Steve Davies, manager of Jupiter UK Growth Fund (GB00B54CH949), explains why he invests in Sirius Minerals (SXX).
“The largest detractor during the month [of April] was Sirius Minerals after it secured a $3.8bn (£3.02bn) stage II funding package for its polyhalite mine in Yorkshire. The funding consists of multiple components, including a high-yield bond and an equity raise. The total raised is a bit higher than previously planned, mostly this is an additional contingency amount and some increases in finance costs. All in, we view this as a very significant step forward for the company, albeit with some indigestion around the share price.
"One relevant point for this funding round is that index trackers are sizeable shareholders in Sirius Minerals following its entry into the FTSE 250 index, which will provide an additional source of demand for the shares.”
Sirius Minerals is the fund’s largest holding and accounted for 6.7 per cent of its assets at the end of May.
Investors Chronicle rates this equity a BUY for reasons including the company receiving financing.
Sirius Minerals has since signed a take-or-pay supply agreement with the Indian Farmers Fertilisers Cooperative to supply POLY4, a multi-nutrient fertiliser. It will supply this product for 11 years, ramping up the amount supplied to 1m tonnes a year by the eighth year, with an option to increase it to 1.25m tonnes a year.
