STEEL alloy producer Hazelwood Resources is this week’s happy chappy, with the shares (ASX code HAZ) up by 33 per cent to 3.6 cents. The strength in the shares follows two research reports on the company, both of which suggest the share price should double in the next 12 months.
The first report, on August 29, was by Helmsec Global Securities, which rated the company a “speculative buy” with “significant potential upside” from the then price of 2.7c a share.
It reckons HAZ could be worth 7c a share in a year’s time.
Hartleys was even more bullish when it released its latest report on the company week later on September 5.
By that time the shares had already begun to move and were up to 3.3c, but Hartleys’ latest estimates came up with a 12-month price target of 8.2c.
Back in March, when the shares were 2.5c, Hartleys was already quite excited by Hazelwood’s prospects, and set a 12-month price target of 4.2c.
Clearly, its market analysts now think they were being too cautious six months ago.
What has impressed both share broking firms is the successful start-up of Hazelwood’s ferrotungsten plant in Vietnam.
It has produced 193 tonnes of high quality metal, used mainly for hardening steel for cutting tools and use in high temperatures.
Hazelwood owns 60 per cent of the plant but is expected to exercise an option to buy full control.
The ferrotungsten sales have generated significant profits and cash flow, enabling Hazelwood to pay down debt and increase its ownership of the Mt Mungine tungsten deposit in Western Australia to 100pc.
It already owns Big Hill in WA, which is thought to contain enough tungsten ore to support a 12-year mining operation.
Hazelwood’s long-term plan is to supply its own ore to the Vietnam plant, but that will require significant capital investment.
Hazelwood has been helped by the rising demand and price for tungsten, boosted by Chinese export restrictions.
The brokers are assuming that the Vietnam plant’s profit margins will be maintained.
They have taken little or no account of the value of Mt Mungine and Big Hill at this stage, and ignored Hazelwood’s nickel and base metal exploration in the East Pilbara region of WA
