Higher mineral sands prices augur well for juniors Image and Strandline
Plus, Dateline highly-leveraged to impending drilling program at high-grade Colorado gold project
22nd February 2019
There was good news for the junior mineral sands players in the annual profit report from the mineral sands king of the ASX, Iluka.
The report confirmed Iluka had enjoyed a 41% increase to $US1,351/t in its weighted average zircon price for 2018 while rutile pricing was 21% higher at $US952/t.
Prices are currently higher than last year’s averages, with Iluka lifting its zircon reference price to $US1,580/t from October 1 last year for six months. Iluka said its customers had swallowed it with “positive” feedback, if that were possible.
Iluka has also secured price increases ranging from 8% to 11% for rutile/synthetic rutile. The rises are for all volumes contracted in the first half 2019.
Just as important was Iluka’s read on the market outlook for 2019. It said it expects the market for zircon to remain balanced. For high-grade titanium feedstocks, the expectation is for things to remain “tight.”
All that is good news for the juniors in the minerals sands space, where the trickledown effect is starting to take hold.
That has been reflected in the recent share price performance of newbie producer Image Resources (IMA). Its share price has motored from 11c to 18c since the start of the year thanks to the dream commissioning of its zircon-rich Boonanarring project in WA’s North Perth Basin.
Image is now a $172m company, which is no surprise given its recent (calendar) 2019 guidance for project EBITDA (revenue from the sale of its heavy mineral concentrates less project operating costs) from Boonanarring of $40-$50 million.
Another to benefit in the junior space is Strandline Resources (STA). The return of strong minerals sands pricing comes as Strandline is on the cusp of securing financing for the $US32m development of its Fungoni project in Tanzania.
In a research note dated February 14, Hartleys estimated EBITDA from Fungoni of $21m annually ($17m on an attributable basis). Using spot prices, at it becomes $27m annually ($21m attributable).
That’s kind of interesting in itself given at its current price of 10c, Strandline’s fully diluted market cap is $36m. But it has to be remembered that Fungoni is very much a “starter” project for Strandline in Tanzania and that it also owns the advanced and much larger Coburn mineral sands project in WA.
The way Hartleys put it, Strandline has an 11c value on Fungoni alone, meaning there is next to nothing in its current market rating for Coburn and its Tajiri project in Tanzania, with the latter shaping up as new Tier 1 opportunity.
Its why Hartleys has a 22c 12-month price target on the stock.
Dateline Resources DTR
There is something particularly alluring about high-grade gold mineralisation. Just ask Mark Johnson, a founder of Macquarie Bank and its deputy chairman up until his retirement in mid-2007.
Johnson is non-executive chairman and a big shareholder in a little thing called Dateline Resources (DTR), so named because its main go used to be a project in Fiji hard up against the international dateline. He also personally supported Dateline’s recent raising to the tune of $3m.
Trading at a princely 0.3c a share for a market cap of about $13m, Dateline turned its attention to high-grade gold in the pro-mining US state of Colorado a couple of years ago, flying under the radar while it consolidated over 250 mining claims in the middle of the famed Colorado mineral belt.
The end result is its Gold Links project area – some 2000 freehold acres covering four historic adits over a distance of 4km which were independently developed and mined between 1882 and 1942, which is when the US shut gold mines for the war effort.
Despite a history of high-grade gold and there being no mining below the adits – one of the mines had a 2oz a tonne cut-off grade – the historic operations have not been touched exploration-wise for the past 50 years or so.
Dateline is out to change that and reckons it could get Gold Links into production within two years. There is a missing link at the moment – a stock exchange compliant resource/reserve estimate.
But everything else is in place, including all the required approvals and a sulphide processing plant which Dateline intends to upgrade to an annual processing rate of 140,000t for as little as $3m.
An aggressive $7.4m drilling program over nine months is expected to lead to a maiden resource estimate, with the idea being that the previously-mined areas are potentially part of a large high-grade system.
It is known that all of the veins intersected in the old adits have the same north-east/south-west orientation and there was no previous mining below the adit levels because that would have required more mechanisation than was do-able back in the day.
Like his chairman, Dateline managing director Glenn Dovaston likes the high-grade story. He joined in November last year and is happy to take a big chunk of his salary package in shares.
A mining engineer, Dovaston is best known as the change agent CEO who took WA gold producer Millennium Minerals from a troubled $6m company to a $220m one with a bright future in the space of two years.
Dovaston last week told investors that Dateline’s market cap is probably fair and reasonable for where it is – ie sans a resource.
“But we know that as soon as we start drilling we are likely to come up with some exceptional grades,” he said.
“We’re targeting 13-17g/t gold, which was half of what the cut-off grade was when it was mined.
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