September 28, 2010

Kenmare operates one of the world’s largest and potentially lowest cost resources of ilmenite, rutile and zircon on the north east coast of Mozambique. In March they successfully raised US$ 270m to fully fund their Stage 2 expansion at Moma and at the end of May released record production figures and operating levels. The widely held view regarding Titanium dioxide is that we are heading for a severe feedstock shortage as well as a tightening of the   zircon market. Now that they have raised the cash, Kenmare is in a position to expand the Moma mine as well as paying down their subordinated debt. The mine predominantly produces two types of product; titanium feedstocks for Ti02 pigment production, titanium metal fabrication and welding rods and zircon products for use in ceramics, foundries, refractors and nuclear casting rods.

Ilmenite accounts for around 91% of the world’s consumption of titanium minerals and the quality of the ilmenite products from Moma is such that no further beneficiation is necessary for pigment manufacture. In addition there is no requirement for expensive smelters to upgrade the Ti02 content.

The market for titanium minerals is determined by demand for Ti02 pigment. DuPont, the world’s largest producer forecast pigment growth rates in the range of 5 to 10% between now and 2015. Meanwhile the US Geological Survey is forecasting that unless new mines are developed, the heavy reliance in the US on imports of titanium mineral concentrates is likely to increase as the mines belonging to DuPont and Iluka are depleted over the next 10 years. It is unlikely that any unapproved projects will be brought into production before at earliest 2015. Firstly it requires significantly higher prices to induce supply and secondly because of the time needed to construct such a project.

The stock today stands at 19p and Gimlet sees a 12 month target of 35p as realistic.

Looking at Gimlet’s recent stock tips, Aquarius Platinum which we recommended on 7th September at 305p is today at 329p. Petra diamonds which we recommended the12th of August at 65p is today at 73.75p.

Now that Gimlet has agreed to my writing up his stock tips he is keen that we keep an eye on their progress.

“€œThere is very little point in writing your bits and pieces if you don”€™t follow it up,”€ says Gimlet. He is right of course.
Constantly full of surprises, I was nevertheless astonished by what came next.

“€œWhat are you doing on Sunday?”€ he asked.

I told him that I had nothing planned.

“€œExcellent! In that case I thought we could drive up to Bolton. They are playing Manchester United and as I have tickets, we can watch Mr Rooney in action! That is if they pick him for the team.”€


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