Is It Time To Sell Amur Minerals Corporation & Buy Sirius Minerals PLC?

Economist Paul Samuelson once said that investing should be more like watching paint dry or watching grass grow. 

“If you want excitement, take $800 and go to Las Vegas,” he added. 

He may have missed the fun with Sirius Minerals (LSE: SXX) and Amur Minerals (LSE: AMC), both of which have been under pressure in recent days — but for very different reasons.

Sirius Minerals

As it drops, Sirius stock arguably becomes a more appealing buy — it’s as simple as that.

Whether or not it’s a buy now is another matter, however.

As I argued on 26 May, there were at least three reasons why you’d have done well to avoid Sirius at that point in time — the stock is down 18% over the period. 

But has Sirius become cheap enough since? 

As you might know, its valuation hinges on the daily news flow and the possibility that the miner — whose financials do not help in the determination of fair value — will secure planning permissions for a huge potash development that sits right on the edge of the North York Moors National Park (NYMNP).

The Fall 

Its stock plummeted last week as the outcome for its application became even more uncertain.

It ended up trading at 18.25p on 18 June, down 15% on the day; at that price, Sirius was still some 4.75p (about 30%) above the level that it recorded on 8 May (13.5p), when it announced that the NYMNP Authority had confirmed that they intended “to hold a special planning committee meeting on 30 June 2015, with the following day also available if required”.

As a key meeting approaches fast, its stock has lost more ground in recent days, and currently changes hands at 17p.

In spite of that, Sirius still looks expensive — even more so when you consider the terms of the £15m placing that was executed at the end of the first quarter, when 225m of new common stock was placed by bookrunners Liberum Capital and Macquarie Capital at a price of 7 pence per share (WH Ireland Limited ranked lower in the syndicate as a “manager”) — three banks arranged a deal whose net proceeds stood at just about £15m.

One element worth considering was that the placing was not underwritten, which means that the bookrunners did not want to keep any exposure to Sirius on their books in the event that investors had decided not to commit to the deal — not even at a lowly 7p a share. 

Is Amur Any Better?  

Amur is a much simpler investment case, in my opinion. First off, it is one step ahead of Sirius, for instance, having already secured and registered a licence for its benchmark Kun-Manie project.

Nothing new has been reported since 10 June, so its risk profile has not changed much in the last few days.

So why is its stock under pressure? 

While it’s true that its shares are down today (-6.6% at the time of writing), you’d expect some weakness in a stock that has rallied more than 100% in the last month of trade — wouldn’t you? 

Some investors may have simply decided to lock in hefty capital gains, perhaps opting to consider Amur at a later stage. That would be a sensible strategy — we are blind on financials and projections, so its stock remains a highly speculative bet, one for which a “buy and hold” strategy could seriously harm your returns. 

Sirius and Amur do not stand a chance to beat a small-cap stock that offers plenty of value right now, as our Motley Fool analysts point out in a brand new report

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Alessandro Pasetti 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.