Kenmare Resources not for sale, says outgoing MD Carvill

Michael Carvill, MD, Kenmare Mining KENMARE Resources said there were…

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Michael Carvill, MD, Kenmare Mining

KENMARE Resources said there were no plans to sell the company despite calls by a shareholder last month for it to consider strategic options.

Outgoing MD Michael Carvill said at the firm’s annual results presentation on Wednesday that Kenmare, which he founded, was too cheap to sell. “We are not conducting a strategic review at this stage,” he said. “We believe the company is performing well and that is not being recognised by the market.”

Shares in Kenmare are 30% lower in the last 12 months. This performance prompted JO Hambro, a 6% shareholder to reveal last month it had written to Kenmare’s board asking it to assess its “strategic options”, with its preference for an outright sale, according to a report by the Irish Times.

One disappointment for Kenmare has been failure to reach production of 1.2 million tons of titanium minerals, principally ilmenite – a paint pigment ingredient. Asked whether this production was possible, the company said it was not “a lost target”.

Technical difficulties associated with management of the firm’s slimes at the Moma mine in Mozambique and variable power supply had frustrated the company’s efforts, said Ben Baxter, Kenmare’s COO. The upgrade of the WCP B (wet concentrator plant) was also key in achieving this target. However, preservation of balance sheet flexibility would probably see this critical project deferred a year, he added.

Kenmare has guided to production of 950,000 to 1.05 million tons of ilmenite for the current financial year.

Ilmenite sales for the 12 months ended December fell 3% partly owing to a lightning strike at Moma in the first quarter of 2023 which interrupted operations. Combined with under pressure pricing, Kenmare posted a 36% decline in taxed profit of $131m.

Despite this the board declared a 38.54 US cents per share final dividend taking the total dividend to $50m, equal to 56.04c/share. This comes ahead of a $341m capital bill until end-2027 upgrading the infrastructure of its WCP A. The upgrade is so mining of Nataka, Moma’s largest deposit, can take place.

Carvill acknowledged dividend payments in future years could be at the low end of Kenmare’s 20% to 40% of underlying taxed profit dividend policy while the capital programme was underway.

Davy Research, a Dublin-based broker, said in a note Kenmare offered “remarkable value” when viewed through a long-term lens. “The stock, the sector and other hard asset sectors all offer remarkable value relative to the market, especially well positioned small caps,” said Colin Grant, Davy’s analyst.

Commenting further on selling the company, Carvill said: “I’m not a believer in fully efficient capital markets nor a highly inefficient capital market. As we continue to derisk the company and the ilmenite price moves to upward trajectory rather than downward we will see it reflected.

“It is not an appropriate time to put company up for sale as (ilmenite) prices are low. We continually review and continually look at all of the options. That is an onging process”. Carvill will relinquish his role as MD in August after 38 years at the helm.

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