First-half sales and profits rose sharply at mineral sands miner Kenmare Resources, but sentiment towards the shares has suffered as the global economic slowdown puts pressure on prices for the company's titanium dioxide feedstock. Cost over-runs and delays surrounding the phase II ramp up at Kenmare's Moma mine in Mozambique haven't helped, either - and we retain our cautious outlook for the shares as further delays could be in store.
The last major section of Moma's expansion - commissioning the phase II wet concentrator plant - has been pushed back to December after "dimensional inaccuracies" were spotted in several structural steel sections delivered to the site. Kenmare has since fixed the problem, but at a cost - total expected capital costs have risen to $350m (£222m) from $280m, precipitating a $60m equity raising last month.
Still, prices of ilmenite and rutile remain near historic highs for the moment - the former has seen a threefold rise in price over the past 18 months - despite softening slightly over the past few months. Production problems experienced in the first half of the year have also largely been overcome, with increased output from the expansion expected early next year.
Broker RBC Capital Markets expects full-year EPS of 4¢ (1¢ in 2011).
KENMARE RESOURCES (KMR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 38p | MARKET VALUE: | £961.5m | |
| TOUCH: | 38-39p | 12-MONTH HIGH: | 63p | LOW: 30p |
| DIVIDEND YIELD: | nil | PE RATIO: | 19 | |
| NET ASSET VALUE: | 21¢ | NET DEBT: | 53% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 56.0 | -14.2 | -0.59 | nil |
| 2012 | 109 | 38.8 | 1.61 | nil |
| % change | +95 | - | - | - |
£1=$1.58 | ||||
