VSA Capital Market Movers – PYX Resources#: H1 Operations Update

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PYX Resources#: H1 Operations Update


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Production Ramp Up Underway


PYX Resources (ASX:PYX) recently reported H1 2021 production results of 3,501t zircon which was up 25% YoY, while sales volumes were up 14% YoY to 3,250t. This discrepancy is simply related to the timing of shipments, and we expect the difference to be made up in H2 2021. With production capacity at Mandiri increased, we expect greater capacity utilisation in H2 of this year and further ramp up progress implying that this year’s earnings will be back-weighted compounded by rising prices into H2 2021.


Zircon Price Increases Continue


A key factor in our investment case is the strong backdrop and outlook for zircon pricing. This year, PYX has increased prices by US$355/t in three instalments to US$1,750/t which is broadly in line with benchmarks for peers, although anecdotal reports suggest that prices in China have increased further since the company’s last price increase. Prices are rising faster than we had forecast and we have increased our forecasts accordingly. Supply dropped by 15% to 1mnt zircon in 2020 as a result of COVID-19, and the recovery has been heavily disrupted by Rio Tinto’s Richards Bay Minerals in South Africa where security concerns and violent protests have forced the company to declare force majeure and halt operations. With few projects globally able to fill the shortfall, PYX is extremely well-positioned to capitalise on rising prices given its heavy weighting to zircon output.


Fundraising Kickstarts Development Programme


The company recently raised US$8.4m (A$11.2m) which will enable the company to advance development of the Tisma project acquired earlier this year. An initial 24ktpa of zircon, modelled on the company’s existing operations at Mandiri, but with low-cost, in-house mining from the start will enable the company to capitalise on rising zircon prices and strong demand from end users including those from technology companies which require the high quality low impurity zircon which PYX is able to produce.


Target Price and Recommendation


Our risked DCF valuation produces an A$2.65/sh. target price, increased on the back of higher zircon prices sooner than previously anticipated as well as a modest change to our risk factor applied to Tisma as the recent financing gives greater certainty.

We reiterate our Buy recommendation and increase our target price to A$2.65/sh.




Oliver O’Donnell, CFA, Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: [email protected]


VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD | www.vsacapital.com


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