Shares in Kenmare Resources plunged 30 per cent as the Mozambique titanium miner announced a $270m (£180m) placing and open offer at 12p a share alongside full-year results that reflected production that was still ramping up against a largely fixed cost base, high financing costs and low titanium prices.
The company and analysts agree that titanium prices are likely to rise due to near-term supply constraints and growing demand from developing economies. Chief executive Michael Carvill explains that when he started to see tightening in the market, he decided Kenmare needed to fast-track its expansion plans if the company was to take advantage - hence a fund raising that came sooner than some analysts were expecting.
Production of ilmenite (titanium oxide) has now reached around 85 per cent of the initial annual target of 800,000 tonnes, and investing $200m of the funds raised will increase capacity by 50 per cent to 1.2m tonnes. This expansion of the plant should enable Kenmare to lower production costs substantially, by some estimates by as much as half on a "per tonne cost" basis. Prior to today's announcements, broker Canaccord Adams was forecasting 2010 EPS of 4¢ (3.6p).
| KENMARE RESOURCES (KMR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 15p | MARKET VALUE: | £131m | |
| TOUCH: | 14.75-15p | 12-MONTH HIGH: | 29p | LOW: 7.66p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 25¢ | NET DEBT: | 154% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | nil | 4.7 | 0.72 | nil |
| 2006 | nil | -4.3 | -0.63 | nil |
| 2007 | nil | -9.6 | -1.40 | nil |
| 2008 | nl | 0.3 | 0.05 | nil |
| 2009 | 26.7 | -30.4 | -3.59 | nil |
| % change | - | - | - | - |
£1=$1.504 | ||||
