The North Yorkshire project will be the world’s first large scale polyhalite mine, the analyst highlighted in a note.
Taking a new look at the mine developer, following a £1.15bn Stage 1 project funding, Knights outlines the key de-risking events that he believes will drive the Sirius Minerals shares to a three-fold rise.
Whilst repeating a ‘buy’ recommendation for Sirius Minerals, Knights upgraded his price target to 60p per share – compared to a current market price of 20p – albeit he also notes that the target represents just 60% of his fully diluted net asset valuation for the company.
“Our fully diluted NPV is 98p per share, or £1.44 on the eve of first production, marginally below our previous £1.02 estimate before we knew the Stage 1 financing terms.
“We continue to assume first polyhalite production in 2022, ramping up to 20mt by 2027.”
Now that the initial stage of funding is in place movements in the nutrient market begin to come into play for investors, he notes, though progress towards a number of further de-risking project milestones will also drive prices.
In focus will be a further 7mln tonne offtake arrangement, he says, as well as any developments relating to the syndication of the Phase 2 debt-based project financing.
Naturally, once Stage 1 operations begin, events on the ground will also de-risk the project and drive investor sentiment, he added.