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Doubling Up - (KENV)
16/1/2017 (119264)

Doubling Up

There were, I'm told, two people at the annual meeting of Kennedy Ventures (KENV), despite the soaring share price. Well, as one-time City Editor of The Western Mail, I appreciate that 11am in Cardiff hardly sets the juices flowing. And, happily, the chap who really matters was out eating dust in Namibia, where he will soon be whipping up real excitement, so I am told.

That seems plausible enough. While they were nodding through all resolutions in a small hotel, the man in question was in the Tantalite Valley on the border of Namibia and South Africa, looking at the lepidolite and tickling up the tantalum. Larry Johnson became chief executive of Kennedy with immediate effect on January 9, and is a heavyweight tantalum authority, 25 years in the business and with key positions behind him in large US listed companies. He has spent several years developing conflict-free global supply chains, just the sort of thing required at Aftan, Kennedy's 75% owned Namibian producer. Unless Trump stumbles over it, coming from a conflict-free area in Africa means Kennedy's tantalum can be bought by US companies, giving it a big advantage over some.

Johnson will be based in Windhoek, some 75 miles from the Tantalite Valley mines, and will spend his first few weeks checking it all out. Once he settles in, expect Kennedy to enter a new, more dynamic phase, with a strong schedule of announcements likely in the year ahead.

That is good news for investors who have seen their shares double to 12p in the past month (they topped 13p briefly today). There was some disappointment that nothing was said at the agm, and the price might ease a touch after a brilliant run of late. For those who are brave and ready to endure the volatility which seems to dog the high-risk, high-reward enterprises put together by cricketing big-wig Giles Clarke, that would offer a good opportunity to buy.

Others might be eyeing taking a profit if they heeded any of the three buy notes here in November (put KENV in the box at bottom left of the front page) . A quick-fire double-your-money is never to be sneered at. But if the omens are right, there could be much more to come in Kennedy yet.

Basically Kennedy owns a mine and mining rights to 1175 highly promising acres in the Tantalite Valley, Namibia, complete with a working mine which has been revived from an abandoned earlier effort. Already the company has established that there is a massive quantity of tantalite on site, so large that no effort is planned at this stage to establish a proper resource measurement. What they know they have in just part of the site would last at least 20 years.

After initial problems, that is now in production. The first shipments have gone to an American listed company which will buy all it can get. Production should be established at 15,000 tonnes a month by the second quarter of this year, and the company will be cash flow positive by the second quarter.

So far, there is no clear estimate of what this means in profits. Various figures have been flying about. They are of uncertain status. Some, I swear, came from an extremely well-informed source, but the parameters have changed since, and that source is growing more vague with the passage of time - but not necessarily more bearish.

At a crude stab, there has been mention of selling 15 tonnes of tantalite concentrate a month. That is equivalent to slightly more than 33,000 lbs. Tantalite, Clarke reported in a presentation in December, had risen from $50 per lb to just under $70 per lb in December. And there have been suggestions from what ought to be well-informed sources that Kennedy has a generous margin of $30 to $40 per lb. At this stage, though, Kennedy has only 75% of the subsidiary which owns the mine.

Maybe this sort of mathematical muddle explains why there have been estimates of profits approaching $1m a month (say $750,000 for 75%) when production is running absolutely on target and smoothly in the second half of 2017. Could that mean the equivalent to a run rate of $9m a year by the end of 2017?

Who knows? There are too many imponderables, production, concentrate, grades, and so on. And though production difficulties appear to have been sorted, we don't quite know how smoothly it will go. Let us say $5m, and translate that as 4m. At 12p, Kennedy is capitalised at 21m. Please note that 21m. Some financial sites seem to have the issued capital wrong, and underplay it. By my reckoning, there are 175m shares in issue.

At least there should not be many more for a while. Clarke promised at a meeting in December that there would be no need for a fund-raising in the next year or two to finance the development of the lithium prospect.

Lithium prospect? Ah yes, this is the second phase of the Kennedy thriller. Part of the delay in getting tantalite production on stream was because it emerged that there was a great deal of lepidolite clogging up the mix, and that means lithium. Lithium is fast becoming the metal to have. Demand is rising fast, fuelled in part by the need for lithium in the batteries for electric cars. Clarke told a presentation that recent off contract deals have been done at $25,000 a tonne, against a market contract of $11,000.

Kennedy will be able to produce tantalum and lithium for sale in 2017. In the first quarter of this year, it should complete the installation of an additional flotation circuit to treat lithium ores, with production expected in the second quarter of this year. The company plans to produce a JORC compliant resource estimate of the lithium deposit in the first half of 2017. There is a great deal of it, easily accessible, initially accessible by blowing up the side of a hill. It may be of passing interest that Elon Musk, best-known for the Tesla electric car, has established an operation in South Africa to work on his energy storage products.

What all of this might mean in terms of profits for Kennedy a year or two out is hard to say. There are still too many moving parts, and notes from brokers are conspicuous by their absence. Once that JORC resource estimate comes out, however, there will be something to work on.

We know there are massive deposits of tantalite and lithium in place, and Clarke is looking for the opportunity to buy more. He will be able to use the cash flow from tantalite to finance the lithium venture. New chief executive Johnson knows his way around the business, and has not joined a tiddler like Kennedy to twiddle his thumbs.

This all continues to make Kennedy an exciting gamble, and now that tantalite production has started, the risk has been reduced. The share price could be volatile, but as the story becomes better known and it is as only quoted lithium producer in London, interest ought to rocket.

One final note. A few weeks ago, coverage of Kennedy took off on the London and South East bulletin board. It is worth ploughing through that thread on Kennedy, in particular for posts by 1750mk1. He has unearthed a fascinating document he calls 'The Bible'. It is actually titled 'The Geology and Mineral Deposits of Tantalite Valley' by J.W.von Backstrom, and was produced by the Atomic Energy Board in Pretoria in April 1976. It looks in detail at the area. One fascinating snippet - it reckons that the waste sites were winnowed by hand, and only 20% of the minerals they contain were found - treasure, just waiting for the picking.


  More on (KENV)
Previous Stories
Mike on (KENV)
8/3/2018 What is happening at Kennedy Ventures?
13/2/2018 Coalescing at Kennedy.
27/7/2017 Chaos at Kennedy.
18/7/2017 What is really happening at Kennedy Ventures?
6/7/2017 Steady progress at Kennedy.
27/3/2017 Kennedy updating nicely.
9/2/2017 More to come at Kennedy?
16/1/2017 Double, and double again?
30/11/2016 More good stuff on Kennedy Ventures.
29/11/2016 A Clarke gamble coming good.
1/11/2016 The fun starts at Kennedy Ventures.
26/7/2016 Disappointment at Kennedy, but the potential remains.


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