Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I’ll try and put this simply.
The cornerstones will take the lions share of any new equity and it is they who will have the say on what the share issue will be. They will want a fair return on their investment. That not only for the new investment requirement but their existing investment. By raising at a low share price they set a low price for the share due to dilution and they lose their money on the existing investment.
Example
Existing investment 50 million shares @ £1 equals £50 million
Add the new investment of £50 million
@ £1, it’s 50 million new shares so in total 100 million shares @ £1 equals £100 million
@ 10p, it’s 500 million new shares so in total 550 million shares @ 10p equals £55 million
So in this example raising at 10p rather than £1 looses them £45 million overnight and the probability the share price will never recover.
When the financials are agreed it’ll be a done deal, whatever the arrangements there will be nothing for the private investor or the markets. Any new investor will have to pay their fair share to join the club. The lowest entry point for the cornerstones was 80p. Just saying. What do 5he rest of you think?
I’m glad that people are now aware that the current share price is just a product of a few sellers. The market has currently priced this to fail. The cornerstones and any new major investor will not be looking solely at the share price but the value within the company. Karim is a highly respected financier who’ll know a little about putting together complex packages. I wouldn’t be surprised if a rabbit is pulled out of the hat. What that package will look like is a guess for us. There will be some equity needed, but maybe not as much as some fear. My view is the smaller the equity slice the higher the strike point can go.
Or could the LME be being influenced by
An Indonesian nickel producer has for the first time ever applied to have its metal listed as a good delivery brand on the London Metal Exchange (LME).
https://www.reuters.com/markets/commodities/nickel-producers-fear-growing-indonesian-pricing-power-2024-03-05/
An informative read
https://www.lme.com/api/sitecore/MemberNoticesSearchApi/Download?id=1dcae570-87ee-422a-9596-acaa2b041f11
Or if that link doesn’t work
Discovering the low carbon premium for the nickel market
https://www.lme.com/en/
Https://www.marketindex.com.au/news/morgan-stanley-nickel-likely-troughed-lithium-closer-to-a-floor
Given that the company just needs to survive and get A1 built it needs cash to do it.
That cash with come with a heavy price.
Say Glencore came in with a prepaid agreement for 10kt over three years 4:3:3 at $15k/t, could the company live with that even at a higher than predicted operating cost of $10k/t?
It’s loose change for glencore.
I’m heavily invested here so news that would take this back up to the heady days of 6p would be extremely welcome. However, I fear with no news this will drift back lower. As said no one knows. Saying that the BoD may I hope have a strategy
LME not playing 😩
https://www.nasdaq.com/articles/lme-says-does-not-plan-to-launch-green-nickel-contract
I’m not too worried about green nickel attracting a premium, just having green credentials would be good enough. That way the likes of the EU and US could legitimately legislate denying Indonesian nickel entering 5he market.
777,
I’m really disappointed with you. I don’t know why you thought it necessary to call me ridiculous. I’ve never aimed any personal attacks on you. Actually I’m more than disappointed I’m angry. However, I’m not going to stoop to your level.
I have acknowledged that the company could do as you suggest, so why can’t you acknowledge, however much you think it unlikely, what I say, could happen. All I’ll say is that you need to look in the mirror at yourself because all you have done yourself is to peddle the same negative arguments. Yes, you have the right to express your opinions as much as anyone else does, but please do not insult anyone for expressing them. We may have to start calling you -111.
Let me elaborate. Sorry it’s late so full explanation not provided. You’ll have to guess on the figures.
For argument purposes, as well don’t know the true figures. £300 million needed, £100 million debt, £200 million equity.
£50 million each for the cornerstones and £50 million for a new investor.
Let look at the case for La Mancha and the new investor. Currently have 23% for their £77 million invested. 62,297,182 shares as we have to talk shares. £1.24 per share.
So as we are fixated with the raise rate, what is the difference in percentage and value with differing share prices. 20p and £1. 1 billion or 200 million.
20p,
LM 250 million + 62 million = 24.6%, £62.4 million.
New 250 million = 19.7%, £50 million.
£1
LM 50 million + 62 million = 23.8%, £112 million.
New 50 million = 10.6%, £50 million.
So they get a percentage of a potentially £4 billion company.
Or the cornerstones put in the new investors money at £17 million
20p, 333 million + 62 million = 31.1%, £79 million
£1, 67 million + 62 million = 27.4%, £129 million
So I do think there is some leverage in negotiations
Rob,
I’ve got plenty of reasons to understand. I’m NOT underestimating the gravity of the situation at all. I’m heavily invested here and have been for a long time. So I’m providing an alternative solution. However, I know that when I invested four years ago I could end up with zero.
What you don’t seem to understand is that with the 3 cornerstones we have, they could if they wished invest without finding a new investor. It would be easy for them.
My statement and the law is correct. You cannot issue ordinary share below their nominal value. However, as you say that some underhand shenanigans can be done.
The first cited is CNR, this being discussed previously on this chat, underhand.
The second is changing the nominal value via a general meeting. As you rightfully suggest it could be done.
I would suggest that this is totally unnecessary.
You, I know, will shoot me down for this, but here goes.
Why get fixated by the current share price. It’s only a current reflection of the inherent risk in not being able to fund the company. It being brought down to this price by the a fraction of the 49% and not the 51%. Those same shareholders took the price up to £1.72 last August. There was still risk at that stage, but not realised.
So has the total future value of the company changed significantly? I would suggest not. The increase in CAPEX spread over 40 years production.
Any new investors will be looking at taking a percentage of the company for the money they invest. The current cornerstones will not want to reduce their percentage by much. The battle will be there as I don’t expect a public offering. So how much can you buy for £100 million and what does it give you in the future?
Again I’ll reiterate that unless some underhand shenanigans are performed the raise has to be done at at least 20p a share. It is against the law to do otherwise.
Three random law websites below as reference.
Payment for the New Shares
Importantly, you cannot issue your shares for any amount less than their nominal value. This is the price per share registered at Companies House. However, subject to your company’s articles, as a director, you can agree for the shareholder to pay the full amount later.
https://legalvision.co.uk/corporations/issue-shares-limited-company/#:~:text=Payment%20for%20the%20New%20Shares,pay%20the%20full%20amount%20later.
A share will have a nominal or par value: 1p, 10p, £1 or any other sum in any currency. And it is an absolute rule that a share cannot be issued fully paid for anything less than its nominal value – that is, it cannot be issued at a discount. A company cannot issue a £1 share fully paid for 99p or less. A company thus has no ability to issue free shares (but it may buy shares in the market and give them as free shares to employees, say, as part of an incentive scheme).
https://www.pinsentmasons.com/out-law/guides/shares-and-share-issues
Shares can't be issued at a discount, i.e. for less than their face value.
https://www.mylawyer.co.uk/issuing-shares-a-A76058D77480/