Sirius Resources (ASX: SIR) briefly joined the list of Australian companies with a market cap of over $1 billion after rising to an all-time high of $4.85 in early afternoon trade yesterday. Unfortunately for shareholders, it didn't stay there long, dropping back to $4.40 at the close, before adding another 10 cents today.
In what has been a meteoric rise, the nickel, gold and copper explorer has seen its share rise by more than 8,360% in the last year. A year ago, the shares were trading at just 5.7 cents each, and the company was close to going bust. By contrast, the S&P ASX 200 index (Index; ^AXJO) (ASX: XJO) has risen by comparison, a measly 22%. In fact, Sirius's shares have doubled in just the last two weeks.
So what is all the fuss about?
Well, Sirius appears to have found a massive nickel copper deposit at its 70% owned Fraser Range project. Despite the markets distaste for nickel stocks, and the falling nickel price, prospects of the Nova discovery, as it is being called, are huge. Some drill results have shown hundreds of metres of mineralisation, at high grades, suggesting Nova could also have a long life.
First discovered in July 2012, Nova shares similarities with some of Canada's giant nickel deposits, and a different style of mineralisation commonly found in Western Australia. Two of Canada's deposits ended up being sold to mining giants in multi-billion dollar deals. As with the Canadian deposits, Nova appears to contain copper and cobalt, as well as nickel, meaning extremely low production costs with a short pay-back period.
Evidence is also mounting that Nova could be just the tip of the iceberg, with the company announcing a new zone of mineralisation called Bollinger, with a similar composition to Nova. Recent drilling results have confirmed that Bollinger connects to Nova, and have returned results providing more evidence that this could be a massive nickel copper deposit.
Famed mining prospector, Mark Creasy has been the chief beneficiary of Sirius' rise. With a 21% stake directly in Sirius and a 30% interest in the Fraser Range project that hosts the Nova and Bollinger deposits. And rightly so, after all he was the person to peg the tenements while apparently looking for bits of the crashed US space station, Skylab.
Foolish takeaway
More positive results could be on the cards with managing director Mark Bennett suggesting that the company has yet to drill the sweet spot. A maiden resource estimate is due out later this month, but won't include Bollinger results. It's still a long way from being a mine in production, but results so far suggest Sirius has hit pay dirt. The share price rise shows the attraction a discovery can make to a junior explorer – the problem is that it's like a lottery ticket – there are very few winners, and plenty of losers.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.
