www.stellarresources.com.au
Stellar Resources (ASX: SRZ) holds two priority advanced resource projects - a major magnetite project located in South Australia and a high grade tin deposit in Tasmania - as well as a number of exploration properties targeting copper, gold, uranium and nickel.
The company's aim is to develop a minimum 5 million tonne per annum magnetite operation based on the completion of a successful feasibility study at Tarcoola iron ore project in central South Australia.
Stellar Resources: Taylor Collison places "speculative buy" with $0.31 price target
Australian sharebrokers and investment advisers Taylor Collison has placed a SPECULATIVE BUY on Stellar Resources (ASX: SRZ), with a six month base case target price of $0.31/share. The company also believes there is upside to this price target. Stellar is currently trading at $0.20.
Below is an extract of the broker report.
Issued Capital: 108.82m ords, 6.88m opts
Market Capitalisation (m, diluted): $19.09
Enterprise Value (m, diluted): ~$15.4
Share Price (21/3/2011): $0.165
52 week low: $0.043
52 week high: $0.24
Cash (m) as at 31/12/10: $3.70
Key Points
The Heemskirk Tin Project appears to “tick all the boxes”, and we consider it to be considerably undervalued.
Recently released maiden JORC compliant resource for the Heemskirk Tin Project of 49,000t of contained tin.
Resource grade of 1.1% tin is the highest grade of any Australian listed tin company other than Metals-X, which is producing from the nearby Renison Bell mine.
This follows on from positive results from initial tin metallurgy at the Queen Hill prospect which indicates that it is theoretically possible to produce a 50% tin concentrate at a recovery of 70%, with the tin mineralogy being cassiterite.
This would produce a potentially marketable concentrate, similar to that produced by Metals-X.
Results of recent drilling also confirm the quality of the project, with wide, high grade intersections.
We see significant resource upside at Heemskirk, and the Company has recently commenced a drilling programme to test for shallow strike extensions, down
dip extensions and additional deposits.
Stellar has a number of additional tin prospective tenements in Tasmania.
With tin at record high prices, and likely to stay strong Stellar has, or is in the process of joint venturing its mainland projects, including iron ore, uranium and IOCG targets to allow resources to be concentrated on tin.
Our View
On March 7, 2011 Stellar released the maiden JORC-compliant resource for the 60% (earning 70%) owned Heemskirk Tin Project in Tasmania.
The resource, which contains 49,000t of tin at a grade of 1.1% is the highest grade tin exploration/development play listed on the ASX, and contained metal compares favourably with other ASX listed tin companies.
This positive news follows on from results of preliminary tin metallurgical work, which were announced in late 2010.
This preliminary work, carried out on samples collected during the recently completed shallow diamond drilling programme resulted in positive results, and goes a long way to addressing misconceptions regarding the metallurgy.
The Company is now carrying out extensional drilling, with positive results to be used to upgrade and expand the current resource, and to be used in a Scoping Study the Company has recently commenced.
Given the recent results, and the relative undervaluation with respect to peers we recommend Stellar as a SPECULATIVE BUY, with a six month base case target price of $0.31/share. We believe there is upside to this price target.
