Sirius 22p Questor says SPECULATIVE BUY
Potash is an agricultural fertiliser and demand is expected to rise over the next 50 years as the global population rises and the amount of arable land shrinks.
Sirius (Berlin: TBU.BE - news) is expected to be loss-making for some time, but is an interesting speculative play on global demand for food. Last week, the company said that its drilling programme means that it could increase its “inferred” resource by 70pc to 2.2bn tonnes of polyhalide.
Polyhalite is a source of potassium containing compounds such as sulphate of potash and muriate of potash.
This represents another step on the road to commercialisation, but further drilling and testing is required for the next stage, which is the movement of these resources from an official category of “inferred” to “indicated”.
The company will hopefully be able to transfer a significant proportion of the resources into the firmer category by drilling in the first quarter of next year, according to Chris Fraser, its managing director.
The market was initially disappointed that conversion of the resource category could not happen at this update, but Questor is unconcerned.
This investment will take time for value to be realised and should be regarded as highly speculative. Last tipped at 18p in September, Questor keeps a speculative buy because the theme of future food demand remains compelling.