Today’s announcement from Sirius Minerals (LSE: SXX) was not what investors in the company had been hoping for. That’s not to say that the planned potash project near York is any more or less likely to receive approval from local authorities, rather the decision on the matter now looks unlikely to be made before May at the earliest.
Of course, Sirius Minerals had not given a specific date as to when it anticipated that a decision would be made. However, the market appears to have been pricing in a decision rather sooner than May, with shares in the company falling by 9% following the announcement.
Uncertain Period
Clearly, the delay in the approvals process is likely to extend the current period of uncertainty for investors in Sirius Minerals. The reason for the delay is that planning officers at the North York Moors National Park Authority have started a ‘critical path analysis’, which has concluded that a 16-week period will be required between submission of any Supplementary Environmental Information and the determination of the application at a planning committee meeting.
In other words, May appears to now be the absolute earliest date when a decision can be made and, realistically, there is still a chance that there will be additional delays in the process. As such, Sirius Mineral’s share price could come under further pressure in the coming months as investor sentiment may remain relatively weak.
Looking Ahead
Of course, for long-term investors a relatively short period of uncertainty may not be a major problem. That’s because, if the potash project is approved, it could deliver significant profitability and share price gains for Sirius Minerals over the medium to long term. On the flip side, if it is not approved then significant share price declines could be on the cards.
So, the medium- to long-term performance of shares in Sirius Minerals appears to be something of a binary event that depends upon the outcome of the approval process for the planned potash project. As such, a logical investment case for the company is difficult to make.
In the meantime, though, it appears likely that investors willing to take a risk on the approvals process being positive for the company may be able to buy in at a cheaper price, since the aforementioned uncertainty is likely to cause investor sentiment to weaken over the next four months. As such, now may not prove to be the opportune moment to buy a slice of Sirius Minerals.