Kenmare Resources shares fell on Wednesday as the titanium minerals miner said it expects to take an impairment charge of as much as $125 million (€107.7 million) against its mining assets in Mozambique as it lowered its future revenue assumptions.
The Dublin-listed company, which abandoned takeover talks with its former managing director Michael Carvill and Abu Dhabi private equity firm Oryx Global Partners last month, said that pricing for its main product, ilumenite, fell in the first quarter of this year, though it has stabilised since then.
The price of zircon and rutile have continued to decline so far this year, Kenmare said in a statement.
Shares in Kenmare were down 5.8 per cent in midday trading in Dublin, bringing it close to levels seen before news of the bid approach emerged in early March.
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Ilmenite and rutile are used in the manufacture of everything from paints and plastics to ceramics and textile. Zircon is widely used in the foundry industry. Davy analyst Colin Grant noted that Kenmare booked a $64.8 million impairment charge in the previous commodity price downcycle in 2014.
“Global demand for titanium feedstocks remained robust, supported by improved sentiment among pigment producers outside of China,” Kenmare said. “This followed the introduction of anti-dumping duties on Chinese pigment producers, which Western producers responded to by increasing plant utilisation rates, leading to anticipated stronger margins and bolstering demand for Kenmare’s products.”
However, the company, which operates the Moma mine in Mozambique, said uncertainty regarding market conditions in the medium term led it to lower its long-term pricing assumptions and take a charge against its assets.
“While this is disappointing, it will be a non-cash charge with no anticipated impact on our operations, projects or financing facilities or the company’s ability to pay dividends,” said chief executive Tom Hickey.
Carvill and Oryx’s original offer of £5.30 per share – or £473 million (€545.6 million) – was rejected by Kenmare’s board in March as undervaluing the company. However, the company allowed the consortium access to its books to carry out due diligence, with a view to improving its bid.
Kenmare withdrew from the talks when the consortium indicated last month that it planned to reduce its offer.
Mr Carvill, who founded Kenmare in 1986 and stepped down last August, told The Irish Times the that lower proposal was partly down to concerns about titanium minerals prices as the global economic outlook has deteriorated since the initial bid approach, amid concerns about the Trump administration’s trade policies and escalating conflict in the Middle East. It also reflected how the Mozambique government is seeking higher mineral processing and exporting royalties from Kenmare, he said.
Mr Hickey met with the president of Mozambique in Juen and said that “constructive discussions” with the government are continuing regarding the extension the royalties contract, or so-called Moma implementation agreement.
