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As simplified ...
I combined the current placement, CB and new $500m bond being worked on now to come up to the simple $1b before JPM credit facility.
Best Case (used by dreamers, PIs):
Now - September we raise this $1b.
Build goes well, some acceleration, no surprises and no need to use the 'cingency'
We need max of $2B more
Total $3b.
Hit Polyhalite 2021, demand grows and Poly4 pricing is better.
2023, Market Cap GBP5-7b. 10b shares (issued, or under CBs), SP 50p+.
Market demand better than expected, we have the $ firepower to build earlier to 20B.
Worse case:
* we struggle with issuing under JPM blocks of $500m (high yield bonds), therefore we are forced to issue as CBs etc...
* more dilution.
* build surprise, issue, use of contingency and worse case even more $.
* at least we have the $ borrowing facility, but we need to dilute more.
This is what IIs will modelling.
Mine gets build. Will be profitable. what does that mean for current SHs? ... whom knows...
scenario: (leaving out 'best case'... we should've learn this by now ...):
2027-28, if the Market Cap is say GBP 10 - 15 Mil. Assume worse case 20 BIL shares. SP? = 50 p to 1 pound ... in 7-8 years' time. long way to go, risks still to go, and opportunities ... IMO.
M
See page 17, and 18, or the Prospectus.
My read:
JMP will be offering a RCF. In stages.
- Day 1RCF Facility available, zero $ borrowed / or drowned from it.
- After we use the $ we already raised from the placement and CBs:
- Day 1 RCF Facility available, zero $ borrowed / or drowned from it.
- after few months, we used (borrowed) around $500m from RCF.
- SM must now issue separate Bonds or raise finance worth min $500m and paying a max 15% for at least 7.5 years terms.
- Before the next chunk of $500m becomes available from the RCF, SM from this $500 new issued bonds (whatever they are), $300m will go to 'pay off' / reduce the amount borrowed under RCF by $300m. (so amount borrowed under RCF is $200m, but gives us option to borrow the next stage of $500m).
- we go and use the cash and borrow the next lot of $500m from RCF (so we have a total $700m borrowed from JPM + new bonds (etc) of $500m).
- Again, we repeat: we issue new bonds of $500m, use $300m to reduce RCF balance which in turns open more borrowings for another extra $500m under the RCF to be used in the future).
And so on.
As on page 18 clearly states:
This, in theory, allows the company to borrow up to 5 lots of $500m from JPM, less 5 lots of $300m repayments = $1B end balance, plus up to 5 lots of $500m bonds etc issued ($2.5B), which in theory give SM $1b + $2.5 = $3.5B borrowing capacity ....
- This is where the FLEXIBILITY comes into play: you can raise and borrow as much as you want (to a total of $3.5B). If you are efficient, no need for contingency etc, this will be significantly lower.
Our ability to future raise / issue this $500m chunks paying up to 15% is key, but I GUESS that both CF and JPM feel relatively confident this can be done.
But how much we think we need to borrow? let's see:
We know we are issuing shares and CBs.
We were told we need $3.6B to complete the mine etc.
So $3.6 - placement / CBs (call it $1b for ease) = $2.6b need to borrow.
IF, flexibility here, we are as good as we say, and don't need the contingency $0.6, means we need to borrow up to $2b via JPM.
This equals with 2-3 lots of $500m + RCF...
IF this is case and we can do it, GREAT. IF...
I think 2020 will see us raise one lot $500 .... and if progress goes well at the mine, SP will be gaining traction.
IF we can't easily raise the $500m bonds (at up to 15% should be OK... I hope), then we need to raise equity, etc .... to make the $500m raise for each step. I think this is the catch / risk.
But, overall, now we have $1B raised from the Placement and CBs, + borrowing capacity of $3.5b = $4.5b.....
This would enable CF to accelerate 20mty expansion if the product demand is there .....
Still, risky in terms of needing to raise these $500m future bonds blocks, either High Yield, or more CBs? .... whom knows.
Risk profile improved, dilution risk still exist ....
DYOR.... make your bed...
M
From my personal point of view, losing Myo from here will significantly dilute the value that I get here (no offence - there are some very good contributors here, but none of us can compare with Myo...).
Nothing personal .... I will 'look away' my SXX holding, and move on to better things, coming here a little less that I did.
GLA,
M
PS - I am trying to go to the AGM this year, anyone else going? I am hoping Myo may do...
Results of Firm Placing and Placing
Sirius Minerals Plc (the "Company" and, together with its subsidiaries, the "Group") announced on 30 April 2019 the details of a proposed Firm Placing and Placing and Open Offer. The Company has completed the Bookbuild and has raised gross proceeds of approximately US$425 million (£327 million) through the Firm Placing and Placing in connection with its Stage 2 Financing requirements.
Capitalised terms not otherwise defined in the text of this announcement have the meanings given in the Company's announcement of the launch of the Stage 2 Financing on 30 April 2019.
Pursuant to the Firm Placing, Firm Placees have agreed to subscribe for 1,962,432,513 Firm Placed Shares at an issue price of 15 pence per New Ordinary Share (the "Issue Price"), a discount of approximately 32 per cent. to the closing price on 29 April 2019 (being the last Business Day prior to launch of the transaction). The Firm Placed Shares represent approximately 28.1 per cent. of the Company's issued Ordinary Shares following Admission. In addition, pursuant to the Placing and Open Offer, the Joint Bookrunners and Lead Manager have placed 218,048,057 Open Offer Shares at the Issue Price with the Conditional Placees, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. The Open Offer Shares represent approximately 3.1 per cent. of the Company's issued Ordinary Shares following Admission.
Pursuant to the Open Offer, Qualifying Shareholders will be given the opportunity to apply for the Open Offer Shares at the Issue Price, on and subject to the terms and conditions of the Open Offer, pro rata to their holdings of Existing Ordinary Shares on the Record Date, on the following basis:
Hi bobster,
it was great to see you here. If you go to the AGM, maybe we meet and laugh over a beer.
Lets put life in perspective - today I am going to a funeral (not mine, obvious, at least not yet ... lol).
It is more to life than one investment - and we should ensure we see this as just an investment, and not attached to it!
GL
M
Below is the extract of the new Convertible Bonds Price setting mechanism.
Please correct me if I am wrong:
* price to be set some 20-25% above the Share Placement taking place now.
* But, there is a correction mechanism to LOWER the conversion price, as below, if by 25 May 2020
the SP is below conversion price.
>>> does this sounds like if this is the case, the new CB holders will have an absolute interest to short the hell out of the SP over the next 12 months and try to force SP down?
Any thoughts?
"On or around 25 May 2020, the conversion price will be adjusted (but only if the conversion price so adjusted is lower than the then prevailing conversion price) based on a pre-determined formula as defined in the Terms and Conditions of the Bonds. If the adjusted conversion price thus calculated is less than the Reference Share Price, the conversion price will then be reset to be equal to the Reference Share Price (subject to adjustment from time to time on an equivalent basis to any adjustment made to the conversion price pursuant to the Terms and Conditions of the Bonds)."
Tricky,
I spotted this too - I am not sure if this is back... covering by JPM as they do not go to underwrite the issue.
GK is the person to ask...
M
Got it - not 'reverse'.
M
GK,
"Concurrently with the Offering, an underwritten firm placing and placing and open offer of new ordinary shares in the capital of the Company (the "Firm Placing and Placing and Open Offer") to raise approximately U.S.$400 million will be undertaken by the Sole Bookrunner and others on behalf of the Company (the "Concurrent Equity Placement")."
Does this not mean the reverse order book is for the Share Placement?
M
Hi LiTC,
Worth remembering:
Believe a half of what you see, and a quarter of what you hear .....
I noticed that too ... - just because some should louder, does not mean they know better.
And this is not about whom was right and wrong in predictions (I would have been delighted to end up with 7-8 B shares and be proven wrong!!! - which by the way, we all only guessed as only CF knew what was going on), is about 'all of us' understanding the investment better and taking the right decisions (for us as individuals).
IMO
M
Hi LiTC
I agree, and would have hoped for less as you mention. But, even if a strategic partner would have arrived, at Asset or Project level, and as we discussed here to death and resurrection 100 times and back again, more Royalties etc are all 'hidden' dilution. What is the difference $100 share dilution and $500 more royalties with Gina (would be another 10% or revenues, right?), or $600m share dilution?.
the Net economic impact was going to be the same (unless Cf would have got some asset leased etc., but I guessed this may have undermined the asset security for the main lender, whom knows what was discussed ...).
For my sins, I toped up today (against my better judgement and gone over the max for one investment). I do think this is a great top up opportunity, and after the book get closed today, SP will start moving up again. I reduced my average, and also this means my target return will be based on lower SP in the future (if I want to exit earlier and still make the targeted profit).
We are now fully funded (and yes, few outstanding steps will need to be taken etc etc).
Then, assuming (and hoping) that we don't get more cost / time disasters, the economics of this investment have not changed (for ME) until 2023-2024.
My thoughts ...
KOH,
"Not impossible task for a skilled negotiator IMO, unfortunately we didn't have one in our team at the time of negotiations."
I assume that you are talking from a position of authority and great experience in Investment banking and closing these size deals.... right...
Not that I WANT the extra shares, but it was expected, anticipated and taken into account (in my books anyway).
M
KOH,
You sound a bit like AndyG last year...
As me and few others have said before, including JpM (remember?) last year, ST2 would require an element of dilution. In my mind that was going to be around 2B.
Then we had the MTS headache, and the company said it will not seek to increase the level of debt for it .... did you get the hint? This is another 2B.
So 10b is, and was, forecastable.... unless people are in denial about reality, speed read info, and do not accept alternative views.
Move Fwd to the Market Cap targeted by BOD for Executive remuneration (as a proxi to calculate a SP, not 'guessing' and using NPV and % discount in the calculation).
2023 target Market Cap GBP7b. 10 b shares = 70p / share. today is nearly 20p. Is this a good return? Yes, not all risks are gone, many more remain.
2024-ish: EBITDA 0.9 - 0.2 interest - debt repayments ... (no tax, we have carry fwd losses), we may see 0.5 as Divi .. yield 5% = SP? 100...
2029, nearly $3b EBITDA ... you do the maths.
The long term prospect is still there.
Yes, we have to share the pie (more mouths to feed - I don't want them either, but without them I will starve too, right?), but if we don't take this deal, then what?
In my opinion.
M
PS - good to see more communications coming from the company. The more the better.
Myo, will be great to meet.
Count me in.
M
LiTC
I am also trying to figure this out.
If you are an II holder, and the SP is > 18, would you not SELL today (at least a portion of your holding), knowing that you can buy it back at 15-18p? But after tonight's deadline, it means tomorrow the SP will float freely regardless.
For us, PIs, this Placement does not apply if all demand is met, correct?
If this is the case, I see a SP change tomorrow, and then again after the AGM.
Or I am missing the mark? ...
M
Marc, before you invest, you should prepare yourself and learn few basics.
As summary: RNS - news release in the market. Placement of shares - Company selling more shares to selected few Institutional Investors (basic knowledge that you should acquire before investing in individual shares .... or you are better of with a Fund manager!!!)
Are you invested in SXX? Or just asking?
M
Hi Marc,
As you can see, many are busy figuring out what it means to them.
No offence here, but a newcomer asking simple questions without at least reading the posts from 7am this morning, shows that you are not doing your own DD and expect others to do it for you (and the first piece of friendly advice, be careful what you read and believe here, too many posters have hidden motives to influence you to do one thing and they do the opposite!)
OK - SP dropped as there is a $400m placement priced at 15-18p to Institutional Investors. They need this volume of shares to be absorbed by demand of the IIs, then the SP will flow more freely.
In my opinion.
M
(By the way, please feel free to read and add / contribute facts to this board, not just turn up and demand answers. It helps all of us if more people add 'facts', articles, research ...).
Vin,
https://www.explorationinsights.com/articles/fatal-flaws-in-the-junior-mining-sector/
If you look on the graph, you see at what point in time in a mine project timeline you see Institutional Investors going in...
Oh, that is about now, right?
What is next phase on the graph?... lol. just need patience.
And yes, fully agree with your value assessment ... not rocket science.
M
Basically we need to wait for the demand to 'suck up' the Placement volume, before SP would move freely based on market demand and supply.
Right? of wrong? Do I miss something?
Thanks
M
GK, Quick question:
I assume that the current SP drop reflects the Open Offer to II placement pricing (for the $400m, at 15-18p price range).
i.e. The SP dropped to reflect the fact that II could buy at 15-18p. It will not drop below 15-18p.
Once the II filled their boots at 15-18p range for these $400m shares (as why would they pay more like 22p as yesterday's price if they can get this cheaper), then the SP will be free to move based on demand etc.
Is this your take?
Thanks
M