Is Sirius Minerals an unmissable bargain at today’s price?

There’s been quite a lot of news for holders of stock in FTSE 250 polyhalite miner Sirius Minerals (LSE: SXX) to digest today.

In addition to releasing half-year results, it also provided the market with another quarterly update on the construction of its Woodsmith mine in North Yorkshire. The shares have responded positively. Here’s why.

On target

With construction progressing in line with its guidance for the year, Sirius stated that first polyhalite and commercial production was still on schedule for 2021. Given the recent volatility following the announcement of higher-than-expected funding requirements of somewhere between $3.4bn and $3.6bn, that’s got to be some comfort to owners.

At £10.8m, operating losses were also a little over 26% lower than in the first half of 2017, mostly down to a reduction in one-off charges relating to the project. Positively, the total loss over the interim period was almost 40% less than this time last year (£95.3m vs £151.3m).

That said, Sirius’s spend over the last six months (£148m) is evidence of just how expensive it is proving to get this project going.

Cash isn’t a problem just yet. Sirius had £323m at the end of June and recent royalty funding of $250m should help keep the things ticking over in time for Stage 2 financing to be agreed. 

Speaking of which, the £1.4bn cap has signed a number of contracts connected to the project in the last nine months, including those relating to the design and build of four shafts and its mineral transport system. These agreements are regarded as a “major pre-requisite” for the company to secure the aforementioned cash needed to put the mine into operation. 

Recent news that the company had signed an agreement to supply Brazilian fertiliser giant Cibra is further evidence that its polyhalite product is very much in demand. More deals are “expected to be completed soon“. 

Show Sirius the money!

While progress on construction has been firmly in focus so far in 2018, the rest of the year will clearly be dominated by financing. Indeed, CEO Chris Fraser reflected that the next few months will be a “pivotal period” for the company. As such, I wouldn’t be surprised if the share price continues to be unsettled for a while yet.

Not that this should bother those following the Foolish philosophy of buying quality companies for the long term, of course.

From an investment point of view, nothing’s changed all that much. Sirius remains a ‘bottom drawer’ investment, in my view, albeit one that still carries with it a significant amount of risk. 

Let’s not forget that the company is wanting to build a mine with a depth of more than one mile. In addition to this, the tunnel the polyhalite will travel down to be shipped from the River Tees runs for 23 miles. To expect such a massive project to be completed without issue (and consequent reactions in the share price) is surely asking too much. 

Right now, the stock still trades below the 30p mark — over 20% lower than the high of 38p hit back in August. Although shareholders could always be diluted in the future depending what Sirius needs, now could be as good a time as any to get involved. It might not be an unmissable bargain but, once doubts over funding recede, positive sentiment could return in spades.