Kenmare Resources Share Discussion Threads

[donkey40] 13/4/2018 21:42

Ah, interesting that when someone posts elsewhere on the negative basis, it is me under a different alias. Yet when someone posts on the company I am, apparently, the self proclaimed expert on that is is someone clever.

The only thing I know for sure is this - you are a winker !!

[wheniamfree] 13/4/2018 21:37

Impacts on downstream users of titanium dioxide
The Carc Cat 2 harmonised classification would impact upon a multitude of downstream user sectors with a combined Gross Added Value of hundreds of billions of Euros; paints and plastics alone, the most important uses for TiO2, account for over €120 billion per annum. Downstream users might consider the reformulation of their products, however, in the vast majority of cases this could not be successful due to the lack of alternative pigments that match TiO2’s performance in technical and economic terms; in any case, substitution of TiO2 would be costly (example estimates: €0.05-60 million per company), take considerable time (2-20 years) and invariably be a case of regrettable substitution. Additional workplace safety measures could have an investment cost of up to €0.1 million, if not more, per plant, while waste regulations would impact upon the recycling and reuse of waste that contains over 1.0% TiO2 and might impose an additional cost ranging from a few thousand Euros to millions of Euros per site for the disposal of packaging and manufacturing waste classified that would be newly classified as hazardous.
The Carc Cat 2 harmonised classification could lead to the removal from the market of a multitude of consumer formulations and products such as toys, cosmetics, foodstuff, food contact materials, pharmaceuticals, tobacco products and ecolabelled products (including textiles); in some cases exemptions could be secured following an evaluation of risks by relevant scientific bodies, however,
the cost of obtaining them could be high (possibly up to millions of Euros to demonstrate low bioavailability).
Importantly, the labelling of TiO2-containing mixtures as suspected carcinogens (CLP requires the label to read “suspected of causing cancer”) and the stigmatisation of the substance would drive negative consumer and industrial/professional user perceptions thus leading to market losses for manufacturers of TiO2-containing products and their downstream supply chains.
Impacts on titanium dioxide manufacturers and their suppliers
It is estimated that a Carc Cat 2 classification would lead to 10-15% of current demand for TiO2 being lost due to adverse effects on the downstream uses of the substance. This would in turn lead to the shrinking of EEA’s TiO2 manufacturing base and the likely shutdown of an uncertain number of production lines. The consequence of this would be a significant knock-on effect on the manufacture of titanium chemicals and iron-based co-products, the sales of which underpin the profitability of TiO2 manufacturing plants. Adverse impacts would not be limited to those driven by effects on downstream users; the Carc Cat 2 harmonised classification would impact upon the sales of co-products (iron filter salts) that contain TiO2 impurities at concentrations above 0.1% and would also have the potential to precipitate severe repercussions on the waste management of large volumes of manufacturing waste (neutralisation solids and red gypsum) which (a) could require disposal as hazardous materials and (b) would prevent sale of such materials for reuse in a range of industry sectors. Loss of sales and severely increased waste management costs could lead to the ultimate collapse of EEA’s TiO2 manufacturing base.
Looking only at TiO2 manufacture, in the context of an EEA market value of ca. €3 billion, its Gross Added Value to the EEA economy is estimated at ca. €560 million per annum, excluding other socio- economically important co-products and by-products; the industry employs ca. 8,150 workers and is responsible for the creation of a further 22,800 directly related support jobs. The adverse impacts from the Carc Cat 2 harmonised classification could result in the loss of thousands of jobs across the EEA. Decimation of EEA’s TiO2 manufacturing base would impact upon both EEA-based and non-EEA supply chains as exports account for one-third of EEA manufacture while some TiO2 grades are only produced by European plants.

[murraybasin] 13/4/2018 21:26

"Murray again I appreciate the response we should agree to disagree until the time of outcome is known."

Just on that note, you'll see the original FR-MCSA submission was 2013. It obviously took until 2016 for a first review because then additional data had to be provided. It then was reviewed again in 2017 where the CARC 1B was thrown out in favour of CARC 2. And then again in 2018 it has more or less been sent back indicating that the French have ENORMOUS work to do.

Given the glacial pace things move at, I won't be sitting here holding my thumbs for any particular outcome.

Don't miss the key points. Titanium dioxide is ALREADY CARC 2. The industry and markets have had this on watch for some time. Any potential negative impact from an ECHA decision with impact limited to EU is most likely already priced in pending an actual outcome. Finally, in terms of market impact, the net result of any regulatory action is likely to be marginal upward pressure on final product prices, not downward pressure on HMS feed-stock prices. An ECHA classification of TIO2 as CARC 2 in the EU -IF- it ever happens is not going to have any major impact on World Wide titanium minerals markets.

[wheniamfree] 13/4/2018 20:53

Murray again I appreciate the response we should agree to disagree until the time of outcome is known.

Donkey, what apparently did I start? If I recall you are happy to post elsewhere and continue to do so but you have issue with me deep diving into Kenmare? That’s interesting.

At least Murray is here to answer for you. The usual speel you spout is nonsense “they have employees, they have debt, they have revenues, they have assets.”

And? So did Carillion, so did Toys R Us, so did Maplins etc etc. All recent events and close to home.

Your lack of insite into this company is outstanding, posting the obvious means absolutely nothing. If you are going to come back with a response please do so with something valid and don’t hide behind Murray.

Maybe best to let the adults discuss, perhaps you will learn something here too?

[murraybasin] 13/4/2018 20:30

You're over thinking it. The management of industrial waste is already highly regulated and a separate topic altogether. The by-products of the production of pigments consist of things far more dangerous to humans than titanium dioxide itself. That's true of a lot of chemical and other manufacturing processes.

I noted that the original risk was documented in the H1/2017 half-year report. The risk is no longer documented in the 2017 full-year report. That was published on March 29th, shortly after the last ECHA/CoRAP update. It seems KMR no longer see this as a principal risk.

As I said, WHO/IARC already document titanium dioxide as a CARC 2 (via the inhalation route). The ECHA rubber stamping of the 2006 WHO/IARC position is not going to change much.

Digging around this afternoon I found a lot of products with (and without) titanium dioxide already having CARC 2 warnings. That was standard practice after the WHO/IARC classification in 2006. There are news stories going back to 2006 in some of the industry publications (paints, inks, additives, etc) documenting the addition of CARC 2 warnings on MSDS documentation as a result of the WHO/IARC findings.

The main push back from the industry is that the French science, was not particularly scientific. Titanium dioxide is not one product, it's a whole range of products with different compositions and characteristics from different manufacturers. One REACH submission couldn't possible hope to treat the whole industry output as a single entity. The French started in the wrong place.

This is in an industry in which there are a wealth of experts available. There has been some very well informed discussion on other industry (versus stock) forums on this topic. You could probably arm yourself better by finding a relevant industry group (TIO2, Specialty Chemicals, etc) on somewhere like LinkedIn.

When's the last time you bought a tin of paint, solvent, or whatever and asked to see the full MSDS for it? Your house and shed are probably full of products that have CARC 2 ingredients but you probably don't check because you assume the product has passed some form of regulatory scrutiny to even make it as far as the shelf.

Old news. CARC 2 warnings already on lots of products containing TIO2 for 12 years now. CARC 1B might have been bad news but the ECHA didn't accept it.

[donkey40] 13/4/2018 20:20

Yes, lots of ideas. But all of them are best not put in print. Keep going - you are amusing everyone here.

Remember you and your mates felt the need to cross a line many months ago by posting on this company’s board on LSE. Nice that you are doing some digging around on the history of KMR - try to keep an open mind. At the minute, your bias is obvious.

Couple of clues for you - it’s not a complicated business, but it is an expensive sand pit to play in.

Not many companies can say they have a mine life of 100 years, even if they have bounce to a new deposit every now and then. The guys at Base Resources up in Kenya are saying being able to branch out from the main deposit there is a good thing - imagine you will post it as a negative.

And yes I am enjoying your interpretation of grade v margin v selling prices v contracts. My simple sense tells me someone who sells about 35% of global supply as the, by far, biggest independent merchant supplier must know a thing or 2 about what their industry and what their strategy is - but I imagine you will see that as a negative.

One insight I will share is - the conversation on grade really does need to be put in context by just about everybody. Falling grades are always going to happen from time to time - this is the first time KMR put quite some emphasis on it. I wonder why. And this is first time they mentioned the dredge had to perform a 180 degree turn - not bad for 15 years production, and they did it all within a quarter. Hmm. But when it comes to grades and recovery, I am way more interested in extent of slimes within the HMC recovered. Can I suggest you go look a bit deeper there - since separation and handling of slimes is a darned sight more labour intensive, ie expensive than whether the grade is 4 or 5% recovery from excavated ore. No doubt when you dig there to you will post that as a negative.

And wrapping up - isn’t it nice they have all these problems. 2 dredges mining both wet and dry. Separation plants and spirals, a jetty and various warehouses. Even their own 2 transshipment ocean going barges. And 1400 staff and $200+m and rising revenues in a commodity cycle that typically runs from busy to boom. And customers, oh goodness me, I almost forgot they also have customers. And cash in the bank. And debt to. I imagine you see all those as a negative as well.

Have a good rest Son!

[wheniamfree] 13/4/2018 19:48

I don’t think it is just relevant to paint nor do I think it’s just relevant to the final product and a mere warning on the tin etc.

Perhaps a wider range of products and the process needed to create them along with waste (including venting of gasses and their filtration requirements). It appears big enough to have caused a push back from many in the industry wishing to contest the reviews of gradings.

I think the extent of it is not fully known just yet and won’t be until it happens, that said I do think it will not go unnoticed certainly from a pricing perspective.

[murraybasin] 13/4/2018 19:42

Just to close the loop on this, if you look at some existing COTS paint products you'll see they already have CARC 2 warnings on them. This is for non-TIO2 paint, but shows how innocuous an impact this has:

hxxps://www.duluxtradepaintexpert.co.uk/web/pdf/safetysheets/SDS403.pdf

[murraybasin] 13/4/2018 18:14

Back to the ECHA classification question: Just to be clear, the material being discussed here is refined TIO2 (CAS 13463-67-7), the white pigment opacifier that is used in paint making, plastics and other manufacturing such as inks, papers, and even E171, food coloring as well as sun-tan lotion. This is in turn manufactured using various processes from titanium-dioxide bearing feed-stocks such as ilmenite, rutile, leucoxene, synthetic rutile, etc. The principal concerns of regulatory authorities are for CMR risks arising from nano-particle inhalation. Those risks generally don't materialise in real world use of TIO2 across the general population.

The risks referred to in studies and classifications are generally referred to as CMR:
* C = Carcinogenic (causes cancer)
* M = Mutagenic (causes genetic mutation)
* R = Reprotoxic (interferes with normal reproduction)

History ...

--- 2006 ---
* 2006, WHO (World Health Organisation) IARC (International Agency for Research on Cancer) classified TIO2 as CARC 2B.
* CARC 2B: "Possibly carcinogenic to humans".
* Conclusion (inconclusive): "Titanium dioxide is possibly carcinogenic to humans (Group 2B) based on sufficient evidence in experimental animals and inadequate evidence from epidemiological studies".
* This 'issue' has been around now for 12 years; more, if you reference studies going back to 1987 and before.
* The MSDS (material safety data sheet) for TIO2 products (not TIO2 bearing products) should already generally be carrying a CARC 2B warning label.
* Chemical/paint companies should already have exceptional safety standards when it comes to inhalation and contact risks for all of the input products that they use.

--- 2013 ---
* Meet the players ...
* ANSES (French Agency for Food, Environmental and Occupational Health & Safety, Chemicals Assessment Unit)
* REACH (Registration, Evaluation, Authorisation and Restriction of Chemical Substances)
* ECHA (European Chemicals Agency)
* RAC (ECHA Committee for Risk Assessment)
* CoRAP (Community Rolling Action Plan)
* No wonder Britain wants to leave the EU
* ANSES submits to REACH/ECHA for classification of titanium dioxide as CARC 1B ("presumed to have CMR potential based largely on experimental animal data").
* First CoRAP justification document.

--- 2016 ---
* CoRAP documentation updated with some additional materials definition and legal basis for submission.

--- 2017 ---
* RAC proposes that titanium dioxide be classified as CARC 2 ("possibly carcinogenic to humans"), CARC 1B proposal not accepted.
* EC can approve or reject the proposal.

--- 2018 ---
* 22/March/2018; CoRAP re-reviews submission.
* Documentation updated to reflect some concerns namely:
(a) Submission relates to nano-particulate TIO2 only.
(b) Animal studies not conclusive and/or not properly controlled.
(c) Submission doesn't distinguish nano-particulate TIO2 from non-nano-particulate TIO2.
(d) ECHA couldn't blanket-label all TIO2 as CARC 2 when the only (weak) evidence provided is for nano-particulate inhalation in animals in poorly controlled studies.

CoRAP opinion:

"Although it was initially foreseen by France to propose an EU harmonized classification for mutagenicity in addition to carcinogenicity, this endpoint was judged as inconclusive. The FR-MSCA was not able to identify specific physicochemical parameter justifying the discrepancies along the mutagenic results and whether the differences reported in the results could be due to different study protocols having been employed. Therefore, further data can be needed to clarify this point.

Several grades of titanium dioxide exist for titanium dioxide (characterized by size, shape, surface treatment, etc). Moreover, titanium dioxide is used in several products that can be used by consumers (including sensitive population).

TiO2 is widely used and leads to significant exposure. However, how to deal with this issue depending on the grades, forms, ... is still under debate. The strategy on how to tackle this difficult issue with a registration dossier as the one currently available is still unclear and will require ENORMOUS work from France.

In this context, we will reflect on how to guarantee appropriate safe conditions for all populations that can be exposed to titanium dioxide in the light of the possible impact of these intrinsic variations of parameters on (eco)toxicology properties."

--- Conclusion ---

It remains an open question from an ECHA perspective but nevertheless it has had a CARC 2B classification from the WHO/IARC since 2006. That has not had any material (or noticeable) impact on the TIO2 market.

[wheniamfree] 13/4/2018 18:05

Murray, appreciate the response.

[murraybasin] 13/4/2018 17:45

Lets start with Metalysis. They are operating in the metal titanium forging/3D print space not the titanium pigment or titanium mineral space. They have a disruptive technology in that fast-forge can facilitate the production of forged titanium parts for a fraction of the current cost of equivalent titanium parts. The saving is in the process, not the metal content. Those of us following the HMS industry have been waiting for some time for Metalysis to get out of the starting blocks since the technology will open up the titanium metals market. That will be a very positive thing for titanium minerals miners, the likes of KMR, Base Resources, Iluka Resources, etc, since it broadens the market for titanium metal products substantially. Bring in 3D printing with titanium and you have a whole new ball game when it comes to automotive, aerospace, defence, etc. Don't under estimate the potential that this has. I'll come back to you on the ECHA question because there was an updated opinion in March which doesn't seem to have had much air time.

[wheniamfree] 13/4/2018 16:43

Murray, the paint point would be questionable anyway since the particles are in a liquid solution.

Will anyone care or stop using products? Perhaps not in some circumstances however there will be others. To assume the prices of the feedstock products would be unaffected is doubtful. They would, without question as it creates uncertainty in variances of use and it would take time for those variances to be realised globally.

Should that happen (and I would be airing more towards it will) the re-categorisation will likely have an adverse effect on agreed sales prices with existing and new customers, how much of Kenmares sales are contracted and fixed and for what periods?

Donkey, any ideas?

And then there comes Metalysis, that appears to be making some very good traction. Titantium production at a fraction of the price, another curve ball inbound perhaps?

[murraybasin] 13/4/2018 15:46

My understanding of this RAC submission is that it relied upon laboratory tests with animal (rat/mouse) subjects in which:
- It focused on ingestion by inhalation of nano-particle sized TIO2
- The biology and reaction of the animals is different to that of humans
- The quantities involved had to be huge relative to the natural surrounding environment, e.g. in densities that could never occur naturally
- The particle sizes in question don't occur and/or are not liberated from TIO2 bearing products

This gives rise to some questions:

1. Will the EU make a decision to label TIO2 bearing products as carcinogenic? Knowing what we know about the EU, the possibility of making ill-informed decisions is still out there.

2. Even if they do require that TIO2 bearing products be labelled as carcinogenic, will anyone care? For example, will you stop buying the Dulux Gold Shield that you've been using 40 years (without getting cancer) just because it has a new cancer warning on it?

There are some additional considerations. If under unrepresentative conditions you can demonstrate that inhalation of nano-particle sized dust, of any composition, can cause cancer in mice (not humans), then how many other products could this potentially apply to? Flour, salt, curry powder ... in theory, ingestion by inhalation of nano-particles of /anything/ could have the same effect in mice.

Today, we don't even have a carcinogenic warning on alcohol, even though there is strong evidence of a linkage ... in humans. Pretty sure too if you were to put the mouse in closed environment and induce a high density mist of an alcohol based solution you could prove given time of a linkage between cancer and alcohol through inhalation in mice (not humans). That said, we don't inhale our beer. At least most of the time.

[wheniamfree] 13/4/2018 11:17

Not quite donkey, you declared that years of research following investment gave you a great grasp of your investment within Kenmare interesting since you can’t answer any points that I’m asking you?

[donkey40] 13/4/2018 10:58

Actually pal, you are the one who annointed me as the self proclaimed expert on KMR. Just more lies from you, endless BS and endless childish silly bogger games.

Thanks for the various compliments.

[wheniamfree] 13/4/2018 10:24

That would be a no then, for someone who apparently knows so much about Kenmare your actions tell another tale im afraid.

[donkey40] 13/4/2018 10:12

I would be delighted to Wheniamfree. I printed out your points and added them to the roll hanging on the wall in the smallest room in my house, where they will get the attention they rightly deserve. Thank you for your continued interest in a company with a significant market position in the mining and extraction of feedstocks to the TiO2 and ceramics industries. May I wish you the best with this investment and others in your portfolio - do drop by from time to time and let us know how you, and they, are getting on.

[wheniamfree] 13/4/2018 07:39

It appears the European Commission is still reviewing the outcome to this.

If TiO2 were to be classed as category 2 as per the submission from RAC this would have severely adverse affects on commodity prices.

Hence one of many focuses on diversification.

“On 9 June 2017, pursuant to a proposal on behalf of France, the RAC concluded that titanium dioxide be classified as a Category 2 Carcinogen as suspected of causing cancer (through the inhalation route). The opinion has been provided to the European Commission, who will evaluate and make the final decision on the proposed classification. The titanium dioxide industry intends to enter into dialogue with the European Commission in connection with that process.

Potential impact:� If the European Commission were to adopt the proposed Category�2 Carcinogen classification, it could have an adverse impact on market demand for and price of our ilmenite and rutile products.”



Still donkey, at least Mozambique allowed Kenmare to move some graves. Can you take the above points please and assist?

[wheniamfree] 13/4/2018 07:27

Not exactly, plenty of companies diversify or hedge. Central Asian Metals is one of nany recent examples. I would think it more applicable however to those companies surviving via bailout placings much in the like of Kenmare.

Q2 will be the tell tale sign of performance for the year, given the work on Concentrator B will begin whilst A has a confirmed location of being in a high slime zone for the same period. That doesn’t sound good to me. All dependant on dry ore compliments and stock depletion’s imho.

And Q1 already ran below expectations so there is some catchup to do discounting any further “unforeseen circumstances”.

[murraybasin] 12/4/2018 20:22

"company has full exposure to macro-economics"

I think Paddy Power is the only company that nailed that problem. The board should sell the mine and buy a chain of bookies.

[donkey40] 12/4/2018 13:42

Don’t forget the supportive Govt that let them build the mine 20 years ago, slowly but surely brought the power infrastructure, left then be to get on with it, ensured the 2 party friction did not spill into that asset, and continue to support them by letting them move grave sites and other sacred sites on the mining path. 1,400 staff employed in a remote corner bringing opportunity and value creation to the presumably bewildered locals at the outset. Their CSR under Sofia Bianci is the model for Non-Execs that add value on the Board.
I read all the forecasts above and in reports - forecast 2018 revenues of $265m and EBITDA $100+m are very achievable with a fair wind. 200/- tonnes finished products gives fair amount of flex to meet targets. And if EBITDA is only $90 something, is that a problem ?!
Boom !!!

[trev1223] 12/4/2018 10:39

Thanks for that Murraybasin, good to learn a little bit more about ilmenite mining.

[caposoka] 12/4/2018 09:51

Latest Hannam report has estimated WASP of USD/t shipped of: 223 (Y18), 249 (Y19), 269 (Y20). On a fixed cost base, profitability will increase substantially.

[murraybasin] 12/4/2018 09:05

Er, shipments up 4% to 267,200 tonnes (not 252,200 tonnes). As the professor says, no point in turning up for class if you don't have the basic qualification of being able to read. Applies to journalists as well as investors.

Some things that might help your understanding:

* Grade refers to the percentage of HMS in ore mined, not the quality of the ilmenite.
* The final ilmenite product grade doesn't change, it simply means the percentage of ore mined to extract the ilmenite increases.
* KMR's ilmenite product is in the 52%-60% TIO2 composition range, which is at the higher end of ilmenite grades and achieves higher prices than many other products available in the market.
* Higher TIO2 content is cheaper for upstream consumers (Chloride process pigment lines, SR producers and slag producers) to process, and thus attracts a price premium. The premium is disproportionate to the TIO2 content, e.g. above linear.
* As a largely fixed cost operation, increased ore mining doesn't contribute much in terms of costs but it is a gating factor on production throughput in plant, as clearly signaled by the company in their 2018 guidance, in other words, no surprises here.
* Dry mining operation is used to supplement (offset) dredge mining operation and thus maintain production levels when ore grade drops or slimes are encountered; the company has replaced the dry mining fleet in 2017 so there may be some unanticipated improvements to come here.
* The relocation of the dry mining operation coincides with the primary WCP turn in the mine path, since the dry mining operation is co-located at the WCP location to increase WCP throughput.
* There are several kinds of growth:
(a) Price/margin
(b) Sales volumes
(c) Production volumes
* For 2018 expect price/margin growth and sales volume growth. For example, while production for Q1 is down due to maintenance, etc, sales volume is up, and sales prices are up.
* Final production volumes will depend on total operating time, grades, dry mining contribution, etc.

It's all in the RNS. But you also need to understand the business.