Stellar Resources Limited [ASX:SRZ]
Metals & Mining
Australia’s highest grade undeveloped Tin Resource
We initiate coverage on Stellar Resources Limited (ASX: SRZ) with a 12-month target price of A$0.052, representing a 223% upside from the current share price. Stellar is advancing the Heemskirk Tin Project in Western Tasmania, Australia’s highest-grade undeveloped tin resource, boasting a JORC MRE of 7.48Mt @ 1.04% Sn. Breakthrough ore sorting results have doubled feed grade and reduced waste, supporting lower costs and improved recoveries. With advanced economic studies underway, Stellar is de-risking metallurgy and strengthening project economics. The nearby East Renison Project adds strategic exploration upside potential adjacent to the world-class Renison Tin Mine. Given that ~60% of global tin supply originates from volatile and high-risk zones, Heemskirk is expected to become one of the world’s highly critical tin resources.
Drilling reveals potential for a significantly larger tin system
Ongoing deep drilling at Heemskirk (comprising a 24-hole, 9,500m drilling programme at the Severn and Queen Hill deposits) is yielding consistently strong results. The drilling is revealing larger cassiterite grain sizes and higher tin grades beneath the current resource envelope. These grades exceed those used in the 2023 resource model and support the potential conversion of a substantial portion of the current Inferred Resource into the Indicated category. This suggests the presence of a significantly larger tin system than currently defined. The results are expected to underpin materially upgraded Mineral Resource Estimates (MRE), scheduled for release in Q3 and Q4 CY2025. This upgrade will mark a critical milestone, enhancing geological confidence and providing a stronger foundation for improved economics and a more robust development strategy in the upcoming Preliminary Feasibility Study (PFS).
Next-gen ore sorting is ready to transform Heemskirk’s economics
Highlighted as the highest-grade undeveloped tin project in Australia and 3rd best in the world, Stellar aims to achieve a step-change in project economics through advanced ore sorting, now central to its development strategy. Test work at the Severn deposit upgraded tin grades from 0.70% to 1.65% Sn and achieved recoveries of over 84.7%, rising to 95% when combining product streams. Leveraging learnings from the Renison mine, SRZ is deploying next-generation X-ray transmission technology to drive superior tin grade results. This is expected to upgrade the project’s NPV significantly.
Valuation range of A$0.044–0.060 per share
Based on a realistic but conservative assumption, and using a SOTP-based valuation methodology, we have valued SRZ at a mid-point target price of A$0.052, representing a Price/NAV of 0.31x. Our target price underscores the substantial inherent value of the Heemskirk Tin Project. As SRZ achieves its stated key milestones (PFS, MRE upgrade etc.), additional value can be unlocked. Further, any potential M&A news is likely to re-rate the stock. Notable risks to our investment thesis include fluctuations in commodity prices, funding challenges, and possible delays in project execution.