Sirius Exploration - Have Recent Events Changed The Picture?

1st Mar '10 by The Prospector

4 comments 5066 reads

Sirius Exploration have recent events changed the picture company news image With the news out today that it has listed its American Depositary Receipts (ADRs) on OTCQX ^[1] and since I messed up the net debt figures for Sirius Exploration (LON:SXX) last time I wrote about it (apologies again), I thought I might put together a little piece on the most recent results, so that I can try to get all my ducks in a row this time. (Yes, I know it's taken me a while to get round to it; the results were out in December.)

Interims to September 2009 ^[2] showed the company busy at work raising finance and making acquisitions. It raised £2.8m of new funding, and acquired the remaining 49% of Dakota Salts to give full ownership. It also acquired 63.5% of AusPotash, giving control of the Queensland Salts exploration permits
After September, the company carried on with its acquisition spree, buying Adavale, with prospects adjacent to the Queensland Salts properties; Derby Salts, in Western Australia; three technology companies focused on carbon sequestration; and an increased share in AusPotash taking its stake to 68.35%.

The company ended the period with £2.9m of cash and cash equivalents, but with a pretax loss of £656k - and increased operating expenses. Now I may be missing something but I'm not really that impressed by the results. It seems to me that the company has continued to buy things. Now, I'm quite good at that - just take me to a second-hand bookshop or an art gallery and watch me write cheques!

What Sirius doesn't seem to have done is to add substantial value to those assets. And the statement uses a lot of words like 'understanding the resource', 'establishing' and 'investigating'. It seems there are still no operations. I also noted that with regard to Adavale, the company doesn't appear to be certain that the operations will be commercially viable. Here's the quote:

“If proven viable, the Board believes the Adavale properties have the potential to provide a major facility for removing Australia’s future CO2 emissions from the atmosphere.”

So this is not a done deal, and I wonder about the quality of due diligence that has been done on acquiring a company that might not actually be worth anything, or am I…

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TrickyDickyTwo

1st Mar '10

With Sirius Exploration I think you need to do a little bit more research into the sector, the locations of the tenements and the significance of the disparate parts of this business before you can start to understand what is developing here. Let me take the tenements in America for a start. Dakota Salts is based in North Dakota. A recent government report highlighted the potash and halite deposits to be found in the state.

https://www.dmr.nd.gov/ndgs/Mineral/nd_saltnew.asp

The significant paragraphs are:-

“Potash may be mined from North Dakota in beds of sylvite (potassium chloride) or sylvinite (mixtures of potassium chloride and sodium chloride). Approximately 50 billion tons of potash occur in the Prairie Formation (Devonian) in North Dakota. These evaporites were deposited in a trough that extends from the Northwest Territories in Canada to northeastern Montana and northwestern North Dakota. Potash beds occupy an area of 11,000 square miles that extends from the Montana border to central Bottineau County and from the Canadian border to central Dunn County. This salt interval reaches its maximum thickness of over 500 feet in Burke County. The potash portion of the salt section has a gross thickness of 83 feet.”

“The main reason that North Dakota's potash deposits have not been utilized is because these same beds are found at a much shallower depths which enable the use of both conventional mining as well as solution mining in southern Saskatchewan. There are currently ten potash mines in Saskatchewan. Kalium operates a large potash plant that processes brines from a series of solution wells near Belle Plain, Saskatchewan. Potash is primarily used in the manufacture of fertilizer although testing is currently being done to determine the feasibility of a potash based water softening salt.”

The first paragraph is an undoubted plus. Massive amounts of potash in insanely thick beds centred on Burke County in North Dakota.

The second paragraph explains why these resources haven’t been commercially viable to exploit to date. The potash deposits in neighbouring Saskatchewan are far more accessible and therefore cheaper to mine. So what has changed? Why was North Dakota not commercially viable to mine for potash 20, 15, 10, 5 years ago but viable now?

The reasons are all down to gas/oil storage, CAES, CCS. You may want to take a minute out to consider where the three major entry points into the USA are for natural gas. Also look at what John Arnold is up to and the Obama Administration’s promotion of clean gas and an alternative to coal fire power station. The John Arnold link is interesting.

http://money.cnn.com/2009/11/23/news/companies/centaurus_john_arnold.fortune/index.htm

The depth of the salt beds, once an impediment to commercial exploitation, is now a very big plus. If you would care to read any of the research posted on the technical aspects of underground storage in solution mined salt caverns you will quickly realise that both the depth and the thickness of the salt beds are what makes Burke County, where Dakota Salts have their tenements, so attractive. Factor into the mix gas, oil and CO2 pipe lines passing through the Dakota Salts sites, the worlds largest wind farm being developed in an adjacent county (read up on CAES, its vey interesting), the proposed ‘re-newable’ super highway and the term ‘right place right time’ springs to mind. 10 years ago this would not have been viable, it is now. This is very much the proverbial “perfect storm”.

They have slowly and quietly acquired the land. They are now slowly and quietly assembling a management team. The sectors? Potash, renewable energy, gas/oil storage, and carbon sequestration. To be in one ‘hot sector’ is usually attractive enough. To be in 4 ‘hot sectors’ at the same time is unprecedented.

I haven’t even touched on the tenements in Australia which, IMHO, are far more exciting and potentially lucrative.

I really do think you need to do an awful lot more research into this company and its potential. The informaton is out there.

All the very best.

TDT :-o

talk2dubya

I will give you some clues on resource.........

http://www.vizmap.com.au/NRM/Commodities/42327.htm

http://docs.google.com/viewer?a=v&q=cache:tk24tz4k3PEJ:https://www.dmr.nd.gov/ndgs/out%2520of%2520print/Miscellaneous%2520Series/MS26.pdf+north+dakota+potash&hl=en&pid=bl&srcid=ADGEESjZ_2g9hIqrQjW9ATL16zao7CDFVixVVGHinRwnXzJp3GNyMIZ9PGX-xxDBA1myd3zCER7kDq6KFXhBjdD04AzR3q2RZaFRNevIo42I6SiR5MYly8MWtIoFb5L_HKMV_baZ6RAf&sig=AHIEtbTebOeyqfH3aVpNu1zlQtUS8NuIRQ

http://www3.interscience.wiley.com/journal/119322713/abstract?CRETRY=1&SRETRY=0

Please do more research before posting. I beg you.

What Sirius doesn't seem to have done is to add substantial value to those assets. And the statement uses a lot of words like 'understanding the resource', 'establishing' and 'investigating'. It seems there are still no operations. I also noted that with regard to Adavale, the company doesn't appear to be certain that the operations will be commercially viable. Here's the quote:

“If proven viable, the Board believes the Adavale properties have the potential to provide a major facility for removing Australia’s future CO2 emissions from the atmosphere.”

So this is not a done deal, and I wonder about the quality of due diligence that has been done on acquiring a company that might not actually be worth anything, or am I missing something?

So the 200 million tonnes of potash is worth nothing if the bi-carb progromme does not work out? You are missing lots as per your last post.

Would just like to add on the viability of the mining. Potash was actually mined in the 1970's - 1980's (again you need to do your research) in ND. However @ $100 per tonne was not economically feasible and was shut down. TDT is right that in addtion to higher prices there are now other income streams which can be developed from the caverns i.e. gas storage and CAES.

The Prospector

In reply to TDT (post #1)

Thanks to both of you for your comments - always appreciated. We disagree, as it happens, but that's fine - that's what makes a market. I have looked at the research suggested and have replied as an addendum to the article above, so I won't repeat the reply here.

Sirius Exploration - have recent events changed the picture?

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