Future looks brighter at Kenmare Resources

It has been a challenging few years for Kenmare with a major decline in mineral prices and production issues weighing on the company's fortunes.

However, with an uptick in shipments reported yesterday and positive signals coming from takeover talks with Australian rival Illuka, the future looks brighter.

Kenmare, which operates the Moma mine in the northern Mozambican province of Nampula, knocked back an offer from Illuka earlier this year but yesterday confirmed that talks were continuing about a possible renewed bid from the company.

“Discussions remain at an early stage; there can be no certainty that an offer will be made, nor as to the terms on which any offer might be made,” Kenmare said in an interim management statement.

Nonetheless, for exhausted shareholders who have been holding out for a payout for some time now, news that Illuka are still interested will be welcomed. This is, after all, the company which a few years ago looked as though it was going to be snapped up for a handsome sum by heavyweight rivals such as Rio Tinto and BHP Billiton.

Since then it has been something of a troubled time for the Dublin and London-listed company, which reported an operating loss of $17.9 million for the six months to the end of June.

What with declining mineral prices, a $350 million extension of the Moma mine and power-cut issues on the ground, production had fallen behind schedule. It reported yesterday, however, that shipments of finished products rose by 24 per cent to 183,000 tonnes in the third quarter, with primary zircon production up 239 per cent to 12,900 tonnes from 3,800 a year earlier and Ilmenite production up 6 per cent to 220,200 tonnes.

Kenmare recently agreed an amendment to the project financing terms for the mine, as well as an extension to a corporate loan provided by Absa Bank, thereby giving it much needed breathing space. With production ramping up once more and the firm still being wooed by Illuka, it looks as though shareholders may finally have something to celebrate.