Sirius Minerals Plc (SXX)  undertakes the business of evaluation & exploration of resource properties and focus on the Woodsmith mine development in the UK. It constructs Woodsmith Mine, located in the Whitby, North Yorkshire. SXX holds interests in North Yorkshire polyhalite project, which produces polyhalite, a unique multi-nutrient fertiliser containing potassium, sulphur, magnesium and calcium. The company through its projects serves local, regional and national economies. Sirius Minerals is headquartered in London, the UK.
Key Products:Fertilizer and Polyhalite.
Key Services:Extracting Services and Materials Handling Facility.
Financial Highlights (H1 FY2018, £000s)

(Source: Interim Report, Company Website)

Operating loss for H1 FY18 was £10.8 million against a loss of £14.7 million reported last year. Operating loss reduced in H1 FY18 mainly on account of reduction in one-time charge pertaining to employee incentive scheme incurred in FY17. Sirius Minerals reported a total loss of £95.3m in H1 FY18 as compared to a loss of £151.3m during the corresponding period of the previous year, due to fair value remeasurement loss on the derivative instruments and to some extent, the royalty financing agreement. The group has invested £148 million during the first half to develop projects. During the first half of the year 2018, Sirius Minerals has made significant progress on its construction activities. In the late June of 2018, the company started its MTS tunnel portal piling work at Wilton. As on 30th June 2018, the company’s restricted cash stood at £59.7m and the total cash and cash equivalents reported at £263.7 million. Basic loss per share for H1 FY18 stood at 2.1 pence, compared to the loss per share of 3.6 pence during the corresponding period of the previous year.

Share Price Performance

Daily price chart as on (April 11, 2019) before the market close, (Source: Thomson Reuters)

On 11th April 2019, at the time of writing (before the market close, GMT 11:30 AM), shares of SXX were quoting at GBX 23.08 and were down by 1.22 points or 5.02% against its previous day close. During the last one-year, shares have reached to a 52w high of GBX 39.85 and a 52w low of GBX 17.25 and at the current price level (as indicated in the price chart), shares were trading 42.08% lower than its 52w high level and 33.80% higher against its 52w low level. The company’s stock beta was 2.05, reflecting the high volatility of the stock with the benchmark index. During the last one-year period, shares of Sirius Minerals Plc have delivered a negative return of 20.07%.

Key Risks
Uncertainties around the Brexit deal, Liquidity risk, Commodity prices risk (mainly fall in the Potash & Polyhalite prices), Permits and Licences, and Forex risk (primarily, non-US currencies and Sterling).

Conclusion
Sirius Minerals Plc remains on track to deliver its polyhalite and commercial production on time, construction activities during the H1 FY18 progressed in line with 2018 guidelines. Although the company’s operating loss decreased slightly in the latest reporting period, the business environment does not augur well for its performance. Environmental risks are elevated given the project operates within the confines of a National Park.In Q4 FY18, the company has achieved considerable construction progress during the period and also it has completed the Cibra strategic investment. SXX being one of the cheapest stocks within the UK mining sector and also financing risk diminishing through additional off-takes and procurement contracts. The consumer confidence has been impacted too, making clients of the company more reluctant to invest more during a volatile period. This has prompted many investors to withdraw funds from the market, leading to a fall in assets under administration during the period. Based on the above rationale, we recommend investors to keep a cautious watch on the stock at the current price of GBX 23.08 as on Apr-11-19.

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