Sirius Minerals Live Discussion

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icebilly 11:24

Forthcoming Quarterly report Sept 2018 Only six weeks to go and counting down to the next Sirius project update. This could be a pivotal report which is due around the 28th of September. Although, SXX have given themselves scope to confirm details by the end of the year. I think Stage 2 financing information will need to be clarified in this issue. They have already confirmed receiving good responses from investment bankers. It’s all quiet from Sirius at the moment, so is Stage 2 nearly there. The waiting will get nail biting. Lets hope for some earlier news from Chris Fraser. Even yesterday Motley Fool was saying the SP could surge on good Stage 2 news. IMHO. IB

proper_pasty 14 Aug 2018

Liberum response to Alphaville So Liberum say it is going to replace MOP but will be priced like SOP. Unbelievable

Ripley94 09 Aug 2018

20p Breach SXX… XXXXX I noticed on Castilian site two hedge funds have short positions on this one . Highbrige & och-ziff. 37p today ( July 2016 high 45p )

icebilly 08 Aug 2018

Can Sirius break through 40p Well massive trading today. Highest level of trades since May11th this year, 43.9Milllion shares traded, (even 18Mill higher than yesterdays Bear strike) and the SP recovered to a 0.36p gain on the day. So were buyers getting on board after seeing a good opportunity? We will have to wait till Friday to see if the steady climb returns. IB.

TrickyDickyTwo 08 Aug 2018

Liberum response to Alphaville …and I don’t mean Liberum. TDT

TrickyDickyTwo 08 Aug 2018

Liberum response to Alphaville A well researched piece that cuts through the bull. TDT

Snowman24 08 Aug 2018

SXX from here further re current volatility; For me the shares are now at interesting junction - with most of us familiar with both sides of the argument. Despite the broker defence which you would expect at such a critical time for the company I would take the alphaville attack seriously. Not because it contained any great revelation, just the old smoke and fire argument. It would appear to me that the financing still has obstacles to clear and I doubt any of us would argue that getting to the now 6.5mt off take agreements has not been straight forward. So expect share price volatility. Also ask yourself, where did the alphaville attack come from? I completely agree with the valuation case but do not believe the progression will be linear nor a straight line. If the financing is agreed and is all debt, this will cause a short term rally in the shares. However thereafter - construction progress will be accompanied with an associated increase in debt. This has the mathematical consequence that initially you need a rather large overrun to disturb the finances of the company, since they have so much undrawn debt. As they progress to 2021 however, available finances will fall dramatically so as construction risk falls, finance risk by definition, rises. At the point when you would expect risk to be falling away ie very close to production, it remains acute due to debt being close to peak, and therefore available finances will be limited. What does all this mean, the returns are likely to be very high, but back end loaded IMHO. The next few years are more likely to be volatile but probably around levels higher than this assuming the financing is secured. I have taken profits for now and will watch the next few months develop around financing. This doesn’t mean I am not in full support of the company and its shareholders… wishing everyone great returns. Snowman24

icebilly 08 Aug 2018

Can Sirius break through 40p Thanks Dan McDum for the buying opportunity. Get in. IB

Snowman24 08 Aug 2018

Liberum response to Alphaville Sirius Minerals* When Alphaville attacks: addressing the bear arguments BUY Target price 60p | Published price 37p | *Corporate Client of Liberum Yesterday FT Alphaville ran a piece amalgamating much of the bear fodder on Sirius here. We think its a worthwhile exercise to address the key points of contention highlighted in the story in order to place some of the project’s risks in context. The two key hurdles for Sirius are still lifting offtake agreements from 5.7mt to c.6.5mt and completion of Stage 2 financing, both of which are pre-requisites to realising our 60p target price and our £1.08 NPV. How one thinks about these two risks ultimately drives valuation and suffice to say, we’re more optimistic than the articles author, Dan McCrum. Regarding ICL’s view of polyhalite as a premium niche fertilizer The article highlighted ICL’s view that polysulphate (POLY4 in Sirius brand name) is a “premium niche fertiliser” which may have potential long-run demand of 3mtpa. There’s no question ICL has always been less optimistic about the ability of POLY4 to be a bulk fertiliser, which is at the very centre of the Sirius investment case. But its worth making a few points to put the ICL view in context: • In the early stages of Sirius’ business plan formulation ICL had been dismissive of the marketing potential around polyhalite, which it had access to around 300m below its potash seam. It has since decided to cease mining potash at Boulby in favour of only mining polyhalite, given the superior economics. ICL currently intends to ramp up polyhalite production to 1mpta and it sees long-term demand of 3mtpa. This long-term view ignores that Sirius has binding sales agreements of 5.7mtpta. • At a 2017 investor day Sirius’ head of marketing JT Starzecki noted his view that the majority of its offtake customers are not replacing niche fertilizer demand (SOPM, SOP), rather substituting KCl (potassium chloride) units with low-chloride potassium units from polyhalite. The simple reason is low chloride units are scarce, primarily due to two thirds of the market coming from Mannheim production (turning KCl into SOP), which has marginal economics at current prices and is capitally intensive. This ‘pent-up’ demand for low-chloride potassium units points to its potential as a bulk fertilizer, substituting demand for potassium units typically taken by more traditional potash. The key difference here is that Sirius sees polyhalite as a bulk fertiliser and its initial offtake agreements imply early customers do also. But if one was to compare the potential market for polyhalite against specialty potassium fertilisers, it would need to be done on a K2O equivalent basis. We highlight the difference between the comparison made in the article, and the same analysis in POLY4 terms. If one was to view POLY4 as a bulk commodity, as we do, the addressable market is significantly larger again based on pent up demand for chloride free potassium units and hence some substitution from the MOP market. We show in the attached note potential for a 100mt addressable market (or 5x Sirius’s maximum mine production potential of 20mT) on pages17-21 of our 2016 report. Regarding the involvement of the Government’s Infrastructure Projects Authority A few points worth addressing in relation to this. The article notes: “… the desired guarantee would dwarf previous financial backstops agreed by the Infrastructure and Projects Authority (IPA), which has underwritten only £1.8bn of lending across nine projects.” This is indeed true, but also fails to mention that the IPA has £40bn of capacity to use by 2026. It also fails to mention that if Hinkley Point ever gets off the ground, the IPA has approved a guarantee of £2bn, which would be significantly more than any guarantee provided to Sirius. On the point of having pre-qualified for investment the article notes: “Pre-qualification is an early stage, however, before the application is assessed or put before the IPA’s risk committee. A spokesperson said “hundreds of projects are pre-qualified. That is an administrative stage that begins the process. Most projects that are pre-qualified don’t go on to get approved”, a point the representative subsequently rang back to emphasise.” While pre-qualification is very much a preliminary step, it does mean the project notionally fits the criteria for investment – i.e. its fits within the definition of projects that could qualify for the guarantee. Whether or not it actually achieves the guarantee will be a function of approval from the IPA’s risk committee. In our view, if the banking syndicate can get comfortable with lending the money, the likelihood of the IPA following suit it high given the benefits of the project (export led growth, in the north, high paid employment etc.). Regarding polyhalite pricing and freight The article notes: “Sirius expects farmers to pay for each of its composite nutrients - potassium, sulphur, magnesium and calcium.” We’re certainly not aware of this. Although the pricing mechanism in existing offtake contracts isn’t public, customers won’t be paying for nutrients they don’t value and in fact, they would be expecting to receive nutrients they do value for free. The polyhalite pricing guidance over the past few years has born little resemblance to the MOP price which the article benchmarks off, but a much closer resemblance to the chloride free potassium (SOP) price - i.e. at $145/t the inference is the customer is not paying for the Magnesium, Sulphur or Calcium. This is a crucial point, as chloride free potassium units in SOP are worth nearly double the potassium units in KCl. To deliver our $7.5bn NPV for the project we model $125/t long-run price on the basis of the marginal cost of producing SOP from using the Manheim method – i.e. the price of POLY4 shouldn’t sustainably trade below this level as the implied SOP price would mean Mannheim production would need to close. Regarding freight costs, the article notes: “The freight cost impact was also laid out. Priced against potassium, Fertecon estimated a competitive price for polyhalite going to Brazil in 2013 would have been $72/t. Going to China, the implied price would have been just $47/t.” and quoting CRU analyst Humphry Knight “The risk is that you get customers who only want one or two nutrients, then you’re basically shipping around a lot of stuff you don’t want.” As noted above, this analysis ignores the price basis on which existing binding agreements have been struck which appears to ascribe value to the chloride-free nature of the product. Regarding shipping around unwanted material, its worth noting for context that the largest bulk commodity market, iron ore, currently trades benchmark product at $62/t. Clearly the impact of incremental shipping charges on a product valued at $145/t FOB is considerably less. Regarding existing offtake agreements The article referred to the Archer Daniels Midlands agreement as a “promotional slight of hand in the way the contract was described in an earlier announcement.” The inference here seems to be that Sirius had misled investors by implying that the agreement was for 1.5mt of offtake from day one. We find this line of argument somewhat perplexing given offtake agreements for any mining operation need to be scaled with a delay to the production ramp up to allow for headroom in case production misses expectation. It would also be odd for a single offtaker on a project of this magnitude to be consuming all of the first year of production. Having covered the stock since the initial ADM deal was signed this is the first time we’ve heard this point raised as a concern, although it is true that the original announcement did not specifically mention that the headline number referred to peak sales. Sirius noted this was due to confidentiality and more granularity was given in other agreements where permitted by the customer. On the company’s Chinese offtakes, the article draws attention to the two changes to agreements in China since 2016. The TCT/peony offtake have been the source of a fair amount of investor scrutiny regarding credit quality, in particular after the CEO mentioned to a Reuters journalist that he did not think the agreement was binding, but later retorted. We think the latest agreement, which replaced this agreements has likely improved credit quality, but there are obvious challenges in doing due diligence on private Chinese companies. Sirius, however, notes it has done significant due diligence, including third party due diligence, on these counterparties, including their distribution networks. It is worth noting that the Yantai offtake for 800ktpa is linked to one of the big agricultural means of production organisations, responsible for getting fertiliser products into farms in the north of the country. …and a few other points worth addressing “Fraser’s answer to that question was to say, in a variety of ways, that Sirius will be better at selling it than ICL has been, and that its rival’s “chipped rock” is somehow inferior to the granules to come.” The implication here seems to be that it is a contentious point that Sirius’ proposed granules delivered superior performance to the “chipped rock” that Boulby is currently selling. Sirius has commissioned studies undertaken by independent bodies such as NRM Labratories, the University of Aberdeen and the University of Limerick that have confirmed granules have a superior nutrient release profile (40 hours vs. 180 hours), better spreading characteristics (lower coefficient of variation), better handling and storing properties and make higher amounts of nutrients available in the soil - all of which improve yield. On the depth of the mine: “to do so it must first finance and build the UK’s deepest ever mine” There are of course challenges related to both shaft construction and tunnel boring , but certainly not any that have been surmountable for decades. The shafts at Boulby mine reach down to 1100m (vs. Sirius at 1500m) and were constructed in the late 1960’s/early 70’s. Learnings from the geology encountered at Boulby have been useful in the planning and design of Sirius’ own shafts. Of course on a global scale 1.5km isn’t close to the deepest mine and there are many examples of successful operations at greater depths. “By comparison, the UK will be on its own if it backs Sirius. Should demand for the fertiliser prove insubstantial, the rock will stay in the ground, along with the money poured into it” This is a risk that equity funders have taken, but the risk taken by the banks and the UK government will be considerably lower. If sufficient offtake agreements of a quality that satisfies the lenders and the IPA can’t be obtained, neither will lend the project money and UK taxpayer won’t be on the hook.

icebilly 08 Aug 2018

Liberum response to Alphaville Thanks Snowman, Good to see Liberum are quick on the case against the FT. Cheers IB

per_ardua_ad_astra 08 Aug 2018

Liberum response to Alphaville A firm riposte by Liberum there, JJP. Many thanks for taking the time and effort to share with readers here. Much appreciated I’m sure - certainly by me anyway. Cheers, per ardua ad astra

JJPHOME 08 Aug 2018

Liberum response to Alphaville Excellent article Snowman 24. I have been a keen investor in Sirius for about 4 years now and watch its continuing progress with great interest. This weeks big gains and yesterdays fall will seem insignificant in the longer term and I have great faith in this really well run large scale project which will be a real boost to the country and its shareholders once production is underway .

23Jez 08 Aug 2018

Any SXX Still Here I do have a quotestream account which I use as part of my due diligence and always before buyinhg or selling. I mainly use short medium and long term moving averages before deciding that I might buy a share. I use bollinger bands momentum and volume next and then look at financial performance and a companys website. I regard myself an investor not a trader I like to keep my TA simple. Complex TA although interesting is for Traders who need to try to identify more precisely when to buy and when to sell. All my life I have done execution only trades. I was taught by my father needless to say a down and out Yorkshireman, who refused to pay a stockbroker to advise and manage his portfolio. Unfortunately my financial education was incomplete when he died aged 54 and I was 24, In those days there were few companies who provided pensions for widows even of senior executives. My mother who was 11 years younger than him lived until she was 97 on the money he left her. I used to buy my cars with what I earnt on the stock market until real life in the form of marriage a child and a divorce caught up with me. I had a good grasp of finance and tax implications and always saved. But as a single parent and a teaching hosptal consultant had no time and little spare cash for serious stock market investments. I have had my iii account for about 6-7 years but I have only made what is for me serious money in the last three years. I survived the last recession by doing nothing as I used DRIP schemes for my existing portfolio, and still do. I am fortunate not to have to rely on my investments for day to day living Investing is a skill learnt by practise. To quote Gary Player “people say I am lucky but do you know the more I practice the luckier I become”. The real test will come with the next recession. This is a bit of a rehash of previous posts I have written on this subject. I am considering getting a stockopedia account some of the posters I am in contact with have these accounts and find them helpful. Gus I think has moved to them. How one researches shares depend a great deal on how one thinks. My MBA tutor told me I thought naturally at a high level of abstraction, and could move freely between universes of dicourse. At the time about 1992 I did not know what these terms meant. In simple terms I am basically a practical academic and problem solver. I enjoy the research I do on shares and sectors, it is real life economics which is basically world history. best wishes 23 Jez I hope I have answered your question as I am not confident I can navigate this part of the website yet

wathonian 07 Aug 2018

Can Sirius break through 40p Sirius is a great project, I have no problems holding for the long term, perhaps he’s never been north of Watford. Perhaps shorting could be his play but he with come unstuck as the share price continues to rise. I’m a little long in the tooth but my kids will have the benefits (not Government benefits!!) GLA W.

icebilly 07 Aug 2018

Can Sirius break through 40p Well I think you spoke to soon, The Financial Times Dan McCrum published an article on Sirius this morning, and was basically downbeat on the whole project. Who knows, or is it just financials playing with the SP. But he failed to mention certain good points, so it’s his view. We are all here for the long haul, so good luck, IB