I'm heading off for the Easter Break like many others, obviously...

I'm heading off for the Easter Break like many others, obviously disappointed with no update from the sale process after 3 months since UBS appointment like many others. Quoted from the SFX corporate adviser update 14th Jan "Sheffield will continue to keep shareholders and other stakeholders informed throughout this process". The only snippets I've read in the quarterly on this process has been virtually a cut and paste from the original announcement, holders remain in the dark.

Much digital ink has been spilt on SFX's equity raising situation and share price funk. I have given it much thought obviously, probably because I took too bigger a plunge, on what still looks to me a binary outcome for shareholders. I still can't agree with Franpower's confidence that a major CR at low prices is off the table, although it may well be that neither management nor major shareholders will countenance such at this point in time. This point in time is as good an opportunity as SFX will ever get though to raise funds for the mine build, more delay is a dangerous game. Stock markets have rallied massively, zircon and TiO2 prices have rallied last year and look to stay strong into looming deficits, especially zircon which it Thunderbird's strength, China has again hit the stimulus in a massive way and to some extent commodity prices is all and only about China!

So after a weeks silence as all holders hold their collective breath on what must surely be an imminent announcement on the outcome of the structured sale process, thought I'd list again the possible outcomes/choices facing management. Everything hangs on generating a good JV sell down offer, an outcome that is far from certain. No decent buy-in offers puts management in the position of a bad equity funding options that permanently decrease the share price potential for existing holders, or postponing raising in the hopes some other saviour is around the corner.

Large and well priced JV project level sale
Leads to a share price re-rating and small placement equity raise top-up. Mine build goes ahead (good outcome)

Small and well priced JV project level sale
Leads to a small share price re-rating and large placement equity raise to complete funding at current price. Mine build goes ahead (poor outcome)

Large but cheap priced JV project level sale
No share price re-rating but only small placement equity raise top-up. Mine build goes ahead (poor outcome)

Small but cheap priced JV project level sale
No share price re-rating and large, discounted placement equity raise top-up. Mine build goes ahead (bad outcome)

No JV project level sale but large placement to cornerstone investor at premium
Maybe a share price re-rating and market placement top-up, cornerstone investor gets control for it's premium which removes or complicates any take-over premium that SFX might have in the future. Mine build goes ahead (poor outcome)

No JV project level sale but modest placement to multiple cornerstone investors at a premium
Maybe a share price re-rating and market placement top-up, cornerstone investors don't pay for or get control, take-over premium that SFX might have remains. Mine build goes ahead (fair outcome)

No JV project level sale, no placement to cornerstone investors but large placement on market
Share price falls into discounted CR, mine is built but existing shareholders unhappy as upside is diluted away. Mine gets built. (bad outcome)

No JV project level sale, no placement to cornerstone investors and no CR placement
Company chooses to "continue negotiations with interested parties" after none of the offers matched SFX requirements. Share price falls and SFX crosses fingers that it shakes out a take-over offer from ILU or similar. Dangerous play as the market could not get any better to raise equity funding than now. (bad outcome)

ILU launches a takeover after all 'final bids' have been submitted during the structured sale process
Happy days, depending on take-over premium offered (great outcome)

Selling big chunks of shares to a cornerstone investor, even at a premium, risks handing over control and/or a blocking stake which reduces a future takeover share price tension. However, faced with this option or a huge market only placement raise, I would think management would go with cornerstone investors at a premium. Everyone has their own ideas of what outcomes are likely, most have placed or undone their bets by now.

So here we are again at a nail-biting stage of the sell-down process where the share price is haemorrhaging on increasing volumes. Unlike the end of Feb, where I was prepared to believe that selling was not due to insiders with knowledge no decent offers were on the table, that seems increasingly unlikely now in mid-April. The company has guided in a round about way that by the end of April we should expect some sell-down news, and even such a 3 month wait seems long in the tooth given would be partners were already talking with Azure Capital (previous advisers) back in December.

Every day now it becomes more likely that many at UBS and the company are aware of all offers submitted, and negotiations underway with those parties. This begs two questions then; why is the selling coming in stronger and chasing lower, and why is there not more buying support?

The selling is easily explained by either insiders selling out, manipulation prior to a takeover or investment deal where a lower price suits, longs panicking late as the pressure builds. Clearly as the ASX, and resources index especially, hit new highs after a huge rally sellers are not exiting on fears or overvaluation. If anything, would be shareholders, as with buy-in partners, should be raising their offers into the more positive economic environment.

The lack of buying is more problematic. It is quite fair play imo for any management in SFX's position, especially faced with potential manipulation of their share price down, to be having conversations with long term supporters indicating positive offers are on the table and being negotiated. Nothing detailed as to breach disclosure rules of course, but a nod towards buying a bargain and supporting the share price in the face of manipulation downwards. Good news nearly always leaks and after the share price shellacking this last 4 months some positive rumours are fair play indeed. There is a lot riding on the outcome and where the share price is when the balloon goes up for existing shareholders, they would want a high starting point as much as would be buyers want a low one. Simply put, If there are good offers on the table why are there no bidders pushing the price up. Barely a few 'bargain hunters'under the offer being taken out on the way down.... not a good look.

So this ramble is really me voicing the thoughts running through my mind as Easter is about to come and go without any news except a share price sell down. The lack of any buying support accept at this very late stage in the structured sell down process is most concerning, as no good JV offers will sorely test management faced with only unattractive options left. Do they try and delay in the hope of shaking out an offer from ILU from even lower prices, or dilute now and reduce any future takeover price significantly for existing shareholders? What is the appetite from brokers for a $200M CR, what price would newbies be interested in? Does one sell a control stake to some party for only a small premium in an effort to support the price and associated CR required but at the risk of killing takeover upside?

Of course it can also be darkest before the dawn. This share price action is also exactly what I would expect from a well managed takeover play by Iluka. The company may well even be in takeover talks now and happy to see the share price dip so as not to scare away the suitor (ie Wynn walking away from Crown after talks were leaked). Like I said at the beginning, this still looks like a binary outcome for mine, either the share price indicates CR pain ahead or a takeover. Still a good risk-reward play at these prices but I'll admit the tension from my holding is quite a buzz. Don't relish the thought of a long climb back from a large 50c placement, love the though of buying a boat if the takeover eventuates lol.

Good luck all and safe travels if your driving away for Easter.