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Sirius Minerals on track

The prospective miner’s interim results contained few surprises
August 17, 2017

We may be several chapters into the Sirius Minerals (SXX) story, but half-year numbers served as a reminder that we are still at the start of an epic tale. Moreover, interims said little that we did not already know about the future polyhalite producer, aside from news that the contract to design and sink the shaft at the Woodsmith mine has been awarded, meaning the project remains “on time and on budget”.

IC TIP: Hold at 27.4p

 

That offers some reassurance, as the shaft will eat up 75 per cent of the $977m (£760m) mine site development costs. But in project management terms, we are just a few inches on from a June update flagging the contract negotiations’ imminent conclusion.

Operationally, investors might have wanted a bit more detail on the kind of contract that will secure stage two financing and – somewhere in the distant future – revenues. Take or pay agreements have so far been signed for 3.6m tonnes of annual production, and management hopes recent investment in the sales team should lead to incremental deals before the year is out.

As the operating loss was only £14.7m for the period, the bottom line in the table below is explained by a £133m non-cash fair value adjustment to the convertible bond and royalty financing derivatives.

On average, analysts are guiding for an adjusted pre-tax loss of £18.9m and a loss per share of 0.3p this year, and losses of £18.5m and 0.3p in 2018.

SIRIUS MINERALS (SXX)  
ORD PRICE:27.4pMARKET VALUE:£1.22bn
TOUCH:27.3-27.5p12-MONTH HIGH:50pLOW: 17p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:9.6pNET DEBT:£377m*
Half-year toTurnoverPre-taxEarnings perDividend
30 Jun(£m) profit (£m)share (p) per share (p)
2016nil-4.5-0.18nil
2017nil-151-3.60nil
% change----
Ex-div:n/a   
Payment:n/a   
*As defined by the company: includes cash, cash equivalents, resitrcted cash and bank deposits, less interest-bearing debt.