Michael Carvill’s Strategic Push for Kenmare Resources Amidst Market Challenges

Michael Carvill, the founder of Kenmare Resources, aims to acquire the company, offering £473 million in collaboration with Oryx Global Partners. This bid, despite being 92% above market value, has been rejected for undervaluation, while analysts believe a revised offer could be favorable. Kenmare faces challenges such as declining titanium prices and ongoing investment initiatives.

Michael Carvill, the founder of Kenmare Resources, is re-entering the market as he seeks to capitalize on his extensive knowledge of the company’s Mozambique operations despite potential drawbacks. Currently, Kenmare’s Moma mine is facing declining titanium mineral prices, political instability, and delays in renegotiating a new royalties agreement, all while undergoing a major investment program. While market conditions appear unfavorable for selling, Carvill seems inclined to pursue an acquisition.

Following a report in the Irish Times, Kenmare confirmed that Mr. Carvill, in partnership with Abu Dhabi-based Oryx Global Partners, has made an offer of £473 million (€565 million). This proposal represents a substantial 92 percent premium over the company’s market value as of the previous Wednesday. However, the bid, priced at £5.30 per share, has been deemed insufficient and is considered to undervalue the company, although Oryx has been invited to review Kenmare’s financial records for a potential revised offer.

Interest in Kenmare has emerged from various entities, including British-Australian mining giant Rio Tinto and International Resources Holding from Abu Dhabi, amid an activist campaign from 6 percent shareholder Jo Hambro, which ultimately faltered. Richard Hatch, an analyst at Berenberg, commented on the situation, stating, “Beauty is in the eye of the beholder, and, as the previous chief executive, it appears that Mr. Carvill can see better value in Kenmare than the market is currently attributing to it.”

Carvill possesses a deep-rooted belief in the Moma project, having built the company’s essential relations with Mozambique’s authorities over approximately 40 years. He is regarded by analysts as having a strong chance of succeeding in raising his bid, with suggestions that an offer of £5.80 per share could be a favorable outcome for shareholders. Moreover, Carvill’s current ownership of around 0.6 percent of Kenmare positions him for significant incentives should the transaction occur.

The journey of Kenmare has been tumultuous since its founding in 1986 when Carvill took over a dormant oil and gas company. Initial ventures into coal and gold mining proved unfruitful until the focus shifted to titanium minerals and zircon, starting production in 2007. Kenmare emerged as the world’s largest ilmenite supplier, but its market valuation peaked at approximately £1.2 billion (€1.43 billion) 13 years ago as demand surged from emerging markets.

Subsequent interest from major players like Dow Chemical and Rio Tinto did not materialize, and the company’s valuation plummeted amid dwindling demand, eventually forcing Carvill to raise substantial rescue capital in 2015. As of 2023, earnings fell to $220 million due to declining titanium prices, coinciding with a large-scale upgrade project at the Moma facility. Since 2019, Kenmare has distributed $280 million to its investors through dividends and buybacks, reducing Oman’s stake to roughly 17 percent.

Davy analysts anticipate that this year’s Ebitda may decline to approximately $150 million amidst a prolonged downturn in titanium pricing. Carvill, while managing director, often expressed frustration over market perceptions of Moma’s long-term prospects, projected at over 100 years based on current output levels. The question remains: Is Michael Carvill prepared to invest further to secure his vision for Kenmare?

Michael Carvill’s strategic approach towards Kenmare Resources indicates his confidence in the potential of the Moma mine, despite current market challenges. His efforts to augment the company’s value through a potential acquisition reflect his deep-rooted commitment and historical knowledge of the operations. Analysts are watching closely to see how Carvill navigates the next steps in his pursuit of managing Kenmare’s future amidst fluctuating mineral prices and shareholder expectations.

Original Source: www.irishtimes.com