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

Good to see this one positive again.

where"s the bronagh j?

new photo"s on kenmare"s web site.

If its of interest to anyone i emailed KMR. last friday asking for a progress update, i got a reply suggesting i phone head office. At the second attempt i was connected to and spoke to a director. Athough guarded in his answers he gave a positive response to my questions.
1. He fully expected the barge to be operatonal during october.
2, $400k per week were payable to kmr as way of a penalty by contractor up until recent completion of MSP.
3, No nasty surprises were expected, or flys in the ointment.
4,Large investors in KMR. were unconcerned with what may appear a lack of newsflow, this will be forthcoming when there's something tangable to report.

Possibly very big news coming re uranuim next week.

Is this uranium news anything to do with Kenmare ?

Must be otherwise he wouldn't have posted it on here.

Long shot outsider even for Frankie Dettori, but we'll find out within the next week,

For uranium read BLT.

That last trade of 1m+ is likely a buy as it totals the number of sells today, would also explain why SP. held up so well under constant selling. At a million could be inst. buying or stake building in antisipation of buyout, or maybe wishful thinking again.

interims. production ahead,but delays by the contractor,barge not delivered until november,no mention of uranium licenses.

Production is the thing,and that is on schedule, so the customers will simply need a larger bulk carrier to take delivery, and the barge will be in time to ferry the concentrated minerals to the bulk carrer moored off shore when it arrives.
Buyout ? Over their dead body only I think, the directors are determined to stay in control, any attempt at this stage would herald a substantial price increase.

NIL ILIGITIMO CARBORUNDUM

Yes, the market makers are very often marking KMR down, with very low volume and even no volume. The heading refers to them. Be alert to their tactics.

for the life of me i cannot see why anyone would sell at this price. 2 years down the line that will be a big mistake.

You are spot on Kivver,and with KMR we are already well down the line,and the management are on track.

from the other side
Reason for rise - tipped on UK-ANALYST today target price 86p.

"What percentage of the hundreds of mining explorers listed in London will ever bring a project into production? We suspect the answer is low. Kenmare Resources, which is listed on the Irish market and the Full List of the London Stock Exchange, has already achieved this feat. In April of this year, after twenty years of work, production commenced at the Moma titanium mineral sands mine in Mozambique. This transforms Kenmare from a cash consumptive developer into a cash generative producer and significantly de-risks the investment. Having recently taken over the Mineral Separation Plant (MSP), the company is now in a strong position to process Heavy Mineral Concentrate (HMC) into final products, which are currently being stockpiled for shipment.

With commercial production now underway the investment case has been further supported by a sharp rise in market prices for titanium minerals (ilmenite, rutile and zircon) over the last five years, largely in response to increased demand from China and other rapidly industrializing nations. The MSP is currently operating at a feed rate of 90 tonnes of HMC per hour, which is 75% of the design capacity. The ilmenite products are within specifications, while the company is storing the rutile and zircon feed until the rutile and zircon circuits come on stream. In addition, the Product transfer barge which will transfer final products to a carrier for shipment is expected to arrive at Moma in November.

Kenmare has the financial strength to increase its annual production capacity by 50% (1.2 million tonnes per annum of ilmenite product) before the end of 2009, with the view of reaching a targeted operating rate of 2 million tonnes of ilmenite product per annum before the end of 2011. With the completion of Phase-1 at Moma, Kenmare has the capacity to produce 800,000 tonnes of four ilmenite products containing 50%-60% titanium, 56,000 tonnes of zircon and 21,000 tonnes of rutile as by-products before the end of 2007.

Starting in April, the project went through an initial phase of mining the ore body with one dredge, as it was necessary to expand the dredge pond, a process which is now complete. Having recently deployed a second dredge to mine the Moma orebody, there are now two dredges mining the enlarged dredge pond simultaneously with the commensurate output increase in the Moma Mine. The addition of the second dredge is expected to accelerate the ramp up to full production and reduce the effect of the late delivery of the facilities by the contractor. With a Proven and Probable reserve of 469 million tonnes of ore at 4.3% grade of heavy minerals, of which 3.5% is ilmenite, the Moma resource can easily deliver the 16.4 million tonnes of ilmenite to be extracted over a 20 year mine life.

However, the total resource at Moma is 6.376 billion tonnes of ore, containing 163 million tonnes of ilmenite, which gives a potential mine-life of over 100 years. It is more than feasible that the mine will be productive beyond the 20 year life span on which the mine plan is based. Given the size of the resource and recent titanium feedstock price trends, the company believes that the Moma mine has the potential to be one of the worlds largest single mine in terms of titanium minerals production and that Kenmare could, at the same stage, be one of the worlds largest titanium dioxide feedstock producer after Rio Tinto, Iluka, BHP Billiton, and Exxaro Resources.

Working in Momas favour at a macro-economic level is that two of the worlds three largest existing mines (Enneaba and Richards Bay) are already in decline or at flat production, while the market for titanium dioxide is growing at around 3.5% per annum with limited new capacity coming on-stream. Momas total output will account for approximately 6% of todays market or just two years annual increase in global demand not taking into account the retirement of existing production.

Over the past five years Kenmare has signed a number of multi-year off-take contracts for over 60% of its production over the first five years of Momas life. We understand that key buyers have shown strong interest in the remaining production and we expect the company to enter into new pre-sale contracts, known as off-take agreements, which will reduce the uncertainty of demand and risk of price volatility over its production cycle. The pricing outlook for all the Moma minerals remains positive, with the largest demand for titanium minerals ilmenite and rutile, stemming from the manufacture of titanium dioxide pigment which accounts for over 94% of total titaniferous feedstocks. The balance of the demand for titanium minerals comes from titanium metal producers and for the welding of electrodes.

We have valued the companys Moma project using discounted cash flow valuation over a 30 year life mine. Using a 8.3% discount factor, in line with the company's average interest rate of debt, and an exchange rate of GBP/USD 1.95, we arrive at a Moma Project base case NPV of 85.47p per Kenmare share, or 592.8 million. The reduction in discounting from the 10% discount factor used in our October 2005 valuation is warranted, given that the company has brought the Moma project into production at a low operating cost model using proven technology and employing a number of specialist engineering and consultancy companies. A lower discount factor, say 7%, can also be applied, justified by the significant de-risking of the project in that it is now fully funded and in production with the bulk of its output already pre-sold. The NPV7 values the Moma project at 697.72 million or 100.6p per Kenmare share. We consider this as a considerable upside to the project.

Taking Moma into production is likely to transform the companys financials from next year onwards, with a projected 2008 pre-tax profit of $33 million, and an Earnings per Share figure of 2.4p on an undiluted basis. Our projected 2008 financials are based on 12 months of production at base case final product prices. This year, the company will continue its exercise of capitalising costs, and as a result, we expect the company to break-even in 2007, following the recent release of its interim results for the period to 30th June 2007. Undeniably there has been a delay in revenues, as a result of substantial delays by the contractor, which have had an effect on Kenmare's finances in 2007.

Going forward, we expect 2009 to see a decent increase in revenues and profitability, as the company continues its efforts into a pilot plant operation and process design for an expansion to 1.2 million tonnes per annum of ilmenite, expected to take place sometime in 2012. Based on the Moma project discounted cash flow valuation, and with an estimated net cash figure of $10 million or 0.7p per share (after the working capital expenditure and settlement of contractor liabilities), we increase our existing base case valuation from 70p to 86p and at 53.125p our stance is buy."

Thanks Dynamite, this assessment should propel KMR to a new blue sky price level.

Thanks Dynamite, this assessment should propel KMR to a new blue sky price level.

Hi Dynamite - long time no post! Hope you're well. I'm stuck in Budapest (could be worse places) for a few weeks.

KMR looking good. Apparently they can make dog collars studded with Zircon too!

hi SD,

Its been the worst year of my life and I now have alot of Titanium in my leg. Today has been the first time that I am back working in my office as it is upstairs and I could only use a computer by the front door so I could answer the door. Now my leg is finally recovering, despite being told by 3 doctors that I would always be disabled due to surgical error, I am back to trading as of tomorrow and I'm getting my life back after 8 months of pain and then finally getting my leg rebroken.
KMR remains my largest holdest in terms of money and infact due to profits is now worth more than my whole original portfolio and thats despite losing on NML. GFM remains my second highest holding but I have a lot more goodies in there these days and now try to cut my losses. You should read 'The Naked Trader'...brilliant!
I hope budapest is fun and not all work and that your portfolio is doing wonderfully well
:-)
Di