PYX Resources : Cedrus Investments Research Report – Reiterate Target Price on Achieving Multiple Milestones amid Strong Zircon Price

23 March, 2022 Global Equity Research led by Dr. Thomas Kenny, Director of Equity Research and

Charlie Yang, Senior Analyst, Mining and Commodities [e-mail]

Overweight

Price Target:

AU$3.35/GBp185

PYX Resources: Reiterate Target Price on Achieving Multiple Milestones amid Strong Zircon Price

Introduction

PYX Resources Limited ("PYX" or "Company"; NSX: PYX, LSE: PYX) has the world's second-largest JORC- complaint zircon resources among all producing mineral sands miners. It is also a leading and fast-growing premium zircon producer with enormous potential to grow output and enhance profitability.

This report provides an update on PYX's recent developments and a
review of its financial and operational performance for 2021 ended on 31
December 2021.
On 16 March 2022, PYX announced its 2021 results with robust demand
for zircon, resulting in increased sales volumes and rising prices. We
maintain our positive outlook for the company's growth and its future
valuation based on new developments reported by the Company and our	Share Price (as of 22 Mar 2022):
analysis of the industry trend.	AU$1.30 and GBp73.00
	12- to 18-month Target Price:
Recommendation Summary	AU$3.35 and GBp185
a) We continue our coverage of PYX and reiterate an Overweight rating	Market Cap (as of 22 Mar 2022):
with a 12- to 18-month price target of AU$3.35, representing an	AU$567.7M and GBP318.8M)
upside potential of about 158% over its closing price of AU$1.30 as of	Total Shares: 434 M
Dividend and Yield: N/A
22 March 2022.

1. Significant improvement in financials, successful fundraising and dual
   listing on the London Stock Exchange have better positioned PYX to capture further growth amid expected production capacity expansion on an ongoing basis, including the contribution from the Tisma tenement, the beginning of revenue generation from the output of ilmenite and rutile and continued enhancement in the Company's financial health in terms of revenue and EBITDA. We are forecasting PYX to grow its revenue at a compound annual growth rate (CAGR) of 67% during the forecast period between 2022 and 2026 and reverse the negative US$4,329,943 EBITDA in 2021 to a positive US$3,406,000 in 2022 with a EBITDA CAGR of about 102% during the same forecast period.
2. Even with the unabating COVID-19 pandemic and extreme weather conditions like flash floods interrupting operations, PYX was able to deliver production growth of 10% year on year in 2021. At the same time, the Company grew its sales by an eye-catching39% over 2020 despite many competitors experienced slower growth.
3. Prospects for the mineral sands industry in general and zircon in particular remain resilient, as long- term demand is sustained by persistent global economic growth, increasing urbanization especially in populous China and India, and innovative applications stemming from technological advancements in areas such as nano-materialsand nano-structurestogether with nonexistent of notable discovery of zircon deposits in recent years that could lead to supply shortages. Although the lingering of COVID-19pandemic worldwide has weighed on short term demand for zircon to some extent, in our view, a full recovery is expected within the next 12 months, as global vaccination rates are on the rise, approaching 60% at present, along with loosening restrictive measures following the flare ups of coronavirus infections to minimize the adverse impact on economy.

This report has been prepared by Cedrus Investments Ltd.

PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 13

1. PYX announced a 34% price surge of its premium zircon to US$3,100 per tonne with immediate effect on 21 March 2022. It is the fifth price hike since January 2021 with a cumulative increase of 135%. The spiraling of premium zircon price has been fueled by supply constraints in South Africa, compounded by low inventory level in China, the world's largest zircon consuming country, and higher demand from technology-basedapplications for producing renewable energy, zirconium-basedalloys for low-emissionelectricity generation, as well as zircon compounds acting as an integral part of catalytic converters to cut pollutants.
2. Our valuation is based on an extremely conservative zircon price of US$2,100 per tonne, compared to the prevailing zircon price received by PYX and our zircon price projections. This makes our target price not only achievable but also likely subject to upward adjustments.

Based on its series of achievements and low valuation alongside the bright outlook for the zircon market mainly caused by demand outstripping supply, we recommend investors to invest in PYX to capitalize on the upside potential presented by the Company.

Note: Unless otherwise noted, US$:AU$ exchange rate throughout this report is 0.75.

This report has been prepared by Cedrus Investments Ltd. • PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 13

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Table of Contents
I.	MULTIPLE MILESTONES COMPLETED DURING 2021 .................................................................................	4
	1.1	Successful Completion of Acquisition of Tisma ...........................................................................	4
	1.2	Fully-SubscribedShare Placement Raised AU$11.2 million..........................................................	5
	1.3	Successful Dual Listing on the Main Market of London Stock Exchange.......................................	5
	1.4	Additional Fundraising from U.S. Institutional Investor Completed..............................................	5
II.	CONTINUE TO DELIVER STRONG FINANCIAL PERFORMANCE....................................................................	6
	2.1	2021 Financial Performance Review ..........................................................................................	6
	2.2	2021 Operation Review ............................................................................................................	7
III.	FAVORABLE MARKET CONDITIONS POST COVID-19 PANDEMIC ...............................................................	8
	3.1	Zircon Price Trend Analysis........................................................................................................	8
	3.2	Zircon Supply and Demand Dynamics ......................................................................................	11
IV.	CONCLUSION...........................................................................................................................................	12
IMPORTANT DISCLOSURES ...............................................................................................................................	13

This report has been prepared by Cedrus Investments Ltd. • PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 13

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1. MULTIPLE MILESTONES COMPLETED DURING 2021

1.1 Successful Completion of Acquisition of Tisma

On 15 February 2021, the Company completed the acquisition of Tisma Development (HK) Limited ("Tisma"). PYX acquired the entire share capital of Tisma via the issuance of 147,277,370 of its ordinary shares. The acquisition serves as a boost to the Company's scale of mineral resources, an excellent strategic addition to its resource base and a milestone in consolidating Indonesia's mineral sands sector.

Tisma controls a world-class mineral sands tenement, which covers a concession area of 1,500 hectares in Central Kalimantan province, Indonesia. Moreover, Tisma is fully licensed by the government with an IUP-OP permit, allowing the mining, production and export of zircon.

In addition, Tisma added about 5.5 million tonnes of heavy mineral inferred resources (containing 4.5 million tonnes of zircon) to PYX's portfolio, representing a 60% surge compared to the pre-acquisition level, and a material improvement of PYX's overall assemblage value of 70%, as Tisma has an ultra-high zircon assemblage value of 82%.

Furthermore, this accretive acquisition has not only created notable synergy to the Company but also acted as a critical part of PYX's transformation into the zircon-producing company in possession of the world's second-largestJORC-compliant zircon resources. PYX now controls 263.5 million tonnes of heavy mineral sands, with 10.5 million tonnes of contained zircon.

Exhibit I-1:JORC-compliant Zircon Resources among Zircon-Producing Companies (Million Tonnes)

Source: Companies public filings

This report has been prepared by Cedrus Investments Ltd. • PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 13

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1.2 Fully-Subscribed Share Placement Raised AU$11.2 million

On 21 June 2021, PYX also completed a share placement to professional and sophisticated investors with the issuance of approximately 10.9 million new, fully-paid ordinary shares at AU$1.03 apiece. This placement successfully raised AU$11.2 million or US$8.4 million, before administrative, legal and placement fees.

The proceeds from the above-mentioned placement will be principally used to accelerate the development of the zircon-rich Tisma deposit. Specifically, the use of funds includes investment in its in-house mining at the Tisma deposit, installation of a mineral separation plant and logistics required to meet growing demand in particular high-tech applications.

The successful capital raising shows not only strong shareholder support to PYX but also provides sufficient funding for capital expenditure programs and working capital at Tisma to ramp-up its production of 65.5 grade premium zircon. Providing sufficient zircon to satisfy growing customer demand is crucial in ensuring that PYX remains competitive and its growth is sustainable and without the concerns of supply disruption in many years to come.

1.3 Successful Dual Listing on the Main Market of London Stock Exchange

PYX's shares started trading on the Main Market of the London Stock Exchange ("LSE") as a secondary listing on 15 November 2021 by introduction. The move was prompted by increased interest in the Company from European investors in addition to being principally listed on the National Stock Exchange of Australia ("NSX").

The dual listing in LSE has a number of benefits, including 1) making it easier for European investors to participate in the growth of the Company, leading to a diversification of investor base; 2) increasing PYX's global visibility; and 3) enhancing the Company's share liquidity because LSE has the deepest pool of capital in Europe.

1.4 Additional Fundraising from U.S. Institutional Investor Completed

On 11 March 2022, PYX announced that it had entered into a share placement arrangement with the US-based L1 Capital Global Opportunities Master Fund ("L1").

Under the placement arrangement, L1 will make a total equity investment of US$13.5 million in PYX with details as follows:

1. L1 will prepay a lump sum of US$4.5 million for PYX's shares worth US$5.0 million; and
2. Up to an additional US$9 million investment upon mutual consent.

This report has been prepared by Cedrus Investments Ltd. • PLEASE SEE IMPORTANT DISCLOSURES BEGINNING ON PAGE 13

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