Business Irish

Sunday 17 December 2017

Explorer Kenmare touted as 2011 takeover target

Kenmare managing director Michael Carvill and chairman Charles Carvill are focussed on the ilmenite mine in Mozambique
Kenmare managing director Michael Carvill and chairman Charles Carvill are focussed on the ilmenite mine in Mozambique

Peter Flanagan

IRISH mining company Kenmare could become a takeover target this year, according to a City money management company.

Royal London Asset Management (RLAM) has highlighted Kenmare Resources as a well-positioned company with valuable assets. Market wisdom suggests the company may become a target for one of the bigger mining firms before the end of the year.

Last November, Bank of America initiated coverage of the company with a 'buy' rating and said it could be attractive for a takeover. The stock has increased more than four-fold since June, now trading in the 45c to 50c range.

Kenmare is focused on an ilmenite mine in Mozambique. The mineral is used mainly in paints. Last year, the company upped production by 50pc to 1.2 million tonnes per annum and according to Ivor Pether of RLAM, there is capacity to grow production further.

"Production at the mine is very scalable and we would not rule out the company doubling production. Ilmenite as a commodity does not receive a huge amount of coverage, but based on demand from China and other parts of Asia it is trading at around $150 [€111] per tonne at the moment," he said.


"While Kenmare is locked into lower prices due to agreements signed when the firm was setting up its infrastructure around the mine -- DuPont has a deal to buy ilmenite at about $90 [€67] -- some of those agreements will be coming to an end which will give them more access to the higher prices."

Kenmare is essentially a single asset company, which in theory should make a takeover by one of the bigger conglomerates in the sector relatively straightforward. Iluka and Rio Tinto are two of the major players who mine ilmenite.

"It is essentially a single asset company, but that asset is very valuable. The mine provides a huge reserve base and it is believed it could last 100 years. That is not to be sniffed at when reserves are running low elsewhere," Mr Pether added.

"Ilmenite prices will be dependent on continuing growth and affluence in the east and in the short term at least that remains likely."

Irish Independent

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