Buying large, resilient businesses with consistent earnings and holding them for the long term may be the hallmark of a Foolish investor, but some will be willing to take on more risk for potential larger returns among smaller but fast-growing companies.

One share that has caught the attention of many small cap aficionados has been fertiliser development company, Sirius Minerals (LSE: SXX). It has discovered the world’s largest and highest grade deposit of polyhalite (a nutrient-rich form of potash) near Whitby in North Yorkshire. What the company lacks is the ability to extract this product in bulk.  However, things could soon be about to change.

All aboard

One thing most investors in Sirius can’t be accused of lacking is patience. For several years, they’ve waited as the company has obtained the myriad of planning approvals required before the mine can be built.

Yesterday morning, Sirius said it had secured approval for the harbour facilities element of the project: a conveyor system to transfer potash from the mine to the port and new berth and ship loading facilities that will transport the product to buyers globally. While objections can still be made (a claim for judicial review must be made to the High Court in the next six weeks), it’s unlikely this decision will be reversed, particularly given the massive impact the project could have on the British economy.

While a positive development in itself, this decision is also hugely significant since it means all major approvals needed have now been granted. But the previously volatile share price hasn’t budged much (finishing yesterday at 23p) suggesting holders are sitting tight for the company’s next update.

The final piece

There’s one remaining aspect of the project to be finalised, namely what funding has been secured to actually build the mine and get it operational within the next five years.

Managing Director and CEO Chris Fraser said: “Our team is currently engaged in the financing phase of the Project and I look forward to providing further updates in due course. We are closer than ever to delivering this world-class project

That last sentence is key as it suggests an announcement may be just weeks away. The CEO has already indicated he’d like construction to begin in September. If and when financing is announced, it’s thought the company could leave the AIM market soon afterwards. Some investors are predicting it may one day enter the FTSE 100. Should this happen, those who buy the shares now and hold for the long term may be handsomely rewarded. 

Diversify, diversify, diversify!

Small-cap investing can be very profitable. Indeed a quick flick through  Guy Thomas’s Free Capital shows the majority of ISA millionaires interviewed had built their wealth through shrewd investments in small companies. That said, the need for a diversified portfolio is even more essential at this end of the market since a lot of investments are binary in nature: they either succeed or they bite the dust.  

Although things are starting to look very positive for Sirius Minerals and its loyal investors (some of whom have held the shares through many periods of uncertainty), anyone considering purchasing now should also think about countering the increase in risk by holding a few blue chips or an index tracker and by only investing a small proportion of their capital.  

Small caps, big profits

It looks like Sirius Minerals is moving into a higher gear. If and when funding is announced, it's quite conceivable that the share price could rocket. Those with a long investing horizon (trading in and out of a share is very unFoolish), could see their shares generate spectacular returns over the long term.

If buying companies with huge potential appeals despite the added risk, I strongly encourage you to take a look at a special FREE report prepared by the experts at the Motley Fool. They've identified another top small-cap share worth considering for your portfolio.

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Paul Summers owns shares in Sirius Minerals. 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.