Resource upgraded |
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IOn 9 April, DRX announced a revised resource estimate, integrating the former Image Resources' (IMA.ASX) Cyclone Extended deposit with DRX's Cyclone deposit. While the total resource volume fell by 5%, from 223Mt to 211Mt :
- There is now 156Mt in Measured, compared with 118Mt previously, with Inferred falling from 9Mt to 0;
- Contained zircon and higher grades of TiO2 has increased, so the value per tonne of ore is now 16% higher $22.8/t.
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DFS in about 3 months; Expect higher value |
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On 9 January 2014, DRX announced a Heads of Agreement with Perpetual Mining Holdings Limited, a Hong Kong based company with sound business connections within China including in iron ore mining and steel products processing, for PMHL to acquire a 6% stake in the Cyclone project for $2m
Beer & Co expects zircon prices to firm to $1,500/t, and rutile to $1,250/t by 2017, when Cyclone begins production. Our resulting, after-tax valuation of Cyclone is $A 125m.
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Product market is now positive |
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At the Mineral Sands conference in March, delegates were confident that the zircon market is improving while the market for titaniferous feedstocks is looking better. This affirms our commodity price expectations.
DRX has had positive discussions with potential off-takers, which will become serious after the DFS has been completed.
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Beer & Co risked valuation now 7.5c/share |
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While the updated resource estimate is higher grade than the previous estimate, we are not changing our mining inventory at this time. We have changed our Long-Run AUD-USD rate from 0.85 to 0.75.
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Beer & Co conclusions |
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There is significant upside potential to our valuation from higher grades, lower capital and operating cost as well as at Tick Hill and Cape Bedford.
We affirm our BUY, High Risk recommendation.
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Beer&Co.
ACN 158 837 186
Authorised representative Melbourne Venture Securities Pty Ltd
www.beerandco.com.au |
Author:
Pieter Bruinstroop
pbruinstroop@beerandco.com.au  |
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