It has been a volatile month for mining stocks, with big names such as BHP Billiton, Rio Tinto and Anglo-American blown about by every scrap of Chinese data, both good and bad.
That hasn’t been the case with Sirius Minerals (LSE: SXX). Its one-month performance chart is a near vertical line, with a rocking 70% growth.
Investors in this stock have a lot of things on their minds at the moment. China isn’t one of them.
Sirius In The Black
When Chinese GDP figures revealed that exports had dropped by a whopping 15% in March, mining stocks plunged.
They weren’t helped by Citigroup downgrading its ratings across the sector, in the wake of revisions to commodity prices forecasts.
AIM-listed potash development group Sirius Minerals, on the other hand, was on the receiving end of a broker upgrade.
Liberum Capital set its target price at 29p, suggesting a potential 125% upside from today’s 13p purchase price.
Planning Pitfalls
Sirius doesn’t bob up and down in line with the copper or iron ore price, it is all about the potash.
While its flaghips York Potash project, in countryside between Whitby and Scarborough, is highly promising, Sirius first has to first navigate the UK’s labyrinthine planning process to get permission.
Any hint of progress, and up the share price goes. While it’s nice to see a mining stock that isn’t overexposed to a potential China slowdown, the vagaries of UK planning a possibly even more uncertain.
As if to make things harder, the plant will be in the rather beautiful North York Moors National Park, although Sirius has played the sustainable investment card, pledging to minimise any scenic disruption through its “zero harm” commitment.
Lucky Numbers
The other big concern is that Sirius is eating through cash while it waits for an answer, and although it recently raised £15m through an oversubscribed placing at 7p a share, the money won’t last that long. It may soon be coming back for more, which could make investors nervous.
7p, 13p, 29p… all the numbers in this article are pie-in-the-sky, or rather potash-in-the-ground, until Sirius gets the green light.
Given the employment and economic benefits, hopes are high, but this is a guessing game. And even then, getting the stuff out of the ground won’t be straightforward.
Big Potatoes
York Potash has a long way to go, as does its spin-off polyhalite powder, which recent research suggests could boost potato crop yields by up to 10%.
But there is a long way to go and a lot could go wrong in between, including a downward shift in wider market sentiment, which could make future investment harder to find.
If gambling on planning permission committee decisions is your thing, welcome to Sirius Minerals.