Emerging mineral sands miner Strandline is heavily under-valued, says Patersons
9th November 2018
Resources Rising Stars
Strandline Resources, which has a pipeline of mineral sands assets in Tanzania and Australian, is substantially under-valued, says Patersons analyst Cathy Moises.
Recommending the stock as a speculative buy, Moises says recent site visits to Strandline’s Fungoni and Bagamoyo projects in Tanzania confirmed the high-calibre of both projects and their strong potential.
“Fungoni has all relevant permitting in place, a fixed price EPC awarded and binding offtakes secured for 100% of production and revenue,” Moises said in a note this week.
“Fungoni is not the main game for Strandline, with WA-based Coburn accounting for ~87% of our operational valuation for the group.
“However, Fungoni is a particularly rich orebody, with low capital requirements and is the ideal project for Strandline to prove to the market their operational prowess.”
Moises said Strandline was trading at just over half Patersons’ discounted cashflow valuation, which is heavily diluted for an assumption of a 50 per cent equity contribution at a 10 per cent discount to the current share price for funding for both projects
“Whilst this discount may appear compelling, look to the current operational valuation of $216m versus current market cap of $38m to see the potential future upside here,” she said.
“This valuation only includes $10m for exploration despite the advanced status of Tajari, and Bagamoyo projects.”
Strandline said this week that received firm commitments for $3 million via a share placement to institutional and sophisticated investors, underpinning its strategy to progress Fungoni and Coburn towards development and production.
The raising was priced at 11c a share, representing a 5% premium to the previous closing price of 10.5 cents.
Strandline Managing Director Luke Graham said the Company was well-placed to capitalise on the growing mineral sands market with a pipeline of projects at different stages of development and with varying scale.
“At Fungoni, key development approvals are already in place and project financing is underway,” Mr Graham said. “The updated DFS released last week (see ASX release dated 01 November 2018) showed Fungoni will generate strong financial returns on the back of low capital and operating costs.
“At the same time, we are on track to release the revised-DFS on Coburn in the coming quarter and we are already assessing partnering and funding options for the project.”
Image: National Resources Review
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