“In our view, the short-term equity story will likely be driven by the company’s ability to secure a second round of financing to fund the development of its Woodsmith mine, along with procurement of various remaining scopes of work on the project,” the European bank’s analysts said in a note.
They added: “In our view, financing is still a key issue for Sirius, but the risks to not securing a second round of financing are subsiding.”
Berenberg’s ‘buy’ comes with a 50p price target which suggests nearly 50% upside to the current price of 33.6p.
Looking further ahead, Berenberg believes the market’s attention will turn increasingly to the launch of PLOY4, the brand name for the polyhalite fertiliser product due to be unearthed from the company’s Yorkshire mine.
“The potential for polyhalite and its future role in the potash market has been a hotly debated topic,” the analysts said.
“Polyhalite is a hydrated sulphate of calcium, potassium and magnesium. The mineral contains four of the key nutrients required for plant growth: 14% potassium, 48% sulphate, 6% magnesium and 17% calcium.”
Berenberg added: “The company aims to market POLY4 as a multi-nutrient fertiliser that could potentially take market share away from current incumbent products, such as muriate of potash (MOP) and sulphate of potash (SOP).
“Independent agronomic studies have shown that POLY4 can compete in terms of yield with these existing products, while also providing farmers with a more cost efficient alternative.”
“The company’s viability as an eventual credible player within the fertiliser industry has been questioned frequently and has often polarised the market.”