Member Info for Valuation-it-is

Pawgee

Thanks for the post. I agree.

The same deal should be offered to both existing and new shareholders. First to existing and then to new to the extent existing do not take up enough of the offer. It would be interesting to hear how this one sided deal has come about.

Have the new boys been able to run down the clock until there is no time left to go elsewhere?

It appears that the current deal, involves a transfer of existing value from existing shareholders to new, a bigger proportion of what results for the new boys, and options for the newbies too, so if it is a great success they can scoop the pool again. Why is the UKIB, set up by HMG a party to this?

Other companies in this industry have now been warned that UKIB is happy to be involved in vulture type deals.

I hope the CL shareholders vote it down and insist on the same deal for all. It is called "equity" after all...........

Robday 15 Aug 2023 11:04

Thanks for your reply. I wondered if the value of the storage for CO2 captured in liquid form might be a lot higher than for gas intended for later release?

Proprinquity 10.10

I did have hopes that the UK Infrastructure bank might get involved and provide finance. But seeing what their involvement has resulted in at Cornish Lithium, I now have grave doubts about whether they should be welcomed. Absolutely shocking.

Otherwise, I think there is a small window of opportunity for someone to use SML as a shell to get a listing and then .....

Bitcoinbuyer

"Yes fully aware of the deal and do have a small holding. "

What do you think the maximum dilution of existing holders is?

What do you calculate the max transfer of value to be from existing to new shareholders?

What do you calculate the "in-price " to be for new investors taking into account the PIK and the ratchet warrant?

Bitcoinbuyer

Cracking video. How did you come across it ? Are you also a shareholder in Cornish Lithium? Have you had a close look at the recent deal?

In this proposal, for every pound these new investors put in, they may receive up to 15 ordinary shares. For every pound a crowdcube investor puts in, they receive 5 ordinary shares - a third. Although the price offered to both sets of investors is the same, what happens to the new shareholders money before receiving the ordinary shares is very different to what happens to Crowdcube investors money. The new investors will first buy CRPs and receive dividends capped up to 14% per annum, probably paid in the form of shares, so their money gets compounded up over around 4-7 years, possibly more than doubling, before it is invested in the ordinairies, whilst crowdcube shareholders have no such arrangement. Furthermore the new investors are offered ratchet warrants.

Source see Ordinary Resolution:

1. AUTHORITY TO ALLOT SHARES parts a,b and c of

https://cornishlithium.com/wp-content/uploads/2023/08/Notice-of-General-Meeting-signed.pdf

You will find that the company is seeking authority to issue up to 813m shares (£34,500+£37,300+£9,500) at 10,000 shares to the £1- to satisfy the requirements of the £53.6m first tranche. That works out at 6.6p per ordinary share. Whilst all that authority may not be used it shows that the two offers are remarkably different. The puzzling thing is why existing shareholders have not been offered the same deal as the new investors. It is also surprising that the UK Infrastructure bank appears to be a willing party to this unfairness.

Justdandy

Very interesting posts - thanks.

I would point out that the £53.6m "next door" is NOT a grant. It is the amount to be raised from a proposed issue of convertible, redeemable preference shares which convert into ordinary shares. The new investors, UKIB and EMG, join Techmet as investors in the company- Cornish Lithium ltd.

In this proposal, for every pound these new investors put in, they may receive up to 15 ordinary shares. For every pound a crowdcube investor puts in, they receive 5 ordinary shares - a third. Although the price offered to both sets of investors is the same, what happens to the new shareholders money before receiving the ordinary shares is very different to what happens to Crowdcube investors money. The new investors will first buy CRPs and receive dividends capped up to 14% per annum, probably paid in the form of shares, so their money gets compounded up over around 4-7 years, possibly more than doubling, before it is invested in the ordinairies, whilst crowdcube shareholders have no such arrangement. Furthermore the new investors are offered ratchet warrants.

Source see Ordinary Resolution:

1. AUTHORITY TO ALLOT SHARES parts a,b and c of

https://cornishlithium.com/wp-content/uploads/2023/08/Notice-of-General-Meeting-signed.pdf

You will find that the company is seeking authority to issue up to 813m shares (£34,500+£37,300+£9,500) at 10,000 shares to the £1- to satisfy the requirements of the £53.6m first tranche. That works out at 6.6p per ordinary share. Whilst all that authority may not be used it shows that the two offers are remarkably different. The puzzling thing is why existing shareholders have not been offered the same deal as the new investors. It is also surprising that the UK Infrastructure bank appears to be a willing party to this unfairness.

I think you are definitely onto something with your comment about SML being used as a shell vehicle to facilitate a flotation. With a mkt cap'n of £4m, interesting assets, cash flow from Cobre and importantly a well established listing on the stock exchange, it is an attractive potential vehicle for someone with aspirations in the sector. And there are plenty of people with deep pockets with those aspirations!

Perhaps that might involve some consolidation of the mining industry in the SW.

JustDandy

£50m grant? Please give a link to that news.

Pawgee

Thanks for the post. Interesting to see that Lansdowne are invested in Techmet, which recently announced a deal for Cornish Lithium. Lansdowne is providing the finance to keep TUN going through the Environment Agency and local authority permit delays. Wonder where they will crop up next? With UKIB, EMG and Vision Blue resources also on the SW scene, finance now seems to be flowing. Lets hope competition emerges amongst these "big boys" so that it is more difficult for them to "dilute" the small private investors.

Whilst the focus has been on the value of gas coming out of SFBY and to what extent that covers hedge requirements, financing and other costs, the picture now is starting to include a value for the storage potential - be it either gas - or possibly more interestingly CO2 storage. Does anyone have an idea of what capacity storage there might be, how much that might be worth and the cost of providing it?

Just Dandy - - Who are you referring to - surely not TUN - mkt cap £7m ?

As electricity supply demand becomes constrained this Winter, with hundreds of thousands more EVs on the roads compared to last year, each of their re-charges taking approx ten days worth of electricity for an average house, pressure will rise on politicians to act. My expectation is that EVs will be encouraged to charge at off peak times by means of a pricing mechanism/smart meters.

At the moment Gridwatch - https://gridwatch.co.uk/ see graph of This Year (Day Averages) and compare with last year's graph alongside- is showing that UK electricity consumption is down around 15% compared to the same time last year - despite last year being hot and sunny. That is probably the impact of pricing for you.

Trikidiki3

The plan is for spoil to be buried within old redundant mine workings. There are huge underground voids which are planned to be filled with waste. If Tomra sorting can take place underground it would save lifting thousands of tonnes of waste to the surface.

Given the spread is 50% of the mid point, the drop or rise may depend on whether the first trade is a buy or a sell.

Re land next to SC.

https://cornishmetals.com/site/assets/files/4930/cusn_corporate_ppt_may_2023_comp.pdf

The graphic on page 30 of the company presentation, shows the plan for the process plant which looks to be in the most likely spot for rail sidings, unless they could be squeezed in alongside. ............... turntable perhaps?

Again a comment on Cornish Lithium NOT Cornish Metals.

In simple terms I think the crowdcube raise is nothing like the new investor raise (i.e. for UKIB, EMG and Techmet). i.e. There is nothing equitable about it. The two sets of investors are far from being treated equally.

Existing shareholders may put their money in now via Crowdcube at 20p per ordinary share.

New investors put their money in now to RCPs, the company will compound that money up with preference dividends of up to14% per annum (payments in kind PIKs) before swapping the enlarged sum for 20p ordinary shares in several years time.

So it looks like a big discount for the new boys but not for existing investors to me.

Furthermore, the new shareholders are also being offered warrants.

I think it is a shame that both new and old investors were not approached with the same offer. I think the company should explain why to shareholders at the AGM.

Small shareholders should bear in mind that Jeremy Wrathall - the founder -is a big existing shareholder. He will be affected by this deal like other existing shareholders. So hopefully he has achieved the best deal that could be done in the really difficult current economic circumstances.

Transportable! Now that is news.

Rail - unlikely there is room on the brown field site. Sidings near TUN though.

Road - yes, but TUN is limited for lorry movements and needs to remove aggregate with those movements it is allowed.

Hopefully time and planners will see the light.

This looks like debt finance dressed up as an equity issue.................................

The company needs to show existing shareholders how this financing package values their shares and whether it provides sufficient finance for its needs until further funding comes through. A presentation on these subjects is needed on the company's website.

Note. This comment does not relate directly to CUSN but to a company in which CUSN has an interest, called Cornish Lithium ltd. The latter has just published a circular relating to a financing it announced earlier this week. The comments below relate to that circular

Five initial points.

1. Why so complicated?

It is going to take a big effort to work out who gets what from this arrangement. Will private investors want to spend a weekend trying to fathom all of this out and possibly get it wrong?

e.g. How about this on preference dividends on the Convertible Redeemable Preference shares being issued to the new investors :-

"The Preference Shares accrue dividends annually, with the Company having the right to elect to "PIK" and issue additional shares to Investors instead of paying cash dividends. The dividend yield is based on the market rate of interest plus a risk margin constituted of an annual coupon (based on drawn funds) of 5.0%, subject to a floor of 8.5% and a cap of 12.0%. The PIK dividend rate is 2% above the cash dividend rate meaning that the overall PIK dividend yield is capped at 14.0%."

Am I alone in wondering what "based on drawn funds" means? Surely when the CRPs are issued the Company will have drawn the money from the investors? But this sounds as if it is like a facility offered by a bank with interest paid on amounts of that facility drawn down. Hmmn

2.Possible valuation indicator:-

The circular states "Based on current market conditions for foreign exchange rates, interest rates and assuming the Preference Shares convert into Ordinary Shares in five years’ time, and including the dividend PIK shares, it is anticipated that UKIB and EMG would each hold 18.4% of the Company’s issued share capital in five years’ time"

Assuming this means dividends are rolled up into more shares for the entire period, (not sure about that) it appears UKIP and EMG are both paying £24m now for 18.4% of the company in 5 years time. Co therefore seems to be valued at £130m... That seems to compare well with current stock market valuations of CUSN, TUN, SML . Existing investors (including CUSN) will probably be very happy with that. Huge caution is needed however when working out value per current share in case the warrants have somehow been assumed away.

3. .Why are existing shareholders not offered the same deal as the new investors? i.e. the CRP shares

Then at least existing shareholders would know they are being treated the same way. Existing shareholders are being offered more ordinary shares whilst new investors are being offered Convertible redeemable preference shares.

4. A date for an IPO was not mentioned. Given it has already been delayed, further uncertainty will be a disappointment. CUSN will not be able to sell on the stock exchange if it wishes.

5.The company has got what it needs to continue and the possibility of more finance later on. That in itself is a huge achievement. H

It closed up!