Michael Carvill, founder of Kenmare Resources, has returned to pursue an acquisition bid for the company amid declining titanium prices and political issues in Mozambique. His offer of £473 million, deemed undervalued, is under consideration while analysts suggest a higher revised bid may satisfy shareholders. Carvill’s long-standing dedication to Kenmare positions him uniquely in assessing its value despite market challenges.
Michael Carvill, the founder of Kenmare Resources, who had previously resisted selling the company before his departure last year, is now exploring a bid to acquire it. The Moma mine in Mozambique, which he has invested significantly in, is currently facing challenges such as declining titanium mineral prices and political unrest. Despite these obstacles, Carvill is optimistic about his investment group, Oryx Global Partners, offering £473 million for Kenmare, which is considered below the company’s true value by current stakeholders.
The recent announcement of Carvill’s bid brought attention to Kenmare’s market struggles, as the proposal of £5.30 per share was rejected. Furthermore, the potential visitors to Kenmare’s financials have been invited to assess the company’s prospects closer. Analysts, including Richard Hatch from Berenberg, suggest that Carvill possesses a unique understanding of Kenmare’s value, advocating for a revised bid of £5.80 per share, which they believe would be beneficial for shareholders.
Carvill, holding approximately 0.6% equity in Kenmare, may benefit from an attractive equity incentive under a transaction with Oryx. A significant shareholder expressed a consensus that the company is likely to be sold, emphasizing that the final outcome will depend on the proposed price.
Carvill’s journey with Kenmare began in 1986 when he transformed a dormant oil and gas firm into a mining company focusing on titanium and zircon. After initial setbacks, Kenmare has since become a leading global supplier of ilmenite, which is essential in various industries. The company’s peak market valuation reached £1.2 billion in 2010 due to high demand from emerging markets.
However, following the diminishing demand from China and various economic challenges, Kenmare’s valuation plummeted, leading to significant financial restructuring, including a diluted investment for previous shareholders. Although the company managed to record impressive earnings in 2021 and 2022, a recent decline in prices has impacted its earnings significantly in 2023, amidst a costly upgrade project at Moma.
Kenmare has also distributed $280 million to investors since 2019, while analysts estimate a further dip in earnings before interest, tax, depreciation, and amortization (Ebitda) due to ongoing pricing downturns. Given the mine’s estimated 100-year lifespan based on current production rates, Carvill remains hopeful about its long-term potential, despite being faced with the question of whether he is prepared to increase his bid for ownership.
In summary, Michael Carvill’s renewed interest in Kenmare Resources and his collaboration with Oryx Global Partners signify a potential shift in the company’s ownership landscape. Faced with current challenges including falling titanium prices and political instability, Carvill’s faith in the Moma mine’s value stands in contrast to market perceptions. Analysts believe that with a revised bid, particularly around £5.80 per share, there could be a favorable outcome for all parties involved. Overall, the future of Kenmare hangs in the balance, contingent upon price negotiations and the company’s ability to navigate its ongoing challenges.
Original Source: www.irishtimes.com
