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Sirius Minerals tipped as ‘buy’ ahead of institutional investor visit to polyhalite mine project

Shore Capital has a ‘buy’ rating for Sirius Minerals and it estimates a risked valuation range between 65p and 82.5p per share.

POLY4, the polyhalite product that will be made from the the new mine in North Yorkshire.
Sirius is working on potential offtake deals of its fertiliser product

Sirius Minerals PLC (LON:SXX) has been tipped as a ‘buy’ ahead of an upcoming institutional investor event at the ‘paradigm-shifting’ North Yorkshire polyhalite project.

In late afternoon trading, the FTSE 250-listed firm's shares were 1.7%, or 0.44p higher at 26.67p.

House broker Shore Capital is organising the tour of the mine development project next month (on Thursday November 23), and today the broker’s analyst Yuen Low issued a note profiling the stock.

READ: Sirius Minerals sees mine development activity rising every month

“While Sirius is currently at development stage and still some years from becoming a cash flow-generating company, an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe,” Low said in a note.

The analyst highlighted that Sirius last month guided that the project was “on time and on budget”, and he added that he is “hopeful that the site visit will yield insights on progress” regarding key deliverables for the December 2017 quarter.

'Key deliverables’ for the remainder of the year

Specifically, Low noted that the ‘key deliverables’ for the remainder of the year include on site operations such as geotechnical drilling and diaphragm walling (or D-walling).

On the commercial front, the group is understood to be working on a ‘take-or-pay’ offtake deal with potential major customers for the mine’s fertiliser product.

“Having previously declined to set target dates, Sirius said during August 2017’s earnings call that it was working to have ‘some new offtake agreements or some incremental volume in place’ by the end of 2017,” Low explained.

“Based on comments made by Chief Marketing Officer J.T. Starzecki during our site visit in mid-May 2017, we are hopeful that significant volumes will be announced at higher prices than before – if so, this should be very positive for the share price (less take-or-pay volumes would be required to support the Stage 2 financing; average received prices could be expected to be higher due to the discounts required to secure take-or-pay agreements; NPV would therefore be significantly boosted).

“If no new agreements/incremental volumes have been announced by then, we will be seeking more timing guidance.”

Shore Capital has a ‘buy’ rating for Sirius Minerals and it estimates a risked valuation range between 65p and 82.5p per share (post-Stage 2 debt commitment) which would suggest upside of 148% to 217% from Monday’s closing price.

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Quick facts: Sirius Minerals PLC

Price: 5.455 GBX

Market: LSE
Market Cap: £382.95 m

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