Shares in Sirius Minerals (LSE: SXX) jumped nearly 10% in early deals this morning after the company published a first quarter trading update and announced that it is planning to move off AIM and onto the main market late next month.
Investors seem to be celebrating the company’s decision to move away from London’s growth market, as well as Sirius’s construction progress. According to the update, work on transport links into and out of the area have already begun, while the construction of preparation earthworks is slated to get underway during the next few months.
This update confirms that the development of Sirius’ mine is both on-time and on budget. What’s more, today the company revealed that it is “actively evaluating” opportunities to accelerate components of the shaft and tunnel spend to “further de-risk the implementation of the construction project.” So not only is the mine currently on time and budget, but management is also looking for ways to shorten the project schedule, which will ultimately result in a shorter payback period for investors.
Alongside this positive construction update, as mentioned above, Sirius is also planning to move to London’s primary market. The company believe this move will provide 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”.
Positive update
There’s no denying that both Sirius’ construction update and the company’s decision to move to the main market are strong positives for the company’s investment case.
The main market listing should attract a new class of investors to the company’s shares. The vast majority of investment funds are not permitted to invest on AIM, which means they can’t buy shares in Sirius even if they want to. So, the up-listing should help improving trading Sirius’ trading volumes and possibly lead to a higher stock price.
Moreover, today’s update confirms that Sirius’ management is set on bringing the company’s flagship potash project online not only on time but also below budget. As less than 10% of mining projects actually get from the design to production stage on time and on budget, the fact that Sirius could bring its project on-stream below budget puts the company in an elite club.
Bright outlook
Put simply, today’s update from Sirius is extremely bullish and only adds to the investment case for the company. By announcing that management is actively considering ways to lower construction costs, Sirius is allaying key investor concerns that the project will run over budget which has been, up until now, one of the largest dark clouds overhanging the company and its investment case.
As construction gets under way during the next few months, the company should be able to prove to investors that this concern is entirely unwarranted.