Kenmare Resources is the Irish, UK-listed owner of the Moma titanium mine in Mozambique. It's had an interesting couple of years developing the mine, during which its share price has fallen from over 30p to less than 10p as it hit execution problems before recovering to the current 25p level.
The Moma mine produces three minerals - rutile, ilmenite, and zircon. Rutile and ilmenite are used as feedstocks to make titanium dioxide (TiO2), for use as a pigment in paper, paint and plastics production. Zircon is relatively higher value, and is used as an opacifier in ceramic production and also in refractory products. Pigments account for 92% of total demand [1] , so this is a fairly economically sensitive industry.
The mining at Moma is done by dredging mineral slurry out of an artificial pond, and then concentrating and separating it. The Moma mine, unusually, was built to a fixed cost, but problems with contractors and with the equipments meant it was late and is still producing slightly below its intended capacity. That led to a collapse in the share price during late 2008 once the problems became apparent - from over 60p down to just 7.5p at the bottom.
Now, the mine has been commissioned and has been producing since July 2009. Already, the company is looking at expansion. And a Deed of Settlement with the contractor has given KMR USD 10m paid over, the right to keep USD 12m retentions, USD 8.5m of waived invoices, and USD 20m delay damages [2] .
The company made a small loss - USD 0.2m - for the first half of 2009, up to the end of June [3] . However, because the mine wasn't up to full production, that's flattered by the fact that many costs of production were capitalised - they have only begun to be reported in the income statement from 1 July 2009.
Production performance has continued to improve since then according to the interim management statement [4] issued in November 2009; third quarter production was up 30% compared to the second quarter in terms of the production of concentrate, and it's at full design levels. However, production of the finished minerals isn't doing so well - ilmenite production was only up 23%, and zircon production was static, though…
