Shareholders of Sirius Minerals (LSE: SXX) have had a good week. On Tuesday, the much anticipated planning meeting took place.
And the outcome was positive; planning permission was granted and work can now begin on a project to mine high grade potash in the North York Moors. It is predicted a thousand jobs will be created to provide a mineral which is a highly valued fertilizer and thus commands a high price. This would provide many well-paid jobs in what is still one of the poorest regions of the UK.
I used to be sceptical about this company
I have to admit, I was sceptical when I heard about this company. How many times have we talked about small cap mining companies which sound like the bee’s knees but which end up being a flash in the pan?
Many of these startup businesses are carried higher on a wave of optimism, only to crash when people realise they aren’t profitable. But I think Sirius Minerals is different. This is now a genuine mining prospect.
It says something about the ‘can-do’ mood in this country that planning permission was granted so quickly. This is a beautiful part of England, but the company will aim to keep the disruption to the environment to a minimum. And this is the largest and highest grade deposit of polyhalite in the world. Reserves of 2.66 billion tonnes of potash, which is 85.7% polyhalite, means that the world’s farmers can be supplied for many years to come.
A growing global population means there will always be demand for this high quality fertilizer.
But this is a business which is clearly worth a punt
Not surprisingly, the mining firm’s share price has stormed ahead, more than doubling in the space of a week. Many Sirius shareholders, and anyone who followed my tip of last week, will be sitting on a tidy profit.
It is estimated that the firm could sell 30 million tonnes of polyhalite per year, at $110-170/tonne. If all goes well, analysts have estimated that Sirius, which is currently priced at 22.88p, could eventually be worth between 40p and 120p.
This means that, even if you don’t yet own shares in this company, it is not yet too late to buy in. But, as is always the case with small caps, it is better to buy in early, and sell early and once you are making a good profit.
I would say this is still a risky share, because small caps are inherently riskier and more volatile, but Sirius is undoubtedly a company which is on the up. It is worth a punt – just choose your moment and buy in on the dips. And remember, there is no such thing a perfect share, just a profitable one.