Kenmare Resources slips after weak short-term outlook
SHARES in Kenmare Resources slid after the rare earths miner said its short-term outlook would be weaker than had been expected.
In an interim management statement covering the third quarter of the year, the company said production climbed 2pc at its mine in Mozambique. Growth was driven by a 21pc increase in ilmenite production -- a form of titanium.
Despite the growth, however, the market reacted badly after the firm said short-term production could be worse than expected.
"The short-term business outlook has been affected by softer markets for titanium minerals, feedstock and zircon products," Kenmare said.
"With regard to titanium minerals, we view this as a temporary situation caused by the general global economic slowdown, and particularly weakness in the housing and construction sectors.
"As economic activity recovers and market confidence is restored, we expect to see a recovery in feedstock demand driven by re-stocking and increased consumption.
"We remain confident that the fundamentals of supply/ demand for titanium feedstock remain favourable in the medium to long term," Kenmare added.
While revenue was "marginally" ahead of the second quarter, net debt stood at $239m (€184m) at the end of September.
Despite the poor outlook, analysts generally welcomed the results, with Davy Stockbrokers' Caren Crowley describing them as "good".
"We expect production in Q4 will be similar to Q3 notwithstanding further power disruptions required to strengthen the network. This will mean full year production will be in line with guidance and our forecast of 630,000 tonnes of ilmenite.
"Although ilmenite prices are holding up 'reasonably well' despite weaker demand for pigment, management is cautious on the near-term market outlook ahead of sale negotiations for H1 2013 deliveries."
By the close in London, Kenmare had fallen 5.2pc to 36.5 pence, while in Dublin the stock dropped 7pc to 45c. Shares in the company have gained more than 7pc in Dublin in the last year but are down 2pc over the same period in London.