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Hi GK,
Yes - he is a smart cookie. And has his skin in the game too and people seem to ignore this fact. Actually, a lot of skin...
I see it this way: if it fails, he loses financially from the 125 million shares his family has in SXX, plus egg on his face and his career is 'done' in SM and also outside. If anything, he has more to lose than any of us, so I do not think he is planning to fail.
IMO
M
Not sure if a bit of realism is needed to construct the wider picture here ...
How many of you / us, have been involved in negotiations?
I guess pretty much everyone - from selling your old car, to professional exposure to financial negotiations.
So, let me ask this question: you are selling your car, you know you would like 700 for it, but accept 600 and would be happy, but you need to sell to fund another car, so, anything > 500 is OK...
A buyer comes and says - I am interested, how much you are asking for? .... over 700, clearly, as you need to give way to get a deal and make the buyer happy he got a discount, correct?
Alternative:
Let me guess, Hard Pawn programme ... what people ask and what people get? ... and they are all fully satisfied shaking hands at less than 50% of asking number...
So, if you were CF, what numbers would you start asking IPA for? You know in your head what the real need is, would you not ask for more? if you don't ask, you don't get, so worth a try ... The publicity made for the $2Bil and the prospect of the project made is difficult for the IPA / Gov to say 100% no.
But, I am pretty sure CF also had an expectation that the $2b is taking the mick ... so we have up to $1b from IPA, CF seems OK with it, IPA OK with it. Why are we not OK with it?
As alternative point of view.
M
There is also a mine prospect in the Republic of Congo.
I think each (local) shareholder get a free Kalashnikov ...
IMO
M
Thanks BF - I do try to add something (and glad to see it that is of value) to this BB... I'm nowhere close to what Myo contributes, but I guess if each contributor here try to do 1% of what Myo do, constructively, then we will be much better informed on this investment, outlook, progress and ultimately, progress.
(but in reality, no one knows better here ... we just try to figure out few things TOGETHER. And IIs have better tools and experts available v us, PIs).
M
Hi BF,
just for clarity - it is an extract from the transcript, it is not a 'me made up statement'.
As I said, it will focus people's attention on what the new plan is (cry wolf, cry whatever for the past, we are where we are TODAY). To any investor: stay in, or sell - make your mind up and stop moaning, will not change anything.
Regarding the statement and the close:
Yes - it can be read in different ways (hey, the fun now begins to see 100 different interpretations , lol).
I think later in the year is to include signed agreements also with IPA.
In my read:
Without specifying timelines! so, manage your own expectations.
Get CLs and possible Bond issuance agreement in a place to satisfy additional 4-600 m to be raised in the capital markets.(i.e. 4-600m will not be raised if there is no outlined agreement for the debt).
We then raise the 4-600, and burn through it for 2 Qtrs. This gives us enough time then to issue the bond later in the year (not too early ... we already have $ in the bank, no need to borrow early to pay more interest).
Once the bond cash is spent, we move to start using the banks lending 1.5b. At the end of that, if still needed, IPA will cover some extra debt (bond likely, covered, or secured. by the IPS).
At that point we will be in the Polyhalite deposit, it will be clearer what is needed, when we can start sales etc.
IMHO.
M
So, IMO, nothing will happen until all agreed behind the scenes between the players, and the first signs will be when we raise the 4-600m (which will not happen without the other agreements).
Just trying to help here, and give the hints:
This is what we should see next - extract from the call in Jan:
"Should we need to, there is the opportunity to slow down development, but we, obviously, don't want to do that because we think that, obviously, undermines value potentially. So I think that's the best guidance we want to give at the moment because we don't want to necessarily put a time line and a deadline on things. But what we have, as you can see, is liquidity that will take us into the second quarter, and the intent is that we would be finalizing the $400 million to $600 million off the back of the committed debt finance positions to enable us to move to a financial close later in the year.'
There is one message from CF, above, but I guess people will read it in 5 different ways and different 'expecting this or that'. I recommend you slow down when you read it, maybe read it twice, then hopefully the message clicks.
DYOR.
M
rrrRRRrrr
'All the quarterly reports said on time and on budget. Is this not a fact?'
No, it is not a fact. It is superficial fact reading.
M
chilting
Yes, and no in my opinion.
original plan: finalise procurement (based on work defined until a year ago) by late summer 2018 / early autumn, then 3-4 months of negotiations with the banks etc.
In May last year they spotted a contract (quite a large component of the spend) that needs more work, then by autumn they announced a change in plans, delaying procurements to be completed etc. We only finalised procurement at the end of the year really.
I think that without the MTS scope change, we probably would have had the CLs by today.
With changes and delays, also adding the complexity to fund-source this 4-600, we added timing to the equation.
Would you still expect the same end of 2018 signed and seals CLs? .... unrealistic expectations.
Is this annoying? ... yes, but, patience is a virtue!
Saying all this, we also bashed and looked down on journalists last year, only for them to be right...
So, we will see...
M
A bit of realism - do you / we think that Government officials will turn up to see the mine only then to full the plug on IPA providing the funding (of last resort - as they are tasked to do)?
Really? with 2 years until a General election, or, god forbid, in 2 months if Brexit all goes wrong?
This will send the Tory party to middle ages in terms of representation above the London line ... do you think they are ready to commit political suicide by turning up, publicly supporting, then let it fail by no providing 'funding insurance for a commercial fee'?
The funding will happen.
if SM has issues convincing capital markets to buy debt, and shares, then IPA will step in.
But, from the information provided, it seems that there is enough appetite in the Capital Market for Bonds, we will source / fund the 4-600m, Banks 1.5B, and the balance from market appetite / capacity to provide funding, the 7-900 mil will then be insured via IPA.
This is not tax payer cash we are talking about, it is a commercial fee funding insurance.
Yes, the legal work, T&Cs, etc, take longer than desired. Do you recall the JPM analyst around May last year, whom said that to have the funding fully signed by the end of 2018 is really, really tight timing for a deal of this size? Or we prefer to select the information we are hearing ....
Worst case (IMO): ST2 outline agreed but not fully in place / fully signed, so we fund source the 4-600m that will keep us going past Q2 into Q3-4. By then all the ducks are either aligned, or sitting in line: the Gov and specifically the IPA will not allow the ducks to be fried, as they are going join them in the frying pan at future elections ...
IMO
Personally I think this is timing, and anyone here whom raised funding in their career will tell you it always take longer than you initially plan (and not because what the company does, also legal, credit committees, consultants reports and DD ongoing questions...).
M
Cherokee, I could not put it better myself.
Well said.
M
FFC,
I filtered the Prost SL (as translated into Romanian, it is such a great name fit to the character!).
But, in doing so, and avoiding to see the garbage he regurgitate (for his own aim as retribution for being the shxxte investor he is and losing money in his investments), allows him to post to occasional readers his bended views as a false exaggerated picture, hoping that he can change the ST2 funding structure to suit his looser aims ..
I have to say, I never been happy when someone else lost money, but for this character, I am making an exception - he deserves to have lost the money on his 'acumen' based on lies and deceits.. And reading his investment success story, let him have the rope and in 2 years he is bust.
M
John 2015,
"Milo your 19:28 - an excellent watch loads of relevant points and well worth the time. Thanks."
Thank you for the feedback. - I strongly recommend that all readers of this board watch this Investing in Mining, if everyone here would watch, we will all be a lot more 'educated' about what questions to ask/discuss here.
This video should be part of your very basic research to do before investing in mining and specifically, in mines under development.
https://www.youtube.com/watch?v=YFRVbSMXcKc
In my Opinion. DYOR.
M
Myo,
I think it is a fair worry. Let's address it.
Let's face it, investing in mining is not for the faint hearted. When it works, there are substantial riches to be had (more related to us, see Fortescue, is a good example ... x400 TIMES the initial investment within 10 years).
For any uninitiated investors here, whom now are in catch up mode, see :
https://www.youtube.com/watch?v=YFRVbSMXcKc
Well recommended to listening to ALL of it. And yes, we are on low cost producer...!!!!
Once you see this, you understand the challenges ...
SM, in my view, passed with flying colours all stages until this point in their development.
But, don't take my word for it ... figure it out yourselves (and for god sake, don't read the sxxxt that Superlegarra or Casapinos come up with, you be your own man, not a 'clown' to follow clowns.
IMO
M
It just shows why I have 'the Guru, the God' of finance forums, filtered ...
If Casapino does not understand such a basic, it just shows the 'expertise' he has to offer.
M
Bythesea,
He was the Lead Advisor for the fundraising of $2.5B. See on Bloomberg CF's background.
Not the banker.
Not sure if you area aware of the difference between Banking, and Investment Banking.
To my research, he was in the latter, not the former.
M
Forgot to add the link
https://www.integer-research.com/integer-alert/is-there-an-end-to-high-sop-prices/
Adding on this, European prices for MOP and SOP.
Considering our 'banks case scenario' is $120 / t, current contracts $140-$150 / t, .... would you really want to sell whatever capacity is unsold at the same prices, or, wait and sell in future at spot price? Or, what prices we may get after the initial 5 years terms on current ToP deals? ..
Interesting.
DYOR.
M
Link below - interesting way to value a proposition to mine SOP in Eritrea ...
For expected Gross profits $170m / year from 2022.
Current NPV: using 8% discount rate, 60% risk adjusted = $242m
Cost to build mine = $302m.
Forward sales, ToP, done.
Funding agreed = $200m
(interesting that the SOP prices are $600 / tonne ...)
So, very similar to SM, don't you think? And the equity component of the build vs debt, around 30% (we have 4.5b cost to build, 3b debt)... and the Danakali investment has a lot less potential for reward than SM, and people are investing (it is a listed share on LSE).
What CF is doing is what is being done around the clock and around the world. The size is 'a bit' bigger, but not compared to other mining projects (Fortescue, BHP mine in Canada etc). At least we are not trying to mine is a 3rd world country ...
(forgot to mention, did our CEO managed one such funding in his past life? ... )
Also this provides a benchmark for calculating value - not 'I think', it is more factual.
Therefore, I still see a prosperous future here for my investment (my money, my call).
https://www.proactiveinvestors.com.au/companies/news/215170/danakalis-share-price-far-below-value-estimates-investors-chronicle-215170.html
M
GK,
Agreed fully.
Binary outcome, and SP is low due to the reasons you mention.
ST2 as designed now, great. if no funding, brace.
However, I would think that Gina (astute investor), Jupiter, now L&G, would not invest at a poker table. Also BHP, ADM etc.
Would a likes of BHP (instead of building their $12 BILLIONS potash mine in canada), pay $1 dollar to buy SM as is today? You bet ... then they can raise / fund $3.5b, and have a massive ROI. what about $100mil, or $1 bil (today's value), or more?
So, as a binary downside outcome / take over target, how much someone would pay? whom knows, but will not be a free of charge asset. My half a penny, I think the worst case = today's value of about $1b, which may be what the market values SM as a firesale asset today. If this is the case, downside = no increase in current value of my shares. Again, my opinion here.
The project has the fundamentals right: product, demand, sales, price, mine location political stability etc. It is not worth Zero...
IMO
M
PAAA, Thank you.
M