Bloomberg News

Kenmare Falls Most in 9 Months in London on Mozambique Laws

July 06, 2011

(Updates with closing share price in second paragraph.)

July 6 (Bloomberg) -- Kenmare Resources Plc, a Dublin-based minerals producer operating in Mozambique, slumped the most in almost nine months in London trading after the southeast African country said it planned to revise its mining law.

Kenmare dropped 8.1 percent to 55 pence, the biggest decline since Oct. 8, giving it a market value of 1.3 billion pounds ($2.1 billion). Officials at the company, which owns the Moma titanium mine on Mozambique’s northeast coast, weren’t available for comment when contacted by Bloomberg News.

Mozambique plans to revise its mining law, seeking to give the state a share of projects in “strategic sectors” such as coal, Mineral Resources Minister Esperanca Bias said today. It’s among African nations looking to reap bigger gains from their commodity wealth as global prices for raw materials climb.

“Kenmare is one of the only significant mining operations currently operating in Mozambique so I’m sure they will be having conversations, but we wouldn’t be worried about license- revoke or loss of license,” Jeremy Dibb, a Canaccord Genuity Ltd. analyst in London, said today by phone. “Any uncertainty is likely to produce a strong reaction” in the shares.

Future Impact

Any change to the law isn’t expected to apply to Kenmare’s current operations and is more likely to affect projects that are yet to start production, Dibb said. Kenmare’s planned expansion, due in about 2015 or 2016, may be subject to any change to the fiscal regime, he said.

Mozambique has begun meeting with license holders and other parties on its plans, Bias said at an industry conference today in the country’s capital, Maputo. Investors who sell licenses or concessions may need to pay tax on the gains, she said.

“Mozambique has always had a particularly favorable tax regime when it comes to encouraging foreign investment,” said Dibb, who has a “buy” rating on Kenmare. “It’s natural to see that as commodity revenue grows within the country, they would move to something more in line with international standards.”

In March, Zimbabwe published regulations to take a 51 percent stake in foreign-operated mines. A month later, Namibia said it endorsed plans to issue all mineral exploration permits to the state-owned mining company, while in Tanzania, the national planning commission has urged the government to consider a so-called super tax on mines.

Other mineral producers such as Vale SA are digging mines in Mozambique, and Anglo American Plc is seeking coal projects there. Rio Tinto Group, the world’s second-largest miner, may add 25 million metric tons of Mozambique coal to its annual output after buying Riversdale Mining Ltd. this year.

Rio advanced 0.4 percent to 4,493.5 pence in London.

--With assistance from Fred Katerere in Johannesburg. Editors: Amanda Jordan, John Viljoen

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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