Grande C te Operations (GCO) – a focus on higher value products
At Grande C te (TiZir 90%, Mineral Deposits 50% of TiZir) run-time availability was maintained at 79.4% (79.5% December 2017 quarter). Dredge throughput was 10.90Mt (10.37Mt previously). Heavy mineral concentrate of 189.5kt was produced (183.7kt previously). While availability and plant throughput has stabilised over the past three quarters, GCO will continue to focus on improved operational stability to lift availability and reduce unit costs.
Given the disruptions to rail availability and the limitations imposed on railed tonnage, GCO opted to prioritise production of the higher value zircon, rutile and leucoxene. Current supply-side pressures, coupled with continued good market demand, has seen stronger prices for mineral sands products.
We model modest improvements in run time and operational efficiencies for the balance of 2018, with commodity prices stabilising at current levels.
Tyssedal (TTI) – it's how you recover
TTI operated at an annualised rate producing 230ktpy of titanium slag prior to the gear box failure in late February, which resulted in six weeks of reduced production. In the March quarter, titanium slag production was 34.0kt (50.7kt previously). Normal production resumed in mid-April. The majority of 2018 production is contracted, and the slag market demand is continuing to firm with supply disrupted.
Our valuation and share price target, based on NPV methodology, remains unchanged (Morgans clients can login to view). We model continued if small operational improvements at GCO, and a return to projected capacity at TTI. We have reduced FY2018 production, offset by increases in our projected prices for zircon and titanium minerals.
Risks to achieving our price target include operational, commodity price, exchange rate and geographic. TiZir is now generating cashflow at both its operations and cash balances are building. The maturity of the bonds was extended to July 2022, and the quantum increased to provide a buffer in the event of an operational mis-step.
We retain our Add recommendation.
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