Mineral sands operator Iluka (ILU) +6.08% rallied yesterday on the news that it would build a rare-earths refinery in WA. This is a big deal on a few fronts with the Federal Government providing over $1bn of non-recourse funding for the project signaling a desire for Australia to value-add rather than simply be the world’s quarry, while for ILU, the project is targeted to be as big as Lynas (LYC) which is currently valued at $10bn (ILU currently has a market capitalisation of $5bn).
This will take time and perhaps this is a case of sell the news because there’s a lot of complexity ahead before putting revenue onto the company’s top line, however the path for ILU to increase in size over the coming years is well defined, and this is now a stock that we want to own, at the right price of course. Back in December we had an $11 target for ILU and although its rallied a bit higher, we think buying higher lows rather than chasing fresh highs is the way to go.
MM is neutral ILU around $12
Add To Hit List
