Sirius Minerals Share Discussion Threads

[eurofox] 19/4/2018 18:15

the SETS order book on LSE. There is a continual turnover of shares passing between very large sellers and very large buyers, mostly done automatically, in lots of small trades so as to not reveal the true intentions of the buyers and sellers (because if these were apparent, traders would interfere with the flow). The fact that this proceeds relatively smoothly with small daily price changes, in spite of the likes of us producing interference by buying and selling, has to be admired. You can see from Time and Sales data how this is all achieved without the price being allowed to "run away" and without day traders taking too much out of the equation.

As I mentioned yesterday, I think there are two groups of bondholders - those who were wanting to get out at almost any price, and those that are happy to sell the share only much later at a substantially higher price. That higher price would not be achieved in an orderly fashion whilst the first group of bondholders were active, and the recent corporate action by the BOD has now taken care of that problem. The whole thing looks well orchestrated now.

[chrisatbirdies] 19/4/2018 17:52

Eurofox.you keep saying that.to which order book do you refer

[eurofox] 19/4/2018 16:39

the order book has been managed in an exemplary way again

[jw30] 18/4/2018 12:05

Thanks again ppvn. Good to know the BoD is covering every possibility.

[eurofox] 18/4/2018 11:47

My take on this event is that the BOD did talk to the bond holders and found that the bond holders fell broadly into two camps. The first were short selling now at today's prices (which they are by their actions happy with) and thus causing the downward share price pressure and the other group will not be selling shares until the price is substantially higher. By taking the recent action, the BOD has largely met the needs of the first group (thus reducing their selling pressure). The BOD was not disappointed by non participation of the second group, since their selling pressure will not come until the share price is materially higher (which by mutual understanding might well be high enough to secure stage 2 financing).

In other words, the BOD took this action to resolve disparate objectives of the two groups of bond holders.

[lenses] 18/4/2018 11:39

CP

Post St2 valuation drivers? As the risks fall away. In particular the build 'biggie' - success with shaftsink to ore level.

Some 2 - 2 1/2y out from here I guess.

L.

[ppvn] 18/4/2018 10:52

Hi Casapinos, it doesn't necessarily but logically it should. Staley also alluded to this in the March 6th call; "in terms of total leverage, that up to $3bn number gives you a leverage of approximately 65% because at that point in time when we start drawing down on that debt, we have already spent almost $1.5bn of capital developing the project". So I guess that's where he's getting that 65% number from. Costs incurred versus debt available. Let's hope the money spent is worthwhile and can translate to fixed assets!

[casapinos] 18/4/2018 10:37

ppvn re the 65% leverage ratio - if that is the debt:equity,then I can see that as debt is drawn down it builds stuff which will appear as tangible assets and that makes the accounts look better BUT does that necessarily mean a rise in market cap? or are you assuming that proximity to production will automatically drive the MC up?

[ppvn] 18/4/2018 10:00

Hi jw30, not sure if I consider it ominous or sage planning to get the facilities in place before costs incurred really. As Muckshifter made plain to me, and hopefully everyone else can appreciate, we don't see as shareholders some really important stuff, such as the commercial terms of the shaftsinking contract etc. If there is an issue, who's responsible? We know there is a pain/gain clause, but if the brown really hit the fan, who's going to pick up the bill? I'd assume Sirius. So whether the additional $400mm goes on building a port, or as contingency, or just general expenditure is something I can't really comment on to be honest, because I'm not an expert at building mines and I don't know. It seems like they are setting things up and planning effectively though. Capex hasn't really increased at this time (or not that I'm aware) - they are just putting finance in place, I'd guess, to allow for every eventuality.

[jw30] 18/4/2018 09:54

Thanks ppvn. Ain’it a bit ominous for the company to increase capex so early on in the project? Is this the first of many more increases to come?

[bolstaf] 18/4/2018 09:25

I must add that My comment is just wishful thinking I have not a clue if there is a "get out" clause

[ppvn] 18/4/2018 09:15

Morning Casapinos, think that whilst the 65% ratio is obviously of key importance, the $3bn debt would not go into the accounts until it was actually drawn down. So when the mine, MTS, MHF, port etc are all nearing completion, the $4bn market cap seems much more reasonable and indeed probably a little low. To me, anyway.

Edit: hi Bolstaf, yes agreed there does seem to be an acceleration toward stg2 finance being put in place. Whether or not that is something to do with the royalty cash, or whether sirius need some additional contingency for interface risk (per Muckshifters previous post) I wouldn't really like to hazard a guess.

[casapinos] 18/4/2018 09:12

In thinking about the recent CB "offer" from SXX I offer this:

In re-reading the ST2 financing stuff , I note the 65% leverage aim which I take to mean that the ratio of debt to market cap. should be 65%. For a ST2 funding of $3 bill that would need a market cap of ~$4 bill, we are nowhere near that, (around $1.8 bill today) A full take up of the bond offer would have released another 800 mill more shares and raised the market cap by ~$300-400 , not enough but heading in the right direction. The failure of the exercise is a worry, there is no way (short of an exceptional share price rise)that we get to a position where ST2 is achieved with a 65% leverage ratio.
Any comment ?

[bolstaf] 18/4/2018 09:11

Full year results conference call 6th March. Thomas Staley sounded very confident though out the call but, I keep listening to the Richard Knight Question 17 mins 30 in. He asked about cash burn timeline and Gina royalty ? This was the only point of the presentation that Thomas stuttered and refused to be specific and didn't refer to the royalty part of the Question. no problem with that personally but are we burning cash so fast that there is a shortage before stage two or are we trying to get to stage 2 before triggering the royalty clause ? Not questioning the integrity of the BOD just hopeful that may be possible that's all.

[ppvn] 18/4/2018 09:07

"Up to $3bn". If you look at slide 7 on the March 6th presentation they did up it. If you listen to the call, Thomas Staley mentions that the $3bn figure would allow them to build their own port (rather than outsourcing), I assume to be able to handle the large amount of cargo hopefully departing in the next few years. So $1bn commercial debt and $2bn being guaranteed gov't bond tranche.

[jw30] 18/4/2018 07:53

Has stage 2 finance requirement increased from 2.6 to 3 billion.

[ppvn] 17/4/2018 21:18

Thanks NMRN. Panic over in that case. I guess with $2bn being (hopefully) guaranteed by UK Gov, the bonds accepted for conversion equal nearly $100mm in some bean counters spreadsheet by 2023 then; I assume this will have a larger impact on the $1bn Sirius are expecting to raise on their own.

As an aside, I feel like I should justify my lofty expectation of share price made prior to these results coming out, and my subsequent posting diarrhoea which was me in mild panic mode (not sure if that was obvious...). In a nutshell, had sirius expected all the outstanding bonds to be submitted in this offer, there would have to have been a background reason for them to do so - their bonds are currently worth at least 650,195 shares at up to $0.538. To have accepted this offer therefore, someone would have needed to take up (I.e. offered to buy all remaining shares outstanding - by my calcs around 620-650mm shares). Their bonds, whilst valued at around that level, are not actually worth that much since market volume is required for them to sell the remaining shares; if someone was to dump 650mm shares into the market this would obviously have a very negative impact on the shareprice (hence unhedged bonds currently worth less, if converted in one block to equity). So when JPM said 80-90% of bonds were already hedged, that could have explained the lack in share price uplift, but as I've said I can't account for that amount of hedging, and neither does the resultant acceptance of bondholder take up. So they are talking rubbish, as we found out when results were published earlier. Because i was assuming high acceptance last week, when the shareprice failed to increase it was very alarming since clearly nobody had offered to buy all remaining shares thus why would any bondholders elect to convert at less than the bonds potential value. I hope that makes sense to people? If anyone needs further explanation I'm happy to try and make a bit more sense. Basically without an share price increase something bad re. Stg2 structure or low bondholder take up was really the only explanation, fortunately it was the latter.

[eurofox] 17/4/2018 16:36

a very well managed order book again

[ppvn] 17/4/2018 13:39

Actually NMRN, you're good at maths. We all hopefully know and accept that the CBs are to convert to equity at some point, but that's reliant on the share price performance (thus unacceptable as a given by financiers). Therefore effect of 8.5% accrual to 2023 on $63.8m (in addition to eventual repayment of principal) has more material impact on amount they could borrow. Buy a house, pay off the car loan first. With hindsight, I don't think the intention or expectation was ever to achieve the clean up of all remaining bonds. Just improve the figures thus interest rate stg2 will be subject to. Thoughts?

[coolhandfluke] 17/4/2018 13:22

Hi NMRNThanks again. Understand. Glad we are not expecting anything too earthshaking unless they start drilling of course.Cheers.CHF

[grahamburn] 17/4/2018 12:34

From Investors Chronicle daily round up:

In the grand scheme of things, saving $27m worth of interest payments isn’t a game-changer for Sirius Minerals (SXX), but every little helps. Results of the prospective potash miner’s decision to invite convertible bond holders to cash out in the money were published today, and the $27m relates to the conversion of $63.8m worth of bonds, for 218.1m of shares. That leaves $244m of the initial $400m convertible bonds yet to be retired. Despite the dilution, we remain long-term buyers.

[not my real name] 17/4/2018 11:37

coolhand.

They've just added 200m+ to the total shares in issue so there is dilution. They are now shares rather than bonds so the effect is dilutive. If you look at the shares in issue now, they have gone up by 200m+. That's where I got the 4.9% figure from.

We know all the extra shares are coming so they should be priced in but they are none the less dilutive to the existing number of actual shares in circulation.

According to the figures in the RNS there are still another 61.1% to be converted which equates to 794,300,000 shares.

Shares in current existence = 4.689bn. Equates to further dilution of around 17%.

Hope that makes sense. :)

NMRN

[coolhandfluke] 17/4/2018 11:12

Hi NMRNAren't they saying then that the only previously unknown is the 23 mil incentive shares so the others, in another guise (bonds), won't dilute?CHF

[ppvn] 17/4/2018 11:07

Perfect. Yep keep an eye on shorts over the next couple of weeks and we shall see if that's what's happened. Agree it's a shame, but could still happen anytime! Back to the grind then...