“We didn’t see anything that suggested that there was any form of radical step-out from anything that had previously been understood, anticipated and signaled,” Michael Carvill, managing director of Kenmare, said today in a phone interview from Dublin. “I don’t think the new mining law will have any effect on our operations as we are presently operating.”
Mozambique’s government plans to revise the country’s mining law and will seek to give the state a share of projects in “strategic sectors” such as coal, Mineral Resources Minister Esperanca Bias said at a conference yesterday. Kenmare shares slumped 8.1 percent yesterday to a nine-month low.
“We have not heard any utterances from anyone that would suggest it’s retrospective,” Carvill said, adding he wasn’t at the conference in Maputo, attended by the company’s corporate lawyer. “It might apply to our phase three. We could expect that as we do phase three, that is a new project and therefore the mining law would apply to that.”
Kenmare advanced 2.6 percent to 56.4 pence by the 4:30 p.m. close in London after earlier declining as much as 3.3 percent. The Dublin-based company has jumped 72 percent this year and has a market value of 1.4 billion pounds ($2.2 billion).
Yesterday’s decline in Kenmare’s share price “is not justified given the strong outlook for mineral-sand prices,” RBC Capital Markets analyst Des Kilalea said in an e-mailed note yesterday. “If there is a change in Mozambique’s mining laws, it would only apply to new projects.”
Kenmare operates the Moma mine on the coast of Mozambique, with an annual capacity of 800,000 metric tons of the titanium mineral ilmenite, with associated production of zircon and rutile, according to its website. Titanium dioxide pigment is used in paint, paper and plastic production, it says.
Mozambique began a series of meetings with license holders and other interested parties about its plans, Bias said yesterday at the conference. The government won’t take any decisions without discussing them with the companies, she said in an interview after the speech.
Resource-rich African nations, including Namibia, Zimbabwe and Guinea, are planning to revise mineral laws to take advantage of commodity prices that have surged on the global economic recovery. Vale SA (VALE5) mines coal in Mozambique, while Rio Tinto Plc (RIO) is buying Riversdale Mining Ltd., which operates in the southern African country.
The changes will affect all mining industries, including coal, gold and uranium, with any percentage of projects held by the state still up for discussion, Bias said in the interview. The law may be ready by the end of the year, she said.
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