Metals X Ltd (MLX.ASX, $0.215/sh, Mkt Cap $285m) – Indonesian export ban will lift premium for Tin. PT $0.45/sh.
We remain bullish on the pricing outlook for tin over the short to medium term for the following reasons;
1)Early this week, Energy and Mineral Resources Minister Jero Wacik signed ministerial regulation affirming the ban on metal ore exports starting 2014, to encourage processing in country as mandated by the 2009 Minerals and Coal Law.
2)Secondly, refined tin shipments from Indonesia has plunged 64% during the month of January driven by the monsoon season and we expect this will remain low till the end of the March Quarter putting pressure on stock piles and also tin pricing.
MLX is a clear beneficiary of this mismatch in supply and demand and we expect margins will improve over the near term on the back of a stronger pricing environment and as MLX moves to improve its feed grade at Renison going forward.
In addition to Renison, MLX is also working towards a deal on Wingellina that could potentially see an International partner contribute to advancing the project to development.
We reiterate our BUY recommendation and PT of $0.45/sh. We expect additional news flow from rentails and Wingellina as well as a significant improvement in headgrades by the 2H 2012. MLX is currently trading on an EV/EBITDA multiple of 4-5 times we expect the stock improve significantly on the back of higher tin pricing and improved margins in the second half of 2012.
MLX Price at posting:
21.0¢ Sentiment: Buy Disclosure: Held
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