Sirius Minerals PLC (LON:SXX) has made significant corporate and operational strides during 2019 but the UK mine developer’s actions have not been positive for shareholders – not, at least, on a simple per share basis.
The substantial project funding undertaken in recent months – selling around US$1.14bn of equity and convertible debt - dealt heavy dilution to the smaller, retail, longer term investors that have backed the company since it was only an ambitious explorer.
For context, the company is now near to closing some US$3bn of senior debt financing in the coming months, and, in doing so, Sirius will bring itself to the cusp of delivering a ‘world class’ scale mining operation.
Setting aside this mining sector specific achievement, it is especially notable that it will also mark the completion of one of Britain’s largest engineering and infrastructure projects for decades – which is all the more impressive given that it is funded by the private sector and delivered by a pre-revenue ‘growth company’.
Nevertheless, a simplistic look only at the price of a single share in the company indicates this has been a less than fruitful period for longstanding investors in Sirius.
At the current price of 14.18p Sirius has a market value of almost £1bn (£993.9mln to be precise).
The price of a single share has, however, fallen by just over 33% to date in 2019.
What lies ahead
It is perhaps unsurprising that stock watchers like CMC Market analyst David Madden are now wondering what lays ahead for Sirius and its long tail of private ‘retail’ investors.
Posing the question “can the company claw back heavy losses”, Madden acknowledged that the financing was crucial to the existence and expansion of the company, and that management has been “caught in a tight position”,
“Now that the capital question has been answered, the onus is on Sirius to continue development in Yorkshire,” Madden said in a note.
“Given the aggressive sell-off in the Sirius Minerals share price since April, any negative updates are likely to be met with further declines, but if the stock can hold above the 13p mark, it would be well positioned to claw back some of the recent losses.”
Madden also pointed to a more specialised expert view, highlighting that mining sector analysts at Credit Suisse recently upgraded their stance on Sirius to ‘outperform’ from ‘neutral’.
“The bank noted that traditionally the consensus estimates were above the company’s forecasts, and therefore expectations were high,” the CMC analyst added.
“Now the Swiss finance house feels that analysts’ predictions are in line with the group’s guidance, and Credit Suisse believes Sirius are more likely to top forecasts.”
Evidently, Madden went some way to answering his own question, and, indeed, the expert prognosis appears quite positive.
It is plain to see that Sirius has and continues to make substantial progress and it is clear that substantial value is being created.
The important questions left to answer is how quickly will the operational progress translate into revenue and profitability, and, who is best placed to benefit as the company makes its transition to large scale producer.