Kenmare Resources’s shares dipped on Thursday as the titanium minerals and zircon miner said a final agreement extending a processing and exports accord in Mozambique will not be finalised before the existing 20-year deal expires this weekend.
However, the Irish company said it has agreed in principle the terms of an extension – even if analysts estimate that it will cost more than the existing deal – and, crucially, that it is being allowed to continue activities until a new agreement is sealed.
The drift in securing a fresh agreement comes as Mozambique has been affected by civil unrest since a presidential election in October, in which the ruling Frelimo party’s candidate, Daniel Chapo, was declared winner amid claims from opposition parties that the process was marred by voting irregularities.
Kenmare’s business is centred around the Moma mine in northern Mozambique, where the so-called implementation agreement governs the terms under which it conducts its mineral processing and export activities. This is separate to the regulatory framework covering its mining activities there.
Kenmare accounts for approximately 7 per cent of global titanium feedstocks production. Ilmenite, the most important ore of titanium produced by Moma is used in the manufacture of everything from paints and plastics to ceramics and textiles. Zircon is widely used in the foundry industry.
“Kenmare has had a presence in Mozambique for almost 40 years and the Moma mine has been in production for 17 years. We are pleased that the government has provided confirmation of our ability to continue to operate under our existing terms during this interim period and that the process can be concluded in an orderly manner,” said Kenmare chief executive, Tom Hickey.
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“Kenmare has always taken a long-term view on our operations and relationships in Mozambique and is very proud of the meaningful contribution we have made to our host country.”
Davy analyst Colin Grant said that the news of agreement on new terms in principle, and Kenmare’s ability to continue processing and exporting pending conclusion of the deal, are both positive.
“The timetable has moved beyond December 21st, which we felt had a high probability given the recent election in Mozambique and the ensuing civil unrest,” he said.
“It would be no surprise if the payments made to Mozambique increased in the extension, but we believe the additional costs will be minor and that getting an extension will be a net positive to the investment case on the stock.”
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