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hope4green: "Time scale of bonds being sold, Any ideas?".

Supposed that SM burns $1m a month, the $425m from placement/open offer can last until the end of September;
then the $400m from the new CB to the end of next January.

(1) The initial $500m has to be raised before the end of October ; and this can be used up to the end of next June. Then the first $500m RCF tranche can be used up to next November (2020), and therefore, (2) the first further $500m h.y.bond tranche should be raised by next November to return to RCF. Then the next $500m RCF tranche lasts to April 2021; and therefore, (3) the second further $500m h.y.bond tranche have to be sold by April 2021; after its return, the third $500m RCF tranche lasts to the September of 2021. (4) the third further $500m h.y.bond tranche have to be sold by September 2021; which makes the fourth $500m RCF tranche available and lasts to the Feb of 2022. By then if the first polyhalite appears (and MTS progresses well) , SM should be able to refinance with better terms. If not, then the h.y.bond solution would continue.

If SM has difficulty in raising the money from the high yield bond market, the money may also be raised in equity-like capitals (shares, convertible bonds, …) to return to the RCF. SM may not raise any none equity-like funds to return to RCF. If such arrangements happen (i.e., refinance from other senior debt sources with better terms than the h.y.bonds and RCF), the drawdown from RCF will end. To be able to refinance with better term once the construction is further de-risked is another flexibility of the JMP solution.

The JPM alternative proposal is quite complicated and not easy to understand. Since its announcement on the 30th of April, 2019, more than one month has passed, I am still struggling to understand it fully. I have tried to summarize it in the following, and please correct me if there is anything wrong in my understanding:

The JPM alternative proposal provides an open market solution, or more specifically, a high yield bond solution with an equity component and an overdraft facility. The equity component includes new shares ($425m) and convertible bonds ($400m with terms encouraging early conversion to shares), aiming at enhancing the SM asset guarantee for the bonds, which are managed, but not underwritten by JPM. The overdraft facility (a revolving credit facility (RCF)), is managed and underwritten by JPM, aiming at raising the confidence of the potential high yield bond purchasers and providing a time and funding buffer for SM to raise further tranches of high yield bonds.

The issuance of the high yield bonds will be in six $500 million tranches ($3b in total):
- An Initial $500m high yield bond tranche (c.10%), which kick-starts the RCF; and
- Five further $500m high yield bond tranches.
Before each of the further 500m bonds is sold, SM may have a $500m drawdown from the RCF in advance and then return them to the RCF after the tranche of the bonds is fully sold.

The flexibility of the RCF is reflected in the fact that SM may take money from the overdraft facility at any time when needed (once it becomes available). However, the RCF has also restrictions: a) the initial $500m bond tranche is its pre-condition; b) it has two drawdown limits: the first is set at $500m with a lower cost (c.8%, an overdraft warning is sent); and the second is set at $1 billion if the first $500m is not returned then the second $500m would incur a higher cost (c.12%, a warning is sent to remind SM if no further tranche would be available if not money is return, or any further tranche would incur sharply high cost, c.25%). These limits make it clear that the RCF is a temporary overdraft facility rather than a funding source for long term funds. When the limits are respected and each drawdown is returned, after the five drawdowns of $2.5b, there will be another $1b available in the RCF for contingency purpose.

As the lending of the RCF tranches is of short-term, and their interests usually are (i.e., with each tranche returned before accessing the next) lower than that of h.y.bonds, lenders are encouraged to act as the refinancing source of the h.y.bonds, such that they may earn higher interests for a longer period (c.7 years).

Note: the interests given above are indicative.

ffcmember, thanks. Yes, now it works.

Chesh, please have a try to access the ppt/pdf presentation, available at the side of the video.

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The above should be what you see at the moment.
It seems to have some error in the JavaScript code, relating to the RNS list. Maybe available after the RNS release.

http://siriusminerals.com/downloads/agm-presentation-june-2019/

If the above mentioned makes sense (i.e., each $500m RCF tranche is to be replaced/refinanced by a $500m h.y.bond tranche of the same lender/buyer (very likely the banks initially interested to the bank tranches in the SM previous stage 2 plans)) , then the first tranche of $500m h.y.bond is left outstanding. This might be why this first tranche is special and important. The purchaser of this first tranche could be the common purchasers of the h.y.bonds, such as PELHAM CAPITAL LTD who (re)sell bonds as their major products to individual clients/customers.

Later, at some point, possibly after 2 or 3 h.y.bond tranches and when the first poly appears, SM may be able to do some real refinancing that leads to the deals with better terms (i.e., lower interest rate) to replace the above mentioned RCF mechanism (such real refinancing will make it possible for SM to low the cost and start to pay dividend at an earlier date than that under the RCF mechanism).

The first and subsequent $500m High Yield Bonds (h.y.bonds) tranches are high risk and high return single B rated bonds. Their interest rate (c.10%) should be higher than that (c.7%) of the $500m senior debt tranches (above Baa1 rated, investment grade funds) in RCF.

As hinted by CF/JPM, many previous potential lenders of the bank tranches (in the previous two and three tranched plans) are also interested in participating in the JPM-led Alternative Proposal ($0.8b equity + $3b senior debt) with the $3b released in five $500m tranches: each B-rated $500m high yield bond tranche backed up by a $500m investment grade tranche).

Refinance usually happens when a deal of higher cost is replaced by a new deal of lower cost. However, in the JPM RCF arrangement, each of the $500m RCF tranches is to be replaced by a lower rated more costly $500m high yield bond tranche. Such refinancing is counter-intuitive, and of course, is not something SM wants to do, but they have to do in exchange of a $2.5b (actually $3b) senior debt underwritten by JPM, which lowers the risk of high yield bonds linked to it (therefore encouraging the participation of the h.y.bond perchasing).

A lender of a $500m RCF tranche must wish to receive the high interest (7% or more) for many years (say 7 to 10 years) rather than less than one year. Therefore, it should be a good choice for the lender to become the buyer of the $500m h.y.bond to replace the $500m RCF tranche. Through such refinancing, the lender gets a better deal (e.g., the interests raised from c.7% to c.10%). SM is not a winner in term of the cost; however, SM will be a winner to secure 5+1 $500m debt tranches (which will secure $3b senior debt, plus the $0.8b shares/CB and $0.5b first h.y.bond, i.e., $4.3b in total (with enough funds and over $1.5b contingency to ensure a completed 10mtps mine)).

In contrast, if the lender of a $500m RCF tranche is quickly replaced in the h.y.bond refinancing by other buyers, the benefit of its participation is very limited (i.e., only served as a backstop or backer, with only the interests earning for a very short period).

If we have a look at the trades at
http://capita.moneyam.com/trades/SXX/Sirius-Minerals.html-trades,
we can notice that most of the trades are of value £99 to £2000 (or 626 to 12,603 shares), or something similar to that.

I am not quite understand how such small trades can be profitable, given the price differences during the day are less than 0.5p (in most days in past a few weeks). Who are the traders/sellers/buys of the shares at such small amount? What kind of strategy/calculation can make such kind of trades profitable?

Thanks, Chesh for the Interesting video.

Sirius, the brightest star (the naked eye can find in the sky), is actually a twin star: sirius-A and sirius-B orbit each other in a double bow every 49.9 years. Sirius-A is three times larger than the Sun and ten times brighter than the Sun. Sirius-B is much smaller (with a diameter 4 times of the Earth).

The Boulby mine should be the Sirius-B (destined to be acquired by Sirius), as their life is linked together by their fate in the sky ;)

gdshaw: "MTS tunnel is certainly important, it is not actually on the critical path for first polyhalite ..."

Thanks for pointing out the error, I agree with you. As the launch preparation through deep and narrow shafts may need several more months to do than that from the surface, I just hope it could get started earlier. If all three of the drives of the tunnel could be launched at similar times (or at least not too far from each other), then by the end of 2021 (i.e., about two and a half year from the time the first TBM starts drilling, the whole tunnel could have been completed (with only the fit-out left to do), that would ensure several major product milestones to be achieved ahead of the schedule.

Thanks, GK, for the details. Where can we find the SRK report you and Myo have mentioned several times?
37km/3 = 12333m for a drive, with 17m per day, it needs 12333/17 = 725 days, i.e. roughly 2 years to drill and build continuously. Add the launch preparation and maintenance, say, half a year, we need about 2.5 years to complete a drive.

The TBM launching preparation at Woodsmith mine site and Lockwood Beck may need more time than Wilton, as the preparation would be done underground. As I noticed that lots of equipment have been used on the ground at Wilton for the launching preparation, and these equipment may not be available underground. Hope they will start the preparation earlier to ensure the first poly in 2021, I gather this depends on the time when the needed funds being raised without any delay or ahead of schedule.

The following is a Ph.D. dissertation that contains detailed information on the design, construction, lining and three relining of the deep two shafts (originally constructed during 1968~1974) at the Boulby mine. It has over 250 pages. The detailed information on deep shafts at a location very near to the Woodsmith mine, should be of interest to many SM shareholders. Myo, this is the very document I mentioned to you in my previous post.

The information on how the failures happened on the shafts is particularly interesting (page 48-64). Cracks appeared in the walls of both shafts after only two years after their completion (at the Marl layer). Within a decade of their completion the lower towers in the shafts were so severely distressed that they both had to be replaced. The failed parts of the shafts have been redesigned and relined three times. Two shafts in Wilton have incorporated the lessons learnt from the Boulby Mine into their power and lining design (and possibly their construction methods, although the Boulby shafts were not constructed using SBR).

Jia, Yudan (2011) Numerical modelling of shaft lining stability. PhD thesis, University of Nottingham. http://eprints.nottingham.ac.uk/11924/1/PhD_Thesis_-_Y._Jia.pdf

Sirius Minerals’ Vertical Shaft Sinking Machine reaches over 115 m depth at Woodsmith polyhalite mine (https://im-mining.com/2019/06/05/sirius-minerals-vertical-shaft-sinking-machine-reaches-115-m-depth-woodsmith-polyhalite-mine/).

Sirius said this is a “testament to the groundbreaking, innovative approach that we have taken to construct our project.” This will be also true for the TBM and SBR, as such a wide and long tunnel is first drilled by TBM in U.K. and the over 1500m is a level that SBR (which is a kind of combination of VSM and TBM) had not reached before. Glad to see the CF team have changed (the initially plan tech) for the better multiple times, which may lead to the first poly and a completed mine on or possibly ahead of schedule with much fewer safety or life threatening issues.

GK and LITC, I agree with you that for any possibility of early dividends, refinancing has to be done as early as possible. Similar as the Gov Guarantee in the previous sequential plan, the RCF in JPM proposal also serves as a backstop to kick start stage 2 and raise the confident of potential lenders. Due to the complexity of the RCF mechanism, there will be no pre-determined date for the closing of stage 2 (i.e., no date when all the $3.8b is fully committed by the lenders for SM to use).

The good side might be in the fact that at least the first $500 is available from the RCF after the successful raising of the first $500m high yield bond, and another $500m would be also available from RCF although at an even high cost (of course, SM and JPM will also try the second or third tranches of high yield bonds). By then if the construction progress to the plan, the first poly should have appeared and possibly some further progress on marketing may have been made (e.g. from India or Middle East, or China over the current 10.2mtpa). With the further de-risking on construction and marketing, refinance with better terms may become possible, such that earlier div may become more likely to have.

Thanks, Myo, for the info. I did not find or read or cope/paste any article on how the SM shafts will be built, as I did not know where to find the documents on the topic. The info in my posts came from my memory on a paper (actually a PhD thesis) I read long time ago on how the shafts were designed and built at Boulby and how the failed parts at a dangerous layer were rebuilt two or three times.

There are images and a vedio on how SBR works at
https://www.herrenknecht.com/en/products/productdetail/shaft-boring-roadheader-sbr/

It shows that the work deck is at the second to the top deck (sheaves).
The building materials transportation is done in the same way as muck and workers are transported (in buckets).

Unlike TBM using a standard set of pre-built blocks (concrete segments) together with a continuous segment transport and installation subsystem, SBR uses different sized pre-built blocks (of different thickness) at different layers or builds the wall using raw concrete and steel frames. From a video presented by Simon, we noticed that there are working platforms/levels in SBR for people to work on and build the wall. However, it is not very clear how to move the big and heavy pre-built blocks and install them in SBR.

Myo, have you read any info on these in the planning application documents or elsewhere?