Michael Carvill, founder of Kenmare Resources, aims to propose a £473 million bid for the company, despite current market challenges affecting its Mozambique mine. Acknowledging declining titanium prices and political unrest, Carvill’s partnership with Oryx Global Partners suggests a renewed belief in Kenmare’s potential value. Analysts support a revised bid that may enhance shareholder interests, as Kenmare navigates a significant investment phase while observing fluctuating earnings.
Michael Carvill, founder of Kenmare Resources, is contemplating a return to the mining sector after his notable exit last year due to resistance over a sale. Presently, Kenmare’s Moma mine in Mozambique is facing challenges, including decreased titanium mineral prices, political unrest, and protracted negotiations concerning royalties, all amid a significant investment endeavor. Surprisingly, Carvill perceives this as a strategic moment to propose an acquisition.
Recent reports indicate that Carvill has allied with Abu Dhabi-based Oryx Global Partners to present a bid of £473 million (approximately €565 million), a substantial premium of 92% over the market value. Though their initial offer of £5.30 per share was rejected for undervaluation, there is a possibility for a revised offer after being granted access to Kenmare’s financial records. Previous interest in acquiring Kenmare has surfaced from entities such as Rio Tinto and International Resources Holding, although no deals were finalized.
Berenberg analyst Richard Hatch emphasized Carvill’s unique insights into Kenmare’s value, noting that he understands the mine more profoundly than current market assessments. He suggested a revised bid of £5.80 per share would be a reasonable outcome for stakeholders based on Carvill’s perspective. Though he owns a modest share of the company, he stands to gain significantly from a successful acquisition with Oryx.
Carvill’s journey began in 1986 when he transformed a dormant oil and gas entity into Kenmare. The company evolved to focus on producing titanium minerals and zircon, becoming the world’s largest ilmenite supplier, contributing to 7% of the global market. Kenmare’s market peak reached approximately £1.2 billion 13 years prior amid rising demand. Unfortunately, subsequent downturns led to challenging market conditions, with potential buyout interests from larger firms such as Dow Chemical and Rio Tinto eventually dissipating.
Kenmare’s recent performance reflected a record Ebitda of $298 million in 2022, fueled by heightened prices due to supply shortages. However, earnings plunged to $220 million in 2023 as titanium prices fell while major investments were underway to revamp the mining plant. Additionally, Kenmare has successfully returned $280 million to investors since 2019, primarily through dividends and share buybacks, while the investment from Oman was reduced to about 17%.
Carvill has frequently expressed frustration over the market’s failure to recognize Moma’s substantial long-term value, projected to last over a century based on current production rates. With potential changes at the helm, the question arises: will Carvill proceed with a bid that reflects his firm belief in Kenmare’s future?
Michael Carvill’s potential return to Kenmare Resources highlights a pivotal moment for the company amidst fluctuating market conditions. Despite current challenges, Carvill’s partnership with Oryx Global Partners introduces a substantial bid, signaling confidence in Kenmare’s long-term value. Observers anticipate a revised offer that may better reflect the company’s worth, particularly as Carvill’s insight into Moma’s significance may influence the outcome of negotiations going forward.
Original Source: www.irishtimes.com
