Its a great idea. Youve chanced upon a huge potash deposit in the North York Moors. You know that potash is a highly valuable mineral which dramatically improves farmers yields, and is thus wortha lot in the commodity markets. You have a revenue stream which will last many years into the future.
This is the idea around which mining company Sirius Minerals (LSE: SXX) is based. Its entrepreneurial and its brave, but will this company actually succeed?
A lot of the hard work has already been done
Long-term investors in Sirius will know a lot of the hard work has already been done. Many small-cap mining companies can spend years searching in vain for high-quality mineral deposits. Even then their share prices can rocket to sky-high levels, only to tumble when investors realise that the business will not make any profits.
Sirius has already found these deposits. Surely the other steps will be a lot easier, and this is now just a case of managing theimplementation?
However, it remains the case that running a UK mining company is far from straightforward. If you were to dig for deposits in Africa or Latin America there ismuch less regulation. But in the UK there is a whole series of regulatory hoops to jump through.
Thats why Sirius is not a sure thing, but a bet on whether the companys potash minewill obtain planning permission. And the fact that the deposits sit slap bang in the middle of a National Park certainly muddies the water.
But no-one can predict the future
A recent report by the North York Moors National Park Authority Planning Committee highlighted the difficulty, stating that although the mine had a strong economic case, the application has a clear and fundamental conflict with both local and national policies.
Understandably, as soon as this report was published, Sirius Minerals share price crashed, and it now stands some 40% off its May high. So should you buy in?
Well, the success of Sirius Minerals is entirely dependent upon what happens at the forthcoming planning meeting,and at any possible referral to the Secretary of State.
Will planning permission be granted? I have no ideaand neither do you. There is a strong chance it will be, but then there is a strong chance it wont. But my view isSirius Minerals is still worth a punt;however, I wouldntbet any more than, say, athousand pounds worth of shares. If you have already invested in Sirius, I wish you the best of luck.
The next planning meeting takes place on 30th June 2015. Fingers crossed
If you’re willing to chance your arm on Sirius Minerals, and enjoy the adrenaline rush, but also the danger,of perhaps making a mint on small caps, then we at the Fool have found a growth company opportunity which might be just up your street.
Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.