VSA Morning Miner, 02/09/21
PYX Resources (ASX:PYX)
PYX Resources (ASX:PYX) has announced interim results from 2021, with a significant improvement in revenue and earnings underpinned by rising production and zircon prices. Revenue of US$4.7m was up 21% YoY on the back of the previously reported increase in sales volumes of 14% YoY for H1 to 3,250t of zircon. Production increased 25% YoY to 3,501t and the difference will be reflected in H2.
PYX has reported an EBITDA loss of US$1.3m and an underlying EBITDA loss of US$661k, the former figure being impacted by listing and acquisition costs in the prior year. Cash costs of production increased 29% YoY to US$4m, however, this was more than offset by higher production and prices and as a result the underlying EBITDA loss narrowed 8%. With no debt, there were no significant further expenses and the net loss for the period after tax was US$1.2m, up from a loss of US$10.6m in the prior year.
The company’s cash position was strengthened substantially by an US$8.4m fundraise during the period meaning cash at period end was US$9.7m. With a strong balance sheet and macro backdrop underpinned by rising zircon prices due to strong demand from China and major supply disruption in South Africa, in particular, compounding the inventory drawdowns and curtailments associated with COVID-19, PYX is poised to transform its business raising output and strengthening margins through low capital intensity growth at Mandiri and the development of Tisma with the former ramping up to current nameplate capacity of 18ktpa and the latter targeting an initial 24ktpa. Ultimately due to the world class resources and best in class zircon grades we believe the company can become a leading zircon producer.
PYX increased prices by US$355/t to US$1,750/t which will predominantly impact H2 earnings while we expect further price increases with reports of zircon prices above US$2,000/t. Rising output in H2 2021 is also expected as growth capital is deployed with a full year production target of 9.7kt underpinning our previous forecasts of US$18m for revenue and positive EBITDA of US$3.6m.
We reiterate our Buy recommendation and A$2.65/sh. target price.
Please click here for our recent update note.
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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