Hartleys joins brokers raising price target on Strandline

Strandline Resources continues to win strong support from broking houses around the country, with Hartleys the latest to increase its share price target on the emerging mineral sands producer.
3rd July 2020
Resources Rising Stars

Strandline Resources continues to win strong support from broking houses around the country, with Hartleys the latest to increase its share price target on the emerging mineral sands producer.

In a new report released this week, Hartleys said its target for Strandline shares is now 42c (current price 27c).

Strandline is in the throes of finalising funding for its Coburn project near Shark Bay in WA.

“The rally in the share price (+125% since our 24th April note) means the dilution we assume for new equity is significantly lower, increasing our valuation per share,” Hartleys said.

“Strandline recently announced that NAIF (Northern Australia Infrastructure Fund) will provide a debt facility of up to A$150m in two tranches, based on a 15.5 year term.

“The first tranche is up to A$130m towards the construction of Coburn’s core mine infrastructure and second tranche of up to A$20m to fund a potential future northern access road linking the project more directly to the Denham community in Shark Bay. 

“We estimate the capital requirement for Coburn is ~A$300m (DFS capex estimate is A$260m). After allowing for NAIF, this leaves a capital shortfall of ~A$170m.

“We would expect a significant proportion can be obtained from commercial debt financing. NAIF is conditional on pari passu security ranking with any commercial bank financing. Hence, we assume only modestly less equity than before (we have lowered our equity assumption from A$150m to A$115m).”

But Hartleys also raised the prospect of another mineral sands player taking a stake in Coburn.

“The fact that there is still some offtake available for premium zircon and rutile (high value products) is positive for strategic reasons,” the report said.

“It also raises the speculative odds of an industry equity injection, keeping the possibility of an outfield positive catalyst alive as the Company progresses through financing.

“The location of the project in WA’s traditional mineral sands province gives it strategic importance, in our view.”

Shaw and Partners has a 52c price target on Strandline and Morgans has a 36c target.

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