25 February 2017 02:42:57


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Tantatilising - (KENV)
29/11/2016 (119264)

Tantatilising

Check the website for Kennedy Ventures (KENV) at http://www.kvplc.com/ on Wednesday, and there ought to be a copy of the presentation by chairman Giles Clarke at an investor conference tonight (Tuesday). He is due to give another, taking in Kennedy and two of his other companies, Ironveld (IRON) and Amerisur Resources (AMER) on Thursday. He is a busy and rather entertaining chap.

He is certain to be optimistic on progress and timing at all of them. Clarke can deliver impressive gains for investors who back him, are ready to accept share price volatility, and to display real patience - or who use a fairly tight trailing stop loss and hop in and out of his ventures as they bounce along. It might be sensible to delay this comment a day or two, and it might be best for me to return later, but since most of us are impatient for results, it seems worth looking at the news today from Kennedy.

The shares touched 7p today but closed just a shade higher on the day in heavy trade at 6p to 6.25p, where it is capitalised at just under 11m. This ought to be far too cheap, and perhaps it will prove so if all goes to plan, and when it does ('when' probably carrying greater uncertainty than 'if').

There is no point in quibbling about the detail of timing on Kennedy. It seems to get there in the end. But today's news was unarguably encouraging. The Tantalite Valley Mine in Namibia is at a commercial production level and on target to hit 15,000 tonnes per month throughput of tantalum. It has actually delivered the first shipment of 1.6 tonnes of tantalite concentrate to the US electronics company customer, and shipments should take place twice a month going forward.

The plant upgrade is in the final stages and installing a milling circuit should be complete in December this year, increasing the recovery of fine tantalite. On completion of this phase, the mine is expected to be cash flow positive. Full production at an increased mining rate of 15,000 tonnes per month is targeted for the second quarter of 2017.

Wow! Cash positive next month? Marvellous. Go back to previous projections which have been buzzing around, sort of semi-officially. I know such things can't happen in this over-regulated system which is designed to keep most investors in the dark, but indulge me. And since some of the sums were circulated when tantalum was $80 lb, and it is now around $70 lb, they might be construed as misleading.

What seems to be the case - and we don't know what the US partner is paying - is that production costs are about $30 lb. So if we take the current market price (and since it comes from a conflict-free zone, Kennedy's tantalite ought to be loved by US companies and sit at the top of the price range), the company could have big fat margins - maybe $40 lb, maybe well over $30 lb, or maybe rather more.

Work this through, and assuming a margin of $40 lb, bearing in mind that Kennedy has 75% of the company which owns the mine, and it might be that Kennedy could be making about $1m a month when production reaches a solid 15,000 tonnes, let's say in the second half of 2017. Given that Kennedy has a June 30 year-end, we might be looking at profits of $12m for the year to June 30, 2018, maybe 800,000 a month or 9.6m a year. What was that market cap? 11m?

There is more, maybe much more. Of course, don't neglect the notion that this is top of the head stuff. There could be much less, and more delays and so on, but...

Today's statement tells us more about the open-pit lepidolite lithium deposit close by the tantalite. The company is upgrading the flotation circuit, allowing it to process the lithium bearing ores, with the hope of being able to sell it. Great stuff. Lithium is in strong demand for batteries and such. All very exciting, potentially very valuable, and - perhaps - in production in 2017. Speculative, but tantatilisingly alluring.

Should be interesting listening to Clarke this evening. Good luck.

Ends


  More on (KENV)
Previous Stories
Mike on (KENV)
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.
3/11/15
6/8/15


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