Interactive Investor

These are the catalysts Sirius needs to double

16th August 2017 13:27

Graeme Evans from interactive investor

As British mining projects go, they don't get any bigger than the work by Sirius Minerals to extract multi-nutrient fertiliser from beneath the North York Moors.

The FTSE 250 company is working towards a date of 2021 for the first production of polyhalite, which it will transport underground to a materials handling facility on Teesside. It hopes the Woodsmith Mine, located south of Whitby, can reach output of up to 20 million tonnes per annum.

The project requires a total of US$2.9 billion (£2.25 billion) in funding, the first slice of which Sirius has already raised with the help of backers including a company controlled by Australian mining billionaire Gina Rinehart.

In half-year results on Wednesday, Sirius offered encouragement to investors by revealing that developments at Woodsmith are on time and on budget.

The results helped Sirius arrest a slide started a month ago and shares were up 6% to 28.73p. The stock is still down 20% since its early June high of 35.5p, however.

Analysts at Liberum said it was particularly encouraging that the project was now ready for the commencement of diaphragm wall construction and ultimately shaft sinking.

The broker has a price target of 60p for the stock, which recently boosted its profile by moving up to London's main market from AIM.

The group's operating loss for the half-year period was £14.7 million, compared to £4.7 million a year earlier due to an increase in activity following the completion of stage 1 financing worth $1.2 billion.

Liberum said: "For us, the main driver of Sirius' share price over the next 12 months will be the signing of incremental, binding offtake agreements which will enable the delivery of stage 2 funding, expected in the second half of 2018."

The company continued to invest in its sales force over the first half of the year as it steps up efforts to identify new crops and markets for POLY4, which is the trademark name of the company's polyhalite products. To date the company has completed over 200 trials on 27 varieties of crops in 17 countries.

Chief executive Chris Fraser said: "We are continuing detailed dialogue with commercial partners around the world, as interest in future supplies of our POLY4 product remains strong.

"These discussions are supported by ever-present and expanding research and development work, which will support customers and farmers in the years to come.

"We also continue to add the skills we need to our team to progress our work quickly, safely and efficiently."

The North York Moors area is believed to be the largest high-grade known resource of polyhalite to be found anywhere in the world.

Polyhalite is an evaporite mineral comprising a natural combination of four of the six macro-nutrients that are essential to plant growth - potassium, sulphur, magnesium and calcium.

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.

Related Categories