Davy Research |
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Kenmare
(KMR ID)
Peer reports that Q3 prices to date are flat on H1
06 July 2012
Caren Crowley
| Closing Price: | 40p | Rating: | Outperform | 30/06/09 |
FACTS: Sierra Rutile has reported that the market remains strong with prices fixed to date for Q3 in line with the average price achieved in H1 2012. Sierra Rutile is a significant rutile producer and a minor ilmenite producer. Sierra Rutile is guiding that it will produce 80,000-85,000 tonnes of rutile and 18,000 tonnes of ilmenite in 2012. We forecast that Kenmare will produce 8,400 and 650,000 tonnes of rutile and ilmenite respectively in the current year.
ANALYSIS: Sierra Rutile’s latest update on prices suggests that its Q3 prices to date may be softer quarter-on-quarter but have not collapsed. While it would appear that Sierra Rutile negotiates prices for its principal product, rutile, on a quarterly basis, Kenmare’s more significant product is ilmenite and it negotiates prices for ilmenite each half-year.
DAVY VIEW: Sierra Rutile’s update leads us to suspect that Kenmare will, on average, manage to hold or roll over its H1 prices into H2. This is an achievement given the weak macro environment. At this time, we do not envisage changes to our price forecasts. Our valuation for Kenmare is 56p per share.