MZI poised to deliver record March quarter production ahead of robust maiden fiscal 2018 profit.

By Trevor Hoey. Published at Mar 3, 2017, in Mining

MZI Resources (ASX: MZI) provided a positive operational update on Friday morning, noting that in the first two months of the March quarter the group had already achieved its second highest level of quarterly sales since operations commenced.

This follows on from strong Heavy Mineral Concentrate (HMC) production in the December quarter from its Keysbrook operation located in Western Australia.

In the current quarter MZI has completed two major shipments of leucoxene products totalling 6500 tonnes of L70 and 7500 tonnes of its high-value L88. The group has also shipped 3118 tonnes of zircon concentrate, with a further 2000 tonnes anticipated by the end of the quarter which would result in record total quarterly sales volumes.

With MZI’s continued optimisation progress having achieved increased throughput rates for HMC and L88 Picton Mineral Separation Plant, MZI’s next bulk leucoxene shipments are anticipated early in the June quarter.

Improvements continue at the Picton plant with work expected to be completed during March and April. Work is well advanced at the eastern mining area to install and tie in the new transportable integrated Mining Feed Unit (MFU) which has previously been used successfully in mineral sands mining. Commissioning is planned for late March.

Production to increase as plant upgrades are commissioned in March

The forecast increased production due to the new MFU positions MZI to benefit from continued strengthening global market conditions for mineral sands products, particularly in titanium minerals.

Today’s news is consistent with broker expectations which point to a strong transition to profitability in fiscal 2018. Bell Potter is forecasting the group to generate a net profit of $14 million, representing earnings per share of 7 cents.

This implies a heavily discounted PE multiple of 3.7 relative to Thursday’s closing price of 26 cents. It would appear that MZI is currently being valued as an unprofitable explorer rather than a company delivering strong production, and on the verge of delivering a robust maiden profit.

Bell Potter has a buy recommendation on the stock with a 12 month price target of 50 cents, implying upside of nearly 100% to the company’s current trading range.

It should be noted here that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

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