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Too impatient for Sirius Minerals? Harvest should be producing fertiliser in 2016

Harvest Minerals has a comparatively cheap early production phase targeted this year, whereas Sirius Minerals has a big British mining project that's rapidly moving towards construction.

POLY4, the polyhalite product that will be made from the the new mine in North Yorkshire.
Sirius's mine in Yorkshire is to come online sometime in 2021.

Sirius Minerals PLC (LON:SXX) continues to move the North Yorkshire Polyhalite project towards production, and quite understandably it continues to be flavour of the month for investors.

The AIM share is up 170% in 2016 making it a notable British growth company - one that is developing a British project with world class credentials. The mine developer’s popularity is quite easy to account for.

When production arrives, presently estimated sometime in 2021, it will be a remarkable and a seriously value adding feat.

There are, of course, many de-risking milestones between now and then that are expected to provide stimulus for investors and day traders alike.

But, another AIM quoted fertiliser stock is on-track to be producing and selling product much sooner.

Harvest Minerals Ltd (LON:HMI), a sector peer that has risen some 300% in the year to date (rising from 5p to nearly 20p), told investors on Thursday that it has now secured the green-light from Brazil’s environmental regulators.

It sets Harvest on a track to start a phase of trial mining before the end of this year.

Here we take a closer look at London’s two buzzing fertiliser stocks that are targeting growth over the coming years.

Harvest Minerals - Early production targeted this year

The Brazil-focused potash explorer last month told investors that new resource estimates at the Arupua project, following a drill programme on only 3% of the property, were sufficient for the company to green-light plans for a trial mining operation.

Harvest Minerals soon after revealed the positive findings of a scoping study which underlined the economic potential of developing Arapua.

In the words of chief executive Brian McMaster: “The project’s where we wanted it to be.”

There are still some hurdles to be cleared, but none that McMaster thinks are insurmountable.

“We’re finalising the process for our permitting,” he says. “It’s not a complicated process and the government has just gazetted a plan to make fertiliser projects a priority. We’ve got to retain a contractor and we’ve got a quote on the desk already.”

What it adds up to is that first production from trial mining is likely to take place before the rains set in this November.

“We’ll do 100,000 tonnes in the first run under the terms of our trial mining license.”

With the environmental approval now secured, Harvest has applied for the trial mining permit.

Permissions granted thus far, see the group able to produce fertiliser product over a four year period in batches of up to 50,000 tonnes at a time – which according to the company allows it to exceed the original plan for 100,000 tonnes per year.

Sirius Minerals - A new British mining story

Analysts have emphasised that despite its recent stellar rise, the journey for Sirius Minerals is far from over.

The current valuation could be deemed, by some, as  very significant given the North Yorkshire Polyhalite Project currently comprises little more than a blue-print with some fairly hefty financing commitments.

But, the layers of risk are being removed. Most recently the British mine developer confirmed that the window for all appeals against the company’s giant fertiliser mine has slammed shut.

It follows the closure of the judicial review period for the mine’s proposed harbour facility on Teesside.

“As a result of this, all key planning and development consent approvals for the company's North Yorkshire Polyhalite Project have therefore been received and all related judicial review periods have expired without any objections being tabled,” Sirius said in short stock exchange statement.

Now the focus will turn to actually building a mine that will, initially, churn out 10mln tonnes of this nutrient-rich polyhalite material to be transported 23 miles underground to the shipping site mentioned above.

The company knows the mine is feasible, economic and it has been given the green light to begin.

Plus, the potential of the asset is huge with mineable resource big enough to last half a century.

The recent definitive feasibility study said it has the potential to generate up to £2.3bn (US$3bn) in operating profits a year. The same report put the project’s net present value at £11.5bn.

The risk now is that Sirius fails to land the cash required to take its monster deposit into production.

“Given said project’s myriad strengths, we are more confident than ever that procuring the requisite funds should not prove overly problematic,” said Shore Capital analyst Yeun Low.

Shares have almost trebled in value in the year to date as the pieces of the jigsaw have begun to fit into place.

According to Shore Capital’s Low, the stock, currently changing 43.4p, is worth 75p, which would propel Sirius’ market capitalisation to £1.7bn.

Quick facts: Harvest Minerals Ltd.

Price: 4.525 GBX

AIM:HMI
Market: AIM
Market Cap: £8.41 m
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