US Edition Kenmare Resources
26p +1.5
Questor says BUY
The company’s main asset is its Moma titanium mine in Mozambique. It is regarded by many as a world class asset, located on the coast with its own port operation.
The company plans to continue to increase its production of titanium-containing minerals. About 95pc of the global supply of titanium is used in white pigments such as paint, enamels and other items. The main mineral sources of the metal are ilmenite and rutile, but Kenmare’s mine also produces high-value zircon as well.
Kenmare reached its target production of 800,000 tonnes a year in August. The 50pc expansion of production at the mine is now fully funded and the company has entered the FTSE 250 since its initial recommendation, which means tracker funds will have to invest in the company’s shares.
Global supply of titanium minerals is expected to be in a significant deficit by 2013.
Last month the Moma mine suffered a breach at a settlement pond, which caused a water to flow through the adjacent village and a local girl was killed. However, the settlement ponds have been redesigned and rebuilt and Kenmare has received government approval to restart the operations.
The shares have outperformed significantly in the two months since they were recommended. They were given a lift after Bank of America Merrill Lynch put a new buy recommendation on the shares at the start of November – four weeks after Questor’s initial tip.
Of the five City analysts monitored by Bloomberg, all have a buy rating on the shares, with an average target of 29.77p.
Questor put a hold rating on the shares after the accident, but now upgrades this rating to buy, although cautious investors may wish to see whether the price eases after the recent spike. A trading statement is expected soon.
The shares are up 39pc since their recommendation on September 4 at 18¾p, compared with the FTSE 100 up 4pc.