Sirius Minerals Share Discussion Threads

[ppvn] 02/5/2018 14:48

Short interest still at -5.31% is very good news! There's one for you!

[richard26] 02/5/2018 13:57

what good news??

[y1phr1] 02/5/2018 10:56

And miss out on the good news coming, not for me, staying in till the good times come.

[thanksamillion] 02/5/2018 10:31

methinks st Ledger Day may be a better time to take some profits.

[hazl] 02/5/2018 09:45

You can do what you like.

[coolhandfluke] 02/5/2018 09:35

Should we sell in May and buy back on St Ledger Day?

[thanksamillion] 02/5/2018 08:36

great little rise to 31.6, I love it.

[ppvn] 01/5/2018 21:03

Hey CHF, yes there are other options, but the way they are structured, economically it will be far more profitable to convert into shares so that leads me to believe that they will be converted. At par they are worth $200k at maturity, if the share price for example goes to around 38p (and forgive me, I haven't done the fx today), because one bond is 650,195 shares, it's around $350k if converted. So I for one think it's unlikely the CB holders wouldn't convert.

[coolhandfluke] 01/5/2018 20:55

Hi PPVN I see the prospectus does mention 'whether bonds are converted, purchased or cancelled' so it does appear that there are other options?Thanks for your earlier reply.CHF

[johnwise] 01/5/2018 20:18

Sirius Minerals (LSE: SXX) might not be everyone’s favourite company yet, but it’s hard to criticise the firm’s prospects. Its flagship North Yorkshire potash mine is a world-class asset, and now the company has planning permission and the financing in place to progress the development of this mine, the project is substantially de-risked.

So far the company’s management has been highly efficient in executing the planning process for the mine and raising the required financing, which was no small accomplishment. The company has already raised $1.2bn from various partners, from shareholders and by debt, giving it plenty of firepower to progress the initial stages of the mine’s development.

As part of the fundraising process, management has moved Sirius’s shares from the Alternative Investment Market to the main market, a move that should allow more funds to buy into the group’s success story. Sirius needs to raise another $1.7bn to finish the construction of the potash mine, and the good news is, considering the prospective profit margins available here, the company should quite quickly be able to raise this additional finance.

Guaranteed profit

Sirius already has many agreements in place with companies around the world to buy its polyhalite (a premium version of potash that does more to boost crop yields than the basic version at a price of $145 a tonne. Customers have agreed to buy 8.1m tonnes of the stuff every year at this price.

The good news for Sirius and its shareholders is that at $145 a tonne, the company is booking a gross profit margin of nearly 400% on estimated production costs of $30 a tonne. Based on these figures, Sirius already has contracts in place giving the company an initial $1.2bn in annual revenue.

To mine the required 8.1m tonnes, it would cost the company an estimated $243m at the price of $30 per tonne giving an estimated profit before depreciation, admin, interest and tax costs of just under $960m. Over the long term, the company is targeting production of 20m tonnes a year, giving an estimated profit of $2.4bn based on the above numbers.

Cash cow

These are just back-of-the-envelope estimates, but they show just how profitable Sirius could become. And even in the base case scenario of production of 8.1m tonnes per annum, the company could be a dividend champion.

Excluding the non-cash cost of depreciation, assuming a 5% interest bill on $3bn borrowing (an extremely pessimistic scenario) and that Sirius’s management can keep corporate admin costs to under $100m per annum, the company is on track to report an estimated net profit of around $500m, or £380m per year. This estimate implies an earnings yield of around 29% on the firm’s current market capitalisation of £1.3bn.

[ppvn] 01/5/2018 19:41

Evening CHF, the bonds don't have to be converted, but economically they will be (or someone will be failing to make as much as they should). If held to maturity, that would assume that 85% of the bonds are not converted, that the value of the underlying shares don't increase above $350k in 2018, or $300k in 2019, etc. In a nutshell it's extremely unlikely in my opinion that they won't all be converted, the prospectus has further information if you want to check it out.

[coolhandfluke] 01/5/2018 17:55

I am sure you guys have covered this but do the bonds have to be converted or could they be held to maturity and then be repaid? Although I guess Sirius wouldn't have the money to repay without issuing and selling shares and hoping the price covered the debt?

[ppvn] 01/5/2018 16:46

Couple of interesting aftermarket transactions again today. Shorts increased modestly to -5.31% which is very interesting. If we don't drop down to around 2-2.5% it means we are a bit further on in the CB sales.

[eurofox] 01/5/2018 16:45

3 trades at the close (including the UT) totalling over 5 million, together with impressive management of the order book all day long all contribute to the good progress - also good to be in a commodities share like this right now

[hazl] 01/5/2018 16:02

'The consensus appears to be hold your nerve – the current share price isn’t really a fair indicator of Sirius’ present value let along what it might be worth when Woodsmith is up and running.

The most conservative of the brokers covering the mid cap mine developer is JP Morgan Cazenove, which thinks the stock is worth 45p, or around double what it’s changing hands for today.

Liberum reckons the stock is worth 60p, which would value the business at almost £2.7bn, while Shore Capital sits at the top of the range at 65p, or 82.5p once the second round of funding is complete.

“While Sirius is currently at development stage and still some years from becoming a cash flow-generating company, an investment in should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe,” said Shore analyst Yuen Low in a note to clients.

The company has made significant progress with activity on the ground increasing every month and opportunities presenting themselves to lower the investment required to build Woodsmith.

Commercially Sirius is making headway with the offtake deals for more than 4.3mln tonnes of fertiliser a year already in the bag.

Liberum believes the company needs binding agreements adding up to 6-7mln tonnes to deliver the stage-two financing.'
Proactive investors April 2018

[eurofox] 01/5/2018 15:31

of SQ or EF or OZ

[mr.oz] 01/5/2018 15:21

EF , don't disrespect SQ or we'll have to consider moderation
;-)

[coolhandfluke] 30/4/2018 18:53

Another 20 million shares traded today. What's that about £3.5 grand for the broker? I think we're in the wrong job.

[ppvn] 30/4/2018 18:07

Trust people noted the transaction for 1.025mm shares in addition to the usual post close sale number. May be a PI, but could hint at further accumulation. Time will of course tell.

[hazl] 30/4/2018 15:36

Thank you Muckshifter interesting thoughts.

[ppvn] 30/4/2018 15:14

Quite possibly Eurofox. The reason I was so excited after Sirius' announcement of the incentivised conversion was that I interpreted it that a buyer had stepped up for the entire amount. JPM also reached this conclusion at the time where they came out with their 80-90% hedged figure. Not to be at the time unfortunately, but all we need are around four more chinamen...

Everyone at this time knows it's the CB holders that are providing the liquidity for this share. Makes sense to approach them directly to buy.

[eurofox] 30/4/2018 15:11

A phrase that stuck in my mind from the recent bond conversion RNS was "This Invitation for conversion provides the opportunity to facilitate orderly conversion for Bondholders while enabling the Company to optimise its capital structure ahead of stage two financing later this year". I am wondering if one of the implications of this process on which the bond holders must have been consulted, was the offer to the bond holders of a facilitated coordinated sale of shares through just a few market intermediaries so that the individual bond holders were not competing with each other and thus causing disorderly disposal of shares.

The precision flow of shares through the LSE order book suggests this might be the case.