There are few betters ways to turbo-charge your long-term wealth than by getting in early on a company that develops into a big stock-market winner for decades to come.
Great long-term prospect
Sirius Minerals owns “the world’s largest and highest-grade polyhalite deposit”, and aims to become “a leading global multi-nutrient fertilizer producer”. Furthermore, the company forecasts impressively low operating costs, “delivering industry leading cash margins of 70% to 85%”, and, just for good measure, reckons the resource has a lifetime of “100+ years”.
Sirius has done a fantastic job of gaining planning approval for the project, which sits in the North York Moors National Park. Working towards first production in 2021, the company forecasts a capital funding requirement of $3.56m, the aim being for part to come from new equity but the majority from borrowing.
At a current share price of 15.5p, Sirius is valued in the market at about £350m. If management can do as good a job on the capital funding as it did on gaining planning approval, and if there aren’t too many setbacks or cost-overruns in construction, investors today could be looking at a great long-term prospect, even with a sizeable shareholder dilution in the first stage of funding.
One to watch
RM2 International is in the process of commercialising its innovative long-life composite pallet, together with tracking and management software, “to establish a disruptive presence in global pallet supply”.
However, the company has endured some setbacks and delays. Last September, management said it would be changing the pallet coating as a result of customer feedback, pushing back mass production into 2016. The delay necessitated a £30m placing. Today, RM2 has announced it will be shifting production to China. However, as a consequence of moving some of its manufacturing assets from its existing Canada base, the company “will fall well short of its 2016 production target”.
The business — valued at about £150m at the current 37.5p a share — still has the potential to deliver, but with the history of delays and a further fundraising looking like it’s in the offing, it may be prudent to watch this one for the time being.
AFC Energy describes itself as “the world’s leading developer of low-cost alkaline fuel cell technology”. The company is focused on large-scale industrial applications, and says its technology “has the potential to be the catalyst, which transforms the way in which industries of today produce energy for tomorrow”. The company has completed an ambitious programme to prove its technology at a gas plant in Germany — only marginally over schedule and marginally under the target output — and is currently busy optimising the system.
AFC is aiming for 1,000MW of capacity installed or under development by 2020, and so far has a 50MW project development agreement in Korea with an expected revenue to the company of £400m over 10 years.
At a current share price of 15p, AFC is valued by the market at £46m. I see a clean-energy technology company as an inherently riskier proposition than a potash mine or pallet manufacturer, but AFC does look to be an interesting prospect in this sector.
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G A Chester 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.