Shares in Sirius Minerals (LSE: SXX) spiked as high as 24.25p on 16 March in anticipation of the definitive feasibility study (DFS) for its York Potash Project. The study, which was needed to quantify the development needs of the project and make some inroads into working out the required investment, estimated that it has a net present value (NPV) today of $15bn, and that once production starts it would have an NPV of $27bn.

That sounds like good news, but the share price soon fell back to the 15p level when investors learned that development could cost around £2.5bn and take five years to complete — previous guesses had suggested around £2bn over a shorter timescale. But I reckon the news was mostly very good, suggesting low production costs and operating margins of 70%-85%.

The main risk now is in getting funding, with £1bn needed to get started, and that’s surely the key hurdle. It seems likely that it will be through a mix of debt and equity, which will dilute existing shareholders. But there should be plenty of future value there for everyone, and if the first round of funding is successful (and it might not be), I could then see the shares rerated upwards — but I expect volatility until then.

Oily darling

88 Energy (LSE: 88E) is the latest to set the oil investors hearts a-flutter, and it’s all about a major shale discovery in the firm’s Icewine Alsakan exploration announced on 15 February which is, apparently, in a “thermal maturity sweetspot“. Fracking is apparently a suitable approach to get hold of the stuff, so there should be a relatively short lead time to production — unlike with deeper deposits extracted through conventional pumping.

The result has been a more than tenfold rise in the share price since early February, to 3.7p today, so does 88E have a chance of becoming a further multi-bagger in the next few years? I’d say there’s a definite possibility — but the real risk is cash. The company has already needed to issue equity to keep itself going, the latest being a tranche of three million new shares which should be trading on AIM any day now, and there’s sure to be more fundraising needed before much longer.

Horse Hill Posse

The partners in the Horse Hill development in the Weald Basin have also been generating excitement, and shares in Solo Oil (LSE: SOLO), which has a 6.5% interest in the well, climbed 56% between 11 February and 7 March. But since then we’ve seen a 20% fall back to just 0.33p. That fall comes despite the latest flow-test news sounding pretty positive.

We heard that stable flow rates from the three intervals at the test well totalled 1,688 barrels of oil per day over a five-and-a-half day aggregate flow period, and that there was no sign of any falling pressure. The test has apparently beaten UK exploration records, and Solo chairman Neil Ritson called it “truly a game changing well“.

While I’m impressed by the oil discovery and have little doubt there are some nice riches there to be had, I’ve already said that I’m less than impressed by Solo Oil’s financial prospects. And no matter how good the recent update, I can still see existing Solo shareholders being diluted out of it by the time any profits show up.

If you can stand the heat and you can pick the winners, you could make a killing investing in small cap companies, though it's perhaps not a strategy for widows and orphans! If you want an idea for a great candidate, check out our latest 1 Top Small-Cap Stock From The Motley Fool report.

It's not a super-high-risk tiddler. In fact, it has a market cap of around £350m. And our top analysts reckon it's transformed itself in the last few years, so there could be some handsome rewards for those who invest now.

Want to know more? To discover the name of this opportunity, click here now for your completely free copy of the new report.

Alan Oscroft 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.