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

I see from other boards that Winnie as put out a rallying call on this stock saying its undervalued. His target price 70p or more.

duhh - and how will the rest of the debt be paid - duhh (ref post 659)

I'm a holder so not being negative, just realistic, its looks a great company with great prospects, but the fact is it has massive debts too, and looking to add more debt.

Thanks for a sensible, less sarcastic response from GF (as always!)

Just kidding Kiver - no offence meant.

I believe 57% of output is sold forward which covers operating costs and services current debt. So there seems to be 43% of output - soon also to be contracted forward - to invest in growth - even after dividends.

sd

SD, yup thats correct, I dont see any funding problems here unless of course they go mad on the Uranium project.

Cheers gd and gf, sounds like a 75-100 percenter from these levels, hope your right. kmr is now my biggest holding!!

Kivver - I'm very much overweight, but my biggest holdings are still reserved for companies already generating revenue and earning increasing profits. Take care, nothing is written in stone - although, I do believe in KMR that the management actually knows what it is doing and has hot every button dead on so far.

sd

yours is the right approach SD, my second biggest holding is National Grid which ive held for about 3 years and has been brilliant. Just hoping and praying for the mine to work with no hic-ups. We dont want another biofuels (bcf).

Kivver - I remember your woes with bfc. I was lucky enough to get out with 147 profit after all the hype. Have you looked at it since. Occasionally look at DOO as well for old times sake.

SD - im still in bfc at quite a loss, but confident i will get even sooner or later. May take a couple of years though.

Moving in the right direction guys.

Yes Goldfinger...I do think though that this is a share the big guys and MMs play with alot...they push it down and down for no reason and then suddenly bounce it back up until the next time...bet they make a fortune out of this. I wish I had enough money to take advantage of it too.
Di

Itl break out at sometime Di, just a matter of patience. Cant be far off now.

See what I mean...12919 shares being bought over and over

Yup I can see what you mean but when the real big funds get interested usually when they have evidence of production on its way to market the speculators will be blasted from their positions.

Steady as she goes.

It looks like another GFM.

Ticking up.

aldwickk,

let's hope so!

I feel we must be due some sort of construxction announcement son, and then we should be back over 40p.

Andy,

Off topic, am still holding BEM at a loss , whats your view on them now ?

Its gone 406 mad !