Morning Equity Briefing
Kenmare
(USc) (KMR ID)
Peer reports higher sales volumes and prices; optimistic on market for titanium minerals
Caren Crowley
| Closing Price: | $0.22 | Rating: | Outperform | 30/06/09 |
FACTS: Exxaro, a diversified South African mining company, has released its results for the six months to end-June.
ANALYSIS: Revenues at Exxaro's titanium minerals sands unit were 37% higher in the first six months of 2010 when compared with the corresponding period in 2009. Demand for all products was strong and helped counter the negative impact of the weaker dollar on Exxaro's top-line (Exxaro's costs are in Australian dollars and rand while its revenues are denominated in US dollars). Exxaro reported an underlying operating profit of R50m from its minerals sands operations, a turnaround from the R67m loss in H1 2009.
DAVY VIEW: Exxaro's results, and indeed results from elsewhere in the sector, demonstrate a rebound in global demand for titanium minerals in H1 which is positive for Kenmare. With investors rightly focused on the future, Exxaro seems to have turned optimistic about the market for titanium minerals. After shelving a number of investment projects in 2009, it has now launched a bankable feasibility study of a mineral sands deposit near one of its South African operations. If successful, management estimates that commissioning of the project could be scheduled for H2 2013. Exxaro needs new supplies of titanium minerals as its operational data demonstrates that some of its South African deposits are in decline and near end-of-life.