Anyone who thought that the Sirius Minerals (LSE: SXX) share price couldn’t drop any lower has been in for a disappointment in recent days. Would-be polyhalite miner SXX has seen its share price close at sub-3p levels three times in the past two weeks and for the first time since it transitioned from AIM to the FTSE 250.
The latest trigger was it being dropped from the FTSE 250, though that shouldn’t have come as a surprise given that the company’s share price has been falling dramatically over time. In 2019 so far, its average price is half of that in 2018. The big question now has to be – is it an investment I’d make?
Huge potential upside
That depends on the nature of my investment goals. I think SXX can no longer be seen as a dependable long-term investment. Let’s be really frank here. The fact is, that until there’s far more clarity on how the company will next rake in investments crucial to its survival, it’s one for the risk-takers. The point though, is that the price has hit such a low that at the current rate, if I invest just a little over £1 in SXX, I will receive 33 shares.
Now, if the price ever rises back to the average for 2019 of 14.65p, the value of my investment will become £4.83p or an increase of almost five times. If the price rises to the all-time high of 45.2p, the capital gain is almost 15 times. If the share price instead falls to zero, when only a small sum is invested there’s little lost. In other words, if I invested in SXX in line with risk levels that are comfortable for me, there’s little downside and a lot to gain potentially.
Campaign to keep SXX alive
And there’s reason yet to be hopeful, I believe. This is primarily because of the weight Sirius Minerals has on account of the economic value it can bring to the North Yorkshire region. A petition’s under way at the time of writing to secure a government loan for the project. While the petition’s still far from getting the 100,000 signatures required for the subject to be considered for debate in parliament, the government did issue a response. It pointed to the commercially confidential nature of its discussions with SXX and that it needs to weigh the project’s benefits against protecting taxpayers’ money.
In writing about this aspect, my point is simply to say that Sirius might be down but I’m not sure it’s out. After all, it has pulled through for a while now and given its past track record, plus how close it is to the finish line before it becomes revenue generating, I think the odds are in its favour. And as I was saying earlier, the price is already so low, there’s little to lose in any case. I’d invest today.
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Manika Premsingh 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.