit...not even any revenue yet.
But actually what's happening is that all the funding is probably in place, the build is very transparently on or ahead of schedule on all fronts, take or pay (sales) contracts are all fulfilled to the target volume within about 5 years, and therefore at a net present value (future P&L, realistic estimated profit levels of say £1bn a year, a conservative industry-based estimate of share price:earnings level, etc), the share price could be a lot higher than currently.
Given institutional (big) investors won't invest with any risk present, I wouldn't expect the SP to rise substantially before September but there'll be a variety of investors all the time just waiting for this one to blow up, and I think that the "starting gun" could be fired at any time. That is just my guess.
Good luck and don't take any risks you're not comfortable with.
Makes sense, sounds promising.
Re Times/TiM/Mail, feels like a new phase in the corporate PR - starting to just introduce it as more of a household name, maybe? FTSE 100 here we come? :-)
Or not, just a guess...
Myo, yep, you have the 360 view of things.
Not sure if you agree but the conclusion I come to is that only a near-zero-risk scenario will satisfy further meaningful amounts of longer-term institutional money that has to provide an RoI for end users (eg. pension funds). That would point to end of September, initially, for any significant movement in the SP. Everything else is more of the FoMO/short-term stuff that, at least in the short term, goes up then falls back in equal measure.
The main risk, for me, is the BoD somehow diluting PIs again - I'm not suggesting that is likely or unlikely, it's based almost purely on fear on my part. But they've had to dilute significantly once (or twice is it?) albeit, as they've announced, to sort an almighty finance package for this stage, but even if finance is sorted, do you think they could somehow do that again, given they have (rightly or wrongly) shown little concern for PIs to date?
When and where's that causal 'spark' going to come from, I wonder...
Fred, my gut feel is there are a lot of people sitting with itchy trigger fingers for SXX. Could blow up at any time.
But even if it does jump, in a scenario where the (Liberum etc) 40p target price is attained over the course of, say, a year or two, that's an average of only a few hundredths of a penny per day over that period to go from 15p to 40p. So it's either going to move imperceptibly slowly, or it'll stagnate then, tectonic-plate-like, it will stay where it is, operational progress and upward pressure will build, then there'll be an earthquake.
Myo - if it was matchplay it'd be a gimme...
Appreciate the updates and details.
Yes.
Counting down the days to 30th Sept / bond sale completion...
GLA LTHs.
...I hope it's not the risk of greedy directors and IIs somehow stealing value from PIs via some sort of dilution.
I hope it is simply that because profitability and dividends are still several years off, the short-term profit seekers are still investing elsewhere.
Resistance at 15p...
Resistance. Is. Futile.
Bellers, I'm taking my inspiration from the recent bitcoin crash then lull then re-spike. IIs will be looking to hoover up any cheap shares they can get their hands on; I'm fully prepared to tough it out. Good luck LTHs.
Not unreported.
But a 112,500 just went through at 15.00.
I've posted the whole article a couple of pages back under a thread subject line including "Times" and "Sirius".
...on Google finance page for SXX.
It fluctuates on there of course, but still good to see.
Must be too many people pinging them for the latest buy/sell quote range right now.
You're very welcome. Least I can do.
cheap. Liberum, the house broker, reckons that they are worth 40p, for example, taking into account both the financing and construction risks. If the high-yield bond gets away, the broker is almost certain to upgrade.
The company’s valuation of £980 million equates to less than a year’s worth of the £1.1 billion of steady-state annual profits before tax and other items that Sirius should make based on the mid-point of its estimates. It is undoubtedly a gamble, but those who think that the company can pull off the financing should definitely buy in.
ADVICE Buy
WHY The funding seems likely to succeed and, with production costs low, future profits should be high
raised by issuing bonds that convert into Sirius Minerals shares. These carry a fairly punitive 5 per cent annual interest, payable quarterly, until they convert into shares at the very latest in 2027.
Next, the group has to raise $500 million through a high-yield, or high-interest, bond issue, which it is aiming to complete by September. The miner is hoping for the bonds to attract a “single B” rating from credit agencies, which should bring down the likely interest rate, but it will be high, nonetheless, and certainly into double digits. The likely lifetime, or maturity, of the bonds is not yet known.
Assuming that happens, in will come JP Morgan, which has underwritten a $2.5 billion revolving credit facility that can be drawn on as necessary for seven years. The American investment bank is charging Sirius Libor — or the rate that London-based banks charge to lend to each other — plus a meaty 5 per cent to use the lending scheme. In addition, for every $500 million that is drawn under the loan, a corresponding high-yield bond has to be issued in order to repay it.
Although the JP Morgan facility far from cheap, it gives the miner useful options and financial flexibility. It doesn’t have to draw on all of the potential loan, but can use what it does take for whatever purpose it sees fit, from funding its capital expenditure to redeeming some of the debts it has built up — whatever proves to be most cost-effective.
At this stage, and having achieved so much, it would be a surprise if the high-yield debt offer failed. However, the uncertainty of it all has weighed heavily on the share price, which is down a third this year and was off 0.6 per cent, or less than ¼p, to 14p yesterday.
This is not the market’s only worry. Even once the financing is complete, there are risks associated with constructing the mine. Also, the group does not expect to begin extracting polyhalite until the fourth quarter of 2021 and doesn’t reckon that it will be generating positive cashflows before 2023.
This means that even though Sirius has secured committed forward orders — in the region of 11.7 million tonnes of the resource — it will be some time before the company starts turning a profit and can even think about paying a dividend.
Shareholders in Sirius have reason to feel aggrieved. First, the $425 million equity placing was carried out at a deep discount of 32 per cent to the price beforehand, fuelling the sense among investors that did not take part that they were left at a disadvantage.
At the same time, while issuing convertible bonds is understandable, the prospect of dilutive new shares coming into circulation when the securities are exchanged — at any time and at the discretion of the bondholders — is bound to worry investors and hold back the stock. With a floor for conversion having been set of 19.54p, though, little is likely to happen while the price is at its present level.
Even with all this to fret about, the shares look ch
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june 27 2019, 12:01am, the times
Sirius Minerals backers gamble on dirt-cheap shares
miles costello
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To get a sense of the mood among investors in Sirius Minerals, the casual onlooker need only pop into a couple of internet chatrooms. The web is alive with gossip and speculation about this FTSE 250 company, whose market value of close to £1 billion is built on the bet that in a couple of years’ time it will hit pay dirt through a mine deep under the Yorkshire moors.
Sirius Minerals was founded in 2003, initially looking for potash mining opportunities in North Dakota. Ultimately fruitless in its exploration endeavours in the United States, more than a decade later the company turned its attention to Britain, finally securing the licence to develop the world’s largest deposit three miles south of Whitby from the North York Moors National Park Authority in 2015.
Having started with a listing on Aim, London’s junior stock market, the company gravitated to a main quote in 2017. It raised $1.2 billion three years ago to enable construction work to begin at the mine, known as Woodsmith, and this year it has been pulling together an additional funding package of roughly $3.8 billion, which is approaching a pivotal stage.
There can be no mistaking the company’s ambition. It is digging a mine 1,500 metres deep in the North York Moors National Park and aims to transport the potash — or polyhalite, to be specific — via a conveyor belt through a 23-mile tunnel to Teesside, where the material can be crushed into pellets and exported overseas.
Successfully starting to bring Woodsmith’s 2.66 billion tonnes of proven high-quality polyhalite resources to the surface would be transformational for Sirius. It is a central ingredient of fertilisers, containing four of the six nutrients required by plants, and there is a high demand for the resource from countries such as India, whose populations are growing rapidly and where arable land is not expanding at any serious pace. Impressively, Sirius has made good progress with the initial construction work, having had to expensively alter its plans to win consent. About 1,000 people are working at the site and so far they have beaten targets for excavation work, such as sinking service and production shafts and carrying out the preparatory work on the tunnel.
The second, and final, financing round is complex, expensive and not without risk. However, raising the money would enable the company to complete the mine and fund itself until the potash starts coming out of the ground and the orders and payments start coming in.
Two of effectively four legs of the move have been completed. A deeply discounted equity placing at 15p a share has raised $425 million, more than initially anticipated. A net $400 million also has bee