Strandline Resources (ASX: STA) successfully raised debt for its Coburn mineral sands project in Washington state sparked a wave of new buy recommendations from leading analysts.
Senior analysts at brokers including Fosters and Shaws have set price targets well above 50c on the stock (currently ~ 27c) following news that the company has secured all the debt necessary for Coburn’s development.
The combination of the recent US $ 60 million bond issue and the already approved $ 150 million loan from the Federal Government’s Northern Australia Infrastructure Facility means that Strandline is on track to become a producer of mineral sands in the United States. globally at Coburn.
Coburn’s feasibility study shows the project is poised to be a big winner for Strandline shareholders, catapulting the company into the ranks of major mineral sands producers with exceptional financial returns and the added benefits of have binding direct debit contracts and be in a level 1 location.
This means that Strandline is ideally placed to ride the wave of mineral sands prices, which are expected to continue to rise due to the lack of investment in new projects for many years and the growing demand for a wide variety of products. industrial applications.
There’s also the prospect of a takeover, as senior resource commentator Barry FitzGerald noted in his latest hugely popular weekly column.
FitzGerald said the king of the mineral sands, Iluka Resources, “faces competition for the investor dollar from new projects seeking to capitalize on the optimistic outlook for the sector, unless of course Iluka does not. seeks to continue to dominate the space by eliminating new competitors with a take-over bid rather than spending on its organic growth options.
“One of the rapidly emerging competitors is Strandline.
“Coburn has a stature in this regard, with a mine life of over 20 years and annual production accounting for about 5% of the global demand for zircon and 10% of the demand for chlorinated ilmenite for the market. pigments.
“So, is Iluka going to sit down and let him enter the market as an independent producer?” “
In a report released shortly after the debt deal broke, Foster Stockbroking set a price target of 56c, saying he believes construction in Coburn is on track to start amid this. year.
Shaw and Partners set a price target of 52c, noting that debt completion sets the stage for a final investment decision at Coburn.
“Coburn is a world class project,” Shaws said in his report. “Coburn will supply approximately 5% of the global demand for zircon and 10% of the global demand for chlorinated ilmenite.
“At current mineral sands prices, Strandline is trading at just 1.2 times EBITDA once Coburn is in production.
“Strandline has firm take-or-pay agreements covering over 90% of the revenue for Coburn’s first 5-7 years of production.
“It has already started the first construction work and has a number of contracts in place.
“Strandline is enjoying strong momentum after a series of positive announcements and we expect this trend to continue as the Coburn project nears FID. “
This story was developed in collaboration with Strandline, a Stockhead advertiser at the time of publication.
This story does not constitute advice on financial products. You should consider getting independent advice before making any financial decisions.