Michael Carvill, founder of Kenmare Resources, collaborates with Oryx Global Partners to propose a £473 million bid for the company. Despite current challenges such as falling titanium prices and political instability in Mozambique, Carvill’s belief in the long-term potential may lead to a successful acquisition, pending a more attractive offer. Analysts suggest the market undervalues Kenmare’s prospects, indicating potential for a revised bid.
Michael Carvill, founder of Kenmare Resources, who previously resisted a sale resulting in his departure, has returned to the company. Presently, Kenmare’s Moma mine in Mozambique is facing challenges, including plummeting titanium mineral prices and political instability, amidst an extensive investment program. Despite these hurdles, Carvill appears optimistic about acquiring further stakes in the company.
After it was reported that Carvill sought backing for a bid, Kenmare confirmed his collaboration with Oryx Global Partners, proposing a £473 million offer, which represents a 92 percent premium compared to the market value. Although their initial offer of £5.30 per share was deemed inadequate, the partners have been granted access to evaluate Kenmare’s financials for a potential enhanced bid.
Analysts note increased interest in Kenmare, with Rio Tinto and International Resources Holding examining opportunities last year when activist shareholder Jo Hambro advocated for the company’s sale. Richard Hatch from Berenberg indicated Carvill might identify a greater intrinsic value in Kenmare than what the market recognizes, suggesting the potential for a revised bid at £5.80 per share.
Carvill, who holds approximately 0.6 percent of Kenmare shares, may attract favorable equity incentives from Oryx should the acquisition proceed. A prominent shareholder commented that there’s a prevailing sentiment surrounding the sale of the company, pending an acceptable offer.
Founded in 1986 from a defunct oil and gas entity, Carvill has navigated a tumultuous journey for Kenmare, initially exploring ventures in coal and gold exploration in various regions, including the Irish Sea and the Philippines, before ultimately shifting focus to the Moma titanium mineral sands deposit.
Kenmare has been producing titanium minerals since 2007, becoming a vital supplier with 7 percent of the global ilmenite market. The company’s valuation soared to around £1.2 billion twelve years ago amid high demand, but it subsequently faced financial difficulties driven by decreasing demand, leading to a significant drop in share prices and an eventual equity investment from Oman.
Despite record earnings in 2021 and 2022, Kenmare’s earnings have declined to $220 million in 2023 due to sliding titanium prices amid ongoing projects costing hundreds of millions to enhance mining operations. The company has also returned $280 million to investors since 2019 through various financial measures, while Davy analysts predict a potential Ebitda low at $150 million this year as titanium prices continue to weaken.
Carvill has long lamented that the market fails to acknowledge Moma’s vast potential, with well over a century’s worth of production estimated based on current output rates, suggesting that he is prepared to invest significantly, but only if the offer is right.
In conclusion, Michael Carvill’s return to Kenmare Resources amidst volatile market conditions poses an intriguing scenario for the company. His collaboration with Oryx Global Partners indicates a potential renewed interest in the value of Kenmare’s assets. As the bidding progresses, the future of the company hinges on securing a fair valuation that reflects its long-term viability and extensive resource base.
Original Source: www.irishtimes.com
