Sirius Minerals Share Discussion Threads

[coolhandfluke] 13/4/2018 18:32

Hope they use non-conference, Evergreen shipping line so freight is cheaper. Mind you, if they sell ex works or fob then freight will be for buyers a/c.

[cottlad] 13/4/2018 18:24

Yes the Valemax vessels can handle up to 400k tonnes. There are only 68 of them. Getting 1 a week every week into Teesport a big ask imho. If shipping to China they are looking at a 3 week voyage 1 way so even if there was a liner service with dedicated vessels this would require 6 vessels working non stop. Also these vessels are unlightly to sail back in ballast for their next load so that 6 vessels is inaccurate. Logistically it just seems unachievable.
How quickly can they load said vessels anyway? They would have to load around 2,500t/hour!

[mail2] 13/4/2018 18:06

A bulk carrier, bulk freighter, or colloquially, bulker is a merchant ship specially designed to transport unpackaged bulk cargo, such as grains, coal, ore, and cement in its cargo holds. Since the first specialized bulk carrier was built in 1852, economic forces have fuelled the development of these ships, causing them to grow in size and sophistication. Today's bulk carriers are specially designed to maximize capacity, safety, efficiency, and durability.

Today, bulk carriers make up 15% - 17% of the world's merchant fleets[2] and range in size from single-hold mini-bulk carriers to mammoth ore ships able to carry 400,000 metric tons of deadweight (DWT)

[cottlad] 13/4/2018 17:57

Has anyone actually confirmed the logistics of of shipping 20mt/year? Teesport is large enough for big bulkers but nearly 400k tonnes per week? Every week? I would guess at least 2 very big ships per week required. How long is their voyage? How many of these vessels will be required to run full time to get 2 vessels a week into Teesport? How quickly can they load each 200k tonne vessel? Less than 3 days?
Producing 20mt per year is one thing..... getting it transported and cleared from the port is another. I was in the shipping game for 15 years, admittedly only handling 4000t vessels of various cargoes, but 20mt from a single berth seems like an impossible task to me.
I'm long and overweighted just for info. Hope these will provide my pension in a year or 15.

[coolhandfluke] 13/4/2018 17:45

I'm planning a visit week after next to the Whitby museum and spend 2 or 3 days looking around the area to see how things are shaping up. Be nice to see how my couple of quid is being spent.

[pugwash north] 13/4/2018 16:09

Hi, local Pugwash here. A lot of traffic in & out of the site, increasing month by month. Being an early investor at around 8p then 10p, I will now not be going in again until what I see as the big de-risk factor is near completion. For all the pretty site nice dry stonewalling, the local financial infrastructure contributions, tree planting, mineral right payments etc is all well & good. The talk on here is all about SP, CB & 2nd stg funding. I understand the de-risk in the funding. However, it seems to over shadow the fact of the huge task of the mine shafts. Boulby is a little over 1100 mts deep. Second largest in Europe, Woodsmith will pass this by 400mts, 1500mts deep. Working temperatures will be around 40C. Along with the tunnel to Teessport this makes it a huge engineering task. If now the interface risk is carried by Sirius then that as I see it is huge. Much greater than the 2nd stg funding. I do understand you can’t have a tunnel without funding. I do find the BB interesting even though I do not understand most of the jargon. Thanks

[johnveals] 13/4/2018 16:02

NMRN and altom - Ok, my £10 share price is probably a bit optimistic but a reasonable figure seems to be in the order of 10x from now once we are in full production mode.

I firmly believe that economic and political capital currently invested make this a relatively low risk high return prospect.

[not my real name] 13/4/2018 15:55

Hi altom,

Yes. PE of 15 probably more realistic. I only used 10 as rough mining industry sector average but given that Sirius is UK based, food production probably continually rising and not cyclical like commodity prices and all other factors 15 - 20 realistically possible.

Won't have to wait for full production. Share prices are generally based on future prospects rather than the here and now. Guess once construction is 80% complete we will be somewhere well north of a quid.

NMRN

[altom] 13/4/2018 15:34

At full production SXX should be throwing off enormous amounts of free cash. Divis should be high so I am going for p/e of 15 or so, and share price about £2.60. However it may be some years before we reach max. production. Please keep your forecasts and calculations coming and generally sensible posts. Good thread ! Thanks.

[not my real name] 13/4/2018 14:58

johnveals,

Take or pay agreements have been signed around the $145 mark so will only get just over £100 per tonne.

There will be around 5.6bn shares by then so gross profits at full capacity are:

£70 per tonne x 20m tonnes = £1.4bn gross profit.

Take off expenses (mineral rights, fat Aussie bird at 5% of gross turnover and everything else) Call it £400m

Leaves net profit of £1bn

Work out your own PE ratio. (I'll use 10)

Makes £10bn divided 5.6 bn shares = £1.78 per share.

Put your own figures in and use the above method for your own calculations.

Edit: I missed the previous post because I was typing. The loss is only a paper loss. They "owe" the bondholder 650,000 shares each. If the value goes up so does the "debt." But they still only give them 650,000 shares.

NMRN

[mcfly46] 13/4/2018 14:57

Ok thanks, it was at 2 min 15 secs in this video that led me to that conclusion.
Sirius lose money as share price rises from 'fair loss value in derivative instruments' associated with Stage 1 financing.

[johnveals] 13/4/2018 14:44

We know the mine is designed to produce 20mt of poly4 /year worth £200 - £300 /t at a cost of £30 /t. (or should that be $ ??)

So what will the share price be when the mine reaches full production ?

My calculation is about £10 give or take a few quid (or should that be dollars ?)

Obviously this is a simplistic back of an envelope calculation, but how realistic is it and what are the margins for error ??

[not my real name] 13/4/2018 14:44

mcfly46,

The payments are fixed at 8.5% per annum on each $200,000 bond and not affected by share price movements.

If they redeem all the bonds they no longer exist so no payments would be due.

NMRN

[johnveals] 13/4/2018 14:35

No, Sirius pays the bond holders 8.5% of the face value of the bond irrespective of the share price.

[mcfly46] 13/4/2018 14:24

Am I right in thinking that as the share price goes up with bonds outstanding, Sirius loses money through payments to the CB holders, so at present it suits them if the shareprice stays relatively low. If some good news was in the offing that could be very positive for the shareprice, they would want the CBs converted before this news.
Not an answer for any questions above, just trying to understand in simple terms. Thanks

[johnwise] 13/4/2018 14:20

13:46 13 Apr 2018

Sirius Minerals shares set to end the week on front foot as bond switch advances

Shore Capital highlights the miner’s progress

Should Sirius secure the conversion of 85% or more of the bonds it will have the right to redeem the remaining bonds, Shore Capital analyst Yuen Low noted.

“We see this as the (soft) ‘stick’ to the ‘carrots’ that are the incentive and premium to Parity shares (which would not be received by ‘last 15%’ bondholders, were Sirius to exercise its redemption option on their bonds),” the analyst said.

“In last month’s quarterly update, Sirius reported that the various workstreams for the Stage 2 financing were progressing well.

“The company was intending is to commence re-engaging with potential lenders over the coming weeks, with the reiterated aim of having commitments in place during H2 2018.”

Low also highlighted that the ‘paradigm’ shifting’ North Yorkshire polyhalite project remained “on time and on budget” to deliver key milestones that are first polyhalite and commercial production.

“We have previously opined that there will almost always be delays in projects of such magnitude as Sirius’s, and noted that the company has been doing the right thing in seeking and attempting to capitalise on opportunities to accelerate activities where possible,” he said.
On time and on budget

“Events have thus far borne these out: aside from being essentially still on time and on budget, there are various opportunities available from which might be eked out further cost and time savings.

“Consequently, while Sirius is currently at development stage and still some years from becoming a cash flow-generating company, an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe.”

Shore Capital used to have a ‘buy’ rating for Sirius, but now, having been appointed as broker to the company it no longer makes a recommendation due to its conflict of interest policy.

Separately, Liberum capital commented: "Whilst the offer is marginal in the context of share price volatility, it may help to shake out loose holders here."

The broker has a 'buy' rating and 60p price target on Sirius Minerals.

[mr.oz] 13/4/2018 13:37

MS - interesting viewpoint and not something that's being discussed generally , I think , amongst PIs
Perhaps this might be of interest to PPVN as to why cash isn't a sweetner

turning into a good thread again, with the very odd exception ;-)

[johnwise] 13/4/2018 13:32

Sirius Minerals hopes to entice bondholders to convert



Fact sheet

$15–$30 BN NPV RANGE EACH END OF CONSTRUCTION

[ppvn] 13/4/2018 12:46

Love your last post Lenses, thanks.

[lenses] 13/4/2018 12:43

Hi Mr Oz

I only think the co will resort to selling further CBs as a tranche of St2 if they fail for some reason with their present plan. FMU from the Feb pres and Staley comment, at present all points to a single large chunk ($3bn) of plain vanilla senior debt that will be pari passu for all takers wrt its security. It will also be excellent if the co can get the 2/3rds target of it covered by the gov guarantee. Arge still going on on that I think.

On assuming they 'get their man' on this present CB clean up, I would rapidly expect news on St2 progress. They want that share price up!!!

ATB.

L.

[muckshifter] 13/4/2018 12:26

The conversion offer and the last progress update fit quite well with my personal appraisal of the project, fwliw.

At the time of publication of the initial defined feasibility study I felt that the contingency sum was inadequate (and posted that, iirc). Later the whole projected cost / funding requirement was reduced, but the contingency remained the same – ie. it became a bigger percentage of expected cost, which perhaps was a tacit acknowledgement that the initial sum was low.

Very highly regarded Preferred Contractors for the high risk elements of the civils were then revealed, and Sirius stated that these contractors were to include interface risk in their final negotiated prices, which I thought was a very tall order to achieve. Predictions on the timing of signing of contracts with these contractors were then made, and not achieved. In the end after working closely with the “preferred contractors” for at least a couple of years, Sirius “changed horses in mid stream” and went to alternative contractors who had: provided better prices and dangled the prospect of early completion in the case of the shafts, and provided a “compelling221; price in the case of the first tunnel contract. This first tunnelling contract was for probably the most difficult section of tunnelling, but has the easiest access to start, and is the section least vulnerable to interface problems.

These two contracts give me the impression that Sirius have done a bit of a U turn on who holds risk.
My expectation was that AMC would not sign up before completion and appraisal of the deep shaft borehole, with the distinct possibility that should that borehole cause them any grief it would be extremely difficult to agree a reasonable price, and interface risk would have to stay with Sirius. (Did anyone listen to the telephone presentation – did anyone ask if the deep borehole side track now underway goes through the aquifer again or just the target material?). No mention of interface risk is made in either of the two contracts, but the DMC contract, with its prospective “up to 6 months early” reaching target should mitigate interface risk a bit, making holding that risk more acceptable to Sirius.

However, if Sirius now carries interface risk, which is a big one if anything goes wrong, it would make absolute sense to remove the interest and possible redemption payments from future cash requirements before any hint of contractual difficulties, which would potentially hit the cash position hard and eliminate further conversions, surfaces. The timing of conversion redemptions if serious problems had swallowed all available cash, stopped conversions, pushed cashflow positive dates out, etc. would be very painful as it seems to be after the major risks have been faced.

Putting my view into perspective, it is the view of a long term contractor who has seen at close quarters many jobs turn into financial disasters for the client because of unforseen ground conditions, which is obviously a very different perspective from that of a hopeful investor.
FWIW, I do think the project is being well managed, and if I’m right about the change in risk ownership, it was inevitable and carried out with subtlety.
Regards.

[ppvn] 13/4/2018 12:25

And Lenses, thanks just seen your post. Agree it's a tough decision, if it were a cash redemption offer at premium to the secondary market value of the bonds I could see why they'd take it, but it's in shares that (to my calculations) they still have around 45-50% left to sell. Baffling but we shall all see in due course. I was basing my "no" on the fact that our share price was in the 30s with quite decent volume, they are making 8.5%, so I saw them as being able to dispose of remaining shares in the next 3-4 months, assuming good newsflow.

[ppvn] 13/4/2018 12:20

It could, Mr. Oz. But then I don't know how or when the strike price is set and as previously discussed I would be shocked to see a strike of less than around 50p, or dilution of more than around 1bn shares. A buyer taking the remainder of my stg1 shares would also economically make them good. Being 80 or 90% hedged (I.e. sold 80-90% of their outturn shares) as JPM say in their research note would also explain it, but I can't get to those figures from what I am able to see. This is why I'm confused.

[lenses] 13/4/2018 12:20

Hi PP

"it would be an offer I would reject since the sums do not stack up."

A balance on their decision I think. Difficult, but maybe 'out' is the best option?
A slightly better option now than before with a 'sweetener' and an obvious determination that the co now want rid.

2023 expiry at par (=100). Today trading at 135.95, yesterday 141.95, one week back 144 odd. At today's price this makes the gross redemption yield far lower than the 8% coupon when you factor in a bond today that's worth 136 odd will be redeemed at 100 par on expiry. Do also note Sirius are not holding any coupon money in escrow beyond end this year.

This 'game of chicken' may go one way or the other, but as sure as 'eggs is eggs' (I'm here all week!) that if Sirius have misread this and the take up is inadequate, they will just come back with a more 'killer' (think chicken having neck wrung) offer.

If a CB holder takes up the offer and then sells out at say 28 over the next few weeks? 30%? Not precisely crunched the numbers. That approx total return to now for those that were unhedged of course. Maybe Hedging doesn't alway pay it seems!! Only one crocodile tear from me on that.

L.