Investors are rushing to own a slice of tantalite miner Kennedy Ventures (KENV:AIM) following improvements to its processing plant and the appointment of a new chief executive with considerable experience in the tantalum market.
Shares in the miner have more than doubled in value since mid-December 2016 and rise a further 14.5% to 10.88p today (11 Jan).
YOU COULD HAVE MADE FOUR TIMES YOUR MONEY
Long-term readers of Shares should be familiar with the stock as we’ve highlighted its attractions on several occasions, most recently saying to buy at 2.66p on 8 September 2016. Anyone following our tip would now be sitting on a 309% profit - not bad for four months’ work!
Many investors will be excited about Kennedy’s potential in the lithium space, as the commodity has been found at its 75%-owned Tantalite Valley Mine (TVM) in Southern Namibia.
We believe the shares still remain very cheap on the basis of potential income from tantalite production alone. The lithium is merely an option on top of the core business.
PROBLEMS FIXED
The tantalite miner was on the cusp of generating attractive levels of cash flow when it encountered irregular metal grades and high levels of fine material at TVM at the start of 2016 as well as lithium-rich ore that the current plant wasn’t configured to recover.
It was forced to undertake a discounted placing to get money to upgrade the plant, hurting its share price.
Kennedy has subsequently upgraded its processing plant which will enable it produce a more consistent grade of tantalite. Coinciding with the plant upgrades is work to better understand the ore body and prove up a lithium resource.
The miner hopes to publish a resource statement on the estimated lithium content in the first half of 2017 to Western ‘JORC’ standards.
WHY THE NEW BOSS IS IMPORTANT
Larry Johnson was appointed as CEO on 9 January 2017, replacing Peter Hibbard who steps down from the role and the board to pursue other interests.
Importantly, Johnson will be based in Namibia so he should be a hands-on boss - unlike many miners whose CEO is often based in London or similar major city and rarely visits the mining operations so doesn’t truly know what’s going on from day to day.
Johnson has worked in the tantalum industry for more than 25 years and has spent several years focusing on the development of conflict-free global supply chains. That’s very important to Kennedy because there is a rule in the US that requires electronic manufacturers to ensure raw materials used to make their products are not tied to conflict in parts of Africa.
Companies have to be able to trace and audit their supply to ensure raw materials are not financing violence in eastern Congo.
Kennedy’s ability to show that its tantalite has come from a ‘conflict free’ source is a key reason why an undisclosed US electronics manufacturer has signed up to buy material from TVM for several years.
This supply agreement also gives Kennedy credibility should it need to obtain finance to buy more mines.
The company has previously said it wants to avoid diluting shareholders by continuously issuing equity to fund expansion; instead it believed the business could be geared up thanks to the relationship ‘with such a credible institution as an end buyer’ for its tantalite. That was according to chairman Giles Clarke in an interview with Shares in 2015.
