Kenmare Resources Share Discussion Threads

[creditcrunchies] 18/1/2024 18:04

This is in the deep value zone here certainly worth accumulating

[petomi] 17/1/2024 11:43

SteMis I was surprised to read that the yield is 12%+ but I think you're right.

Interim divi of US17.5c cost $16.6m per today's RNS. So if dividends declared for 2023 were exactly $50m the final would be $33.4m ie 37.4c with 89.228m shares now in issue following the tender offer.

So total 2023 divi would be 54.9c ie £pence 43.25 at current rate, or 12.1% yield at price of 358p.

That would be subject to the 25% Irish WHT unless you can reclaim it - I have asked my SIPP provider to do that and must check whether they have managed to do so.

The key question though will be whether they maintain $50m for 2024, given weaker markets and heavy capex. FWIW I think they will try to maintain it unless they have a major setback since they knew the current issues when they launched the buyback tender - why do so if you expect to cut the dividend next year?

We shall see

GL to all LTHs.

ADDENDUM
As an update to the above I have seen a new note today from Hannam which shows some reduction in 2024 dividends, and a further rough halving in 2025, not very encouraging.
They reduce tehir target price from 660 to 510p. May have contributed to the drop in price today

[spectoacc] 17/1/2024 07:24

Reads well to me:

"In 2023, we made $31 million of debt repayments, paid $58 million in dividends, bought back $30 million in shares, began the capital investment for the transition to Nataka, and finished the year with $21 million net cash. We expect total 2023 dividends to be approximately $50 million.""

[stemis] 16/1/2024 09:56

Have I got this right? According to interims they expect to maintain dividend payments of approx $50m. With 89m shares in issue, that's $0.56/share (= 44p). Last year they paid about $0.54/share. That would put them on a yield of 12.2%?

[return_of_the_apeman] 15/1/2024 15:15

Surely everyone's expecting production to be solid

[robmcelf2] 13/1/2024 07:54

Seems that since KMR announced capex plans the share price has reacted negatively. I guess we will get a production update for q4 next week. Let's hope it's a decent one. Still confident in this company's future.

[return_of_the_apeman] 19/12/2023 11:36

Thanks ben, I was assuming flat commodity pricing throughout the next 2yrs

I like your long term view and hope it makes £11 for you plus substantial divis along the way, More research on my part is required

Good luck and thanks for replying

[benjonesinvestments] 19/12/2023 10:32

Hi apeman,

The $250m figure was the guidance from Kenmare in their capital markets day presentation earlier in the year. However, this $250m was for upgrades to WCP A and B and didn't include any sustaining capex. They were never clear about sustaining capex but you can look through previous years of capex to get an idea. It's normally best to add this on top given how common it is for mining companies to have capex overspends. Of course they may have expected sustaining capex to come in lower given the additional work they're doing on WCPs A and B. I checked my own model and had $392m total capex for next 2 years to account for sustaining capex and inflation adjustments. So overall I'm still ok with the increase in capex guidance.

Well the worst and best case depend pretty much entirely on ilmenite prices to be honest. YTD ilmenite prices have been $347/t, a continuation of that price for the long-run would put Kenmare at around £11/share (unadjusted for dividends) in my view. Of course those ilmenite prices may be a little rosy in the near -term. Long-term ilmenite prices of $280/t with corresponding drop in zircon prices put Kenmare around £6/share in my view. Either way, the company looks undervalued to me. The way I'd be wrong is if ilmenite prices really tank down towards $200/t. If that happens then of course Kenmare is going to struggle.

Dividend is just a function of the cashflow and I'm really not too fussed about near term dividend changes as long as long-term cash generation looks good (which again depends heavily on ilmenite prices). At current ilmenite prices, dividend looks very sustainable at present levels. At lower ilmenite prices ($280/t say), then I would expect dividends more in the $30m range rather than $50m.

I know they're looking at ways of restructuring the company to minimise witholding tax - any success there would also be helpful!

[return_of_the_apeman] 19/12/2023 07:20

Hi benjonesinvestments,

You wrote "There is around $250m of capex required over the next 2 years"

The rns on the 14th now estimates this to be between $316-331 million, which is a lot more but there is no explanation, please can I ask where you got the $250million figure from?

Thanks in advance

If I use the new figures from the rns and assuming they pay the max 40% of profit for the divi, existing cash and sustaining capex is equally spread over the 2 years then in your best case scenario from post 1399 I get cash for the divi of $15.4M without taking into account taxes to be paid first etc. This would be a cut of around 2/3rds of the current divi. In your rosiest figures the divi could almost be held for next year. Wonder if you have also worked a worst and best case model?

Still a great company, things just look a fair bit tighter now which is perhaps why they added the dividend comment

Gla

[dimknaf] 08/12/2023 14:00

There was not deep talk on the history of dilution, but my impression from the whole presentation is that KMR is a different company today. The recording of the presentation is already on Youtube.

[dimknaf] 04/12/2023 23:53

Thank you very much for your perspective.

I have always found that it takes time to know a company and it's history.

Per Buffett: "You can't produce a baby in one month by getting nine women pregnant".

If what you say is true, and somebody should trust the quality of the management, and the major shareholders, the obviously it's an opportunity.

I will listen to the presentation carefully tomorrow, and let you know about my opinion.

[benjonesinvestments] 27/11/2023 14:12

Would be interested to hear your thoughts after the presentation. I wouldn't say it's anyone's business to raise equity, it's only done when financially necessary. Sadly in 2015, that was the case for Kenmare. They raised >$300m in debt to develop Moma, mineral sands prices tumbled from 2012 onwards and they couldn't afford to service the debt. The only way to save the company was a huge equity raise (mostly through Oman Sovereign wealth fund who remain largest shareholder today) that was used to pay down the debt and keep the company solvent. I'd argue Kenmare today is in a completely different situation - low debt & great cash generation. Even if ilmenite prices fell significantly, they are highly unlikely to become financially distressed. There is around $250m of capex required over the next 2 years but in my view it would take a drastic downturn in ilmenite prices very soon to cause any issues with financing that capex through operating cashflow.

Anyway, keen to hear a fresh perspective!

[dimknaf] 23/11/2023 10:14

On 5th December, Kenmare will be one of the companies to be presented at the London Value Investing Club.

Personally, I would like to ask the speaker about the history of management, and the massive dilution in the past.

Because, if it's their business to print shares, as in some other companies, even with 0.10x price to book, at the end you may stay with 1/1000th of what you had.

But, if there was a bad management in place, and now this has changed, I would be inclined to buy at this price.

So, I will ejnoy the discussion, and learn more from people that follow the company.

[benjonesinvestments] 20/11/2023 21:27

Depends on ilmenite prices of course, but at current levels they can generate around $200-250m in operating cashflow per year (say $400-500m across 2 years).

In terms of capex, there is $250m capex for WCP A transition and upgrade, plus WCP B upgrade which is likely to fall across 2024 & 2025. I would also expect $50-100m of sustaining capex across the 2 years.

Kenmare also have $108m cash and it looks like they'll have paid down $32m of debt by end of the year with just $46m remaining.

In other words, if ilmenite prices remain ok, I'd expect dividends to remain fine throughout the next 2 years. Although looks to me like returns from buybacks would be higher than divs, so I'm not sure why they like to prioritise divs.

Catalysts is a good question, not sure I see anything in particular beside them being incredibly undervalued! I think concerns about ilmenite prices from possible global recession and the upcoming capex programme likely weigh on the company. However, the valuation already takes into account a significant decline in ilmenite prices. Either way, just need to see good cash generation going forward!

[robmcelf2] 18/11/2023 20:16

However I guess there will be limited dividends in 2024 given the scale if capex spend - think it's projected to be c $125m+ due to the move of WCP A in 2025..

[robmcelf2] 18/11/2023 14:41

I think KMR share price has 2 big share price drivers in 2024 1. The trailing PE is 2.2 - that's unbelievably low - must be one of the lowest in the FTSE? Not sure why it's so low but with decent production lying ahead of us, no obvious spikes in opex and market pricing unlikely to collapse, re-rating must be possible 2. Divi yield of 12% at this price is mouth watering. Does anyone see other drivers?

[davidosh] 16/10/2023 22:53

The company were featured on the BASH session on tonight’s Mello Monday show

[robmcelf2] 11/9/2023 13:49

Good point! Maybe 422 will act as an underpinning price now with such a big buy at this level?

[soitopdog] 11/9/2023 13:12

But the company lost 30million USD to buy the shares so market cap will should be less but share price stays the same but yes would expect it to gain back in the near future as that profit keeps rolling in after all it's a great value company with a great dividend

[robmcelf2] 11/9/2023 08:16

Looks like 5.9 per cent of shares in issue will be purchased under the tender offer that closed last Friday. So the share price should jump by about 6% as a consequence if the market cap is to remain the same..

[robmcelf2] 02/9/2023 09:54

Hopefully the KMR share price should move forward a bit on 11 September after the tender offer price of 422 expires..

[soitopdog] 28/8/2023 19:05

Withholding tax 25%

[cestnous] 18/8/2023 11:58

How much is the withholding tax?

[robmcelf2] 16/8/2023 10:12

All it does surely is pin the share price back to 4.22 until the offer date expires? Not well thought through. They should done the usual and bought back at market price.

[spectoacc] 16/8/2023 07:04

Got to laugh - so on the same day the co wax lyrical about their tender offer at £4.22, a director dips his toe in and buys at £4.31.

Guessing he won't be tendering then.