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Sirius Minerals shares set for a re-rating in the coming months as Yorkshire mine advances through development

Liberum has a 'buy' recommendation and with a 60p price target suggests substantial upside, although the broker's full asset valuation sees the mine developer being worth up to 110p per share

oil and gas operations
Project financing will be a major valuation target

Sirius Minerals PLC (LON:SXX) is set for a series of ‘re-rating triggers’ over the coming months as the group’s mine development project in Yorkshire, that’s according to Liberum Capital.

Analyst Richard Knights, in a note,  highlighted that the UK miner’s share price is presently trading at a significant discount of 70% to the Liberum valuation of 110p because of the remaining risks to the project – such as marketing risk, financing risk and construction risk.

Knights does, however, expect those valuation discounts will unwind as the project advances.

READ: Sirius Minerals still targeting Stage 2 financing by end of this year

“The company is in a strong position to largely eliminate two of these three risks in the next 6 months,” Knights said.

“Signposts that it on the right path, such as bank syndicate commitment letters, indications of government participation and/or offtake agreements could be even more imminent.”

The Liberum analyst has a ‘buy’ recommendation and has a 60p per share target, suggesting major upside to the current price of 34.52p.

Closing the Phase 2 financing is seen by Knights as the major catalyst which he believes will trigger the re-rating that will narrow the discount to 50%.

“Sirius expects bank commitment letters in June, which will then be compiled into a final document in July. Positive newsflow around interest levels could de-risk,” he added.

“The company has noted that Europe and Brazil are most advanced in terms of new offtake.

“Finance will be conditional on offtake hitting 6-7mt, but offtake not a roadblock to getting conditional commitments from banks.”

Quick facts: Sirius Minerals PLC

Price: 3.482 GBX

Market: LSE
Market Cap: £236.86 m

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