Back in February, I suggested that the share price of polyhalite miner Sirius Minerals (LSE: SXX) would likely recover over 2018 as progress was made on the construction of its Woodsmith mine and the signing of contracts with buyers.
In the four months since making this call, the stock has indeed rallied — rising a pleasing 37%. Based on the latest announcement from the £1.5bn FTSE 250 constituent, I think there could be more to come.
Africa-bound
Today, Sirius revealed a new seven-year agreement for its POLY4 product with ITL Trading — a Dubai-headquartered global trading company that’s been around for 25 years. The latter provides products and services that are regarded as “critical to laying the foundations for a modern economy” and is one of the biggest fertiliser suppliers to Nigeria.
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The agreement involves Sirius issuing increasing volumes of POLY4 — to the tune of 350,000 tonnes per annum by the fourth year — at a price “linked to a relevant product benchmark” and similar to agreements already made with other companies. This agreement brings the company’s peak contracted sales volumes to 4.7m tonnes per year.
Commenting on today’s announcement, CEO Chris Fraser reflected that Africa is a “huge potential market” for Sirius and that ITL Trading will be “a fantastic long-term partner.” He went on to remark that his company was in “active discussions” with other potential purchasers in Europe, Brazil and India with the view to helping Sirus achieve its Stage 2 financing for the mine.
Unsurprisingly, today’s news was welcomed by the market, with shares in Sirius Minerals climbing 5% in early trading. This, however, will be dwarfed by the kind of capital gains that investors can expect once its mine enters production in late 2021. Indeed, the idea that the company could enter the FTSE 100 in a couple of years — and in doing so put some early holders well on the way to achieving financial independence — doesn’t seem fanciful to me. Just add patience.
Another route to riches
Of course, investing in promising companies like Sirius isn’t the only way of increasing your chances of being able to quit the rat race ahead of time. Another option would be to buy a diversified portfolio of already-established, high-quality, decently-yielding global companies. Hold these — through thick and thin — while reinvesting any payouts straight back into the market and simply let the power of compounding work its magic.
Given that several metals such as copper are forecast to go into supply deficit in the next few years, one company that might feature in such a portfolio is mining giant BHP Billiton (LSE: BLT).
Having climbed almost 50% in value over the last 12 months as investors become enthused by the potential boom in demand for electric vehicles, shares in BHP currently trade on 14 times earnings for the next financial year (beginning in July). That’s fairly expensive relative to peers, but the stock does come with a juicy 5% yield, safely covered by profits.
While it’s possible that political meddling will cause the shares to become more volatile going forward, I think this risk is more than outweighed by the gains long-term holders could eventually reap as the copper price continues to rise. With the latter having already touched its highest levels since 2014 in recent weeks, the future for holders of BHP is looking very promising.
