Kenmare Moves on Mozambique's Moma Titanium Sands Project

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Construction is underway at the Kenmare Resources (LSE,IRE:KMR) (Dublin, Ireland) Moma titanium mineral sands project in the northern Nampula province of Mozambique. A joint venture (JV) between Multiplex Limited (AX:MXGCA) (Perth, Australia) and Bateman BV (Boksburg, South Africa) was awarded the $220 million base price construction contract, with provisions for overruns to a maximum of $240 million. Between $220 million and $240 million, the JV shoulders a progressively greater portion of the cost, thus giving an incentive to keep overruns to a minimum. The project is scheduled for completion in 2006. Various other contracts for the project will be put out by September.

The start-up of construction followed the finalization of a $400 million debt and equity arrangement, led by ABSA Corporate and Merchant Bank (JSE:AMAGB) (Johannesburg, South Africa), with the Export Credit Insurance Agency of South Africa. This includes an $80 million export credit agreement with Kenmare and $269 million senior and subordinated debt. This financial arrangement is said to be a turning point for the mining industry. Traditionally, large resource projects have been financed only through the support of major mining partners. Most excluded traditional mid-tier mining companies.

The total lender group includes the European Investment Bank, The African Development Bank, FMO (a Dutch development finance institution) and ABSA. Political risk guarantees are being provided to the project by MIGA (World Bank), and will be supplemented by Hermes, an arm of the German government.

The project plan has a 20-year span, which could be extended on the basis of known deposits. The project dredge path contains the equivalent of 16.4 million tons of ilmenite, and the total ore resource at Moma is 2.13 billion tons, containing 63 million tons of ilmenite. Kenmare will use proven technology. The project will consist of two dredgers, dredge pond, concentrator plant, minerals separation plant, tailings dam, access road, export jetty with product storage and loading facility, and other related infrastructure.

The project will produce 620,000 tons of three ilmenite products a year, containing between 50% and 60% of Ti02 (Titanium Dioxide). Co-products will be 34,000 tons of premium grade and 18,000 tons special grade zircon and 13,000 tons of premium grade rutile. 94% of titanium minerals are used in pigments, plastics, and cosmetics, to lend properties of whiteness and opacity. The balance is used in titanium alloys, characterized by strength, lightness, and corrosion and high temperature resistance.

Annual revenue of about $85 million will be generated on an operating cost of about $23 million per annum. Sales contracts, covering more than 50% of the project’s annual revenue for the first five years of operation, are in place. The forward sales cover the lenders’ marketing requirements, preceding disbursement of loan finance.

The investment and the creation of 450 jobs have been welcomed by the Mozambique government. The project is located on the coast, near major shipping routes, and benefits from low cost power. The output of ilmenite products not requiring beneficiation can be sold into both sulphate and chloride titanium markets. These advantages make the use of additional resources for future expansion of the project a potentially attractive prospect.

View Project Report - 84500020