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Continued

Number crunching
Because there are so many variables to consider with this number, I think it’s probably better to try and place a value on Sirius using revenue projections instead.

On this basis, assuming the company can reach production of 10m mpta, at an average price of $145 per tonne, we get total possible revenues of $1.5bn. At the time of writing, BHP, the world’s largest mining group, is dealing at 2.8 times sales. Using the same valuation for Sirius gives a possible market cap of $4.2bn or £3.3bn at current exchange rates.

Following the recent fundraising, the company currently has just under 7bn shares in issue so, on a per share basis, the stock could be worth as much as 47p, a gain of 210% from current levels. That’s why I believe the Sirius Mineral share price could be worth 47p, although I should make it clear that these are only rough figures.

Whenever I have covered Sirius Minerals (LSE: SXX) in the past, I have always tried to make it clear that this is a high risk, high reward opportunity. And even though the company has recently sealed the deal for the second phase of funding for its flagship North Yorkshire potash mine, I continue to believe that this is the case.

In the worst case scenario, the equity value of the company could be nothing, but on the other hand, if everything goes to plan over the next 10 years, Sirius could be worth significantly more than it is right now, and today I’m going to explain why I believe the enterprise could eventually command a multi-billion dollar valuation.

Building a business
Sirius believes that the economics of its potash project could help it become the world’s most profitable fertiliser business. A historic investor presentation from the company suggests that at maximum output, the enterprise will be operating with an earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of between 67% and 80% above the industry average of 25%.

The good news is, the company has already inked agreements with potential buyers agreeing to take up to 8.2m metric tonnes per annum (mtpa) of its polyhalite production. The average sale price on these agreements is reported as being $145 per tonne, while management is predicting production costs of around $29.40 per tonne when production hits 10m mtpa.

For the sake of this article, and to give a margin of safety, based on these numbers I’m going to assume that the company can generate an operating profit margin of $100 per tonne when production hits this level, which gives a rough operating profit of $1bn per annum.

This target assumes that the company meets its cost forecast and doesn’t encounter any problems along the way. Considering the fact that the group has already increased its capital costs by $500m in the past 12 months, I think it is highly probable that the final production cost figure will come in higher than initial estimates.

Still, the firm wants to increase output up to the 20m mpta level by the late 2020s, which, management believes, will lead to further cost efficiencies. Overall, management’s own numbers suggest that the company could generate $1bn to $3.3bn in EBITDA at full production, which at an EBITDA margin of nearly 80% would make the business the second most profitable potash producer in the world.

Hi all, I'm just reading through the prospectus and am finding it heavy going to be honest.
Could anyone clarify that the Terms and conditions for the Stage 2 Debt Element ($500 million Initial Bonds and $2.5 billion RCF) are set in stone so to speak..?
As an example the RCF is expected to have a 7 year tenor with an annual interest rate of LIBOR plus 5.0 per cent, are these T&C's legally binding as long as we get the $500 million of Initial Bonds away or can they be changed..?

Yep, keep the closing SP coming please Jonesy, works for me and is appreciated.
As Scotman says your average is now 58226 / 323766 = £0.17984

Now back over 1 bn....

Totally agree Mr.dt, however if we can get the high yield bonds away and finally nail Stage 2 then I think we will see the SP reacting favourably to the Impressive progress on site, IMO of course :-)

The Volume isn't as high as the previous 2 days, do we think that shares are being drip fed so as to keep the SP around the 15p mark..?

Wow, I thought I was heavily invested here, some of you boys are casters deep :-)

A bit too heavy for me LN but you will certainly bring your average down, probably by 10p or so.
If we get somewhere near the Brokers target of 40p you will have done very well.
The very best of luck to you mate..!

Mines, here's a couple of statements from HL.

The 1st is when we should expect funds for excess shares not awarded to be put back into our accounts.
The 2nd is when HL will be putting shares into peoples accounts, it says asap and nothing said about for 8:00am

1. Cash for shares that you applied for but didn't receive will be credited to your HL Stocks & Shares ISA when we receive it from the company. I'm afraid we don't have any indication of when this will be, but it's normally a few days after the shares are allocated.
2. We expect to receive the new Sirius Minerals plc shares on or soon after Thursday 23 May and will add the shares to your account as soon as possible after that.

Hope this helps

I have a feeling there will be no extras Fred as it was over subscribed..!

That is sad news indeed Chesh, can Rita just not just buy some new batteries.....Hmpfffff :-))

Absolutely on the money for me Milo, Stage 2 completion is the catalyst for a realistic SP to be achieved, without it we are in trouble.
To be honest it's been that way for a few years now, the tremendous progress in the field doesn't appear to effect the SP greatly. I think that if we can get the high yield bonds away we will have a much more positive and BB as well.

Just for Info, there are quite a number of new Current Vacancies on the Sirius site, including Agronomists for both North and South India..!

Correct Fred, Stage 2 is not a done deal yet...!
IMO I'd expect it will be but it is not as yet.... If successful we may get back to 22p we will have to wait and see..!

Morning Brad, I also had a good look and couldn't find any new news on Sekaname or Kalahar.

Just for my clarity I asked Tlou a question, I have posted their reply below:

Thanks for your ongoing support.
Tlou only proposed a 10MW PPA as part of our tender. We intend rapidly extending once we have implemented the 10MW.

Superb Podcast, Tony looks like a Cheshire Cat :-))

Ha-ha, very good olda, if it's aftershave though it might be better called Botswanan Badger because that's what you'd probably smell like.
I bet 'Our Henry' would have splashed it all over though ;-))

Thank you Brad..!