Kenmare Resources has slipped back a week after a trip to show off its Moma mine in northern Mozambique.
Analysts at Westhouse, despite putting an add rating on the company's shares, pointed to some problems at the mine, which has recently been expanded. They said:
In addition to teething problems at the new Plant B, the company has been struggling with longer power dips due to demand exceeding the current stability level. These have resulted in Kenmare operating below the levels required to hit its post-expansion targets.
There was no further update on the debt negotiations mentioned in the 2013 production results. With two thirds of subordinate debt due on 1 August 2015, a weak market, and ongoing power issues, this should be a key area of focus for the company.
The power issues should start to abate as the storms die down towards the end of March. However, until a second power line can be constructed, this would appear to be only a short-term relief at most. Simultaneously, Kenmare will need to continue to focus on addressing the teething problems at Plant B, which seem achievable, and further reducing the downtime impact of outages. The next 18 months will be key, with re- negotiation of the debt, short and long-term solutions to the power issues, and an in operational performance all being necessary to bolster the company's attractive longer- term investment case.
Kenmare is currently 4% lower at 16.80p.
