Member Info for GaiasKidney

Best to look at the market out there for the rating of bonds that it is thought these will be marked as by the agencies and then marketed as such. The co have placed an upper limit of 15% on the coupon they are willing to pay and Fraser has flagged to the press he thinks they will be 'B' rated. Commonly described as 'junk'!

GK.

Morning Dub.

"I am trying to get a gauge on how likely it is that we will get these bonds shifted as planned and what risk there is of a significant downturn if we are in Aug/Sept with no takers."

It is spelled out quite plainly by the co that if these bonds are not sold by end Oct this year then the co soon moves to become insolvent if there is not another money raising route in place. So the consequence of failing could be very high, but that tells you little on how likely it is they fail with this present plan.

So there is risk ahead. This I expect is why the St2 issue went at the price it did. However at 15p a large and significant proportion went to long term holders that look unlikely to flip their new shares. If this moves to an insolvency situation they - as us - will be the first to decend to wipe out territory as the CBs that are not covered by the escrow and Hancock will have first call on the assets.

Resolution of the sale of the first $500m bond will remove this risk. By then the sp may well again up in the 30s. It may move to that area before. Buyers today look to get value, but also have to take risk on completion of this plan. Buying in when there is lowered risk would likely cost more.

See what transpires.

ATB.

GK.

There is talk of lowering CT to the Eire level of 12.5%. In 2020 the rate is scheduled to go to 17% so a further reduction of 4.5%. That reduction in take will in most likelyhood have to be recovered elsewhere but what would be the impact of this lower CT on the future divi expectation for Sirius?

For the most probable initial 13mt/y operation SRK (prospectus) are estimating EBITDA/y over the LoM of $2.25bn. The taxable amount would be somewhat lower, but staying with that 4.5% of $2.25bn gives an extra $100m/y retained that you would expect to go to the divi payout. With 9.5bn shares that would equate to around an extra 0.85p on the divi.

SRK also estimate net cashflow per tonne to settle at around $130 for 13mt/y. If a level of 2/3rds of that can go to the divi payout then the expectation is 14p. Add 0.85p lifts the payout by 6%. Every little helps.....as someone once said.

A future yield today of 93%! Some years away and a few (but fewer) hurdles to still overcome. But something for today's position takers to ponder.

GK.

Myo.

Production shaft progress is what I'm looking at - 'WS Drone 006'. A lot of progress with the winding house. Much still to muck out with the fore shaft, 10m down?

Deep shafts is where I see maximum potential for delay and delay duraration - most critical aspect of build, so the further they can crack on now the better. First P will be a great day. FP with both shafts a bonanza day.

Or...........................a horror rise of high pressure saline roaring up the shaft if they mess up. Then you will have more like 99.995% of these 'ere board monkeys clamouring for YOUR explanation.....;-)). Think on!!

Won't 'appen.......Or they could start a line in pickled cabbage?

GK.

'Ere Myo.

There is a nice new incentive for Messers Fraser and Staley as well re getting it to the MHF. 5mt by end 2024 gets Beardy an extra ~£900k!...(P75 2019 res)

"Long-term Incentive Plan
The Remuneration Committee has agreed that an LTIP award would be made to each of the Executive Directors in 2019. The 2019 LTIP share grant consists of an ordinary share award of up to 200% of salary for Chris Fraser and up to 175% of salary for Thomas Staley. No exceptional share award will be granted in 2019. As set out in further detail below, the vesting of the 2019 LTIP awards will be based on the critical milestone of a total of five million tonnes of polyhalite being shipped to customers.

Ordinary award (up to 200% of salary for Chris Fraser and up to 175% of salary for Thomas Staley).

Vesting of the ordinary award is linked to a total of five million tonnes of polyhalite being shipped to customers
by 31 December 2024 for maximum vesting of the ordinary award..."

Mind, I've heard tell there's a secret cost saving plan out there - code named 'Yorkshireman' - it involves never investing anything (unless it is 3p lower than...whatever the price is), but instead lending five quid to half a dozen Boro Boys to go to the local charry shops to get as many desert and tea spoons as they can..........and then get digging!!

120 years is the new estimated completion time for (the first twenty yards of) the tunnel.

GK.

Beerbull

Just recalleed your Q:

" ‘There is strong incentive for Sirius to reduce the RCF by selling further bonds.’ Any chance you can explain?"

Heavy going, prospectus pps 219/220:

"Under the terms of the RCF, from time to time, the Borrower will be subject to a Securities
Demand. A Securities Demand is automatically triggered on a Securities Trigger Date. In the event of
a Securities Trigger Date, the Borrower must issue and sell Take-Out Securities to refinance such
RCF loans. As an alternative to issuing Take-Out Securities, (i) the Borrower may issue debt
securities (including securities convertible or exchangeable into or exercisable for equity securities)
with a maturity date beyond the final maturity date of the RCF or (ii) may issue Alternative
Securities. Subject to any prior cancellation or prepayment of the loans outstanding under the RCF,
the total commitment under the RCF would be permanently reduced by 60 per cent. of the net cash
proceeds of any Relevant Securities (other than net proceeds of any issue of common equity) issued,
e.g., by approximately US$300 million for each US$500 million. As a result of such reduction of the
commitment under the RCF, the Company would, for example, have an additional US$1.0 billion of
funding available for drawdown under the RCF following the issuance of a total aggregate amount
of US$2.5 billion of Take-Out Securities. However, in the event of a Securities Trigger Date, there is
no assurance that the Borrower would be able to successfully issue Relevant Securities on
commercially attractive terms, or at all. If the Borrower fails to issue Relevant Securities within the
Demand Failure Date, the loans under the RCF would then become subject to the Increased Rate. If
a second Securities Demand is triggered when Relevant Securities have not been issued in relation to
a previous Securities Demand, a Demand Failure Date will be deemed to have occurred on the date
of such second Securities Demand. If any such second Demand Failure occurs, it will result in
significantly higher financing costs for so long as Relevant Securities are not issued. Moreover, the
refinancing of outstanding amounts under the RCF through the issuance of Relevant Securities
following a Securities Trigger Date may be subject to higher financing costs than amounts drawn
from the RCF, which may result in significantly higher overall financing costs."

Jist FMU is if Sirius don't get the $2.5bn facility sydicated out as bonds (or some via other securities) JPM's charges go up and up.

GK.

For followers Phil:

https://www.candlesticker.com/Pattern.aspx?lang=en&Pattern=2101

See what's ahead.

GK.

Yes I do YM............

I think everyone else has gone down the pub, enjoying the anticipation of something else about to launch from the 8AM open. ;-))

GK.

Looks to be temporary. Trading from 24/5, no trade activity recorded so far:

https://www.londonstockexchange.com/exchange/prices-and-markets/debt-securities/company-summary-chart.html?fourWayKey=XS1991118255LUUSDCWTR&ds=0

Codes are 'XS1991118255', 'BJQ2TK5', '65LC'.

Names: 'SIRIUS MINERALS FINANCE NO.2 LIMITED 5% GRTD COV BDS 23/05/27', 'SIRIUS MIN2 27'.

GK.

To add..

FMU that JPM is offering to be 'initial purchaser' is not the same as if they had contracted to undewrite this $500m bond, as they did with the Firm Placing and Placing & OO, rather a case that they will only intially purchase it when they have certaity they can sydicate it away, I would think in at least large part, to the market. There is an upper limit for the coupon of 15% in the deal. AFAICT 'B' rated UK bonds are going for around 9 to 12% presently. Info there is limited.

GK.

Hi TB

"Could anyone clarify that the Terms and conditions for the Stage 2 Debt Element ($500 million Initial Bonds and $2.5 billion RCF) are set in stone so to speak..?"

Both are as 'letters' from JPM to Sirius. 30/4 RNS

a/ "Commitment Letter":

"On 30 April 2019, the Company entered into a commitment letter in respect of the RCF (the "Commitment Letter"). Under the Commitment Letter, J.P. Morgan Chase Bank N.A., London Branch (the "RCF Lender") has committed to provide an RCF of up to US$2.5 billion, subject to certain conditions precedent. The commitment provided under the Commitment Letter terminates on 30 October 2019 if the conditions thereto, including issuance of the full amount of the Initial Bonds, have not been satisfied... "

b/ "Initial Bond Engagement Letter":

"On 30 April 2019, the Company entered into an engagement letter with J.P. Morgan Securities LLC ("J.P. Morgan Securities") in respect of the Initial Bonds (the "Initial Bond Engagement Letter"), pursuant to which the Company has agreed to engage J.P. Morgan Securities (acting directly or through its affiliates) to act as initial purchaser of the Initial Bonds on a best efforts basis, as well as for future bond issuances to refinance or replace amounts drawn under the RCF...."

'Best effort basis'.

If for some reason the market will not take the $500m of 'Initial Bonds' by end Oct then both the "Initial Bond Engagement Letter" and the "Commitment Letter" between JPM and Sirius lapse. If they suceed with selling the Initial Bond then the terms within the "Commitment Letter" for the RCF become active. There is strong incentive for Sirius to reduce the RCF by selling further bonds.

Hope to help.

GK.

https://www.youtube.com/watch?v=0e2kaQqxmQ0

??????????????

GK.

Evening Lives.

"So my question is our ability to go straight to 13mtpa as you state we may considering the construction build is initially for 10mtpa."

There seems little doubt, if the sales/price/technicalities etc can support it, plus it's their stated intension. P3 Prospectus:

"The Company is expecting to achieve first polyhalite from the mine by the end of 2021 and is initially targeting commercial production capacity of 10 million tonnes per annum (mtpa) from the Project by mid-2024, at which point the Project is expected to be capable of producing up to 7.0 mtpa of granulated POLY4
product at steady state, with the balance as coarse POLY4 product. The Company intends to implement the Project so that production capacity is phased to rapidly increase to 13 mtpa by early 2026 (under existing planning permissions/consents) by incremental addition of mining, granulation and harbour capacities......"

Capital market raisings so far have been to finance completion of a 10mt facility. There would be a relatively small additional $361m required for expansion Capex to 13m, SRK sec 17, that cash coming from early revenue. Post St2 I can't see a rational for that 13mt not now becoming the co's press release stated target nameplate, particularly as more TorP is being sought to around that level.

I'm concluding it's nailed.

GK.

Hi.

Well, I've banged on for a while that this was not behaving like Stage 1.

First off I think Sirius let them selves get into a position where they were 'up against it' and so ended up with a deal that need not have descriminated as much against existing holders. Second so much is now different with the project compared to the time of St1 - no build had started. Third it has become obvious now that this gets taken to 13m with no halt, the customer book only needs to add 20%. Fourth looking at the structure of the future bonds and the incentive to sydcate out the lending facility it looks pretty near certain there will be zero issue in selling all the bonds, a price can always be found.

I doubt the market will be waiting on that so I give any remaining overhang no more than two weeks. Then this goes back to 'value at risk' pricing. See how that goes.

GLA.

Tnx for all the info put up.

GK.

PS: conspiricy to take from PI and give to II, or no one makes you press the 'S' button? Discuss!

Oh I would say a number that would support a £2 per share sp once in full production.

But for the number there is today's first RNS.......But you knew that.

GK.

Yep Myo.

Makes little sense to to not take this to 13m if the order book can support it. $350m odd capex from cashflow gives 3mt/y extra sales at 150-180t year after year? Get them roadheaders down there!

GK.

Ah Mr C.

I've been trying today to pin down a listing for the NCBs. It should be coming up on the LSE bond lists, had no luck so far.

Couple of years to go from FP to decent production I reckon, add that to the debt pile that Sirius will have and I think that sort of discount will still be suffered. However I won't be crying if the big 3 fig gets breached! :-)

GK.

Hi SD

Pelham have put them in their long/short fund.....as 'longs'. Which must say something?

The Qataries are thinking longterm, stratergic and diversify. They see a positive opportunity at risk.

I doubt either of these will be minded to offload. Though you cannot exclude they may lend out at times.
------
If the predictions for this mine and product pan out then in ten years or so Sirius will be judged as a pretty predictable very long term money machine. What II wouldn't salivate?

GK.

Some chunkies at 16-06.

I expected more vol today, particularly on the sell side with a few large transfers from some who I would expect to offload in short order. Not that much to see. On 24/11/16 - first day of St1 - there were many 7 & 8 fig sells inc a 45m and a 73m. non of that scale today.

Who knows but perhaps pretty much most of this has been taken by stickies? In many ways this is behaving differently to St1.

Forecasts: non of the brokers are likely to depart from the official line at pres that this is a 10mt mine, even though, and with India coming, it is nailed that this will be taken to 13m bar some bad back step. with that I think the NPV that should be the measure for how much this is discounted should be that for 13mt when this gets to first P. Late '21, that's about $19bn from my calc on what the co have modeled out there. That sucess will change the attitude I imagine.

Also I don't anticipate much NCB conversion - despite the opportunities with the last lot, not much was converted and this time round there is strong incentive to hold to the end - 2027. So from that, if you are going to play the forecasting game, I think the issue at the late '21 FP point will still be sitting no higher that 7.5bn (Hancock adds 200m this year fmu). From that and say Liberum's 40% risk discount you have ...........117p.

Yeah right. Fantasy. But we'll see!

GK.

Northern Echo

Andrew White

Sirius Minerals injects over £5m into local communities

" OVER £5m has been injected into local communities by Sirius Minerals as the company works towards developing it's huge fertiliser mine on the North York Moors.

The mine near Whitby and accompanying 23 mile underground transport conveyer system to Teesside which will employ up to 1,000 people is not due to be finished until 2021.

But part of the planning permission was that up to £1.7m a year would be paid by the company towards local schemes including education and skills development, tourism, landscape and ecology.

Briony Fox, Director of Conservation at the Moors National Park, said contributions from Sirius had so far included many habitat programmes including planting 40,000 trees last year, improvements to historic buildings and monuments and upgrades to over 20km of footpaths.

She added: "This will increase year on year, in 2019 a further 60,000 trees will be planted as part of a 7,000 hectare woodland that will see a total of 10 million new trees. Funding from Sirius is also contributing to the Slowing the Flow project to alleviate flood risk by natural techniques such as building dams and planting trees."

The company is also paying for a 10-year education and skills programme across North Yorkshire and the Tees Valley. This includes a £1 million programme to promote science, technology, engineering and maths in local schools which has already worked with 8,000 young people over the last year.

Some of the money is going towards schemes that improve job prospects for people across the area including Scarborough Jobmatch and Construction Skills Village, and East Cleveland Training and Employment Hub. The Hub has already worked with 700 people, resulting in 245 securing jobs with a wide range of companies including Sirius Minerals and its contractors.

Matt Parsons, External Affairs Manager for Sirius said: "Our project will operate in the area for many years and we are committed to being a positive part of the community. In addition to our efforts to boost employment and skills, it is great to see our funding to local authorities being put to such good use.

"We are delighted students and people seeking work are already benefitting and that a wide range of environmental projects have already been delivered with work on track to increase rail services between Whitby and Middlesbrough."

https://www.thenorthernecho.co.uk/news/17655659.mine-money-ploughed-into-region/

GK.