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Why Sirius Minerals plc is the investment of my lifetime

Image: Sirius Minerals. Fair use.

I always thought of myself as a relatively high-risk investor, but the truth is, I’m a scaredy-cat.

Small isn’t beautiful

I have often been tempted to take a big punt on a small growth stock, in the hope that it would grow into something beautiful. I was tempted on three occasions, but each time lost my nerve. Thankfully, because all three would have been a disaster.

The first was Imagination Technologies Group, recently shafted by Apple Inc. My next choice, digital technology group Monitise, made the interesting journey from 78p a share to 2p. Junior miner Rare Earth Minerals was my last temptation but has done precious little aside from change its name to Cadence Minerals. All three highlight the danger of investing in hotly tipped growth plays.

In a hole

Despite all that, I have finally taken an outsized plunge with Yorkshire-based polyhalite potash mining company Sirius Minerals (LSE: SXX). True to form, it took time to shed my inhibitions. I had written on the stock several times, and tracked its progress for a couple of years. I watched its shares surge to 45p last August, then watched them collapse. I finally took the plunge last November at around 21p, throwing a fat chunk of money into the 200-square mile pit Sirius plans to dig under the North Yorks Moors. And then I watched the share price continue to fall.

Sirius Minerals is at the mercy of news flow. Most of the time, there is no news at all, and its share price drifts lower, as the short-termists lose interest, and new investors lack a reason to buy. However, there is a lot of pent-up interest out there, as we saw at the start of this month, when The Mail on Sunday’s Midas column hailed Sirius as “an adventurous long-term buy” for those willing to take the risk, and the price jumped.

Midas touch

Midas said the mine is one of most ambitious UK industrial projects in decades and success should generate hundreds of millions of pounds for shareholders. With planning permission in the bag its prospects are promising, although the column warned it’s not for the faint-hearted. Yet this faint-hearted fellow is digging in.

The one thing my portfolio lacks is edge, something to inject a bit of excitement and to drive outsize returns. Sirius gives me that. It is also increasingly respectable, joining the main market at the end of April 2017, where it must now be held by FTSE 250 and All-Share trackers, lifting the share price.

Fertile ground

So far, I am 12% up on my investment. That means little to me. I don’t expect the real rewards to start flowing for five or 10 years. Let’s face it, Sirius hasn’t earned a penny in revenues, although it has drawn up some potentially juicy contracts with global customers, many in China. Until then, it is all cost, cost, cost.

My big worry is dilution, as large mining projects have a habit of overrunning. However, if Sirius performs as I hope, this could eventually turn into a five or 10-bagger, so the potential rewards outweigh my possible losses by five or 10 to one. I call that a decent bet. My retirement may depend on it.

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Harvey Jones holds shares in Sirius Minerals. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.