evans & partners research piece

Mineral Deposits has performed strongly over recent months (up over 60% since early August).

This has been despite the looming commissioning risk on its flagship Grande Côte, with commissioning on track for the March quarter 2014. The company is still trading at a 40% discount to our valuation, and that is after applying a hefty 11% discount rate and further discounting valuation of development project Grande Côte by 25% to reflect the remaining risk here. Assuming Grande Côte is de-risked, the valuation increases to $8.00. The company is unusual in that it is in joint venture with French company, Eramet, which brings a sizeable balance sheet and an income producing project (Tyssedal).

Key Points

- Mineral Deposits offers both short term cash flow, via its Tyssedal upgrading facility in Norway, and long term growth through its development project Grande Côte. The company appears attractively priced even when applying conservative risk factors to reflect the commissioning risk associated with Grande Côte.
- Grande Côte is expected to commence production in early 2014, producing 85ktpa of zircon and 575ktpa of ilmenite over a 20 year mine life. On a global scale, planned production output would represent approximately 7% of total world zircon production, and 5% of world titanium production.
- Experienced joint venture partner, Eramet, with strong government ties via the French Government holding 30% of that company. Eramet has a very strong balance sheet, with zero net debt and net liquid assets in excess of $1bn as at the end of December 2012.
- Tyssedal currently supplies approximately 7% of the world’s Titanium Slag market, (which accounts for approximately 2/3 of total high-TiO2 but the proposed expansion would lift this to circa 14%). Whilst Tyssedal current supplies to the sulphate pigment market, due to the 80% TiO2 content and the chemical properties of its product, it is looking to potentially also produce chloride pigment feedstock should it process the higher grade Grande Côte material.

They have a valuation of #5.41 on it, heres hoping!!