MZI Resources (MZI) No one is exactly quivering in anticipation...

MZI Resources (MZI)
No one is exactly quivering in anticipation of the mineral sands sector being set on fire in the near-term, linked as its products are to the pace of global economic growth.
But there is good reason to believe that the worst is over for the mineral sands producers. Citi last week identified four signs that the tide was turning, prompting it to rate the biggest mineral sands producer in this market, Iluka (ILU), as a buy with a price target of $7.90 a share ($6.71 now).
But today’s interest is in MZI Resources, owner of the Keysbrook project, some 70km south of Perth. It was only officially opened in April, creating jobs for 60 workers at the mine and ensuring work for another 20 at Doral’s minerals separation plant.
Someone must have done some extrapolation on the Citi report because MZI popped a handy 2.5c higher on Friday to 28.5c a share. Mind you, it was a 38c stock at the start of the year.
It fell to lower levels by the trade of a big block of shares in January, a volume reduction notice from a key customer (Chemours), and the mineral sands market starting out the new year on a sluggish note.
Throw in the sort of issues that can be expected with the start-up of any new project, and it was a case of bang, down to below 30c. But as Friday’s share price pop showed the tide is turning.
Keysbrook’s average cash cost of production in the first quarter was $414 a tonne (across its zircon and titanium dioxide products). So even at today’s prices — and with plant tweaking to come — the project is well and truly washing its face.
What’s more, once the project settles down in to steady state production, unit costs of production are expected to become even more robust in the low to mid-$300 a tonne range across all products.
Confidence in all that improved with MZI’s recent report that the Keysbrook’s wet plant (it makes the concentrate at the mine site) ran at about 90 per cent of design recoveries in May. At the Doral dry plant (where the concentrate is separated in to the three final products), there is more work to do to get to design rates in the next couple of months, but the trajectory is looking good.
Ahead of the good news in the May update, Argonaut had a buy rating on the stock of 70c a share (March 23) while Patersons was at 48c (March 4).