Shares in PYX Resources Ltd (LSE:PYX, NSX:PYX) may be on track for a re-rating as the company, which holds the second largest zircon deposit in the world by producing resource, starts to get more recognition in London, where it recently listed its shares.
Two factors underpin the potential for growth.
The first is that zircon prices have seen four significant uplifts over the past year or so, as supply has struggled to keep up with demand.
Zircon is the highest priced of the mineral sands, and at the end of 2021 was trading at over US$2,300 per tonne, up more than US$1,000 on the year.
The gap between supply and demand has largely opened up as a result of the re-starting of the global economy after covid. But the tightness in the market has also been exacerbated by tensions between Australia, the world’s largest exporter of zircon, and China, the world’s biggest buyer.
PYX’s assets lie on the nicely neutral middle ground of Indonesia, in the island of Kalimantan, right in the heart of Belt and Road Country.
And that brings us on to the second factor in PYX’s potential for growth: even as prices have been rising, PYX has been ramping up production.
In December of 2021, already some way into that ramp up, PYX produced 1,200 tonnes of premium zircon. The plan is to take monthly production up to around 4,000 tonnes over the next five years.
The company certainly has the resources in the ground to do it.
Globally, there are only three companies with bigger zircon deposits than PYX: Astron, Iluka, and Sheffield. But neither Astron nor Sheffield are yet in production from their deposits, whereas both Iluka and PYX have tangible track records.
In the case of PYX, production has been ongoing at the Mandiri project in Central Kalimantan since 2015. The recent addition of a new project to the south east, at Tisma, is likely to add considerable scale.
Overall, the combined resource of Mandiri and Tisma rings in at 263.5mln tonnes of ore grading 5.65% heavy minerals, to give 14.9mln tonnes of contained heavy minerals and 10.5mln tonnes of contained zircon.
That puts it just ahead of Kenmare, and well up in the big leagues of the zircon players.
There’s also some associated rutile and ilmenite, but it’s important to reiterate that it’s the high value zircon that’s dominant here.
PYX’s chief executive Oliver Hasler points out that the average zircon mine runs at grades of between 0.5% and 1% globally, whereas average grades at Mandiri run at 4.8% and grades at Tisma at 3.3%.
So, there’s a lot to be positive about already.
But there’s plenty more to come too. Because not only is PYX ramping up output at the existing projects, but it’s also looking to be the consolidator of mineral sands projects in Kalimantan.
The acquisition of Tisma has already laid down a firm marker on this score, but there are plenty of other opportunities. Indonesia, after all, is well acquainted with mining, and activities on Kalimantan and in mineral sands go back hundreds of years.
Hasler himself is confidence PYX can deliver on its ambitious expansion. He’s managed billion dollar companies before, so if PYX does take off and become a ten-bagger from here, there’s no sense at all that he’ll be out of his depth.
“Our focus has been to grow the volumes,” he says. “And to cut costs by moving to in-house mining.”
These projects are well in hand, and the timing, says Hasler, “could not be better.”