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Well, for the past 2 times the calamity news come out of SM, I was away on holiday ....
Just fair warning (to the superstitious ones) ... I am away on hols from Saturday for 2 weeks ...
Hence I bought some more today.
GK / Scotty - thanks for sharing the links. Clear. Pricing should be by 6th, closure 9th.
M
Apologies for missing the point (which I am sure was presented to a factual statement which I missed).
Aug 9th .... why Aug 9th as the D day for Bonds? and specific documents, statements, pointing to this as the day for the bonds to be sold, or a made up date?
Thank you
M
Love to watch from the sidelines these days ...
New bashers coming with the orchestra of multiple personalities, even posting between themselves. Filtering is becoming a routine activity these days....
Let's not forget: 2024-ish (or earlier, a bonus!) 13m tonnes and $1.5BIL EBITDA, maybe more...
Interest on 3bil debt, say 300m. Left 900m.
Tax ... nil, for some time as we carry quite a bit of losses.
Repay some debt / refinance 3-400m / a year (i.e. convertibles bought etc.).
4-500m = Divi ...
Shares in issue say 8Bil.
Div / share? ... 5p. SP (you do the maths dear bashers ... I lend you the calculator if you need...)
Fast Fwd 2028-9.
20m tonnes. EBITDA (current pricing) = $3-4 Bil). With MOP pricing going up, better deals, existing deals coming up for end of initial TOP period, this can be 5-6 Bil. Net earnings call it 4B.
Shares in issue? If we call the CBs early, then 8 Bil. If not, 10B
Divi / share ... 40 - 50p / share.
SP? .... you do the maths. (5% yield means ... x 20? right?)
Risks along the way to get there? Of course, there is no free lunch on offer.
Can we raise the debt? we all hope so, and we will find out in the next few weeks.
Can we build on time, no surprises? ... we all hope so, we will see, critical next 12 months-is..
But, as always, DYOR, do not read and believe what people say here, including me - it can still go south badly...
IMO
If, as few articles point to a favourable bond market, there is likely to be a successful bond issue, then why the SP is still lingering around 15p?
Even the house broker pointed to a 'major SP rerating'....
What are we missing?
Welsh-Wizard,
The 7-8% was desired if we had $2b IPA guarantee ...
If you look at the CBs, they also carry 8% (ish), so a bond without convertibles is likely to be high yield, around the 15% (the ceiling that the RCF mandates).
IMO
M
Casa,
Thank you for the view.
My angle was: with new High yield bonds (likely 15%, the ceiling on the JPM restrictions, and considering that the convertible bonds carry 8%), we will have raised all but $2bil to complete the mine.
Worst case - things go sour along the way. A massive delay / issue flagging a substantial over budget (SM either taps SH, or can't fund the bonds ).... So, bondholders 'confiscate' the company from SHs.
Now the bondholders own say 99% of SM (SH left with 1%).
By this point, we spend all what we have and $1.4b from the $3.6b needed to complete the mine as current estimate.
Bonds get converted into shares, right? so at this point, the $1.5b bondholders / JPM convert this into 99% of shares. And now you have a company with no debt, looking to raise $2b to complete with less risks ahead. Then they can float the shares.
is this about right?
Question:
New Bonds, senior secured, 15% interest / year, for 7 years.
I assume that these bonds and the Convertible bonds issued, plus the Overdraft, will form the Senior Security.
Correct?
Then:
If you have x shares today, and now you also buy a bond (I know, $200k is not for every PI), say in the new high yield - you get $30k / year interest for 7 years.
IF things go south, then current SHs get wiped out, and the Bondholders will become the new SH.
As a strategy, double hedge (on one risk asset, true), is this feasible?
Any views?Casa, any thoughts? I am thinking that instead going to add more shares, double back and do it via the new bond.
Thanks
M
Hi Casa,
I concur with your views. Prospectus / terms / details are not for wider audiences.
As for the other part, it goes back to 'believe' or not, in CF magic to pull this through, although SM is becoming bigger and stands a little more on its own two feet, with or without CF (at least after this bond raise).
Soon we will find out.
IMO
M
Interesting list.
Regular, but rarer, check in...
GLTA
By Oct the SP is likely to be double, or half ...
Take your pick and put your money where you say you would ...
M
Difficult to justify using our money (tax payers, including me and you) to bail them out. It is as easy as saying 'just move them on public payroll' regardless if they make and sell anything without losing money. Add Jamie's restaurant chain, ... why not everyone? I recall the uproar when Tata Steel suggested terminating the Final salary pension scheme, to reduce cost and make them relatively more competitive ... so, if you want your cake, have it, but the cherry picking will not work. And please don't read this wrong - my company too closed the FS pension etc, and we all understand that this is not 70's socialism building, and the company needs to be competitive to ensure it is still here in 20-50 years' time.
I do think that the Gov (and opposition = all politicians really), should wake up to the fact that all other countries (including US, France etc) support their new industries for future competitive advantage setting.
It is also true that the IPA is a backer of last resort ... I guess as long that there is a buyer for a company on the cheap, decimating SHs, IPA does not help...
Here is where they missed the trick: if they did actually move their back side and supported SM in a timely manner, you have some 85,000 investors (UK based) whom will be significantly more wealthy in few years - and pretty much everyone will SPEND this in UK, supporting economic growth, jobs etc. They did not ... so now we have Foreign companies and Funds benefiting from a large chunk of this future reward, so Qatar, Norway etc can share this wealth in their economies, and few American banks paying more dividends.
But hey-ho, it is not a fair world.... and the fittest survive (just that we sit on the back side and assume a TV footie game means we are burning calories and get as fit as the players ...).
My quarter of a penny...
M
Hi Vin,
Good post - I would add my view:
* in 10 years this is likely to be a $30-50 Bil. Company. (at 10B shares, we an see the maths...)
* September milestone is HUGE - we kicked the can down the road with this funding package. If we get the High yield bond successfully issued then constructions goes well, great for all. If, as Casa flagged as a risk (also JPM not underwriting the issue) we struggle, then we need to add shares etc. September likely to be the point when we know this is a 10b shares company, or ..... a significant dilution coming up etc.
* Takeover - I always said that the best time for a Nutrien, BHP etc to buy us is before we draw ST2 / high yield bonds. Instead of 15%, they can borrow at 3% ... save $1Bil + in funding. This Summer is their best window to do it.
> I guess a lot of SH will cash out at 30p today (of course some will say 'never' but the majority speaks ...)... 8B shares = GBP 2.5B, add $2.5B build (cheaper funding) and you have control over new disrupter product in the market. Consider that BHP is building a MOP mine in Canada for a staggering $12 Bil! this is lower priced, MOP, and capacity 10mt/yr...
So if you hold long term, assuming September works out, you can hibernate for the next 5-10 years. If September goes wrong, wait many years to recoup the current priced investment...
Short term traders - You can sell, re-buy, re-sell ... and few here doubled or tripled their holding. WELL DONE! It is just not my cup of tea to do this daily ...
GLTA. DYOR.
M
I agree with Casa,
the next few months will be relatively flat. All the 15p shares are sold, demand is / was higher than we had on offer, therefore we would expect few more buys at 15s (and yes, some will be selling at 16 to bake a half a buck).
I would assume that the Resolutions will all be passed, and then the next catalyst is the High Yield Bond.
When we / ,market see that we can raise the high yield bond and unlock the RCF, everyone will gain significant more comfort in believing in SM ability to raise funds and finish the mine, moving the SP up.
True, any significant construction progress will also support it, especially if this leads to faster production timing (but, let's face it, CF needs to manage expectations ... if we have a pick up in timing and later an issue is discovered and we come back to current timing, many will not forgive ... ).
Assuming, and hoping, that we stay with 10B shares by 2028 and construction stays on time and budget, and we will progressively see value.
One thing that is annoying - if CF shares updates with II, maybe he can also share to PIs (via the website, or updates etc).... it feels that we are second hand citizens here ... a spare bone here and there will ge a long way...
GLA,
M
Hi GK,
I halved..... finally... As Myo said, stay half in half out, then balanced approach. Also taking the Casa approach, wait and see, no rush. We will not be back in 20s for a while.
Still Pxxxx off like there is no tomorrow.
Still believe this will be a profitable mine - not sure by when for the SH, but is a good proposition.
We (at least me) took a risk on CF's ability to master a deal, which seems tough to get. I am pretty sure that if we changed CF, the banks would have offered zilch ... so, take what is on offer...
My worry - looking at what the deal is, I see more headaches coming (as we just pushed the can down the road). One problem > small delay > cost over-run ... and ...
This is not de-risked - if anything, it is a clear warning of impact from risks ...
Hence I am swallowing my pride, hedge my bets going fwd and take what is today a partial loss. And I will NOT discount warnings from a lot of journalists ... they can't all be mad ... versus us staying too optimistic ... C'mmon, I see Roulette saying just now that this is going for 1 pound in 2023 ... really ... we are just kidding ourselves, or play for hidden motives..
What about you, in, out, wait and see?
M
This title - doubted what?
That we issue more shares and convertibles? Really? Is this what we expected as best outcome?
This is a short term smokescreen to raise a bit of cash to avoid closing down construction next month.
Then we are going to raise $500m 15% debt ... we had this on the table from day one, but we did not want it as it will kill the company with high cost debt. Hence CF said that the IPA $2B guarantee is CRITICAL, as it reduces the debt cost burden.... so, where do we stand that now he is not mentioning it?... bury under the carpet and will come out in 1-2 years...
We are still to raise the funds for the rest - and lenders are not going to cough up until we are pretty much de-risked, close to production 2023, and debt repayments are happening. Even with the RCF! it is not a RCF, it is a 'we let you say you have it, but then go away and raise your own expensive debt without our help'.
10-13m t / year gives an EBITDA of $1b.
Take away $400m in interest.
Let's see how much 'net earnings' we can report: ... another 3-400m in Depreciation, leaves $1-200m, say GBP 100m before tax.... and this will continue until we go to 20 m / t.
* now, we assume that the product will trigger demand of 20m / year .... let's hope so.
PE for best miners without a lot of debt x 15 = GBP 1.5b .... until 2028-9...
Cash: $1B EBITDA - $400k interest - 4-500m capital repayment, add some sustaining Capex ... not a lot left in the bank for division etc.
OK, let's 'hope' we get better pricing ... (wonder what the competition will do, including the new BHP mine)....
I am not holding out my breath ... and this is assuming no issues / delays.
The NPV for $14b is unleveraged cash flows .... just add the 'leverage' and interest payments, debt ... and you end up with a small number for 10 Bil shares, mouths to feed... the extra risk is a freebie ...
Or I am bonking mad?
M
FunkySausage,
Your Sat.18.34 is one of the best read here.
My take- we struggle to raise debt..... at least we failed to avoid high cost debt. CF failed ( and you all known that I praised him lots and pinned my hope on his magic...)
We kicked th can down the road really, whilst under a smokescreen we sold more shares, and we push our luck with another 500m 15 % bond shortly.
Effectively we pretended to raise the debt, ....
Next year we will need more.....
Perfect execution, no delays or overruns.
If all goes well and the plan is 100% perfectly executed ( and our track record so far is not great), we end up with some 4b of DEBT.... Likely 10%+ rates, which is some 400 m / year cost.... From 2023 cash flows onwards, pretty much fixed until 2027.....
Biggest risk I see- one mistake, one delay,, and we can kiss goodbye to future bonds.... Will end up as more dilution, heavy....
Also any production issues at start will reduce revenues etc, we risk servicing the debt... Etc.
Not happy, but I look at the guy in the mirror to blame.
Also, CFnot buying his 1-22 shares? No director buys? How many signs of 'not well' do we need?
And yes, we all ( including the undersigned) blasted negative or risk rising posters, journalists etc. ( looking back, if ALL journalists wrote negatively about the short term, did we know better?). All IIs stay out for a reason, mining history also supports the surprises....
LTSH- you were diluted some 2000 %, now is 4000%.... You are less than a coule of %.... Your voice does not count, is the rest (sorry.... But fact). And yes, I lost money too.... Well done to the few that tried profitably this!
Read the post fromFunkySausage.... He is spot on.
Use it. And don't believe comments here, manipulators, some with multiple post-names.
Good luck to you all. Whatever your position.
M
Casa,
Thanks.
M
Casa,
Your thoughts - with 2B more shares about to hit the market (bought by IIs at 15p), wait a bit longer to accumulate, or now as good as later...
Thx
M
Casa, you are reading my mind ....
You know this part well, likely better than me.
Asset security and Senior secured debt.
Assuming all goes well, by Dec 2019 we will have only $500m of Senior Secured debt (ignore CBs, as my understanding is that they are not senior secure).
This also gives us nearly $1b more cash than we have today (ignoring for a moment what we spend for the rest of the year).
Sometime next year, we will need to borrow up to the first $500m limit under JPM facility.
Now we need to issue our first $500m 'block' bond as senior secure (if not, issue as shares, mezzanine .. whom cares other than SHs whom don't count really...).
This new $500m senior secure High Yield is in addition to the $500m being raised this year, totalling $1B Senior debt.
* As asset security ... we would have spent some $2.5b cash to build the mine, half build, but still has asset value. Market Cap highly likely to be above $1b, so any buyer od this 2019 $500m bond knows if all goes south, they have plenty of security / market value of the asset.
If this raise goes well, and NO BUILD SURPRISES, then likely future issues are going to happen as planned.
Is this your take?
M
Last one, then I shut up:
* the main risks are around our ability to raise these $500m blocks to satisfy RCF requirements, as high yield bonds paying up to 15% and min 7.5 duration.
The proof is in the pudding ... we are currently raising this $500m by September.
If this goes well and we can shift this bond volume, then it shows the market has appetite to participate to our debt raise issues.
If not, brace .... Hence I think the comments from the analysis for the next few weeks.
IMO.
M