Today's Sirius Minerals action is par for the course for an AIM stock

If you trade in stocks on AIM (Alternative Investment Market) you need to accept that unlike investing in a FTSE 100 company, swings in the share price of over 10% in a day aren't an uncommon phenomenon. AIM stocks tend to have a large private investor base which can mean a lot of trading in and out on news flow, market makers setting the price and relatively low liquidity (because the number of sellers to buyers and vice versa can quickly move out of equilibrium) resulting in big price spikes up or down.

A wonderful illustration was Sirius Minerals (SXX) today. After rising 10% on Thursday and Friday, an RNS was released this morning with the analytical results from the North Dakota potash drill which has been awaited with great anticipation for the last 6 weeks. First thing the price moved up again to 22p, but it was downhill all the way to 17.25p, a fall of 17%. The shares have had a great run over the last couple of months, from the 8p level in early December (and even lower earlier in 2010) so there are undoubtedly many investors who have made 300%+ gains. So expectation for this latest North Dakota RNS was sky high. There has been talk of this potash reserve being worth $1 billion etc. etc. - i.e. massive hype and expectation. So when the RNS finally came out, the news was relatively underwhelming and probably raised more questions than it answered. Many private investors were probably anticipating confirmation of a massive potash find there and then.  So then the sell off started and gathered pace throughout the day.

Was the North Dakota RNS really so bad? The drill results released today were from the first drill with more to follow over the next couple of months. The depth of the Potash looks positive (over 30 feet) but the concentration looks to have raised concerns. It is interesting that Sirius management chose to release the results early since previous communication had confirmed mid-February as the period when the results from the analytical analysis of the seams would be available. The question is why release the results early when although they weren't bad, they weren't overwhelmingly positive either? Perhaps the board believe future news flow over the coming weeks will drive the share price much higher e.g. progress at York Potash or further updates after the Memorandum of Understanding (MOU) with with Sino-Agri Mining Industry Co. Ltd (a division of China’s second largest fertilizer distributor), to develop Sirius’s property overlying the Adavale Basin in Queensland, Australia. It was probably no accident that the York Potash deal was announced last week to take the pressure off news in North Dakota.

I was annoyed that one of my positions closed on a guaranteed stop at 18p today, especially as I don't usually use stops on AIM stocks. But I still have two significant positions running. I believe that North Dakota still holds strong promise (the company has only done one exploratory drill), there is the potential for a transformational deal with the Chinese in Australia, York Potash seems a sound acquisition and there was a fairly large director buy last week at 17p. Sirius seems to be serious about becoming a major global potash producer and step by step they seem to be moving in the right direction. Global potash use is forecast to grow strongly in coming years so the demand side of the equation doesn't seem to be an issue.

It's volatile and frightening at times to be in these AIM stocks but that's half the fun of it. If you do the homework on fundamentals, then the volatility shouldn't faze you as an investor. Although Sirius is not a "done deal" like Xcite Energy (XEL), it would be surprising if the share price wasn't a lot higher in 2012.

Potentially exciting week of news on portfolio

Lots of potential news due any day on the Contrarian Investor portfolio. As a reminder:

1. Angel Mining (ANGM) - 1st gold pour and shipment from Greenland's Nanulaq mine

2. Xcite Energy (XEL) - Signing of agreement for Rowan Norway jack up rig

3. Rockhopper (RKH) - news from 14/10-3 well on its PL032 licence in the North Falkland Basin

4. Bowleven (BLVN) - update from Cameroon Sapele 1 well.

Plus early to mid-February

1. Xcite Energy (XEL)- upgrade of resources to reserves on Bentley (200 million Plus)

2. Sirius Minerals (SXX) - update from Queensland Australia seismics and Sino-Agri Chinese deal

3. Imagination Technology (IMG) - confirmation from Apple on IPAD2 and Iphone 5 spec

Final tree shake on Xcite?

Looks like the foolish are bailing out of Xcite into Xtract energy (XTR) this morning. Lots of bulletin board posts about Xtract but I think I'll stay put in Xcite.

Why would I move my precious £'s out of Xcite when they have a 200 million barrel field in the North Sea (possibly up to 500 million barrels) which will go into production this year at a rate of 60,000 barrels per day! Whereas with Xtract Energy you are not going to get close to this for years. Plus it's not a core holding for Walter Energy (who recently acquired Western Coal, the previous owners of Xtract) since they are a coking coal specialist. I would bet on a divestment rather than a big investment by Walter.
Mad, but what does Contrarian Investor uk know! Classic "pump and dump", be careful out there!

Portfolio getting a pasting this morning

After some nice gains on Friday driven by Xcite, Bowleven and Sirius, all are down this morning. Sirius is down around 11 percent today after the North Dakota results were no more than in line with expectations and profit takers have moved in selling on the news. Profit now gone on Sirius but I've promised myself I'll avoid trading this one too much since it's more of a medium term play i.e. turn off the computer and check the price in 6 months rather than buying in and out on RNS releases. Angel Mining is up at least. At last! Still waiting on Xcite which has drifted down a couple of pence. Patience will be rewarded .

I couldn't resist buying into Rockhopper (RKH) in a small way this morning. Drilling news due in next week or so in the North Falklands basin. Was hoping for 350p, but at 360p a reasonable entry point. A gamble but only a bit on the table and nothing wrong with a bit of adrenaline!

Sirius Minerals confirms North Dakota potash discovery

Sirius Minerals (sxx) issued an RNS this morning which confirmed that analytical testing had confirmed high quality potash at their North Dakota exploratory drill. Not having a degree in geology, the details of the news are difficult to interpret but it seems the potash layer discovered is sufficiently large to make this is a significant commercial find. More later on this story.