Mineral sands prices are rising … and analysts say this stock is the way in
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Mineral sands prices are rising – and analysts are lining up to recommend investors buy shares in Australia’s next big producer of these increasingly essential ingredients.
Strandline Resources (ASX: STA) has again shown why it is set to be Australia’s next world-scale producer of mineral sands, revealing it now has binding sales contracts covering more than 90 per cent of the forecast revenue from its Coburn project in WA.
The company’s latest offtake deal, with US major Venator Materials, paves the way for Strandline to finalise the last component of project funding and start construction.
The Commonwealth Government’s Northern Australian Infrastructure Facility (NAIF) has already agreed to lend Coburn $150 million, covering a major share of the project’s total $260 million funding requirement.
The feasibility study shows Coburn is set to generate outstanding financial returns with the added benefits of having binding offtake contracts and being in a tier-1 location.
This means Strandline is ideally placed to ride the wave in mineral sands prices, which are forecast to continue increasing due to lack of investment in new projects for many years and growing demand from a wide variety of industrial applications.
Broker Morgans tips Strandline’s share price to go to 39c from ~23c currently, saying it “understands several debt proposals are being assessed”.
Foster Stockbroking has set a 54c price target and says “the finish line is tantalisingly close” for Strandline’s funding package.
Fellow broker Shaw & Partners, which has a price target of 52c, says “the preferred commercial debt partner for Coburn should be announced shortly, which will pave the way for a Final Investment Decision”.
“The advantage of the NAIF facility is that it is long duration and doesn’t need to be repaid until after the commercial debt is paid back,” Shaws said.
“This gives Strandline the ability to gear the project with more debt than would be usual and may allow Strandline to begin distributing cash flow to equity holders early in the project life.
“We retain our buy recommendation and 52c price target. Strandline is enjoying strong momentum following a series of positive announcements and we expect that trend to continue as the Coburn approaches FID.”
Strandline managing director Luke Graham said the signing of the latest long-term offtake agreement with an industry leader provided further endorsement of Coburn and the high quality of its mineral sands products.
“With over 90 per cent of the project’s revenue now underwritten by binding sales contracts with major customers and a significant portion of the development funding secured via the NAIF loan, Strandline is on track to become Australia’s next world-scale mineral sands producer,” Graham said.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.