At what price would I buy shares in Sirius Minerals?

With the recent drop in the Sirius Minerals share price, is now the time to buy?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Like Brexit, Sirius Minerals (LSE: SXX) seems to always be in the news. Yours truly even wrote about the company back in August, asking if it was a bargain buy or a value trap.

My conclusion then was that there was too much uncertainty and risk surrounding the company. That was two months ago. At the time, its $500m bond sale had just been pulled, with unfavourable market conditions being cited for the decision. With all of the recent noise about Sirius Minerals, I wanted to investigate whether my position has changed and at what price I would buy the company’s stock.

In a hole

Since I wrote about the company in August, the shares in Sirius Minerals have fallen by over 60%. They are down over 80% in the year to date, with the share price now hovering below 4p.

I have concerns with mining stocks in general. To begin with, the companies usually have to splurge vast amounts of funds to attempt to return money to investors. But if a business is not be generating any revenue and has a problem accessing funds, as is the case with Sirius Minerals, that is not going to make me want to invest.

At the start of October, it was reported that Sirius could start mining early in a bid to solve its cash-flow crisis. But approximately 300 job cuts have been made after Sirius stopped night shifts in a bid to save cash.

Another red flag for me is that the UK government has also declined to offer to back up to $1bn of bonds for Sirius Minerals. It had every incentive to support it: helping the local economy, preserving and building jobs, restoring the landscape. Even the financial benefit of at least $400m over the lifetime of the bond was not enough for the government. If the Treasury did offer Sirius Minerals a lifeline, I think I would be viewing the shares very differently at the moment.

The news about Sirius has terrible consequences. It had estimated that its project in the North York Moors would have generated 4,000 jobs. This was welcome for the region, which suffers from the highest unemployment rate in England and Wales. It undoubtedly would have influenced some local personal investors’ decisions when questioning whether or not to buy the shares.

Looking ahead

I want the company to get back on track and start returning money to investors, but I just can’t see it happening in the future. My conclusion remains the same as it was in August. In fact, I would now add that I can’t see myself buying shares in Sirius at any price.

If I currently held shares in the company, I would probably cut my losses and sell them. Unfortunately, I can’t see the stock price returning to the value that it opened the year at. With the recent slump in the share price, I’m not the only person thinking this.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

T Sligo has no position in any of the shares mentioned. 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.

More on Investing Articles

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »

Investing Articles

1 under the radar FTSE 100 AI stock investors should consider buying

Our writer explains why this FTSE 100 pick could be a shrewd investment with its established experience of using AI…

Read more »

Investing Articles

Does the beaten-down Diageo share price make it a no-brainer buy?

Harvey Jones spent years waiting for the Diageo share price to look like good value, before finally buying it in…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

8%+ yields! Should I buy these FTSE 100 income shares this month?

Christopher Ruane weighs some pros and cons of two FTSE 100 shares, both of which have a dividend yield over…

Read more »