Kenmare Resources - re-rating due soon?

Looked back over the thread from 9th December onwards and the following doesn't seem to have been posted:



Kenmare hopes for higher output at Mozambique mine
December 9, 2004

Dublin - Mining firm Kenmare Resources could increase output at its titanium mine in Mozambique to 1 million tons a year from a current estimate of 650 000 tons when production starts in 2006, given the demand outlook.

Kenmare's managing director, Michael Carvill, said yesterday that demand for titanium - a metal used in aircraft and to make white pigment in paint - was strong and looked likely to outstrip expectations.

Kenmare's Moma mine has already sold 57 percent of its expected production for the first five years and is in talks with potential buyers about selling more.

"If we converted the guys we're talking to, we'd be oversold," Carvill said. "We believe 1 million [tons] is possible if we can get the consumers to sign up."

Kenmare, which has a market capitalisation of about €159 million (R1.2 billion), had the mineral reserves to boost output. However, this would require further investment of $30 million (R172.5 million), Carvill said.

"So we'd obviously have to persuade the banks."

Kenmare has just completed a $450 million structured finance package to fund the mine's construction after years spent investigating the site's potential, and persuading banks and titanium consumers that the project was viable.


The finance package won an award at the annual Mining Journal international awards last week.

Financing the development of the mine is made more difficult because titanium is not traded on the open market, so banks cannot hedge the risk of lending by selling the metal forward.

Kenmare believes part of its appeal lies in customer disaffection with dominant producers of the metal and the fact that Moma, which uses a dredge system and floating concentrator, is a relatively low-cost producer.

"We will be the lowest cost of any potential new entrant and the lowest cost but one of all existing entrants," Carvill said.

Only Richards Bay Minerals in South Africa is a lower-cost producer and that mine is starting to deplete.

Moma is expected to account for about 2 percent of Mozambique's gross domestic product once production gets under way.

It will employ 1 800 people while it is being built and 600 in the course of normal business. - Reuters