From the FT on the 19th June

http://search.ft.com/search/article.html?id=040619001094&query=kenmare&vsc_appId=totalSearch&state=Form

COMPANIES UK & IRELAND: Kenmare negotiates $269m loan
By John Murray Brown
Financial Times; Jun 19, 2004



One of the largest debt financings for an independent mining company was announced yesterday when Kenmare Resources agreed a $269m (146.5m) facility to develop the Moma titanium mine in Mozambique.

Drawdown of the debt is contingent on the Irish company raising equity of $79m, lifting the value of the project to $345m.

The company already has commitments of $55m from a number of large investment funds.

Documents will be posted to shareholders on Monday for an open offer to raise up to $42m.

A banker at NM Rothschild, lead advisers on the financing, said the debt package represented three times Kenmare's market capitalisation of $90m.

"I do not think there have been any listed mining companies who have done that," he said.

Among the lenders, the African Development Bank is lending $40m and the European Investment Bank $15m in senior debt and a $40m subordinated loan, reflecting the vital economic benefits to what is the poorest region of one of Africa's poorest countries.

Martin Curwen, of the EIB, said this was the first deal signed under the 2000 Cotonou agreement between the EU and African, Caribbean and Pacific countries.

He said EIB's presence would "provide comfort" to other lenders. "It is part of our mandate to support projects where the funding would not have been available from the financial markets," he said at yesterday's signing ceremony, attended by Castigo Langa, Mozambique's minister of mineral resources and energy.

KFW, the German development finance institution, is providing $50m, partly tied to the supply of electrical equipment by Siemens.

The Dutch development agency FMO is lending $15m. The only commercial bank involved is ABSA, the South African bank, which is lending $80m to support the purchase of South African goods and services by the mine.

The mine is expected to be in production in the second half of 2006, with annual output of 600,000 tonnes of ilmenite and other titanium minerals that supplies white pigment used in paint and toothpaste.

The company has already raised 4m to purchase a mineral separation plant in Western Australia, which is being dismantled and shipped to the site.

At full production, the mine will account for about 5 per cent of world supply. About two-thirds of world production is controlled by RTZ and Iluka, an Australian company spun out of the old Rennison Goldfields.

FT Comment

* There have been similar financings in the minerals sector but never where the borrowing is three times the borrower's market valuation. The Lihir gold project in Papua New Guinea raised $300m in 1995 but lenders had the comfort that Rio Tinto Zinc owned about 40 per cent of the company. Kenmare's project is 100 per cent-owned by Kenmare, a company that has no cash flow and would have reported a small loss of $40,000 last year but for interest on its bank deposits. This project clearly could transform its fortunes. There are offtake agreements in place for more than half the first five years' production with Dupont and Mitsui. Prices for mineral sands tend to be more stable than base metals, which behave more like a commodity dependent on capital goods demand. The current market cap is little more than the value of a year's production from the mine. An upgrade seems inevitable. Canaccord, the company's broker, has a current price target of 35p. This compares with a close of 17p, down 2p yesterday.


Copyright The Financial Times Ltd

And in the blue again with big volumes.

cheers GF.

Can't see them doing an AEN, they'll be taken out before they get to quid imo

capa

Capa what's a AEN?

Sorry Dynamite AEN is the epic for Asian Energy, now that is a chart !

capa

Dyna,

Asian Energy, whose price rose from 70p to 6 in a couple of months.

A quid will do me capa.

cheers GF.

MMs now playing silly devils with this ones price. Looks like they need stock.

cheers GF.

Well IMHO I reckon a quid by the year end and several pounds by 2007. Thanks Capa and Andy I should have realised you meant Asia Energy.

A friend who has made a huge amount of money on Penny shares recommended KMR to me in 2003 when I bought orginally, he the lucky devil, bought at 8p previous to this and has no doubt like me added to his holdings.
D

mm's and profit takers now weighing in but underlying strength is still clearly there - if not today then next week we'll continue to see the climb.

I agree Joe. Buys more than sells but price down slightly. Prices never move up in straight lines.

cheers GF. Will get that analyst report if I can find it.

Here it is.................

Lifted from advfn an analysts report..........

If, as I expect, Kenmare secures further offtake deals over the coming months it does have the cash to expand the capacity of the project so that it has a DCF value of 57p per share. An announcement along these lines could well happen by the half year. So on fundamentals the shares are not expensive.

cheers GF PS from t1ps.com I think.

Thanks GF. For me, this is one to tuck away in the bottom drawer through 2005.

If I wasn't in so heavily already I'd still be tempted to add and add at this price level. Why?: There are already offtake agreements in place for more than 60% of the first 5 years capacity at Moma and given global over demand they will easily get to a 100% order book in mid 06. At full capacity, Moma will provide 5% of global supply, with stable prices and guaranteed cashflow to pay it's debtors, including a flexible low interest deal with the African National Bank and other sources of "friendly" financing (only one commercial RSA bank is involved), the picture will start to change dramatically as they move from commissioning to production. Even at today's market cap it's an absolute steal, barely covering the net value to KMR of a year's production vs. multiple year reserves. Factor in that although the project is financed by many sources BUT owned 100% by KMR - they will easily cover the debt and redress the short term balance sheet weakness. IMHO This share is an absolute banker to deliver long term - the activity of the last few weeks is just the dawn of realization and expect the institutions to start buying in before too long. I stand to proved completely wrong and please DYOR but this is a company in a sector I've watched for a long time and I can honestly say I've never before felt more bullish about the prospects of a single stock.

hi guys,

good thread, plenty of decent and informed info, and i admit, this does look good, prima facie!!!

Does anyone know at what price they have forward sold the 60% production for the first 5 years???

i may be in monday, but would like to know how much they have contracted for in comparison to the curent world price.

Aimtrader, I don't know specifically the nature of the offtake agreements but given strengthening global demand esp in the US where aerospace and industrial applications have recovered apace of demand and prices are following in line - could reach $8.50/kg by 2008. Similarly, scrap shortages and strengthening demand resulted in rapidly rising prices for ferrotitanium from around $4/kg in August 2003 to over $11/kg. Based on 650 tonnes @ a guestimate of $5 per Kilogram = $3.25 Billion annual revenue on titanium from Moma based on annual capacity.

100% owned by KMR--this is exciting stuff. Only bought in a small way at the moment so I hope I have time to accumulate as funds permit!

aimtrader - 29 Jan'05 - 01:19 - 60 of 62

hi guys,

good thread, plenty of decent and informed info, and i admit, this does look good, prima facie!!!

Does anyone know at what price they have forward sold the 60% production for the first 5 years???

i may be in monday, but would like to know how much they have contracted for in comparison to the curent world price.






Offtake Agreements

The agreements signed by Kenmare already are confidential so we do not know its partners for certain. However the agreements have been scrutinised by the lender banks and so there is no concern that they may be anything other than real. One might speculate that major users such as DuPont are among those who have signed up.

The nature of the offtake agreements, which in total cover 57% of the first five year's production (on the 600,000 tonne ilmenite model) is that 18% of production has been sold on fixed price contracts. That means that Kenmare is guaranteed to have enough income to cover its operating costs and bank interest charges. The rest of the offtake deals signed to date are on a fixed volume, variable price - that is to say if prices increase Kenmare will issue an additional invoice post shipment, if they fall it will rebate the customers on the following shipment. This gives Kenmare clear exposure to any above trend increase in titanium minerals prices while guaranteeing that it will not default on its loans.

We understand that negotiations are underway which will see further offtake agreements signed during 2004 and 2005 which will ensure that most, if not all, of the base case output already has a customer before the commencement of operations. At a certain stage this process is likely to prompt Kenmare to take the decision to expand output to1 million tonnes of ilmenite. We do not expect to have to wait until 2009 to see that expansion take place.

Source: http://www.kenmareresources.com/GECRReport/GECR.html

Weekend papers say there is a suitor.

chers Gf.

GF,

Interesting, been looking at these, may be in if they fall a bit further.

goldfinger - could you elaborate on your post please! which paper?

Got it from Rebels above.

cheers GF.