Kenmare Resources (KMR)

Titanium dioxide is all around us in its refined form, in paints, plastic, fabrics, paper and inks. The minerals it comes from - ilmenite, rutile and zircon - have yet to experience the steep price rises seen across other commodities, but the pressure is building. Although ilmenite's price averages around $80-100 per tonne depending on the grade, recent shipments into China have garnered around $130. So the start-up last autumn of exports from Kenmare Resources' Moma titanium sands project on the coast of Mozambique could be well-timed.

The profits forecasts from stockbroker Davy in the table don't presume a price explosion, rather they presume low single-digit percentage rises in line with global economic growth. Under this conservative scenario, and assuming that the Moma project has a 20-year life, mining analysts think that Kenmare's equity is worth perhaps 70p per share, considerably ahead of the current price. Equally, it is unlikely that the price of titanium will dip unexpectedly. That's because most production is taken in long-term supply contracts - as, for example, Kenmare has agreed a five-year deal with DuPont. As a result, little production is dumped on the market.

But there is more. Kenmare's bosses aim to produce 1.2m tonnes of ilmenite per year, but, at that rate, production at Moma could last for over a century. Yet that level of production could easily be boosted. Moma is a surface sand-dredging operation of striking simplicity, its site is big enough to allow for expansion and extra processing equipment has already been installed to do the job.

As regards the price of titanium dioxide, it is not just burgeoning demand from China that threatens to throw a balanced market into supply deficit. A major Australian producer, Iluka, is facing production difficulties, which will hit the supply side. In addition, major producers in South Africa, such as Richards Bay Minerals, face power rationing, which may affect their output.

Meanwhile, Kenmare could boost its profit margins by upgrading its products, for example by installing a smelter to produce titanium slag. Kenmare's managing director, Michael Carvill, has a fine eye for a deal, having bought Moma's plant second-hand from a BHP operation in Australia that was winding-down. Now he talks of finding a smelter in much the same way.

That said, Kenmare has not had it all its own way. It has not been able to ramp up its production as it wanted because of problems with new equipment. At least its contractors have agreed to correct the problems at no cost. All the same, delays mean that analysts have trimmed their profit forecasts for the next few years. On the other hand, these delays have driven Kenmare's share price back to levels last seen in early 2007, yet they should not materially affect the long-term value of the project.

Admittedly, Kenmare carries net debt of about $266m (£132m), or 1.3 times shareholders' funds. That's not as bad as it sounds. Effectively, Kenmare is a single-project venture, financed largely by external lenders who have heavily stress-tested assumptions in a field where financing of 75 per cent debt and 25 per cent equity is reasonable. Besides, its lenders include agents of western governments, which should dilute the political risks of operating in Mozambique.