Is Sirius Minerals PLC Poised To Deliver Big Gains?

Now could be a good time to invest in Sirius Minerals PLC (LON:SXX), explains local resident Roland Head.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

siriusAre the stars about to align for Sirius Minerals (LSE: SXX)?

The potash miner’s shares have risen by 26% over the last 12 months.

What’s more, after several planning setbacks, Sirius is about to submit its final planning applications for both the mine and the port facilities, both of which have strong local support.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Construction imminent

Sirius now expects to be able to begin construction early in 2015, subject to the necessary planning approvals, with production subsequently expected to start in 2018.

As someone who lives close to the proposed mine site, I’ve been impressed by the broadly positive local press coverage York Potash has received, and by widespread public support for the project, which bodes well for next year’s planning decisions.

Great product

The York Potash project has two fundamental attractions: it has the potential to become one of the world’s top five potash producers, and the product itself is superior to conventional alternatives.

Sirius updated the market yesterday with newsof  another crop study demonstrating the superiority of its POLY4 fertiliser over conventional MOP potash feed. The numbers from this and previous trials are impressive: POLY4 has been shown to boost tomato yields by 73%, soybean yields by 13%, and corn yields by 30%.

What about financing?

Sirius is a £240m company with no revenue and just £48m cash. However, the firm does own the world’s largest, highest-grade polyhalite resource, measured at a JORC-compliant 2.66bn tonnes of 85.7% polyhalite.

Sirius also has signed agreements with a number of potential customers, which the firm says have committed to purchase more than 5 million tonnes per year, once production starts.

Based on the company’s low estimate free on board [sale] price of $110/tonne, plus its anticipated 65% cash margin, these sales deals could equate to gross earnings of around $357m per year, with more customers likely to come on board once production starts to ramp up.

Funding is unlikely to be finalised until planning approval is given, but the firm is confident that some combination of investors and debt financing will be available to back the project.

A clear buy?

If the York Potash project goes to plan, Sirius shares could be worth a multiple of their current value in a few years’ time.

The next major milestone will be the planning decisions due in the New Year — followed by the start of construction. Although risks remain, my view is that the shares are a buy at today’s price.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland does not own shares in Sirius Minerals.

More on Investing Articles

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

Down 65% from its highs, this FTSE 250 stock is one to consider buying low

Shares in a strong FTSE 250 company going through a cyclical downturn have caught Stephen Wright’s attention as a potential…

Read more »

Investing Articles

£20,000 invested in a Stocks and Shares ISA 5 years ago is now worth…

Stocks and Shares ISA investors have reaped enormous returns since the pandemic, but how much money have they actually made?…

Read more »