Wednesday 21 February 2018

Kenmare makes a play on Chinese growth continuing

LAST Thursday's news of increased output from its Moma mine in Mozambique had only a marginal impact on the Kenmare Resources share price.

Despite announcing an 83 per cent increase in 2011 revenues to $167m (€127m), the share price added just two (euro) cent to 57c.

This values Kenmare at €1.38bn plus net debt of $168m (€129m, Kenmare reports in dollars), a total of €1.51bn. The share price is up 50 per cent over the past three months.

A quick look at output figures shows the market is right to be sceptical. While revenues were up by 83 per cent, shipments of finished product only grew by 2.4 per cent to 730,000 tonnes. The increase in Kenmare's revenues was mainly driven by it securing higher prices as older, fixed-price contracts came to an end.

A large proportion of Moma's output goes to China, effectively making Kenmare a play on the Chinese economy. With the Chinese economy rapidly decelerating Kenmare is hoping Chinese growth will continue to be "substantial and sustainable". Investors have yet to be convinced.

Sunday Indo Business

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