VSA Morning Miner, 24/05/21
PYX Resources (ASX:PYX)
PYX Resources (ASX:PYX) has reported a further strong price increase of US$70/t for 2021 following the US$75/t increase announced towards the end of Q1 2021. This takes the company’s benchmark price for 66% zircon concentrate to US$1,540/t, up from the implied year end price of US$1,395/t and the average realised price for 2020 of US$1,329/t.
Prices have been rising on the back of destocking in China during COVID-19, as has impacted many commodity markets, compounded by supplyside disruption ex-China, notably in South Africa at this time at Rio Tinto’s mineral sands operations. This means that the market for the high grade product which PYX produces is tight and PYX efforts to gain market share are further aided by the low impurities content of alumina, uranium and thorium making the product suitable for premium markets.
PYX is ramping up production currently to meet stronger demand with 18ktpa of installed capacity and offtakes covering a significant proportion of this. Our forecasts for the year for zircon pricing are currently US$1,450/t and with sales weighted to H2, it appears that PYX average realised price is now likely to be ahead of our estimates. Our outlook is for further price increases with a repeat of the last cyclical highs being exceeded above US$2,000/t, however, prices appear to be rising even faster than anticipated.
We reiterate our Buy recommendation and target price of A$2.60/sh.
Oliver O'Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: oodonnell@vsacapital.com
Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: prenken@vsacapital.com
VSA Capital Research | T: +44 (0)20 3005 5000 | E: research@vsacapital.com
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