Kenmare six months off growth decision on zircon

Feb. 1, 2010
KENMARE Resources, which has an ilmenite mine and plant in Mozambique, says it will iron out the remaining bugs in its processing side of the operation soon and is studying an expansion project to meet a widening gap in supply and demand.
London- and Ireland-listed Kenmare's $500m Moma project was beset with planning and engineering difficulties with its contractor Bateman. These have largely been resolved and the group is operating the dredging-based mine at 100% of capacity but its plant is still lagging.
Ilmenite production is at 87% of capacity at its mineral separation plant, which produces a concentrate that is then shipped from a dedicated loading point off the nearby Mozambique coast. Kenmare's engineers are tweaking the plant to ramp it up to 100% of capacity by the end of the year.
There are also two projects on the zircon circuit to ramp production to 75% of capacity in the first quarter of this year and full capacity by the end of the year. Ilmenite makes up 60% of the project's output and zircon comprises 35%.
Rutile, which makes up just 5% of the project's heavy metal output, should flat line at 75% of capacity from the third quarter of the year.
Kenmare is investigating a 50% expansion of the project by 50% to 1.2 million tonnes a year of ilmenite in 2012. Analysts have estimated the cost of the project at around $200m.
Michael Carvill, CEO of Kenmare said the company had a number of options in raising the capital if the engineering study due in mid-2010 shows the expansion to be viable.
The options could include bringing in a strategic partner, raising more debt on top of itrs $184m of senior debt due between August 2015 and the same month three years later.
Exxaro Resources and Iluka have run into problems at some of their operations, which Carvill reckons will contribute to a widening defict of titanium feedstock in the market. A number of producers are also sourcing ilmenite from hard rock, which is more expensive than dredging sand like Kenmare is doing.
"We expect a widening of the supply/demand gap as those two producers step back," Carvill said.
Asked whether Kenmare will look to other ilmenite projects to grow its portfolio from a single assets, Carvill said: "We have huge untapped value in this project which we need to release for our shareholders before we go venturing elsewhere."
The market for ilmenite has shown signs of recovery after intense destocking in the first quarter of 2009 when orders dropped right down to one single shipment, he said. "That was our annus horribilis. It got about as bad as it could get."
By mid-2009, queries for material started increasing and Kenmare has seen a recovery in prices, something it expects to continue.
Du Pont has forecast pigment growth rates between 2009 and 2015 will have a compound annual growth rate of between five and 10%.