A site visit to Sirius Minerals PLC’s (LON:SXX) polyhalite fertiliser project in North Yorkshire has prompted Shore Capital to restate its ‘buy’ advice and bullish valuation of shares in the mine developer.
Number cruncher Yuen Low said the meet and greet re-affirmed the company’s “positive trajectory”.
Restating his net present value-derived 65-82.5p price target range, Low outlined a number of potential catalysts for the stock, which is currently changing hands for 28p.
He believes the company, which has a market capitalisation of just north of £1.1bn, should be included in the FTSE 250 at the next re-shuffle.
“Sirius’s shares broke orbit in the month leading up to the moving of the company’s listing from AIM to the main market,” said Low.
“It would appear to us that the company is enjoying a similar boost during the countdown to the FTSE 250 milestone.”
The fact-finding visit uneathed a number of interesting nuggets about progress on the ground.
“Pain-gain” sharing agreement with the contractor sinking the mine shaft
Low said Sirius is negotiating what he described as “pain-gain” sharing agreement with the contractor sinking the shaft of the giant polyhalite mine. This would ensure the contractor is rewarded for finishing the job promptly, but penalised if work drags on.
The analyst also said minehead plans could reduce the complexity (and by extension the cost) of the project, while there may also be a low cost-alternative to the building from scratch an export facility on the River Tees.
For the Redcar Bulk Terminal (RBT) may be a viable, ready made option following the closure of the local steelworks.
“The use of RBT would remove/reduce the need to develop port facilities at Sirius’s adjacent greenfield Bran Sands site, in turn lowering tolling rates payable by Sirius (port financing/construction and operations are to be outsourced),” said Low.
“Repositioning of Sirius’s Teesside facilities next to the harbour could result in further savings.”