This year has been a disaster for the Sirius Minerals (LSE: SXX) share price. The company entered 2019 riding high on the back of its phase one funding agreement. However, it soon became apparent that getting the next stage of financing in place would be much harder than initially expected.
Then in September, disaster struck. Sirius announced that it was giving up on its attempt to launch a $500m bond issue, which was required to unlock the rest of the phase two funding package.
Since then, the company and its management have been scrambling to find backers for its flagship potash project in North Yorkshire.
There’s been limited interest so far, but that could change now that Boris Johnson and his team are in Downing Street with a big majority boosted by winning a number of unexpected seats in Northern England.
Government spending
The Prime Minister is reportedly planning to spend £100bn over five years on roads, rail and other infrastructure projects across the UK to stimulate the economy. A large chunk of this funding is reportedly going to be allocated to the Midlands and North West, as the Tories try to cement their position in so-called red wall constituencies.
Sirius could receive a substantial funding boost from this promise. Located between Whitby and Scarborough, the mine is right in the centre of the new Tory heartlands, and it has the potential to create thousands of jobs across the region with a relatively small investment.
The price tag to finish the project is still in the area of £3bn, but government backing for just a small percentage of this total could reignite outside investor interest.
Indeed, the company has already informed investors that it is courting third parties who might be willing to fund the rest of the project if further progress is made on the initial stages of construction. This would de-risk of the overall project and reduce the chances of investor losses because Sirius would be able to show that it can offer what it has been promising for so many years.
High risk
At this stage, it is difficult to tell if Johnson and his team will go down this route, but considering the potential rewards on offer for the region’s economy, it could be a quick, easy economic win for the Tories without having to risk too much taxpayer cash in the process.
That being said, considering the potential risks and rewards of the project at this stage, I think it might be best for investors to sit on the sidelines and wait for a concrete proposal, if one emerges, before taking a position. There is no guarantee that the government will offer Sirius the rescue package at this stage, and it may never happen.
So, while the chances of a government bailout have improved for the company, as an investment, I think Sirius is still as risky as it was before the election.
