Michael Carvill, founder of Kenmare Resources, is attempting to secure funding for a £473 million bid alongside Oryx Global Partners despite declining titanium prices and ongoing challenges at the Moma mine in Mozambique. Analysts believe Carvill possesses unique insights into the company’s value which may not currently be recognized by the market. As discussions around a potential sale continue, the future of Kenmare may hinge on Carvill’s next steps.
Michael Carvill, founder of Kenmare Resources, has returned after a perception of resistance to selling the miner led to his departure last year. While the company’s Moma mine in Mozambique faces challenges such as declining titanium mineral prices and political unrest, Carvill believes now is a favorable time for a bid. He has teamed up with Abu Dhabi-based private equity firm Oryx Global Partners to propose a £473 million offer, approximately 92% above its market value. Though initially rejected, they have been granted access to Kenmare’s financial records for a potential revised offer.
Sources indicate that major mining companies, including Rio Tinto and International Resources Holding, previously assessed Kenmare when activist shareholders encouraged a sale, but no purchase occurred. Analysts suggest that Carvill’s insights into Kenmare’s value may surpass current market perceptions. Richard Hatch from Berenberg noted, “Beauty is in the eye of the beholder and, as the previous chief executive, it appears that Mr Carvill can see better value in Kenmare than the market is currently attributing to it.”
Carvill owns around 0.6% of Kenmare but may stand to gain significantly through an equity-based incentive plan as part of a transaction with Oryx. A top-10 shareholder expressed optimism about a sale, commenting that it is a matter of price.
Kenmare has navigated a tumultuous history since Carvill founded the company in 1986. Initially pursuing various opportunities, it ultimately focused on titanium minerals and zircon production. The company became the world’s largest ilmenite supplier in 2007, capturing 7% of the global market. At its peak, Kenmare was valued at approximately £1.2 billion, with speculated bids exceeding £1.6 billion. However, interest waned as market demand declined, leading to financial struggles and eventual dilution of existing investors’ stakes by nearly 90%.
After delivering record earnings of $214 million in 2021 and $298 million in 2022, Kenmare’s earnings dropped to $220 million in 2023 amidst falling titanium mineral prices. The company has distributed $280 million to investors since 2019 through dividends and share buy-backs, though ongoing challenges such as a significant mining project are occurring during this downturn. Analysts predict a potential EBITDA drop to around $150 million this year, coinciding with Carvill’s historical frustrations about market undervaluation of Moma, which is expected to have a lifespan of over 100 years at current production rates. The question remains whether he will secure the necessary funding for a bid.
Michael Carvill’s return to Kenmare Resources and his partnership with Oryx Global Partners signal an active effort to reassess the company’s value amid current market challenges. Analysts believe that Carvill’s intimate knowledge of the company may provide a strategic advantage, despite the recent downturn in titanium prices. As discussions of price continue, the outlook for Kenmare potentially involves revitalized interest and investment, hinging on Carvill’s capability to secure funding for an increased bid. The future trajectory of Kenmare remains to be seen, as it confronts both operational challenges and industry volatility.
Original Source: www.irishtimes.com
