Sirius Minerals (LSE: SXX) is a stock that splits investment analysts. I’ve just read one expert claiming this is one the surest small cap plays in the UK today, while another urges investors to steer well clear.
That is what you can expect when analysing a company that hasn’t actually delivered a product to market yet, and won’t do so for at least three or four years.
Sirius Minerals is little more than a hole in the ground, and one it hasn’t got permission to dig yet.
Potash Stash
If Sirius does get permission it can help itself to the highest grade deposit of polyhalite potash identified in the world, right here in Yorkshire.
Its location is also a problem. If it was in the arid Australian outback or a lonely North American Prairie, the drilling would have begun by now. But it is below the North York Moors National Park, a beautiful region in a country with possibly the toughest planning laws on the planet.
So first, investors are betting that Sirius gets the planning green light, and second, that it can get the potash to market before the money runs out.
Redcar, Green Light
There was good news on the planning front when councillors at Redcar and Cleveland Borough Council gave it the thumbs up last week.
It helps that 97% of locals are in favour of the plans, with Sirius offering a “zero harm” pledge. No Nimbys here, this is more a case of “in my backyard, please!”, with excited locals said to be loading up on the company’s stock.
Its shares leapt 7.7% on the news, and have soared almost 75% in the last month alone.
There is still another planning hurdle to jump, because Sirius must also convince the park authority that mining 6.5 million tonnes of potash is commercially viable. Given recent encouraging results for polyhalite fertilizer on potato, cabbage, barley and tomato yields, I would hope for a positive outcome.
Sirius Money
Even then, the Secretary of State for Transport us to sign off an application for harbour facilities at nearby Teeside, and we won’t know the answer until next summer.
Considering the potential £1.2bn annual boost to the UK’s current account balance, and the extra 1,000 jobs it is expected to create, I couldn’t imagine central government contradicting positive local sentiment (not in your backyard).
But don’t invest before acquainting yourself with all the risks.
Last week, Sirius moved another step closer to success. It still has several big steps ahead of it, and must still find a viable market for its product, but progress so far looks highly promising.
I am firmly in the pro camp.