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Are Sirius Minerals PLC, AFC Energy plc And LGO Energy PLC Set To Soar?

This week was a huge moment for Sirius Minerals (LSE: SXX), the global potash industry and the UK mining sector. That’s because the company received the final go-ahead to press on with building its potash mine in Yorkshire, with it obtaining the final permits from authorities.

This will allow it to build the first new mine in the UK in over 45 years and it is set to become the largest potash mine in the world. As such, it is a major project which has the potential to supply fertiliser on a vast scale. And, with the crop studies being undertaken by Sirius Minerals showing that its polyhalite fertiliser offers a more resilient crop, demand could prove to be relatively strong once production commences.

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Of course, before then there is a lot of hard work to do. Clearly, the world’s largest potash mine is likely to cost £billions and, while the project is relatively enticing, Sirius Minerals may have some difficulty in obtaining the necessary capital at the desired rate and within its chosen timeframe. That’s at least partly because sentiment in the wider mining sector is rather downbeat and investors may choose to give preference to established, profitable companies rather than new mines.

Despite this, Sirius Minerals holds considerable long term potential and, for less risk averse investors, it remains a company with relatively high long term growth potential.

The same is true for alkaline fuel cell producer AFC Energy (LSE: AFC). It continues to make encouraging progress with its eleven step plan, with in being on-track to deliver its first commercial full-scale operation of the KORE system in Germany by the end of 2015. Upon completion, AFC is set to turn its focus to developing further commercial agreements, with it having already signed agreements to deploy its technology in Korea and in the Middle East as the world continues to shift to using cleaner and more sustainable sources of energy.

Despite it being on track with its programme, shares in AFC Energy have disappointed in recent months. For example, they have fallen by 42% in the last three months despite encouraging news flow. A possible reason for this is profit taking, with AFC Energy’s shares having risen by 464% in the year to July and being capable of further gains over the medium to long term. Although relatively risky, the potential for growth remains strong.

Meanwhile, shares in oil producer LGO Energy (LSE: LGO) have declined by 75% in the last six months and the key reason for that is a disappointing update regarding its Goudron Field, released earlier this week. It stated that the company will experience significant cost implications from a mechanical problem which was encountered in September and reported to the market on 18 September. Since then, unsuccessful recovery attempts and other costs totalling approximately $1.9m have been incurred, with LGO Energy also being potentially liable for the cost of the lost downhole equipment of approximately $1.5m.

Furthermore, the net oil pay observed in one of LGO Energy’s wells was exceptionally thick and the loss of anticipated production from the well is due to have a negative impact on the company’s cash flow forecasts. This has caused the stipulated liquidity ratios in the company’s borrowing agreements to drop below the required level and, while LGO Energy is in discussion with its lenders, in the meantime no further amounts can be drawn against its credit facility.

Clearly, the news is hugely disappointing and places additional uncertainty on the company’s long-term future. As a result, it may be prudent to watch, rather than buy, LGO at the present time, although it remains a company with a relatively appealing asset base and long-term growth potential.

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Peter Stephens owns shares of AFC Energy. 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.