Member Info for GaiasKidney

Morning Chris

"Sxx will know if there is any chance of a government guarantee. If there is,they will persue that as long as they possibly can, because that offers the best possible outcome. Unfortunately for us, that means an extended wait...."

I think you are misreading the present situation Chris. FMU Sirius walked away (for a few months) not a 'walk' from the IPA. The offer of cover from HMG still stands, but only at a later construction stage where project risk has been reduced, see 22/1/19 RNS, Fraser confirms that they are still in play (back in play) with the IPA in the Wcast - around slide 23? From the get-go (2015?) the IPA would only ever cover pure debt financing for the build but as with the rest of the previous all debt aspects of St2, this is now moved now into the Deffered Scope.

AISI there is no way there will be any offer from the IPA in relation to the est $600m First Scope, but Sirius can show potential FS investors the large amount of work already done on exploring debt financing (inc the scoped reductions) that will now go into the DS. So hopefuly reducing that risk aspect for them - construction/geo-tech being the central risk the FS investors have to shoulder .... as with the rest in here.

The FS will be found, I don't fret about the 'quantum' of 'cake' that will have to be parted with to get it. But get it I have confidense they will.

ATB.

GK.....With aches and pains in shoulders nowadays!

Detail is all Myo. Tnx.

These investors and associated customers would have known very well last spring that the St2 debt solution had a real risk of not flying yet they have bought in and remain.

All parties have a contingent interest in this project getting done and ASAP. The route to expediate that is obvious. A deal.

ATB.

GK.

Hi.

It got mentioned earlier that the TBM for Dr1 is not stopping. There were reasons mentioned but a very crucial one omitted - the 'squeeze'.

Tricky business TBM tunneling, stop the progression and there is a very high risk the ground will squeeze the shield and the kit will become un movable. It is then either dig it out, if at all possible or it's scrap and also on resumption a new diversionary route has to be made. All astonishingly delaying and expensive. Check the Prossy and what SRK fear on this.

Without a deal to keep funding coming in there will be a point where Sirius would have to suspend the STRABAG contract, aiui there is not sufficient cash at present to take SR to LB and complete surface access down to it.

Stakeholders - those who have strong interest in this project delivering asap, contractors, customers, the BoD and obs SHs - will see huge damage to that prospect if there is a stop for SR. There are many and various stakeholders here. Competition (re probable partnering for a chunk) will not just be about getting a part of a valuable assett but also about securing the present asset from severe damage.

That there is motive and competitive motive at that is a masterly understatment.

Alternative is Sirius put the whole thing on genuine care and maintenance, spending say no more than £2m/y..........could sit there for decades like that.but what's the use?*

Deal soon enough is obvious.

GK.

*Elect tomoz. The use? I struggle, but chance for a good straddle bet. See how that goes.

Ho ho Casa. Really?

What a weak comparison that was!

For Sirius now what PIs think - from blind loyalty all the way to bitter cynicism - is now not of interest. The sp means they will take no or very near zero part in any financing for the FS. Sirius do not care if they are buying, selling or doing nothing.

If a partner is announced before a full deal as offering a large part of the $600m that may change, but Sirius has never offered more than 10% to PIs on any new issue.

The sp today aisi is not predominantly about risk of this co dying but instead is the usual reason that the market just hates uncertainty and presently cannot see any certainty that the co will get a deal that preserves at least in part the value for present holders.

With a successful deal however (something I do not discount) providing enough funds there is a near to certain prospect that withing two years the mine will be in a position of becoming a far simpler basic infrastructure project with near no geo tech risk remaining. Something that will be market investable via debt, something that would in all likelyhood have a value at least half the well understood (and notable never disputed here) 13mt NPV figure for two years ahead.

7bn shares presently. There would still be upside if there were 70bn..... But there won't be I imagine. Far less.

ATB.

GK.

Buckyboy

There is no loan, nor is there any - hide behind the ' ' - type 'loan' either. Perhaps you need to spend a bit more effort learning to comphehend if you want to keep up here?

A loan involves a fixed legal obligation to pay back regardless. There is none. There is.... a royalty agreement. That alone.

There is a valuation escalator attached to the RA in the co accounts as IFRS insist on this to provide a fair valuation going forward since Sirius MAY pay out far more ahead on the RA than they received. but they also may pay nothing, so there is also a hypothetical derivative attached to this hypothetical accounting value.

Obviously under new ownership all would be up for negotiaton. All always is one way or the other. New owner, powerful owner? Not the pushover Sirius have been?

The stakeholders need to think on.

GK.

Morning.

LTH here should welcome talk of predators and hostile acquisition as it shows there is interest in this asset. Rightly so, there is around 1.5bnt of potentially available ore below the moors and the ongoing production news from the neighbour is shouting that the product is being bid up more and more - a $300bn prospect is there to be realised.

However the stakeholders, the other stakeholders that is, ie the customers, the constructors and Rinehart should be rightly getting very twitchy at the prospect of a change of ownership away from Sirius and the management from this BoD. This BoD are in a hurry and will need to produce asap, that is unlikely to be the case for any new owner with deep pockets. A new owner would have little incentive to:

1/ keep the deal with Rinehart, buy her out at low-ball or threaten mothballing of WS. 5% of the above $300bn? A huge royalty income stream at stake.
2/ the constructors, highly likely get drive 1 and shafts sunk then mothball and take your time, new deal with who later? Not good for present builders' earnings from this and
3/ and most at peril, the customers. There will be little to no incentive for a new owner to keep the TorPs open , they have been offered at large discounts by Sirius to get signatures - the core of the prev finance plan. Boulby's mounting sales tells all that those TorPs are now well under priced and the market at full nutrient pricing for future Poly4 is wide open.

Though I see little prospect of a predator appearing just yet, mere talk of this and that if there is no funding action soon, then an 'inevitability' will develop, that has to be a motivator to all stakeholders in the Woodsmith project to not procrastinate.

They would have understood long back that this situation now ongoing could arise where if they don't quickly step up to the plate they will lose out in very large part what Sirius have gifted them................... And there have been some giveaways!

I would think one or more of the interested parties rustling (one defenition: round up and steal cattle........ yeerrs!) up say 1/3rd of the $600m requirement flagged by the co, that's well under 0.1% of the value of what is down there, would be a small price very worth paying when the alternatives are now becoming stark. The other 2/3rds would quickly follow.

So bring on all talk of the alternatives............. Bashers do your work!!!

GK.

Hi WW.

Thx for the response.

As I recall the drill and blast for Boulby took six years. I don't think Sirius can realisticly go back to that method from here. With the sinking risk I suspect lenders were frit about the previous financing from a general feeling of there being too much risk - regardless of method. General geo risk, D&B too slow, freezing too slow, or SBR not tested enough. All 4?

Re the marl (from 1300m down): "The deformation of the shaft walls happened two years after." Yes. So for Sirius no prob would be arring, if any, for some time, therefore well after the DS debt pakage was secured (hopefuly).

For me it is definitly the high pressure aquifer and how DMC cope there: what major water ingress mitigations have been put in place, how long the grouting takes and how sucessful it is, etc? That are by far the major hurdles I would hope DMC surmount that will then ease the route markedly for those we anticipate will lend on this project. Unfortunately I don't think the VSM experience offers much on that, agreed.

ATB.

GK.

PS: I think it was you that found this paper re Boulby marl?

http://eprints.nottingham.ac.uk/11924/1/PhD_Thesis_-_Y._Jia.pdf

Some scary pics!!

Myo.

Tnx for linking up the prospectus again, I've not looked for a while. Little doubt the updated version is being sweated over as we speak!

On the assumption First Scope money is raised then I would think the SBR could commence cutting after ~2m of prep. Looking at Fraser's "Reasonable Target", slide 15 of pres, giving an av sink rate of 2.7m/d for DMC and then referring to SRK table 9.2, p434, there are 1398m between the top of the Whitby Mudstone (~start) and intercepting polyhalite. 518 days cutting. So if the money is in say by end Jan '20 FP could be hit by end Aug '21. Then Deferred Scope?

However I think it would be probable with extensive PR, jawboning and other fanfair to instead go for the Deferred Scope on DMC getting past the 'danger zones' - water, water - re the 'Sherwood Sandstone Group' and lower 'Transition Beds', ending at 1046m below the start level. 387d of cutting at av 2.7m/d, running to an earlier end April '20 'this is now safe' situation.

Only the Sevice Shaft mind, but would be a great demonstration that DMC are capable. Production Shaft scheduling remains a bit of a mystery to me at pres. Regardless 12 months to go for the DF pure debt solution looks practicle.

GK.

PS: bit of an sp up trend bulding? I think that will have to happen.... and well past 5p up prior to the FS raise. New issue at sub 5 as part of $600m is a tall order.

Daylight visible through distant trees?

HAGW.

"Sounds risky to me."

Now then Bucky. I expect everyone is very relieved you are now at last startng to understand this share. But coming up with that bit of genius won't realy impress - we know!

And yes it's the shafts that are the highest risk element in this build,,,by some margin (I trust all do grasp that). Too risky for the IPA, learned that in Jan. Too risky for the MLG, learned that soon after and then in the end too risky for JPM even though its seems highly probable they came up with their structure.

I'm guessing you've done all your DD on that, so you will know.

Now, after pure debt raising efforts sadly failed, the consequense has been taken on and probably priced in by the market. That being the $600m being presently targeted may not be offered, that the $600m may not be enough to complete this most risky aspect, on shafts down to P4 through that complex geo.... and that there still may not be a pure debt solution offered even with that risk taken out.

That adds up. The compensation for the risk (for anyone who may care to buy - do you?) is the valuation now, then compared to the valuation on full production, how long that takes and how diluted this is along the way.....A maths thing realy.

ATB.

GK.

Just a coincidense that BNP have been bookrunners last summer for a Euro 500m to BayWa? Cashed up then?

https://www.bloomberg.com/press-releases/2019-06-18/dgap-news-baywa-ag-successfully-places-green-bond

The potential parner (if that is in part 'the deal') being a customer offers the best matching of interests as regards present SHs IMO.

Seeowitgoes.

GK.

Hi WW, how are you doin'?

"Will history repeat itself?"

They are taking a big hit if that is a permanent reduction decision and with them having been in this game for so long it seams improbable they are deciding to step away now.

So - as I believe you are suspecting - sub present sp placing countdown is on? but how much can be raised that way? Not the full $600m by any imagination. The BoD have to have something else significant up their sleeve. A few options out there. I don't think streaming has been mentioned? Poss with one or more existing TorP customers. EG:

https://www.fool.com/investing/2018/05/04/what-is-gold-streaming.aspx

ATB.

GK.

PS: whoduvthought Foooell can be useful.......ish!

Myo.

Eye for details. Valuable. Tnx.

GK.

Yes. Tnx Myo. Care and maintenance for most at WS it appears, only one work vehecle on the move shifting some rebar.

Am I right in thinking Drive 1 is all paid up front as are the major non DMC contractors at WS? If so and with DMC not going into action until the ~$600m is raised then present running costs are pretty low I would think. Much time to get the best deal they can.

I reckon any sucessful raise of that figure, in almost all cases of dilutiveness or not will see a substantive lift for the benighted LTH. As presently 'death' is. what? 80% priced in.....................as the alternative.

Aub

As with trying to buy a guarantee to preclude the game of Twister with Grim (and getting to First Poly). Just cannot be done..............Bit of the b****din obvious there Aub ;-) Twas also the case with the previous two major raises, but raised it was. Harder now of course.

ATB.

GK.

Afternoon FFC

"Well that’s me done asking a silly question !!!!! Didn’t like the only answer ..."

Not a sill Q at all imo. Very pertinant, it's what Fraser mentioned. Sorry you didn't think much to the answer, perhaps offer your own? It was just a modeled guess.....And:

"...believe he will be proved wrong again "

Little doubt I will! Pay no attention. However.............. there's no pesimism on my part in that thinking with proposing this may pan out with a total share issue around 10 to 15bn.

If with: 1/ sucess with gaining the ~$600m First Scope they then also :-

2/ acheive First Poly and Drive 1 with that cash + reserves in the stated timeframe;
3/ then get the Deferred Scope money from the debt markets (~$2.5bn) and complete the mine and;
4/ they start selling to full production at expected pricing and costs (all of which I think is doable).

Then eanings can be calculated as can what would be expected to go to those 10 to 15bn shares as a divi. I expect it would beat what the Post Office would offer.

Present sp pricing suggests to me the market is only giving a low chance of the co even getting past "1/". Fair? Or not fair?

What do you think?

ATB.

GK.

PS: friend of mine who has scorned (with glee at times) my interest in this co for many a year now - and you could say they were right to do so...considering. Well, they just bought in today.

Hi Aubery.

A 'share' of some sort. Be it at Sxx level or project level (eg hive off YPL say) - impact the same aiui. 'Partner' suggests equal legal rights in proportion to each partiy's stake size. If it's Sxx shares then Sxx BoD should retain managing this. If at project level maybe a different structure of power. Much to chew on.

We'll see.

Wooden hill.

GK.

Hi FFC. Re your 16-05:

"Anyone have a clue what the warrants might add to the 15% ?"

Yes I've thought about that and I think maybe they could get that to work within a debt component of the First Scope. They may go down the debt route for all, for part of the FS or not at all - they may get nothing to work. A model anyhow:

Anyones' guess as to what they may come up with but to me what looks to have a decent chance is a combination of a partner coming in for a portion of the FS, say 1/3rd*, with the balance beng from a sweetened debt offer.

Some £310m ($400m, 2/3rds) at (a what I think plausible) 12% rate with warrants attached would sell to those who have shown previous interest. But warrants will often expire worthless so I think the package will have to have generous terms. Offering potential gain of a good 50% above the total debt interest due. Say it's 5y bonds that would be some £185m of interest. So holders would want some £90m of gain from the warrants as a reasonable outcome for them.

Pricing? A balance with keeping the new issue arising from warrants as low as possible for the co whilst also making them attractive to recipients. I wouldn't expect an exercise price higher than 5p* in the present circumstances and the outcome a few years on for warrant holders would centre around a warrant price of 5p (the Sxx sp at 10p and a 5p gain for warrant holders). Getting £90m profit at 5p equates to 1.8bn warrants issued but the holders have to stump up £90m to the co to realize that.

For the partner they invest some £155m ($200m), again I would not think they would pay more than 5p* for their stake, so assuming shares then 3.1bn new shares.

Timing: the gain for warrant holders would be predicated on the co achieving the aims of the FS - shafts and drive 1 (not a certainty) and then being in a position to get the Deferred Scope. By then and with exercise the total issue would come out at some 13bn when all is added in. At 10p that is Mcap of $1.3bn. Would it be more? Project NPV is far higher but conversely that possible Mcap is also a large five fold jump from today's and there would still be a long, now delayed, road to full production.

* Asking for more than around $200m from a partner would I think be un-achievable when all concerned know that the WS mine can very easily become available for next to nothing via the route of those watching doing just that.... Nothing. An exercise price too far above the present I doubt would get much traction, it has to be close to the present sp. The same thinking would apply for the partner AISI.

I think they could pull this or something similar off, there is a degree of mutual interest. Enough? A great pity if not.

GK.

TeX

LMR dropped from 0.58 to 0.47 so dropped out. Not half a percent but a trend may be building.

Have a good w end you and all.

GK.

Last line: '$120/t of earnings'.

And rest:

Borrowings fully paid down
Divi distribution ¾ of earnings
Valuation 15x divi pay-out.
Finally: no of shares 18bn.
Realistic? One to judge ………. Divi per share and share price? Best go calculate.

Whereas if they don’t?............What else is there? Toast city!

This is now an outsider punt when you look at the odds. But the odds are what they are because this ‘horse’ has never yet/is yet to.. come ‘in’. Fair odds? You know what they say – DYO.

Note to self: no way to build a pension this.

GK.

Evening/

Long time no comment on Sirius from me. I’ve found no reason until there was something worth chewing on from the co. All would be just chaff otherwise. But now we have a plan to possibly drag this from the gates of the graveyard. A nascent plan as yet, but something that can become plausible and even executable….I think. IMV Sirius have always wanted to control this. But as the debt market would not give them the trust with that and hence all the cash to complete this build they have had to finally submit to the prospect that they are going to have to share. So partnership is in the end being taken seriously. Perhaps that should have happened some time back but that’s the past.

Little doubt this BoD know well there are many out there who would take every opportunity to not share nicely – Eurochem? Zero chance IMO and just FT mischief – so finding this partner is a tricky one especially with the clock quickly ticking down. This partnering party has to be attracted by more than just getting an asset of high potential value (post covering the build), they must also I believe want in majority this management to remain and also the goodwill between Sirius and contractors and between Sirius and TorP customers to hold. As for the BoD and SHs so the partner will also want the later $2.5bn of debt raise to succeed – the ‘wheels’ have to remain on. They need to have motive to not be attracted by instead seeing WS mothballed and so becoming available from receivers for a fire sale song. With those aux strictures I can only see one entity or a small consortium of the TorP takers (with probably associated funded wealth holders) being in the frame. We know who they are.

If the co get that to work, the big ‘if’, what of present holders’ prospects?

$600m is being targeted for this project derisk. There is a chance part of that would not be (in either immediate or longer term) new equity, but I’m assuming it would be. Mcap today is a depressed ~$300m. They cannot take the open market route. I expect (with luck) it will become understood that there is a partner and then who they are to be. That ‘should’ lift the value – maybe even to 6p (Liberum … yeah, yeah, paid by co) we’ll see. With that the dilution would be more palatable and retained value for existing SHs may just come out near half today’s. Not forgetting existing CBs perhaps an 8bn new issue taking it to a total 16b issue.

With the present 3p odd sp this is still priced to die and until something solid suggests there is someone other than the co who looks to want to agree to the plan or something close I doubt it will change much. However this now extrema speculative negativity has to be balanced with what can be a now very significant upside, though that many a year off. Assumptions for year 8 from here:-

In production for 5 years.
At 13mt/y production.
Average P4 sale price $200/t.
Total costs (Opex + other) $80/t so $120/y of earnings.

Is what I get from today. Certainly not dead!

Fraser states (rns/wcast) that the primary consideration that has made lenders reluctant to take the IBs below the strictured JPM 15% was the risk associated with the main shaft sinks. He says he has worked hard to try and convince lenders of the thorough assesment of the line of shafts and that they have the best in the business to do these sinks, however it is not enough for them. With that and the now new situation it seems reasonably probable Sirius can avoid for some time yet (and maybe at all) having a partner come in offering build finance in return for taking a large part of the project.

It looks like the build will be reprioritised accross the board with almost total emphasis now put on getting the shaft sinks past the high risk geos. This will be in particular the high pressure aquifers at ~1000m down. Even in the best of sink rate circumstances this is 1y+ (2y prob) away so the project needs to be bridged with finance beyond what they presently have (~$100 -150m) and beyond six months. How much?

I would also think they will continue with MTS drive 1. Costings (from prospectus):

Service shaft $284.7m,
Production shaft $246.1
I would anticipate by now ~10% of that is now sunk cost, so an outstanding cost remaining of ~$480m.

MTS total cost is $1498.6m. This includes the drives plus associated shaft/portal development at the 3 sites. From that and the good progress already made with drive 1 from Wilton I guess the ongoing cost to take D1 to the half way point (it is not feasible to stop the TBM) between its start and LB and construct a cavern there would be around 15 to 20% of the total - sub $300m.

Add ~20% for other care and maintainance and the total over next year or so ~$850m. But if you refere to fig 16.6 in the SRK report looking at the breakdown of build capex for year '19 & '20 it may be that $850m for just these aspects is an over estimate.

If this bridging and sinking can be done so as to get this to a debt market investable position is not doable then it's likely they go to the partner financing which will hurt present SHs. But it is worth modeling future earnings using present estimates of project earnings ahead (that have not changed) whilst adding in say a one year delay to build completion and say a, bight the bullet, 2/3rds handover to a partner.

It remains investable with still worthwhile upside...........but obs speculative.

I remain on balance positive just about.

GK. Don't mention the J curve!