Interactive Investor

Sirius Minerals: Buy, buy, buy

28th March 2017 13:50

by Lee Wild from interactive investor

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As promised, Sirius Minerals has published a quarterly update to keep us abreast of progress at its North Yorkshire polyhalite project. The news is good. It's also firmed up plans to shift its quote from AIM to the main market, and announced largely academic annual results. So happy are analysts that three have repeated 'buy' recommendations with price targets far in excess of the current market value.

Given both the tone and tangible progress, that optimism is understandable. Four months after raising £1 billion of Stage 1 financing, managing director and CEO Chris Fraser tells us that Sirius is "progressing in line with schedule and budget". It's why Sirius shares jumped almost 10% Tuesday to their highest since 3 January.

It's likely that site preparation activities will begin in the second quarter of 2017, as expected. And there may be opportunities to speed up spend on the shaft and tunnel, which could shorten the project build.

Contracts for the highways works, geotechnical drilling and shaft engineering are signed and within budget, while talks with AMC for the broader shaft sinking contract are ongoing. Road works at the Woodsmith Mine and elsewhere could be completed within weeks, and access to Lockwood Beck soon.

Crucially, Sirius will move its stockmarket listing from AIM to the main market, as promised.  Expect the switch to go through on 28 April. The ticker SXX stays the same.

Says Sirius: "The company directors believe that a premium listing will support the long-term strategy of the company by providing the company with a more appropriate platform for its growth and is in keeping with the nationally significant nature of the company's project and its market capitalisation."

It will also "raise the company's global profile, increase its trading liquidity and provide the company with a greater range of potential investors for its ordinary shares".

In terms of the numbers, Sirius lost £23 million in 2016, but ended the year with £665.3 million of cash.


"The investment case remains," writes Paul Smith, an analyst at joint house broker WH Ireland. "After construction, there will be a major international mine in the UK capable of production for >50 years and generating significant cash flow. Buy with a 60p price target."


"The company has also added resource in its marketing department, where signing of further binding sales agreements will be the next major catalyst for the equity, in our view," says another joint house broker Liberum. "Our 60p target price is based on 0.6x P/NPV [net present value]. Buy."


After providing a nice round-up of progress, Shore Capital also decided to reiterate its 'buy' rating.

That Sirius is delivering on its promises is certainly encouraging. Yes, there's a long way to go before the money starts rolling in, and there are plenty of potential banana skins between here and then, but this uptick in share price is understandable.

It's quite feasible, too, that Sirius might maintain momentum, at least in the short-term. Hanging onto those gains will be harder, however, and, realistically, many more milestones will be passed before we see that 60p print.

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.

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