The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Posco's $40m stake is likely to be equity:
https://www.mining-technology.com/news/black-offtake-posco-tanzanian/
And Posco have already taken equity
This time IMO the interim funding will be a very significant statement - the number needed is out there, the opco has been ringfenced, the bank waiver is (about to) expire. There will only be further funding if it is going to succeed. Whether or not that increases the SP or not I don't know - the market generally is on its a**e right now and the a***oles are licking their chops at a demise of another co or two :) My bet still remains Mr Nasr didn't take the job to fail, with more $ 'deals' under his belt than the current value of the nickel under the ground!
>>Company's RNS said there are nothing left if they cant find any solutions so there will be 50/50 as gamble in here. Never place your money on if there is no guarante outcome at all.
So you only bet on a certain outcome? That must be a cushy investment strategy. Let me know how it works out for you and where I can invest for a gaurante (sic) outcome.
>>How can peoples ever think they can get back 172p share as 65 billions still underground and there is no way they can bring it for sell yes.
I said $65bn in the ground. I didn't say 172p. You made that up. One does in no way imply the other, or the other way round.
Furthermore the probability of upside is not always linear with upside. Say I do believe this is 50/50 right now. But what's the upside? 9p 'one day'? Then I can take a bet that pays 3x with a 50% chance of success. That might be a bet worth taking.
$65bn is a big number. Big enough for a lot of big players (including the incumbents) to be very interested in getting a deal. GLA
The next interim funding, and the composition, will be crucial IMHO. Lets see who puts in and how much - it will give us as clear an indication that they think a deal will be done. Why would any of the big 3 put any more in if they can't see a viable path? You just don't keep throwing money in if you don't think it can be done. I think interim finance will raise, and the finance package will raise. Whether or not existing sh/retail get a good shafting I don't know, but I know the guys revelling from the companies potential failure revel in that (I just generally filter them - they have no more clue than I do).
>>Is there actually a business case any more. That's the question?
3.5 million tonnes of reserves of a commodity trading at $19k/t presently. $66.5bn potential revenue. Nah you're right, no (possible) business case at all......
Why all the flap about yesterdays RNS. Standard course I would have said - Brazil has strong protection / laws around the opco, creditors are targeting/in discussions with the holding co, so you ringfence the opco while you sort it and say to mr BNP Paribas - better for all of us if you agree to this finance package which gets the mine built and you see your money back, than drag it through the Brazilian court system and get pennies in the pound.
To the punters saying 'Glencore will take it for peanuts' well, it could happen, but there are plenty of other miners who would offer potentially more, not least Vale next door. Why would Glencore want to lose it (and their current shareholding) or take a chance with that unless they can't find a finance package that works, when they have already got the offtake deal?
The RNS last night changes nothing. That the finance package takes this long to put together forces the companies hand to ringfence the opco and to buy time to complete it, that's all. There is no guarantee it will complete successfully of course, and that's been made obvious in the RNS's. And is more than reflected in the shareprice. GLA
Actually Orion end up with 10% of the company without putting a penny in even at severe dilution, on account of their convertible bond. In effect their bond, which cost them $50m, ranked as nearly 10% of the pre crash company at the conversion price, and now also roughly 10% of the amount of funding required to complete A1.
However, they end up losing both the bond and their shares if a funding solution can't be found.
So there is probably HAS to be some gamesmanship going on. Glencore and Orion are, IMO, better position than La Mancha. They all need a solution or they all lose, but slightly different solutions may suit each party better. Hopefully by now the hard yards are done and at least the three are agreed though, and it's a case of getting the banks over the line with it and apportioning whatever else is to go to new investors. But I still think the current bonds are signicant, unless they somehow get magically subsumed into the finance deal (e.g. converted or something). GLA
Orion basically did a better deal subscribing more of their money as a convertable bond with dilution rights, than La Mancha did going for physical shares. I think the bonds rank behind the senior debt though so they're toast if it all goes tot the banks, like the equity. Which, lets hope it doesn't!
"At any time until the Maturity Date, the Noteholder may, at its option, convert the notes, partially or wholly, into a number of ordinary shares up to the total amount outstanding under the Convertible Note divided by the Conversion Price. The conversion price is £1.268/US$1.71."
So after the last raise the conversion price of the bonds dropped to 127p. This makes Orion in for another 33m shares and La Mancha in for another 10m shares (approx, assumed fx, ignored interest).
So that's significant IMO. Orion 'look like' 10.5% holders of the company at the moment, but with the addition 43m shares from both bonds would actually be 19.5% holders. La Mancha would move from 23.09% to 23.09% so completely unchanged. Orion/La Mancha would hold a similar chunk of the company if both converted.
Now this equation will skew massively depending on the fundraise, and somehow this might be reflected in the placing. Orion will, 'for free' benefit from the lower raise with their bond disproportionately. To 'protect' their position, La Mancha may need to subscribe for more shares than Orion which per Mike's comments might mean they end up doing it in the current physical share proportion.
The convertable bonds can't be ignored IMO looking at the 'what if' because they represent the slightly stronger hand Orion have. Orion can probably live with a lower placing - they can afford to subscribe less, and benefit more, from a lower placing price. GLA
>> $50m - which dilutes with the raise
By which I mean - Orion don't lose as much on their convertible loan as La Mancha do on their physical shares because the convertible loan has dilution rights so the strike price will reduce with the raise. La Mancha have one too, but theirs is only $15m.
La Mancha lose slightly more, and Orion lose slightly less, so La Mancha are the most exposed. Why? La Mancha have the highest absolute holding in shares, Orion have the larger convertible loan - $50m - which dilutes with the raise. Glencore supposedly have a bottomless pit of money to throw at problems so maybe they don't care too much.
There is some risk of treating all the cornerstones as the same entity (and 100% aligned), in practice they probably aren't. But they all stand to lose if overall it's a lose. La Mancha are the most exposed, hence it doesn't really surprise me that their ex CEO is now our CEO. They will be working the hardest to make sure it isn't a lose. GLA
As for the retail punters, well they're either bricking themselves and going 'never again on AIM, never again in junior mining' etc etc (must admit I feel like this at times/often) or revelling in their astute shorting success and driving their fast cars around yorkshire beating their chests. Them not buying either doesn't mean anything either.
I agree if it was leaky and there was whiff of a deal you'd expect to see some trading. That there isn't might mean it's not leaky or it might mean it will fail. We don't know. But I expect to find out at some point relatively soon. I think we'll be building a mine early H2 or will have folded, personally, it will be one or the other. The next few months we find out.
For the nth time this needs pointing out - the cornerstones can't buy (or, possibly, sell). They're sitting in a large meeting room with 5 investment banks negotiating a financing package. Any buy, or sell, while holding these discussions would constitute insider trading. Pretty obvious really.
So cornerstones not buying open market means nothing, as they can't.
Https://seekingalpha.com/news/4078573-li-cycle-surges-to-ytd-high-after-securing-75m-investment-from-glencore
conversion price was above prevailing price.
Someone sold into the liquidity provided by notready1, unless it was notready1 selling at a loss! There is still a chunky spread though you can tell from the buy/sell prices, on any decent size trade.
>>This company will never produce nickel for its current shareholders
Interesting. Even though the ex-CEO of its largest shareholder is the CEO?
They can raise at 3p and wipe out $250m pre investment, not ruling it out and neither is the market but then that is the outcome for them - b/e just got a lot higher. Also Karim hasn't earned his salary then as I could probably negotiate that deal :) Lets see we are all guessing....
I've been thinking of a signal cornerstones could send if they wanted to the market. If interim finance is needed issue some shares at 20p. Debt is all well and good but it doesn't signal intent as much as a raise at premium. Maybe wishful thinking but if I were them and wanted the price higher it's what I would do. Make it a decent tranche, say $50m so it makes a dent in the capex. Why not. How would the sp respond? 10p I would say for starters.
Mv01 there is also a slider we don't know on the debt ratio because you can't do it all with debt, $500m debt would probably kill the NAV completely with whatever discount rate is applied based on whatever future nickel price is estimated (I don't know if the project can carry $800m debt). So there will be some equity and all of the factors come into play - what 'maximum' debt amount retains enough NPV to attract new investors and at what equity price to make the investment still attractive with whatever ratio of equity the cornerstones are prepared to put in to maintain liquidity.
It has to be a pretty complicated equation and given the total capex number is so high (higher than alluded to in the October RNS, obviously), I can fully understand the decision to pause the mine build while they sort it out. It is also completely rational of the market to assign some risk of bust - you can't argue with that really when the capex number remaining is bigger than the original capex number in the DFS! That said and like I put on the other post the 'non bust' scenario must be worth more than 3.5p I think in every outcome.
It's going to be interesting. For now I could live with a 20p raise as I think in due course we might then see something like 50p+ from Araguaia or Araguaia 1 and even though it wasn't what I invested for (my targets were £3/£4 in new money) but it would be a start. Worse is possible of course but as we both believe, not really in the cornerstones interests. GLA
Mv01 - and we know that doesn't work for La Mancha. They do not want it to be illiquid. They had exactly this problem trying to do a deal with Glencore+open market on the other Brazilian nickel project hence pulled the deal. So they have to keep it liquid. Keeping it liquid means getting other investors in - the challenge is how to get other investors in at above the current mkt price and not wipe out their prior investment. I don't know the answer but I absolutely agree with your thesis (and it's why I added even down to 3p area).