Sirius Minerals (SXX LN), are you Serious? Take the money and run!

sirius_logo I think it might be about time for shareholders in Sirius Minerals to get serious and start taking profits.
It is one of the most popular stocks among retail punters, professional fund managers shun away as fundamentals have yet to prove the project is viable.

“The writing was on the wall ..”


I think current stock price is overpriced because:

a) there is not enough cash on balance sheet to fund the ambitious project, current shareholders will be diluted in a series of necessary capital raisings.

Actually Current cash on balance sheet stands at GBP 16.9m,
Serious cash burn at Sirius, GBP 12m in only 6 months (29m cash balance at y/e – 16.9m at 30/6/16). So I Think their current runway could last for another 6 months, unless Sirius issues new

Well it doesn’t take a PhD in Math to realise that current available cash  GBP 16.9m is not enough to fund a USD 2,909m project.


Screen Shot 2016-08-20 at 12.17.38

The million dollar question:
– First production in 6yrs, how much cash would be needed to serve the debt they aim to raise?

It has happened in the past: Sirius Minerals repeatedly issued new shares in the past, and always stock price rallied before the dilution.

Chart: stock price (green line) v number of shares (orange columns)


b) It will be very difficult to raise debt, because Potash market is oversupplied, adding extra capacity will only push currently depressed potash prices further below. I think even though a potential 10% yield on Sirius junk bonds looks attractive, holders would be more worried about their return of their capital, rather than the return on their capital.
The bull argument goes: “yes but Fortesque minerals made it, they funded green-field development with junk bonds”,
The bear case is that Fortesque Metals success happened when there was a massive boom in iron ore and copper, fueled buy the real estate boom in China. This was the time when the commodities supercycle was going upwards and BHP billiton was completing one acquisition after the other and Glencore IPOed, many things have changed since then.

Potash market is massively oversupplied,

Bloomberg News: Russia’s Fertilizer Tycoon Says Potash Glut May Last a Decade

For your eyes only: the current supply / demand and utilisation rate:

Current available potash supply exceeds demand by 41%, utilisation in ’16 stagnated at 71%. Well that means if current Potash cartel wants/needs to bully new entrants they can oversupply the market for a year or two until potential entrants give up.

potash market

Pricing looks ugly


c) I think the recent rally is has all the characteristics of a ‘Mania’ among retail investors.
Sirius is one of the most popular topics in stock punter forums, in brokers like HL and buying activity exceeds than one for respectable stocks like Legal & General, Barclays.
If it is such a bargain, why institutional investors aren’t buying?

Last time we had an institutional buying was almost a year ago, Capital on 21/10/15, the stock was at 17.75 and increased more than x2fold since then.
Screen Shot 2016-08-20 at 11.47.11

Checking twitter for Sirius under their cheeky ticker SXX, it feels like people buy because they don’t want to risk ‘missing an opportunity’

I was wondering, in a couple of years time, Sirius will look like the success at Fortesque or like another similar mania a few years ago with Falkland Island oil exploration companies?

Rock Hopper and the Falkland Oil E&P dream ended up in tears..

rkh gp


Sirius stock price is at all time high, everyone is sitting pretty on paper profits.
I think is about time to cash it before it is too late



  • Caution: This blog is for entertainment only, just thoughts and day dreaming, not FCA registered.
    It’s not advice to buy or sell, please do your own research before you put your money to work for you

  • thanks for sharing your thoughts,
    I still hold my shares tight, after my thorough analysis on management’s NPV assertions
    and my fundamental belief in “greater fool theory”

  • Your article is undermined by your poor grasp of grammar – unconvinced.

  • thanks for the feedback Bosh,
    I am more than happy to fix any specific grammar errors you might have spotted.
    Otherwise, it’s better to leave the numbers do the talking 🙂

  • What I don’t get is as follows:
    1. How did an industry tiddler like YP/Sirius get the mining rights in the first place for a relatively very small sum of money if there is so much money to be made here – and right under the noses of BHP Billiton and such like. Rio Tinto knew of this admittedly vast and high quality PH deposit as long ago as 1938.
    2. Who in this day and age of fast money/returns is going to wait 10 years fro a ROI? 6 years to build and then – assuming MOUs translate into healthy contracts (by no means a given) – say 4+ years to recoup capital outlay.
    3. ICL at Boulby up the road are already down to and actively mining SOP (6KT/week now and ramping up in coming years not least as the MOP is nearly depleted) and they are sitting on 1bn tonnes of it (say 10MT/year for 100 years) AND they already have a good rail link to Teesside. So why the need for a second mine 12 or so miles away? (Are SXX eyeing up acquiring Boulby….? As per above, Boulby already HAS the rail link – what’s it going to cost SXX for the MTS alone??)

  • Hi Big Mike, thank you for the insightful comments,
    I absolutely agree, I think management’s assumptions look very optimistic, it will take too long to have a cash pay back, +10 years and it looks weird they don’t want to use the existing rail link.

  • Do you know the difference between potash and Polyhalite? It would seem that the whole sentiment of your article is based on a Bloomberg report. The seams at Boulby are very ‘thin’ and it costs a lot to get it out of the ground; they do not have the lifting capacity for even 4m tonnes/year for a start. Considering this and ICL’s recent publication of job losses at Boulby points unerringly to the fact that your research is at best flawed and at worst casual.

  • My blog is meant to be casual, I do it for fun.
    Yes, I know the difference between potash and Polyhalite. Polyhalite is the poor-man’s potassium source.
    The typical ‘potash’ has x4 times more potassium (K2O) content than Polyhalite.

    Have a look on that report which proves why Polyhalite is inferior to Potash,
    “The negatives associated with handling unnecessarily large volumes of Polyhalite cannot be overemphasized”

    • That report, and its’ originator were especially chosen by the NYM planners to cast a very negative slant upon the use(s) of Polyhalite. Not of course that he had any interest in trying to ensure that SXX didn’t get the mine built. Have you looked at any of the very positive agronomy studies?

  • By that reasoning SOP is also a poor-man’s potassium source, but sells at a much higher price to MOP.

    Also Andrey Melnichenko’s predicted 10yr oversupply has not stopped Eurochem from developing two new mines.

    • SOP (Polyhalite) market is much smaller comparing to MOP. Global SOP market size is about 6mn tonnes, whereas MOP is about x10 bigger, at 55-60 million tonnes per annum.
      This allows the potash cartel to have a tighter SOP grip on pricing.
      Serious wants to flood the market with SOP, adding 10m tonnes pa in the 1st phase and 20m tonnes in the 2nd phase.
      It’s basic economics, prices go down when supply goes up ..

  • Rarely have I seen so much drivel in such a small space.

    I can’t possibly think what your agenda is. Well, OK, you got me, I do know what your agenda is. If you are going to short a share at lease use a reasonable, if not twisted, form of fact.

    I hope you get burnt, I really do because the money you gain is at the expense of others and that is evil.

    • Gary,
      Don’t forget every short seller is a committed buyer, selling short requires buying afterwards to close the position.

      Stock promoters benefit when prices go up, short sellers when prices go down, it’s a zero sum game.

  • That is true. China dominate supply and demand of SOP. There are far fewer exploitable resources of SOP. So is it only 6m tonnes because of lack of supply or lack of demand. Also how much of the MOP market would prefer Chloride free but can not pay the premium?

    Not forgeting they already have 3-4m tonnes at an average $140/tonne in TORP agreements before production has started and in an oversupplied MOP market.

  • Job losses at Boulby are mainly due to MOP running out (by 2018). They are endeavouring to switch to SOP (of which they have access to 1bn tonnes – if the seams beneath the whole area beneath which ICL have mined MOP are significantly thinner than Sirius’s, whilst I’m willing to be educated in that regard, I struggle to see that there can be that much difference in thickness at least where the two separate license – SXX and ICL – meet…) but seem to be doing this slowly/incrementally for whatever reason – are potential buyers kicking their door down demanding more?

    Anyway, always good to see differing opinions rather than the naieve and blinkered fear and greed-driven bilge on the forums!

  • Thin seams of SOP under Boulby license area?

    “CPL began mining polyhalite in 2010, becoming the first company in the world to mine, process and sell the mineral. The company currently markets the processed polyhalite under the brand name ‘Polysulphate’ worldwide through the network of its parent company, ICL Fertilizers.

    In the face of the proposed York Potash project, CPL have sought to reassure residents that Boulby Mine still has a productive future ahead and Mr Baines added: “Our offshore seismic survey and core samples of polyhalite from underground exploration drilling indicate that there are over a billion tonnes of high-grade polyhalite located in CPL’s mining area at Boulby, in a thick seam at a relatively low depth that is readily accessible from our existing mine workings. We look forward to developing this substantial asset in addition to maintaining our position as the UK’s largest mine and sole producer of potash.”

  • I believe Boulby are endeavouring to switch to Polyhalite, but are limited to how much they can haul and higher operating costs due to an ageing mine.

  • Blue,

    Noted, but how much would it cost to dramatically ramp up production at Boulby compared to getting to production from a standing start at Doves Nest?

    Would be good to know what the upper annual tonnage limit is for Boulby’s rail link.

  • it's all gone pete tong

    I think city analysts are highly biased, issuing Buy notes, because they all stand to benefit from hefty fees.
    Sooner or later Sirius will knock on their door asking for Debt and Equity, to finance the project.
    No bank would want to alienate a lucrative customer with a Sell recommendation and risk loosing their business..
    You can ask Quindell shareholders and Cenkos securities about conflicts of interest between brokers and shaholders

  • A question to the siriously $SXX entrenched:
    If you like so much the Potash / Polyhalite investment theme, why take the execution risk and not put your money to an already operating miner, like ICL ?
    ICL operates the lowest cost in the world potash mine in Israel and they compete with $SXX in their neighbourhood.
    Plus they award patient investors a 4.6% divi
    stock quote in the US:

  • The share price dips 15% off an all time peak. You slam it and it drops another 20%. Within 5 days the SP is back to the “pre-slamming” level.

    Add to that the fact that you have no understanding about polyhalite, why it is better than SOP or MOP, any of the Durham University trials, why the NYM deposit is so important, the volumes involved, the number of years this mine will operate or of the green credentials of this material and I think the average person can make their own judgement.

    Meanwhile, Sirius shareholders are watching their share price rise. How about you post the Sirius SP every month on your site and we’ll just watch and see who is right?

    How about you allow this post on your web-site?

    • Hi Chris, I hope you are right and I am wrong, because this project could benefit local community, exports and shareholders. But I am afraid until now benefits only ‘fat cats’ and stock promoters. Ask yourself, Pottasium (K2) is oversupplied and prices have collapsed, why Poly wouldn’t get oversupplied as well? Why the auditor hasn’t issued a clean report?
      I never delete posts/comments, you are more than welcome to revisit or even better subscribe to get the new articles 🙂

  • How f* amazing has your call been! Well done Seeking Alpha!!! I remember reading it back in September and I was so jealous of seeing all this abuse you got. You clearly hit a nerve and where there’s abuse there’s usually success! The abuse was so much I made a point to myself to check the share price in 3 months time. Hats off!! I am sorry for the people who didn’t listen and lost money but as in every fair competition whoever abused this blogger but lost should have said “well done!” Loud and clear!!

    Chris Chaviaras

  • It´s up again! Quite alot.

    • I put it down to irrational exuberance. It will go down again once they run out of cash and they need to raise capital. I think every investor in Sirus should ask himself: does the world need more potash? and if yes, why current producers operate well below full capacity?

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