Ferret's Stock to Watch: ASTRON LIMITED 08:41, Thursday, 26 April 2007
LOCAL EXPLORER, PRODUCER LEADER IN ZIRCONIUM CHEMICALS
Sydney - Thursday - April 26: (RWE Aust Business News) ******************************************************
OVERVIEW ********
The name of Astron Ltd (ASX:ATR) tends to hide away what the company is really all about.
It is one the world's largest producers of zirconium chemicals and related materials.
The company exports its products to a number of countries with a manufacturing base located in China.
The company's president, Alex Brown, made the following remarks:
"With the dawn of the new millennium, new technology continues to effect substantial changes in the quality of human life.
"In its fields of zirconium compounds, optical raw materials and other special ceramic chemicals and products, Astron is committed to provide technological innovation, better services and lower prices to customers.
"It is dedicated to providing innovative solutions both to customer needs and production cost reduction to maximise all the benefits of new high technology applications," he declared.
The materials are used in a range of applications such as electronics, ceramics, paper and deodorants.
Almost a week ago, it all began to happen for Astron.
Firstly, the company's shares shot up 58c to $2.77 in reaction to the disclosure it had purchased strategic land for the Donald mineral sands (DMS) project in Victoria.
Earlier, Astron reported it had received an approach from a third party in relation to the possible sale of its zirconia materials business based in China.
These discussions are continuing.
Astron announced preferred start-up location for the Donald mineral sands project at a community meeting in Minyip last December.
The Donald project team announced that the preferred start-up location was in the northern section of the project area.
"The northern area was selected as the preferred start-up location based on avoiding any impact on significant flora and fauna, proximity to infrastructure and a larger concentration of economically extractable ore," DMS principal mining engineer Simon Peters said.
Mr Peters said this northern section covered about 2,845 hectares of the original 5,000-hectare project area.
The northern section contains sufficient ore to sustain a 7.5 million tonnes per annum mining operation for at least 25 years.
Mr Peters said DMS will apply for a mining licence over this area in the near future.
DMS will also continue detailed discussions with affected landowners regarding development plans and timing.
About 40 people from Rupanyup and Minyip districts also discussed other project developments at the community meeting, including progress of an environment effects statement.
"EES studies are progressing well, with all studies now well underway," Mr Peters said.
"Specialists will be presenting their findings and reports to the EES Technical Review Group over the coming months."
Mr Peters said water was also discussed at the meeting.
"Over the last few months the DMS project team has focused its attention on water exploration drilling and is progressing permits required for water testing associated with an Avon Deep Lead regional aquifer," he said.
"Water exploration and water testing has confirmed that this aquifer has potential to provide DMS with sufficient saline water supplies for mineral processing."
SHARE PRICE MOVEMENTS *********************
Shares of Astron last sold 15c higher at $2.82. Rolling high for the year is $3.65 and low $2.01. Dividend is 10c to yield 3.55 per cent. Earnings per share is 25.1c and p/e ratio 11.24. The company has 60.4 million shares on issue with a market cap of $170.4 million.
In the December half year report, Astron declared revenue of $84,756,243, showing a rise of 19.4 per cent compared with the corresponding period a year earlier.
However, net profit fell 44.5 per cent to $7.3 million.
Continued strong demand in China has largely driven this rise in revenue resulting in higher sale volumes (approximately 20-30 per cent when compared to the same period for last year) for fused zirconia and zircon chemicals and the opportunity to significantly increase sales of titanium slag.
Fused stabilised zironcia sales continued to expand strongly.
This growth in revenue was partially offset, however, by reductions in prices for zircon flour and zircon sand caused by the decline in the usage of zircon flour in TV glass applications and increased competition in the zircon sand market from imported zircon concentrates from Indonesia into the Chinese market.
Overall gross margins decreased in the December half when compared to the previous corresponding six months, reflecting the market conditions for zircon sand and flour and a higher proportion of titanium slag sales.
Gross margins for manufactured products all improved strongly, in line with the strong demand for these products and continued attention to reducing manufacturing costs and lower prices for some raw materials.
Detailed design and specialised engineering work on the critical processes of Astron's 90,000 tonne per annum titanium pigment plant progressed during the period.
The environmental impact assessment report was also completed in the period with work continuing on finalising infrastructure agreements and gaining planning approvals.
Outlook *******
Demand in China for Astron's product range remains strong and although the market continues to be very competitive, Astron expects to expand its position in the near term.
Astron also anticipates that these prevailing favourable market conditions will improve its performance in the second half of the year.
BACKGROUND REVIEW *****************
The Yingkou Plant continued to improve although one lost-time injury was recorded during the period.
Increased plant availability and a reduction in the consumption of utilities and electrodes contributed to lowering unit operating costs.
Stock levels at December 31 included substantial raw material shipments as goods in transit.
The Donald mineral sands project has made significant progress and chalked up a number of milestones.
The evaluation of data from the 2004 drilling program has defined a contiguous ore body in the northern section of the project area sufficient to sustain a continuous pit mining operation for the first stage of 7.5 million tonnes of ore per annum for at least 25 years.
Metallurgical test work conducted on the Concentrate Upgrade Plant circuits has also confirmed their capability in producing high-grade magnetic and non-magnetic concentrate containing 99 per cent and 96 per cent heavy mineral, respectively.
A source of groundwater, important for use in the production process, was identified through a series of exploration bores.
The sustainability of extracting water from this source will be tested in the coming months.
Other work, including the finalisation of the environmental effect statement and the evaluation of product transport options is continuing satisfactorily.
Reporting on its Gambia and Senegal operations, Astron said production at the Gambia mineral sands project commenced during the half year and is being ramped up to achieve the project target of 20,000 tonnes of zircon per annum.
Two dredges were operating at the Sanyang deposit at the end of the period with a third dredge, intended for the Batukunku deposit, under construction.
The project also completed its first shipment of heavy mineral concentrate as part of the offtake agreement with Astron.
A low-level, high-resolution airborne magnetic and radiometric survey was conducted over the licence area in Senegal to detect magnetic anomalies associated with mineral sand deposits.
Data independently processed from the survey identified targets for further exploration and drill testing.
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