Michael Carvill, founder of Kenmare Resources, returns with Oryx Global Partners to propose a £473 million bid for the Mozambique mine, amidst declining titanium prices and political instability. Despite the initial offer being rejected, analysts suggest that Carvill perceives greater intrinsic value in the company. The focus remains on whether he can adjust his bid to satisfy current stakeholders.
Kenmare Resources founder Michael Carvill, who previously resisted selling the miner, has returned to the scene amidst various challenges facing the company. Kenmare’s Moma mine in Mozambique is experiencing declining titanium prices, political unrest, and stalled negotiations over royalties, concurrently undergoing a significant investment initiative. Despite these adversities, Carvill appears optimistic about acquiring the company.
Following an Irish Times report, it became known that Carvill, alongside Abu Dhabi-based Oryx Global Partners, proposed a £473 million offer for Kenmare, representing a 92% premium on its last market value. Although this £5.30 per-share bid has been dismissed as undervaluation, management has allowed Carvill to review the company’s financials for a potential revised offer.
Previously, Kenmare attracted interest from mining giants such as Rio Tinto and International Resources Holding, as activist shareholder Jo Hambro campaigned for a sale, yet these pursuits did not lead to any conclusive offers. Analysts suggest that Carvill may see greater inherent value in Kenmare compared to current market evaluations.
Richard Hatch from Berenberg noted, “Beauty is in the eye of the beholder… Mr Carvill can see better value in Kenmare than the market is currently attributing to it.” An increased bid of £5.80 per share might be seen as reasonable for stakeholders. Carvill holds a 0.6% stake, but would benefit from a lucrative equity incentive plan in collaboration with Oryx.
Carvill founded Kenmare in 1986 after acquiring a dormant oil and gas outfit. His early ventures, including attempts to extract coal and gold, were unsuccessful. However, he steadily honed in on Mozambique’s heavy mineral sands, leading Kenmare to commence titanium and zircon production in 2007. Today, Kenmare is the world’s largest ilmenite supplier, holding 7% of the market.
The company’s valuation peaked at £1.2 billion thirteen years ago driven by demand, especially from China. Though speculative offers from Dow Chemical and Rio Tinto were rumored, they never materialized. A failed acquisition attempt by Iluka Resources during a downturn forced Kenmare to seek additional capital, significantly diluting existing investor stakes.
In recent years, Kenmare’s earnings before interest, tax, depreciation, and amortization (Ebitda) reached impressive highs, culminating in record figures of $214 million and $298 million in 2021 and 2022, respectively, driven by post-pandemic demand and supply disruptions. However, earnings dropped to $220 million in 2023 due to falling titanium prices amid ongoing capital-intensive infrastructure upgrades at Moma.
Kenmare has since returned $280 million to shareholders through dividends and buybacks, with Oman decreasing its stake to approximately 17%. Davy analysts forecast a potential bottoming of Ebitda around $150 million in the current downturn, which is expected to last three years. Throughout his role, Carvill has lamented the market’s underappreciation of Moma’s value, which boasts a projected lifespan exceeding 100 years at current output levels.
Michael Carvill’s renewed interest in Kenmare Resources, amid adverse market conditions, reflects both potential and challenges for the company. His collaboration with Oryx Global Partners introduces a substantial bid but faces skepticism from current management regarding valuation. Historical context reveals missed acquisition opportunities and current operational hurdles, culminating in fluctuating financial performance. As Kenmare navigates these complexities, the focus turns to whether an enhanced bid will reshape its future prospects and shareholder value.
Original Source: www.irishtimes.com
