The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Vote!!
Has anybody with a DEGIRO account managed to bote?
Manyana
Ireland has compiled monthly rainfall data since 1711.
The decade 2006-2015 was the wettest until that point!
Looking out my window, I don’t think it has got much drier during the past 5 years.
Geng13
You may be right - odds on that the outcome will be similar - but that doesn't explain why you are so exercised about this, or what you think shareholders have to gain by taking your advice as opposed to trying to kick the BOD in the gooleys while leaving open the possibility of a minor miracle!
In late May you posted the same advice, more or less. Did you know that if you had ignored your advice and bought in then, you would have almost trebled your investment in 3 weeks?
If you return without acknowledging any of these questions, I will turn you green; I know that will upset you greatly??
DEGIRO
I have a transaction-only account with DEGIRO; voting is difficult.
Is there anybody else here with DEGIRO who can advise?
Thanks
RNS
Is this PM Question Time?
Are you just going o ignore the questions that were addressed to yo specifically?
RNS
6 per day for the past month on HUR with just a handful on other shares!
RNS
I can’t figure out why you’re working so hard to deliver your message here.
My shares are virtually worthless under the BOD proposal, and indeed they’re virtually worthless now also.
So you are not saving me from anything; it’s no risk to let my few hundred run in the hope that at least I can take a kick at the BOD which I think did not to what it could to at least reduce the shareholder losses.
Judging by what you say about yourself, you should have something better to be doing.
So could you please explain what you are trying to achieve with all this effort?
Mamba
Not an expert but this doesn’t make sense to me:
“That is to be decided in an extraordinary general meeting. I can see little difference even if the said removal of directors take place as that would not affect in principle the re-structuring plan.”
Surely a majority on the board could withdraw the proposal and/or fire the CEO if they wish?
Ultimately, it may not help but it would affect the restructuring plan, no?
You really are a sour kraut
NGR
I'm sure we're all pleased to know that you don't know what's going to happen!
The group is currently outputting heavy mineral concentrate at the rate of 1.4 million tonnes pa, which is 87% up on last year’s total. With 37% higher grades, this will drive Kenmare’s operat- ing profits up to possibly $150m.
Last year’s capital expenditure programme pushed the group into net debt of $64m but with the cash flow now flowing freely, this debt should be eliminated in the current year, resulting in finance charges being almost eliminated. This could push earn- ings per share up to an all-time record of €1 year to put the shares at the current price at €5 on a prospective five times price-earn- ings multiple, which looks like a dramatic undervaluation.
PROSPECTS
On the back of this perfor- mance, Kenmare’s share price has almost doubled from the begin- ning of last year but the prospects are that the shares will gain in value over the next year as the market begins to realise just how profitable Kenmare has become.
This looks likely to attract the attention of one of the bigger heavy mineral sands producers
of the titanium dioxide feedstock, which is led by the Chinese, with a 25% market share, while the €120bn Anglo-Australian mining house Rio Tinto is sitting on a 20% market share. With Kenmare now capitalised at €500m it could, therefore, be easily gobbled up.
Another likely mineral sands predator is the €2bn Australian Iluka Resources. It has already expressed interest in Kenmare and has a 9% market share and is more focused on this sector.
It is difficult to know how Mick Carvill will play his cards. With no obvious issues now fac- ing the company and throwing off massive amounts of cash, he is unlikely to simply sit on his hands and pay out huge dividends.
Almost certainly the Ken- mare CEO will have to facilitate a major takeout deal or maybe explore the possibility of moving into a new area.
For example, Kenmare could consider taking out Aminex, which is about to spend $150m moving into first gas production over the next two years, or what about examining again the
Ancuabe graphite mine? One way or the other, the long-term shareholders, who have almost been written down so much, should get something back over the next year, while those who joined at the time of the big 2016 refinancing (and have already doubled their money) should be happy to sit tight for the next 12 months awaiting the impressive returns set to be delivered to shareholders this year.
This pushed Kenmare to the brink of bankruptcy, with breach- es of virtually all of its banking covenants despite raising $270m from shareholders in 2010, $67m in 2012 and $90m in 2013 – a total of more than $400m.
Kenmare ended up in July 2016 with net debts of $387m but Carvill pulled a Houdini-like escape by getting the bank to con- vert $40m of debt into equity and write-off $69m, and then raised $275m in a fundraising exercise that saw the Oman sovereign wealth fund put in $100m.
Last year was not a great one for Kenmare, with finished prod- uct shipped down 17% to 853,000 tonnes in 2020. With the average price up 9% to $271 a tonne, how- ever, this left sales down only 10% to $244m, with operating profits knocked back 42% from $59m to $34m and trading margins down from 22% to 14%.
D I S R U P T I O N
The big $141m capital expen- diture programme last year (as against $69m in the preceding year) was reduced mainly due to the relocation of the concentrator plant. This disruption to produc-
tion resulted in reduced output, but the plant today has a capacity of 2,400 tonnes per hour, so the situation is now reversed. Not only is production at a record high but the ore grades are also significantly higher as the plant is working on a richer vein in the Pilvili zone. The company’s production platform has now settled north and south and will be stable for some years to come.
With everything going smoothly and Kenmare’s three wet concentrator plants working flat out, the total volume of ore grades excavated in the first quarter of 2021 increased only 10% to nine million tonnes, the more significant factor is that the total ore grades are up a hefty 37% to 4.64%.
This means that heavy mineral concentrate is up a huge 46% in the first quarter to 362,000 tonnes, with the core ilmenite production up 32% to 270,000 tonnes, while the production of the four times more valuable zir- con is up 39% to 13,000 tonnes. This resulted in total shipments
of finished products in the first quarter increasing 77% to 344,000 tonnes.
K E Y M A T E R I A L
Kenmare accounts for 7% of the total global production of key products for producing titanium dioxide, which is the key pigment feedstock to produce titanium metal. This is a key material for welding electrode fluxes, paint and ceramics, bringing brilliant whiteness to these products.
Kenmare Resources now a cash machine
THE NEW Sultan of Oman, Haitham Bin Tarik Al Said,
must be pleased with Kenmare Resources, which was saved from going under in July 2016 when the State Reserve Fund of the Sultanate of Oman acted as the lead investor in a $255m equity raise for an effecting controlling 29% stake at €2.40 a share. With Kenmare shares now trading at €5, this means that the vehicle used, Oman Investment Company, has more than doubled its $100m investment. Kenmare has now moved into serious money-making mode, with its Moma mine in Mozam- bique set to deliver huge profits over the next few years. Could a takeover now be on the cards?
When Kenmare was saved, the original investors were almost written off in a 200-for-one consolidation. Back in 2012,
the shares had traded at the equivalent of €140 a share (ie, pre-consolidation), meaning that even at today’s share price, those shareholders who are still around have suffered a 96% writedown, separate to a series of fundraisings pushed through by CEO Mick Carvill.
RIDING HIGH
Nevertheless, Kenmare is today riding high, having success- fully completed a major
logistical exercise. This
involved moving its largest
wet concentrator plant,
which weighs 7,000 tonnes
and is the width of a soc-
cer pitch, over a specially constructed 32km road
from Namalope in the
northern part of the huge six-billion tonne Moma
mine reservoir in Mozam-
bique to the Pilivili zone at
the southernmost end of
the mine.
The plant has successfully been redeployed in this rich new part of the Moma mine and is now boost- ing production by about 50%.
The effect of this increased production will push sales in the current year towards $400m while production costs per tonne are being reduced from $158 a tonne last year to $140 a tonne in the current year. With the combined impact of pushing up ilmenite from 841,000 tonnes last year to
a projected 1.2 million tonnes
in 2021, this should have a total impact of pushing last year’s $23m pre-tax profit to a lot more than $150m. This will bring earn- ings per share up to about €1, leaving the shares trading at the current €5 on a very modest five times price-earnings multiple.
After Mick Carvill decided to get Kenmare to take the sole risk on the development of the giant Moma project, he walked
his shareholders into a series of disasters, even spending heavily to increase the production by 50% during the global economic crisis. The price of ilmenite, a titanium dioxide concentrate and the core output of the mine, fell from $300 a tonne in 2010 to $130 a tonne, resulting in losses of $200m in 2014 and 2015.
Cash
Paper copy in the shops in Ireland tomorrow; also online with a subscription.
It depends!!
He might (and probably had) have meant that the odds were, e.g., 3 to 1 against before but they are now 2 to 1 against; thus a decrease.
If he thought that it was odds on before, it gets more complicated.
However, either way, I think you've reinterpreted it correctly.