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Sirius Minerals surges as US investment giant sells £20mln stake

Analysts have speculated that Capital Group might have stopped trimming its stake for the time being, which would remove the lid that has kept shares at 20p in recent months

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Capital Group is one of Sirius’ biggest shareholders

Sirius Minerals PLC (LON:SXX) shares surged on Tuesday as one of the world’s largest investment groups offloaded another slug of shares worth more than £20mln.

In a stock exchange filing, Sirius confirmed that US giant Capital Group sold off a 2.12% stake worth just over £22mln based on Monday’s closing price.

READ: Is now the time to invest in Sirius Minerals?

It is the second time this year that Capital Group has trimmed its interest in the FTSE 250 group. Back in February, it disposed of a 2.8% stake, which was worth around £25mln.

Such sales typically flood the market and keep a lid on the share price, something which keen Sirius followers would have seen in recent weeks when the stock has never drifted too far away from 20p.

Shore Capital’s mining analyst Yuen Low has speculated that one of the reasons for the sudden jump in the company’s share price today could be because Capital has possibly stopped selling down.

“We know that one of the Capital funds has been selling down not just Sirius but others as well, and it might be that the weakness in the share price in recent weeks is due to that particular fund within Capital selling down,” Low explained to Proactive Investors.

“Share prices are a function of supply and demand. If there is no supply but there is lots of demand, then the price can only go up.

“Maybe [Capital] has stopped selling and that is allowing the buying pressure to come through. That is just speculation though.”

Major financing on the horizon

Low added another potential explanation: momentum, especially with Sirius due to complete a major US$3.5bn financing by the end of the month.

“I would say it is also a possibility [that investors are getting in ahead of that financing].

“If you are confident that the management will deliver, completion of the financing would be an inflection point for the stock because at that point the company’s destiny would effectively be in its own hands.”

He concluded: "I would imagine the real answer is probably a combination of [Capital not selling any more and momentum building], although I'll re-emphasise that this is just speculation on my part."

Sirius shares were up 15% to 25.7p in mid-morning trading on Tuesday.

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