Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.

Today we hear from Collins Street Value Fund (CSVF) executive director Michael Goldberg.


What’s hot right now?

“What we have recently been introduced to is a commodity called zircon which is often found with rare earths,” Goldberg says.

“Rare earths are interesting in their own right – being a key ingredient in wind turbines and electric vehicles.

“Given the rapid increase in demand for RE, and the near stranglehold that China has on the industry, this is a space that is very interesting.

“It is also one that has seen significant demand increase, price rises, and concern around availability from tech companies, to consumers, to the US military – who use RE in many of their technologies and guidance systems.”

In fact, Goldberg adds, Iluka Resources – the main player in the space – recently came out and warned of supply constraints and an inability to keep up with the growing demand.

“But as I said, it’s zircon that most interests me,” he said.

Zircon is a broadly unwatched commodity that is found in ceramics (think bathrooms and kitchens – bathtubs, tiles, and sinks.)

“There is an existing undersupply – prices have recently increased by about 15% and are expected to go up by a similar amount in the near term.”


Top picks

Goldberg reckons for investors looking for the big player in the industry, there really is no alternative to Iluka Resources and for those looking for a small player with some deep value and significant leverage to the zircon and rare-earths space, its pretty hard to look past Astron.

Iluka Resources (ASX:ILU)

An investor could certainly gain exposure to rare earths and zircon through ILU, Goldberg said.

“I have no doubt that over the next 5-10 years they will do very well.

“Trading at just 12x earnings, the company has strong management, solid projects and a strong balance sheet.”


Astron Corporation (ASX:ATR)

However, Goldberg said his preference for the sector is in a much smaller company named Astron.

“Collins Street Value Fund have been following Astron for a number of years, but given its size and liquidity, we’d never been able to find a way to meaningfully invest in it until quite recently – when we offered to provide funding via a convertible note,” he said.

“Our thinking is that the company is worth over $3 per share, and against a current share price of just 55c seems a highly attractive space to be.

“The company has an exceptional asset in the Donald Mineral Sands Project based out of Victoria – which is an excellent jurisdiction, the team have over 30 years of experience in development, processing, and trading zircon after having sold a production facility to a French company for over $300m in 2013.”

Within the Donald deposit area, there are Ore Reserves of 602 million tonnesMt of ore, with an average HM grade of 4.8%.

This roughly equates to an in-situ ore body of 28.9Mt of heavy minerals, comprised of 5.4mt of zircon, 9.2mt of ilmenite, 8mt of higher titanium content products of rutile and leucoxene, as well as a significant rare earth element component of 491,000t.

“Astron’s project is the largest undeveloped zircon project in the Southern Hemisphere and is big enough to single handily provide five full years of global demand,” Goldberg said.

“The mine life is expected to be longer than 40 years, and our funding was provided to enable the company to redo a DFS.”

The company had previously produced a DSF (also in 2013), which produced a NPV of approximately US$1.4Billion.

“At the time, production and financing was put on the back burner due to some global issues but since then the market has tightened considerably, and the environment is materially better for the industry,” Goldberg added.

“Assuming the upcoming DFS lands at even half the value of the previous one (which is unlikely given the improved environment), we are still looking at a company trading at about 20% of the value of its likely intrinsic value,” he said.


The views, information, or opinions expressed in the interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.
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