Member Info for wwguk

"At the time of the Anglo American proposal, the most advanced alternative proposal was a potential debt
financing proposal from a consortium of financial investors. On 9 December 2019, Sirius received a nonbinding term sheet from the consortium to form the basis of a US$680 million funding package to cover the
initial scope of work. On 9 January 2020, Sirius received a revised non-binding term sheet from the
consortium. The Sirius Board reviewed the proposed terms and conditions
(which included a requirement for:
(i) Sirius to undertake a substantial new equity raising,
(ii) concessions from some of Sirius' major creditors,
(iii) certain local authority approvals, and
(iv) further due diligence),
together with its advisers, and concluded that the consortium’s conditions and the time it would take to meet such conditions (if possible to do so) were such that there is a very material risk that the overall funding package would not be
implementable by the end of March 2020. Since the date of the firm offer from Anglo American on
20 January 2020, the Sirius Board together with its advisers has continued to explore the option to
implement the alternative proposal. There has been no further progress and as a result, the Sirius Board has
concluded that the alternative proposal is not implementable. Based on the backdrop of the search for a
standalone funding solution undertaken over the last four months and the extensive discussions held during
that timeframe, the Sirius Board believes that, at this time, there is no alternative to the Acquisition. If the
Acquisition is not approved by shareholders and does not complete there is a high probability that the Sirius
Board will place the business into administration or liquidation.

In this context, the Sirius Directors view the Acquisition as the only viable way forward for Sirius. "

Apparently more advanced discussion has to made to address (ii) on creditors and its linked consequence to shareholders (the level of dilution, or how much left to shareholders). The scheme doc might have revealed additional info that some potential debt/strategy investors (including the consortium) are waiting for. Therefore, next two weeks will be critical to see if anything may happen (or if Polygon continues to increasing its stake, and if the share price would stay above 5.5p).

steve58: "Another option is why can’t the work continue with workers being paid in shares thereby getting more in the medium tern through the increase in the sp dividends etc. "

This is better than the unpaid leave. They should be flexible to identify all possible ways to keep the company as an ongoing concern before they worked out and completed the alternative options, other than the current AAL takeover offer.

"The Company is focussed on the delivery of its strategic review process and, ultimately, securing a route to complete the development of its Project, where it believes the greatest value to shareholder lies.

Any approach to take over the Company would need to be made in accordance with relevant laws and regulations governing such an approach and would be dealt with appropriately by the Board at any such future time. Ultimately it would be for shareholders to decide should an offer be made."

If their emphasis is on delivering the updated plan for the Initial Scope funding, they should speed up their discussion with the consortium of debt financing investors; to have a firm proposal placed on the table for shareholders to vote, together with their recommended AAL offer. Since early December when the proposal was made, two months have passed by. There seems no progress has been made up to the time CF met ShareSoc rep in London a few days ago, as they mentioned that the proposal still remained indicative and non-binding. We are not sure if this because the negotiation is difficult; or almost nothing happened during these two months; or the letting time passing is intentional for keeping the AAL offer as the only option. SM/CF seems not confidence on their own Initial Scope plan, as they prefer a fully funded takeover over the alternative proposal from the consortium. They should keep what said, make effort on their updated plan (rather than selling the company), take their claimed objective -- maximise shareholder value honestly and seriously.

SM please stop almost all spending now (except those used for pursuing funding options)! Shareholders want options to stay invested in the project.

If they stop all spending on construction and start unpaid leave for most of their staff member who are not working on funding options, the money left so far could last much longer for them to work out an alternative solution.

Otherwise, if all the money would run out by the end of March, there might not be enough time to complete the fundraising in alternative path; they have already made such excuses in last December, rather than trying to identifying flexible ways to address the time/remaining-funding problem.

Why the end of March? Why continue construction in driving 1 at this live or death stage.

If they take further actions as they at the beginning of the strategy review (to down tool and save money on staffing), the project can last much longer.

illbetabuck: 1) … 2) … Or.......... Do not assume that they are expecting the price to rise. It could be as simple as holding onto corporate bonds and using votes they hold to secure the gains made on those bonds since the AAL offer was made.

Some of the IIs that hold their CBs might be in this category.
However, Polygon, now the largest SM shareholder, does not hold onto their CB, and they sold all their 5m CB; so they seem to be determined to pursue alternative options.

If there is no other options/offers/proposal, almost all big IIs should vote for the only available AAL offer.

However, if any alternative proposal appears, AAL would either give up or revised their offer into a partial ownership one (i.e., as a largest owner and strategy partner).

Chris Spencer-Phillips from ShareSoc made some comments on Jupiter's suggestion.

Steve Davies, from Jupiter Asset Management, said: "We would like the Board to pursue any alternative options, including the consortium of financial investors who submitted a proposal for a $680m funding package earlier in January, within the remaining time available.

"We would like to be able to consider a standalone financing proposal that would enable shareholders to remain invested in the project, as an alternative to the existing takeover offer from Anglo American.”

Chris Spencer-Phillips said: "We now have over 750 Sirius shareholders registered and more joining every day; it is fair to say that there are a lot of very concerned investors.

"It is an interesting development because if Jupiter feels an alternative funding package can be put together, since they own 7% of the shares they could help get that organised.

"We could help facilitate that."

"The tell-tale signs of whether there's any sort of option will be if shares go above that (i.e., if the SP would go above 5.5p)."

"Jupiter could come up with an alternative funding package which might encourage Anglo American to offer more.

"We are trying to galvanise the shareholders together and give them some information on what's possible."

https://www.gazettelive.co.uk/news/teesside-news/sirius-minerals-top-shareholder-urges-17687829

I still hope what we current see on the surface was not the full story of his project, in case he has been working hard behind the scenes on the alternative proposal and would announce it in next couple of weeks.

poolielad: "What does this mean??"

SM has been a speculative adventure mostly owned by small IPs (over 70% and than 60%).
SM had also attracted many big names, and they have increased their holdings gradually.
Now, at this critical time, the IIs' holdings are keeping increasing; over 51% now.
They are not as easily manipulated as small PIs. Hope they will push, involve, and support better deals than the current one that kicks all the shareholders out with a few pennies.

Adding
Capital Group, 196.8m, 2.8%
Citigroup Global, 250.7m, 3.57%

Now big IIs hold 3561m, 51%; I.e. from now on IIs own more shares than PIs.

Capital Group and Citi Bank should still have quite amount of shares; it is quite strange that they have not reported in this period.

Polygon, 598.4m, 8.524% (CFD increasing)
Jupiter: 547.2m, 7.79%
Pelham, 353.5m, 5.04%
Qatar, 230.2m, 3.28%
Vanguard, 224m, 3.19%
BlackRock,200.6m, 2.85%
Norges Bank, 156.2m, 2.23%
Legal & General, 144.4m, 2.05%
Barclays PLC. 119.5m, 1.70% (119m short)
Jefferies, 117m, 1.66% (117m short)
Societe Generale, 114m, 1.63% (114m short)
Bank of Nova Scotia, 44.8m
Oasis, 43.8m (CB increasing)
State Street, 74.4m
Perry Morgan, 66.2m
Sculptor Capital LP, 33.8m CB (shorted 141m)
UBS, 22.4m
Citadel, 3m (7m CB, 91m short)
SUNRISE PARTNER, 6m
Weiss Asset Management,7m new CB
Whitebox, 7.4m CB (53.9m short)
Highbridge, 5m new CB

22 of IIs, there are some smaller ones not in the list.
3113m in total, 44.35% of the current total shares 7020m

Another 2 to 3 km, so what? The segment factory and the TBM have been the major work keeping going after the plan updated. The good progress has been useful to demonstrate to the potential investors/strategy partners that the tunnel can be drilled faster than expected. They have already demonstrated that.

The updated plan was to raise the $600m for the Initial Scope from those investors/strategy partners. But now the recommended offer is a 100% ownership transfer, kicking all the shareholders out of the project.
The alternative proposal needs more time to work out, so why still burning the money on the tunnel to shorten the available time towards bankruptcy??

TonyBaby: "The money set aside for staff relates to share incentives awarded as part of their annual appraisals ..."

Yes, from the disclosed documents, the £19m will be mainly distributed among the few top level directors, i.e., CEO (around 16m shares at 0.05.5 = £0.88m) and CFO (10m shares at 5.5p = £0.55m) (See Form 8 (OPD) 21 Jan 2020). These awards were conditional on performance, but since AAL allocated £19m for them, they may have agreed to pay as part of the condition for the board of directors to recommend the offer and sign the Irrevocable Undertaking to commit their yes votes.

Ordinary employees will get very little per person from the awards in comparison to the directors, who are actually responsible for bring the company into a shareholder-wipe-out situation (and still getting the largest amount of the Awards). Awards not for bring the independent company into production, but for selling it at the bottom of the market that gives AAL an attractive great value.

illbetabuck: "Because bills have to be paid.....at the start of April.
Tax, Wages, Bond coupons, Contracts. … One has to assume that for contractual reasons they had to keep the TBM running."

Contracts may be amended under such extreme situation. It is also in the constructors interest to get the funding issue resolved. SM did so, by stopping the work on most sites except for drive one, and letting around 300 workers from constructors to go. They can now keep all jobs using unpaid leave for all those whom work at this moment is meaningless.

They have an alternative indicated debt-based offer on the table, revised once immediately after the initial intended AAL offer announcement; this alternative proposal must have been under advanced discussion to make acceptable and executable for all the parties. More time is needed, further down tool is one way to make the project lasts longer; the consortium may also arrangement a small sum of emergency loans, e.g., £50m, to keep the project going, as soon as a firm proposal is agreed and SM formally place it on the table for the shareholders to choose from (between the AAL one and the Alternative).

Yellow, thanks for the interesting article. Griffith (the creator of Polygon) seems to believe that he could push the SM share price higher, either through a bidding war, or an alternative proposal; or compensated by AAL for its yes votes …
as he did similar tricks again and again, with a return more than 50%.

Among the £405m that AAL to acquire Sirius, £19m will be used for the SM employee reward plans.
Therefore, although many employees may loose some money in their investment in SM shares, they will keep their job and get some compensation/rewards (if the £19m are shared evenly by their around 100 employees, everyone would get £190,000 , that might be more than most of them have invested). Therefore, the AAL deal should have been welcomed by most of the SM employees.
Only the investors out side of the company take the big loss, to get this project at the bottom of the market and an attractive deal to AAL and be a successful ending of CF's own well-planned and well-executed adventure project.

I believe that most of the SM staff are also shareholders; if the company can be kept in the market through production, the return from their shares could be much more than their loss in one or two months unpaid leave.

I have not found any convincing argument or details that would make the debt based Alternative proposal not acceptable.
We know that this would involve dilution; possibly a large one, e.g., leaving with shareholders around 25% to 30%. But this would make the shares worth much more than 5.5p per share in the long run.

The time is a constraint. But if the managers of SM are determined to search for better options, they could plan ahead and act asap to reserve more money to let the company running longer. SM still has positive Net Asset. If they do some further down tool, they can last much longer. If they stop spending, they can stay in dormant for years.
They just need to make advanced discussion with the consortium to work out a acceptable firm proposal asap!!

To get additional one or two months, SM could stop the TBM in drive 1 as its progress and potential have already been demonstrated. SM could also ask staff to take unpaid leave for one or two months. They should do this right now, as any spending and construction progress at this stage is almost meaningless.

calamari: "In the event of an AAL take-over, SXX bonds would increase in value because AAL has a much higher credit rating."

So this might the reason why Polygon sold their 5m CB, as the CB price was moving up in past few weeks; and Polygon expects some twists of the AAL offer or the emergence of the alternative proposal?

AAL will submit some documents prepared for the voting.
So, this is what you are expecting.