Kenmare Resources defaults on debts


(2016-02-04) Shares in the Irish company Kenmare Resources dropped in value on Monday by almost twenty per cent following the announcement that it has defaulted on its loans.

Kenmare operates a dredge mine in Moma district, on the coast of the northern Mozambican province of Nampula. The mine extracts ilmenite, rutile and zircon from titanium-bearing heavy mineral sands. However, falling prices and a nineteen per cent drop in output last year has plunged the company in deep financial difficulty.

Kenmare intends to reduce its debts through an investment of 100 million US dollars from the Omani sovereign wealth fund and a further 75 million dollars from existing shareholders. This plan had a deadline of 31 January and the company is technically in default. However, lenders have agreed to give the company a new deadline of the end of February.

Production at the mine last year was hit by 57 days of storm related electricity cuts. In addition, work at the mine was halted by an unofficial strike at the end of June in response to cost cutting measures.

On a positive note, Kenmare pointed out that Mozambique’s publicly owned electricity company EDM has increased the capacity of the transmission lines and improved the quality and consistency of the power supply. Kenmare is also hopeful that ilmenite prices could improve this year.

However, it also noted that it has received a force majeure notice from one of its customers who had been expected to purchase 100,000 tonnes of ilmenite this year (the company mined 763,500 tonnes of ilmenite in 2015).

Ilmenite (iron titanium oxide) and rutile (titanium dioxide) are used to make white pigments for paints, paper and plastic. Titanium can be extracted from these ores and used to manufacture metallic parts where light weight and high strength are needed. Zircon (zirconium silicate) is used for abrasive and insulating purposes.

Source: AIM

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