Why Sirius Minerals is up again

Sirius Minerals has been stuck in a planning application quagmire as it tries to win approval for its potentially massive York Potash project. Getting the authority's go-ahead is vital, but a series of delays has caused a plunge in the share price to new lows. However, the firm has just confirmed it will not be awarding bonuses again this year and there's also news on some lapsed share options.

Directors and staff will get nothing under either the Short Term Incentive Plan or Long Term Incentive Plan for the year to 31 March 2015, said Sirius on Wednesday. They received nothing last year either, but 285,714 LTIP shares will be issued to chief executive Chris Fraser out of a total of 847,381 issued as part of the scheme in 2013. Fraser now owns nearly 123 million shares, or 5.7% of Sirius.

Of greater importance, however, is news that 43.8 million options held by the trustee of deputy chairman Chris Catlow's Catlow Family Trust have been allowed to lapse. Of course, we do not know Catlow's financial situation, but it is understood that the options were in the money and the market could have taken this decision badly. Instead, the avoidance of further dilution of investor's holding has been taken favourably, and Sirius shares are near a 2015 high.

Last month, Sirius raised £15 million from an oversubscribed placing at 7p per share, which will help fund further development at its York Potash project. Multiple delays to the project have put pressure on Sirius's share price, which fell to just over 6p in February. Sirius has been lining up the buyers and approval is expected in May. Expect plenty of newsflow over the next few weeks and months.

"We feel that there will be a positive outcome as Sirius has demonstrated that it will go the extra mile to limit its effect on the local area," said Paul Smith, an analyst at WH Ireland, recently.

"We feel there is considerable value in the York Potash project and we keep our price target unchanged today. Our valuation is based on an NPV (10% discount rate) of the project ramping up to 13Mt/a polyhalite assuming a $2.3 billion capex and a polyhalite price of $150/t, risked for the appropriate stage of the project. Sirius continues to demonstrate a market for its polyhalite product which competes not just with standard potash, but also with sources of calcium, magnesium and sulphate and comes 'preloaded' with a long list of minor trace elements essential for healthy plant growth."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.