Shares in Kenmare Resources, the Dublin-listed titanium minerals miner, have drifted off their highs in the past three weeks as former managing director Michael Carvill and Abu Dhabi-based private equity firm, Oryx Global Partners, weigh a revised offer for the business after their initial bid got a cold reaction.
This has seen the stock hand back more than a third of the 49 per cent gain it made in the wake of confirmation early last month that the consortium had made an approach.
The stock closed at €4.60 on Wednesday, well off the £5.30 (€6.17) price that the consortium had originally put on the table – let alone the £5.80 (€6.75) that some analysts, including Richard Hatch at Berenberg, have estimated it would take to get a deal done.
While Carvill and Oryx face a deadline of close of business on Thursday to at least announce a firm intention to put in a bid under a “put-up-or-shut-up” date set by the Irish Takeover Panel, they will likely seek an extension on this.
First, Kenmare, which operates the Moma mine in Mozambique, is due to issue a production update in the morning, which would give the suitors – and the wider market – additional information as they weigh a revised offer.
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Second, it would be prudent for all concerned to see if the recent volatility across financial and commodity markets on the back of US president Donald Trump’s saga will have a lasting effect.
The main concern is the fact that China, a key market for ilmenite and zircon, Kenmare’s main products, is locked in a trade war with the US that threatens to drag the world into a recession.
Global demand for titanium feedstocks like ilmenite, which is used in the manufacture of everything from paints and plastics to ceramics and textiles, reached a record high during the year, supported by strong demand from emerging markets such as South America and Asia, excluding China. However, prices have fallen over the past two years, as a result of a spike in production.
Demand for zircon, which is widely used in the foundry industry, has been more challenging due to weakness in the Chinese market.
Data from Bloomberg indicates that ilmenite prices, which had started to stabilise earlier this year, have not yet been affected by the recent market turbulence. Whether that holds remains to be seen.
