Why I see more upside ahead for Sirius Minerals plc
Shares in Sirius Minerals (LSE: SXX) ran up as high as 35.5p a share this year on its promotion to the FTSE 250 in June, but they've since fallen back to around 25p a share as investor appetite for commodity stocks waned in recent months. Still, I reckon the North Yorkshire polyhalite miner has a lot further to run, as there are multiple potential bullish catalysts that could help its shares push into higher ground.
Sirius is preparing for its next stage of financing -- a plan to raise £2.1bn of debt by next year to pay for the mine's second stage of construction. Talks to secure government guarantees on a portion of the fundraising are reportedly "progressing well" with the Treasury's Infrastructure and Projects Authority, which could lead to a deal which would significantly reduce its cost of financing for the project.
One thing which could boost its chances of securing good terms in the next round of funding would be the signing of further off-take agreements. Sirius has continued to invest in its sales force over the past year, and is in advanced negotiations with potential customers to expand its commercial reach into new markets. It hopes to announce additional off-take agreements by end of the year, after having already secured a total of 3.6m tonnes in binding 'take or pay' off-take agreements.
What's more, there's also been talks over a potential buyout of Israel Chemicals' Boulby potash mine, which is located just over 10 miles north of Sirius's Woodsmith Mine. The Boulby mine, which has historically focused on potash mining, is looking to boost production of polyhalite, with plans to produce up to 3m tonnes a year by 2025.
A potential tie-up with ICL would give Sirius earlier production, increased scale and infrastructure sharing opportunities, which could deliver significant synergies and improve returns for shareholders. However, not everyone is convinced, as analysts from Shore Capital warn about the risks of ICL's historic liabilities and its ageing infrastructure.
Nevertheless, I still reckon the Sirius is a long-term value play. Although the company is still very early in the development phase and execution risks are very high, the investment opportunity for the stock seems to me very promising.
Huge copper discovery
Another stock offering great potential is Australian gold and copper mining company SolGold (LSE: SOLG). Shares in the company have gained 56% since the start of the year on growing investor enthusiasm with its Cascabel copper and gold discovery.
There's growing evidence that its 85%-owned Cascabel deposit in Ecuador is a huge new copper discovery, rivalling in size some of the world's largest existing mines, including Freeport McMoran's Grasberg in Indonesia and Oyu Tolgoi in Mongolia. Such new discoveries of large copper deposits have become extremely rare in recent years and companies are having to spend ever bigger sums to find similarly sized deposits.
As investors increasingly flock to SolGold's shares, the company has made the move from AIM to the Main Market of the London Stock Exchange, broadening its appeal to a wider investor base and increasing demand for its shares. This bodes well for its future fundraising plans and puts further growth on the horizon.
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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.