Member Info for StarBright

PI’s have the perfect opportunity to have their say on the company’s plans, as a formal “scheme of arrangement” incorporating a vote for shareholders is (apparently) required for the top-hat route to an ASX listing.

A scheme of arrangement involves a dedicated meeting for shareholders, at which a majority vote must be secured - see below. This happens alongside a legal process - including a court application / appearance - designed principally to protect the rights of creditors. Scheme particulars must be published in advance.

A majority vote means both a majority by headcount of the shareholders voting at the meeting, and that the shareholders voting in favour of the scheme hold at least 75% in the value of the shares represented at the meeting.

So existing ordinary shareholders get a direct opportunity to say yes or no to the scheme that the company is proposing. Note that the 75% threshold isn’t 75% of all shares/shareholders - it is only 75% of those represented at the meeting. The company will turn up to the meeting with secured proxy votes from as many insto holders as they can get to engage. If PI’s don’t like what (the new top-hat structure and ASX listing) is being proposed they can participate in person or by proxy and vote against the scheme.

SD and his team are likely very focussed on this vote! It is possible they might vary their plan and go for the listing only - I think it is the top-hat construct (ie not the listing) that gives rise to the need for the scheme of arrangement. Interesting decision as to whether the benefits of the top-hat outweigh the risks of the vote.

It is also interesting to consider how SD planned to sequence the various steps he has acknowledged as “under consideration”. To date he has been very much the model professional, so I find it hard to believe he was planning to secure a vote for the top-hat AND THEN spring a “surprise” capital raise alongside the listing. I think he’s better than that.

So I am inclined to assume that he hoped/planned to set out everything - the rationales for the top-hat, the ASX listing and the raise - in one narrative statement. The leak has disrupted any such plan.

At the end of the day what I think will matter most is the rationale given if the company decides to proceed with a raise alongside the ASX listing. If it’s (say) to support the acquisition of the 70% the narrative is much better for existing holders than if it’s to fill a hole in funding for upfront capex.

Quite a few plates for SD to spin, all in one short period with meaningful exogenous uncertainties. Interesting!

I read - can’t remember where - that a UK “scheme of arrangement” would be required for the top-hat route to an ASX listing. This may create the perfect opportunity for PI’s to have their say on the company’s plan(s)…

A scheme of arrangement typically (always, I think but would need to check) requires a dedicated meeting, at which a majority vote must be secured - see below. This happens alongside a legal process - including a court application / appearance - designed principally to protect the rights of creditors. Scheme particulars must be published in advance.

A majority vote means both a majority by headcount of the shareholders voting at the meeting, and that the shareholders voting in favour of the scheme hold at least 75% in the value of the shares represented at the meeting.

So existing ordinary shareholders get a direct opportunity to say yes or no to the scheme that the company is proposing. Note that the 75% threshold isn’t 75% of all shares/shareholders - it is only 75% of those represented at the meeting. The company will turn up to the meeting with secured proxy votes from as many insto holders as they can get to engage. If PI’s don’t like what is being proposed they can participate in person or by proxy and vote against the scheme.

ANGS published its interim accounts on 30/6/22. These showed a “unrealised loss” (see explanatory note below) of £30.5m on its derivatives contracts.

When ANGS publishes its next set of interim accounts, it seems likely that they will show a large “profit” on the derivatives contracts, caused mainly by movements in the NatGas pricing curve.

They will also evidence the generation of free cashflow since production commenced.

This may be quite an eye-catching release.

“Derivative financial instruments are recognized at fair value on the date on which the contract is entered into and subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is greater than its initial measurement and financial liabilities when fair value is negative. Any gains or losses arising from the changes in fair value of the derivatives are recognised in the statement of profit and loss…”

The Exchange has a market supervision team that is concerned with situations where market sensitive information may have entered the public domain. They tend to work through the Nomads for AIM companies.

It is possible - likely even - that GGP were instructed to act by their Nomad following contact from the market supervision team. Sometimes companies are required to confirm or deny “reports”, that is they are told that they must comment and that “We do not comment on unsubstantiated rumours” is not an acceptable form of response. The exchange can put quite a lot of pressure on companies to act v quickly, so hurried output sometimes results.

@baits, market makers don’t “value” companies - they are responsive price-takers (other than in the very short-term) content to set their nets wherever the greatest two-way flows are to be found.

They are not the ‘droids you are looking for….

My suspicion is that the DFS will reveal a material increase in the Hav project’s USD381m upfront capex, driven by a decision to start at the 3Mtpa level plus the impact of inflation on costings originally prepared in 2021.

Whilst optimistic GGP shareholders may have preferred a low-capex startup leading to self-funding for subsequent development, that approach may not suit their deeper-pocketed JV partner - whether that’s NCM or NEM. And in 2021, when the PFS was being prepared, few (other than @speedymeadie..!) were forecasting inflation in labour and raw materials at anything close the levels we’ve seen since.

So the circumstances have changed, and SD must react to this ahead of the potential financing pinch-point at DFS/DTM time. His plan to onboard Aus insto investors (they are REALLY hard to find in the UK) via an ASX listing combined with a raise looks like a rational strategy.

A raise in the range referenced in the press report could give GGP the capacity to absorb a material increase in its share of the upfront capex. Whilst unpalatable it is likely the “least worst” way forward, so I can see why it is being explored.

A large part of the criticism aimed at SD here today may be mis-directed, although he should perhaps have had more of a contingency plan to cover the possibility of a leak.

If the leak hadn’t happened he would have been able to communicate the necessary context for the raise. He’s probably fuming that the opportunity for this has been taken away. If @Jerryspaniel is correct and one of the potential subscribers has chirped in order to drive down the price, SD has very right to be furious. I doubt this will ever be proved though…

100% agreed that the possibility of a placing has been well flagged, and should be no surprise to investors. As was pointed out earlier, there is a difference between being “fully funded” for the plan in the PFS, and “well positioned to be fully funded” for a revised/accelerated plan. Lending conditions have deteriorated since the debt package was put in place, so it shouldn’t be a surprise if more capital is required on any variation.

Looking at your bullet points, I think that (2) is likely the “problem” and (3) is the “solution” chosen by SD. No doubt he will have the future votes and backing of the II’s onboarded through any such placing.

No-one should be surprised by news of a potential placing.

The recent Sprott note indicated that GGP has a cash “buffer” of USD34m vs the PFS funding assumptions, which are yet to be updated for variations to the mining plan or for inflation.

If additional capital will be required to support the existing (30%) plan, it will be better for GGP to raise now than at gunpoint when its lenders are asked to re-confirm their commitment to the debt funding package post DFS/DTM. The ASX listing offers a good opportunity to raise from a position of relative strength. A properly executed raise could enable GGP to deal with the buffer issue, and to onboard some stable long-term investors.

Companies are listed for the purposes of raising capital. Institutional investors prefer to invest (particularly in small/mid caps) via primary offerings, rather than chase share prices up in the secondary market…

Someone @JerrySpaniel? mentioned the “…cavalry [of Aus insto investors] coming over the hill…” following the ASX listing. SD has mentioned the ASX listing as helpful in unlocking investment from Aus II’s / funds.

Announcing your intention to list, and appointing advisers etc is - in many cases - enough to allow institutional mandates to invest in your securities. This because fund/mandate restrictions are customarily drafted to accommodate intent, “ The Fund is invested in companies listed (or expected to be listed) on an Australian securities exchange.” or similar. This drafting is particularly relevant where secondary listings are concerned. It avoids the potential dislocation that can arise from securities becoming investible overnight, by allowing funds to build into positions ahead of the cliff-edge event.

TLDR; now that the ASX listing process is underway, some (many?) Aus institutional investors are likely released from mandate restrictions formerly preventing them from buying GGP shares.

My limit order to buy another 1m at 1.42p wasn’t filled during the session. I am hopeful it’ll get hit now during the auction… Only a few minutes to find out!

If so, it would make my day :) to think the shares were made available by one of the RNS-chasing mug-punters posting drivel here today.

As an aside, the deck contains NEM’s definition of a Tier 1 asset:

“ Tier 1 asset. Defined as +500k GEO’s/year consolidated, average AISC/oz in the lower half of the industry cost curve and a mine life >10 years in countries that are classified in the A and B rating ranges for each of Moody’s, S&P and Fitch”

It’s a mark-to-market loss, the discounted NPV of the derivatives contracts as at 30/9/22. Since which time the pricing curve for NatGas has fallen substantially. If this situation persists at the next accounting reference point, the p&l will show a large “profit” as the “loss” is unwound. All of this is essentially immaterial though - other than its transient impact upon ANGS ability to pay a dividend which is hardly a pressing issue at this point. What matters is stable cashflow generation, specifically free cashflow over and above that required to meet net commitments under the derivatives contracts. At a production level >9mmscfd, ANGS is generating material free cashflow. This will - eventually - be noticed…

I’ve just placed a limit order to buy another 1m at 1.42p

Let’s see if it gets filled…

ANGS doesn’t have £138m of debt. It has £138m of accumulated losses.

If you don’t understand the difference, you shouldn’t be investing.

If…. “they making 24M” then the spot price of NatGas must be favourable relative to the fixed prices referenced in the derivatives contracts. In which case the large M2M accounting loss on those derivatives contracts might unwind quite quickly. This would result in post-tax profits far higher than £24m, thus reducing the £138m much more quickly than cashflow would suggest. So it is perfectly possible that paying dividends will be possible sooner than six years time….

What @ScarletDunningKruger failed to do was to read my post properly. It said “ANGS has accumulated losses of £111m that must be covered before a divi can be considered.”

Having checked, I can see that the £111m was just for the last financial year. The actual accumulated losses figure is £138m. So £138m of post-tax profit before a divi can be considered. Of course it’s likely that the movement in the spot price for NatGas will provide a tailwind, but I don’t expect @ScarletDunningKruger would have any idea about that either.

Be careful about who you listen to on these boards people….

@ScarletVixen - why comment on a topic where you clearly have no knowledge?

The £111m is a post-tax figure, so your question is essentially irrelevant.

However - current/future profits can be offset against previous losses incurred on the same activities. We don’t yet know for sure how useable ANGS accumulated tax losses are.

@Bearsandbulls - ANGS has accumulated losses of £111m that must be covered before a divi can be considered.

With what…? That’s a ridiculous suggestion. Their cash priorities will be:

1. Pay the overdue bills

2. Pay the bills coming due

3. Build a little breathing space

4. Make sure they are cash funded for 12-18m minimum

5. Think about paying down the most onerous debt obligations

6. ….

Only then can they possibly start to even think in terms of divis or buybacks! They can’t pay a divi until their accumulated losses are covered in any case…