Strandline Resources Uplifts Financial Estimates On Stronger Price Outlook At Fungoni

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Strandline Resources Limited

Strandline Resources Limited (ASX: STA) uplifted their revenue and earnings projection on the stronger price outlook for high-value product from Fungoni mineral sands project in Tanzania.

In today’s announcement to Australian Securities Exchange, Strandline unleased the results of updated Definitive Feasibility Study at 100% company-owned Fungoni project. The update highlighted an overall enhancement to the project financial metrics. The outstanding Internal Rate of Return has been increased to 61% from 56% and first quartile revenue-to-operating cost ratio has been posted to 2.8.

Driven by the higher price expectation, the company has increased its guidance for Life of Mine (LOM) revenue to US$184 million, up from previous US$168 million. Whereas, earnings before interest tax depreciation and amortization (EBITDA) is now estimated to US$115 million instead of previous US$98 million. The improvement in outlook further reflects the pre-sale of 100% of product under the binding offtake agreement. 

Strandline Managing Director Luke Graham stated that with the ongoing tightening in the mineral sands market, Fungoni offers additional opportunities to grow reserves and mine life, resulting in increasing financial returns over time.

Construction and operating cost estimates were also revised upwards from $42 million to $45 million on the back of advancement in execution contracts. This comes after the company has secured fixed-price EPC contract with international contractor GR Engineering Services. Further, following to the recent approval of the Fungoni mining license from the Tanzanian Government, the company has engaged Azure Capital to lead the project financing process for the Fungoni project and has progressed the process of engagement with potential lenders.

These updates are based on commodities price forecasts published by TZ Mineral International Pty Ltd (TZMI) in August-2018. Project’s current ore reserves for an initial 6.2-year LOM has been reportedly considered for new pricing assumptions.

On the basis of updated DFS, Strandline told its investors that its project Fungoni, located ~25km from the Dar es Salaam port in Tanzania, will deliver strong financial returns, has a high unit-value product suite fully pre-sold under offtake, is capital-efficient and strategically, paves the way for a succession of the Company’s mineral sands developments along the coastline of Tanzania.

Mr. Graham stated that Fungoni is set to continue benefiting from the forecast supply shortages in the global zircon and TiO2 market. He added Strandline’s two most advanced projects, Fungoni and Coburn, differentiate through their premium zircon-titanium product suite and relatively low capital intensity. It was further informed that funding process for Fungoni is well in progress while the company continues to build close collaboration with the Government of Tanzania and local communities.

The stock of Strandline Resources Limited (ASX: STA) traded flat today. STA closed at $0.110 on 1 November 2018. But over the past one year, the stock has shown a tremendous improvement of 83.33% in the daily price change.


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