Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Sirius Minerals a sell at 8.75p Sirius money needed soon.

By Lucian Miers

19 January 2015 06:59

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I lasted shorted shares in Sirius Minerals (SXX) in August 2013 when the company, desperate for cash, announced a death spiral equity finance loan from an unnamed New York based firm. This was misleadingly dressed up as an investment, with CEO Chris Fraser even crowing that it demonstrated “confidence in the on going development of the York Potash project” when anyone familiar with death spiral financing knows that it did no such thing and such arrangements invariably cause steep declines in the share price.

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Comments

DUCK AND DIVE

19 January 2015, 07:58

At 30 September 2014 they had £31m in cash and receivables and liabilities of £11m – so say £20m net. They were burning cash at just over £1m per month so should now have £15m or more – which at that burn rate would take them through to April 2016.

Or have I missed something?

Planning permission is, and always was, a binary risk but local support is overwhelming and the planning authority is today asking HM Government for a share of enterprise values that it permits in its protected spaces.

Funding isn’t easy at the moment but the financial whizzkids who run Sirius have had years to line it up. They may not be the world’s best at putting a planning application together but, as you imply, they are premier league at putting cash deals together.

As a shareholder, I rate it 75:25 to get off the ground.
turbograndad

19 January 2015, 08:10

Lucian,
2015 shaping up to be the year to get your shorts on.
Shaun

19 January 2015, 08:28

at v quick glance: using the half yr report…..£48m cash end of march, £27m end september. Thats £3.5m burn per month giving them just under 8 months from end sep. So end of may cash runs out. Very rough estimates but moneys going to run out soon, if decision date delayed from May any cash raise could be substantially lower. Aimho.
REDBARON

19 January 2015, 08:31

DUCK & DIVE:

You pre-empted me – was going to give a similar comment. On a risk/reward basis this has to be a good opportunistic play.
DUCK AND DIVE

19 January 2015, 09:02

Shaun, yes but it was front-heavy: they have slimmed down and reined in since then. Cash burn in the 6 months to Sept 30 was just over £1m per month.
kingoldby

19 January 2015, 11:09

This is a good case study of how an important industry, capable of creating large exports, a useful product and high paying jobs in an economically struggling area has been nearly completely wrecked by government interference. The behaviour of the Council has been remarkably short sighted, obstructionist and fundamentally stupid. I do wonder about the calibre of people who are taking such important planning decisions.
shaun

19 January 2015, 12:51

Duck and Dive – the figures i gave from half yrs show 3.5m burn a month – are you referring to G&A being 1m/month and the other 2.5m was other costs (capex/licence purchase/?). Can you share reference to a reduced £1m cash burn pls?