An Alternative Proposal

Captain Qahn's picture

On 12 March 2019  Sirius Minerals Plc made a rather exciting announcement via an RNS aka regulated news story:

"Sirius Minerals Plc ("Sirius" or the "Company") announces that it has received a conditional proposal from a major global financial institution (the "Financial Institution") in respect of its stage 2 financing.  The Company has been pursuing a senior debt financing with a group of prospective lenders since 2016.  This was most recently adjusted on 22 January 2019 to focus on a US$3 billion multi-tranche structure.  The Alternative Proposal contains an alternative senior debt structure to completely replace that structure.

The Company believes that the Alternative Proposal potentially offers a more flexible and attractive solution to its stage 2 financing requirements and therefore it is pausing discussions with its existing prospective lenders to pursue the Alternative Proposal.   A number of options for the additional non-senior debt financing requirement, as previously outlined in the Company's announcement of 6 September 2018, continue to be progressed. 

The Company is working towards obtaining firm commitments for the Alternative Proposal and its additional financing requirements before the end of April 2019.  The Alternative Proposal is subject to the finalisation of the Financial Institution's due diligence and internal approvals.  Further announcements will be made in due course."

Thankfully, not quite Great Expectations, or 22 RN'sssssss on one day then . ..

Would it be Sensible to name them?

"Sirius would not be announcing this now, and giving a deadline, if the deal was not as good as done."


"In a statement, Sirius said: “The company has been pursuing a senior debt financing with a group of prospective lenders since 2016. This was most recently adjusted on January 22 2019 to focus on a US$3 billion multi-tranche structure. The alternative proposal contains an alternative senior debt structure to completely replace that structure.  “The company believes that the alternative proposal potentially offers a more flexible and attractive solution to its stage two financing requirements and therefore it is pausing discussions with its existing prospective lenders to pursue the alternative proposal.

“A number of options for the additional non-senior debt financing requirement, as previously outlined in the company’s announcement of eptember 6 2018, continue to be progressed.  “The company is working towards obtaining firm commitments for the alternative proposal and its additional financing requirements before the end of April 2019. “The alternative proposal is subject to the finalisation of the Financial Institution’s due diligence and internal approvals. The Woodsmith Mine will provide access to the world’s largest and highest grade polyhalite deposit."

“Further announcements will be made in due course.”

"In a note, Shore Capital described the announcement as “very intriguing”.  The note continued: “Specifically, the alterative proposal comprises an alternative senior debt structure which would completely replace the three-tranche concept for raising US$3.0bn of senior debt that had been outlined by Sirius in January 2019.  “Encouragingly, the alternative proposal potentially offers a more flexible and attractive solution, according to Sirius.

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

An Uplift ... It does actually circumnavigate any & all outcomes of the dreaded 'B' word.

"Looking forward to the updates as things progress in the finance front. Counter bid from the original lenders or have they burned a bridge?  Any other offers on the horizon?  Why didn’t they announce the name of the alternative funding providers?  Is this to stop the “dark forces” inviting them to dinner?"

'How's this for a commute?'

"The massive winding gear that will be used to transport workers a mile underground to Sirius Minerals' polyhalite mine has arrived on Teesside. The company is well advanced with the construction of its £3.5bn mine near Whitby and Teesside processing plant.  It is the world's largest of its kind - and the first deep mine to be built in the UK for 40 years.  Last month the first tunnel boring machine that will be used to construct a 23-mile underground conveyor system, straight to Wilton, was shipped in ready to start work.  The 400-tonne winding gear will be fitted to the top of the mineshafts in the coming months.  It will transport equipment at first; then it will be used to take miners and other personnel up and down the 1,500-metre long shaft to the mine itself - before being used to hoist 10m tonnes of polyhalite a year."





Captain Qahn's picture

‘If you can’t grow it, it has to be mined’

"But it is not the first major mining project to be hit by setbacks or funding problems and there is good reason to feel confident it will go ahead. Serious sums have already been invested, including by investors, which is why many believed, coupled with the job opportunities up north, the government would guarantee debt for the project. Interestingly, that same argument applies to reports JPMorgan, already involved, could be the mysterious backer.

It already employs over 800 people in an area that has lost jobs and been neglected (using the spare capacity at Redcar’s terminal is an example of its effect on the area) and when in full swing it will account for over 2500 jobs, including those in the supply chain it would create. At peak production the project is forecast to add £2.3 billion to UK GDP, export £2.5 billion worth of material, pay £500 million in tax and make £100 million in local payments each year.

The project has cleared the major regulatory and planning hurdles that many considered a bigger threat to the firm’s ambitions rather than securing funding for a fully approved project. Plus, Fraser’s specialty is raising money for mining projects and, having come this far, is unlikely to be keen to falter at the final hurdle.

Investors will hope the matter will be settled within a month but, if not, we will know by June whether Sirius still has the ability to see it through. Until then, the confidence of short sellers will only grow as the clock ticks down."

“The implication that the tunnelling costs could jump a further US$530mln and take up the entire project contingency is at odds with engineers' detailed assessments of all available technical information and extensive ground investigation,” read a note to clients.  “The company’s base case (P65) contingency across the entire project is US$465m – i.e. there is a 65% chance that contingency is below this level. “Given the amount of debt the company expects to take on, lenders will also be undertaking the same level of due diligence and will need to come to a similar view in order for the project to be financed – hence the Sirius view can’t deviate materially from the view of independent technical experts employed by the lenders.”

"“We use the P65 contingency of US$465m and if we took this even beyond the P80 of US$580mln, the impact would have little bearing on our project net present value of US$6.8bn. “Indeed, by simply applying POLY4 pricing in line with existing contracts at US$140/t instead of US$125/t we could add another c.US$1bn to project NPV, dwarfing any potential capex over-run.  “The more important factor will be the amount of headroom the company has in eventual debt structure to see it through a worst-case scenario without the requirement of further equity and we await further developments from the company on this front before the end of April.”

Fight Night.

Ask yourself one question ...



Captain Qahn's picture

Sticks & Stones

A challenging climate :

Ohm ...

Erm ...

Thats not very nice.

"Brazil has suffered another mining dam collapse, though this time there are no reports of dead or missing.

The Rondonia state environment secretary says the dam in Oriente Novo gave way after a waterspout damaged its structure on Friday.

Authorities say there's no risk of contamination from the water, sand and clay that spilled from the dam owned by the Metalmig company."

"As old hands will tell you, a mine’s just a hole in the ground until you can move the dirt to somewhere where someone will pay for it, and at the moment Atlas is only just holding its own."

"As the Queen and Prince of Australia’s iron ore industry, Gina Rinehart and Andrew Forrest going head to head in a fight over junior producer Atlas begs the question of whether the battle is personal or strategic.

Given the history of animosity between these two big personalities - one which exploded into the public arena during the mining tax saga - there is undoubtedly an element of the personal involved in this contest..."

One for the Antipodes.

"This is known as motivated reasoning — and online news source algorithms and social forums are only enabling the phenomenon, allowing for further information curation for the individual."

"We got the farmers to have conversations about changing rainfall patterns and continuing dry spells, rather than us telling them what to do.

"And they told us everything that we needed them to tell us for us to reflect that back to them and say, 'Well, actually, that's climate change'.

"If you take a very left-brain, very scientific approach to these matters, you are going nowhere, and what we used was very right-brain, very heart and gut-driven — and it worked."

"Mr Evans agrees, underscoring the deeply personal connection farmers have to the land, its role in their business approach, and why the message must be managed psychologically rather than scientifically.

"Ultimately, for a farmer to confront the reality that this new climate might be permanent, requires them to go through the five stages of grief: denial, anger, bargaining, depression and acceptance."

Ethical commodities...

"For the most part, investing in the food and agricultural sector is uncontroversial.
"There is no inherent ethical dilemma in investing in the food and agri space, provided these are investments in the true sense of the term - such as investments in companies that make products and/or services that create value for customers and society as a whole," ...  While these companies exploit a basic human need - the need for food - it is not more unethical than investing in an energy, water or educational services company. In short, it is not the area of investment but rather the investment vehicle that determines whether an investment is ethical in nature or not."


Awe Patrol.

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'Exciting Times'

"A Teesside polyhalite mine employing hundreds has reached an "all time" sales high.

Boulby mine is currently the world's only polyhalite producer - until rival firm Sirius Minerals' £3.5bn mine comes into production.

Owner ICL, which switched its entire operation to mining polyhalite last year, has recorded a 30% sales increase as demand for the "ground-breaking" fertiliser grows worldwide.

ICL Boulby vice president Andrew Fulton, said: "This year is very important for Boulby as we step up polyhalite production towards the target of a million tonnes a year by the end of 2020.

"The latest sales figures show the scale of the increasing demand for this ground-breaking mineral, which is only produced at Boulby, and which is benefiting growth and yield for farmers in so many different parts of the world.

“But what we actually do at Boulby is just part of the story…the efforts of our staff at Tees Dock, together with those involved in research and development, marketing and sales, is equally important in delivering our targets."

The figures, he said, reflected the "united efforts" of the entire workforce at Boulby, which is one of Teesside's largest employers.

Products using the multi-nutrient mineral, marketed as Polysulphate, are boosting food production across five continents...

Sirius currently employs 800 people and says it will create 1,000 long term jobs at peak production.

It expects to reach the polyhalite seam in 2021 and to be producing 10m tonnes of fertiliser a year by 2024, supporting more than 2,000 direct and indirect jobs in total."

"Even longer term there is a lot more poly4 to be mined from different license areas, Boulby could be linked underground ... business could go to 50m tons a year or more 2030 on. There will be plenty of world demand for poly4."

The Potash Powerhouse ...

The Prospectus is under protected documents (top left unless you are Antipodean)

Tin Time.

Double Bubble

"“Love’s Labour’s Won” has been a puzzle to Shakespeare scholars for centuries. There are currently three schools of thought.

The first theory, and probably the most obvious, is that Shakespeare did indeed write a play titled “Love’s Labour’s Won” and it just didn’t survive with other plays that did manage to be passed down through time. Some of the proponents of this theory point out that “Love’s Labour’s Lost,” a play that does survive today, would have benefitted from a sequel. That play just stops in the middle of the story and has many loose ends that need to be tied up. Shakespeare may have written “Lost” with a sequel clearly in mind and that sequel was “Won.”..."

Ah, Baldrick !!!!

Oooh err