Securing project finance for the North Yorkshire polyhalite mine is the ‘final hurdle’ in the way of unlocking a possible US$7bn valuation, says Liberum analyst Richard Knights.
First though, there’s the not so small matter of finding US$1.6bn of finance to build the first phase of the mining operation.
Liberum’s Knights says the financing will likely come in the form of high-yield debt and equity. Clarifying the quantum and nature of the funding will in itself remove risk from the Sirius investment proposition, he explains.
Knights added that a 50:50 mix of debt and equity would see an 80p per share valuation for the mine's first phase.
Plainly a lot has to be done before Sirius investors can start spelling million with a B, nevertheless Liberum sees substantial upside in the nearer term.
With a 40p price target the broker suggests the AIM quoted share should more double in value from the current price of 18p - a move that would see the market capitalisation close to £1bn.
For context, the share is already up 140% from around 7.5p in just over a year.
Liberum’s target is based on a number of assumptions, including a polyhalite (POLY4) price of US$125 per tonne.
But, Liberum has also created an interactive valuation model, which allows investors to tinker with many different variables - including funding terms, debt-to-equity splits, capex costs and currency rates.
A key point to be highlighted is that Knights sees significant upside in important areas including price, demand and the mine’s potential capacity.
“We believe there is up to a 100mt addressable market for POLY4, enabling Sirius to ramp up to 20mtpa over time,” he said in a note.
“We model Sirius producing 10mtpa and delivering >$800m of EBITDA by 2023, and 20mt delivering $1.2bn EBITDA by 2027.”