Hi seals,
Thanks for your comments, always good to engage in a healthy discussion and do more due diligence on companies.
I agree with you that it will take some time for MZI to realize its full potential/value in case of confirmed turn-around/achievement of profitability over the coming quarters. Investors will be in the beginning skeptical which is understandable after a long period of undeperformance, they would want to ensure that the turn-around is sustainable and for real before jumping-in. IMO the share price / market cap will recover gradually over the coming quarters. Each profitable quarter will help the share price go higher.
However we should keep in mind that gradual here dosent mean slow recovery, just a jump from a 25M$ to a 100M$ market cap is already a 4 bagger. The market cap / share price of the company has been beaten so badly that even the slightest improvement in market sentiment will translate to a big jump in the share price. For instance, I wouldnt be surprised in case the september quarter turns to be nicely profitable (5M$+ earnings) that the share price in reaction will at least triple or quadruple from current levels (30c - 40c). Even if market cap goes to an extremely undervalued 50M$ that is a doubling of the share price from 10c to 20c. Time will tell how fast the market would react to profitable keysbrook/picton operations. The market attitude now is still skeptical and in mode : "show me the money". Once the market sees the money with the september quarterly, the sentiment will radically change IMO.
As for costs, I made a table and explained in a previous post (another thread see link below) that most costs are fixed for each quarter, no matter the production throughput, on average MZI is burning around 14M$ of cash each quarter. Hence why higher throughput will highly reduce costs per tonne. Assuming MZI burns on average 15M$ of cash over the coming quarters, each additional Million$ of revenue beyondd the 15M$ is pure profits. If they produce and sell 29.000 tonnes of Mineral Sands at a conservative low ball average basket price 700 AU$ per tonne that is 20 Million$ of revenue and thus 5Million$ of net profits per quarter. IMO both Total costs will go down and Average Prices will go up from here, due to higher recovery rates of the premium product Leucoxene 88 and improved mineral sands market (tight supply, increasing demand). That is why I expect gradually we will get to some 8M$ - 10M$ of profits over the coming quarters.
Regarding fair value and Price/Earnings ratios of mineral sands companies, I completely disagree, IMO my 12x earnings is a conservative ratio. I did some research and calculated the Price/Earnings ratio of the following mineral sands companies :
Kenmare Resources :
Annual Revenues (2017) : 208 Million US$
Annual Net Earnings (2017) : 19.4 Million US$
Market Cap (august 2018) : 314 Million US$
Price/Earnings ratio : 16.2
Base Resources :
Annual Revenues (2017) : 215.5 Million AU$
Annual Net Earnings (2017) : 21 Million AU$
Market Cap (august 2018) : 316 Million AU$
Price/Earnings ratio : 15.0
Iluka Resources :
Annual Revenues (2017) : 1018 Million AU$
Annual Net Earnings (2017) : 322 Million AU$
Market Cap (august 2018) : 4800 Million AU$
Price/Earnings ratio : 14.9
The market loves earnings, that is why I am optimistic about MZI prospects and fast share price recovery once they could demonstrate sustainable earnings to Mr market.
Hope that helped,
Good luck and Happy mutli-bagger hunting to all !
MZI Price at posting:
10.0¢ Sentiment: Buy Disclosure: Held
