Muna Muleya +353 1 240 4137 muna.muleya@merrion-capital.

com

Reuters JEV.LI / Bloomberg KMR LN

Kenmare Resources
Date 25th May 2011 IRELAND

Rating

Target Price

Buy

63p
Basic Resources

Expanding into a sweet spot We initiate coverage of Kenmare Resources with a Buy recommendation and a target price of 63p, 48% upside from current levels. While Kenmare has been a strong performer over the last year, we believe that the stock remains undervalued. We expect that prices for its products, which have almost doubled over the last two years still have upside potential. We also believe conditions are favourable for further mine expansion beyond announced levels which will not only make Kenmare a significant mineral sands player but significantly add to valuation.
Favourable mineral sands market A strong recovery in demand, coupled with constrained supply, has seen published mineral sands prices for Q2 2011 reach almost double the 2009 lows. With demand continuing to grow and no new major supply coming on stream in the medium term, industry forecasts envisage a structural deficit in titanium feedstock of 28% of total annual demand by 2016. We are confident that pricing momentum will be positive for an extended period. Current contract prices for ilmenite are some 40% lower than current spot prices. Comparative advantages Kenmares large resource base, with a life of mine well in excess of 100 years, operating costs at the lower end of the industry average and a favourable tax regime, gives it comparative advantages in mineral sands mining that will make it a significant and efficient producer. Its revenue to cash cost ratio of about 3 times at full capacity compares favourably with the industry average of 1.5 times. Aggressively expanding into a favourable market Current conditions present Kenmare with a window of opportunity to become a much larger player in mineral sands. A 50% expansion is currently under way, even though the mine has yet to fully reach its original design capacity. This will increase its titanium feedstock market share from 5% to more than 10%. Further expansion is already being considered, with a prefeasibility study being conducted. We expect an announcement on the results of a prefeasibility study by early 2012. We believe that a positive recommendation makes sense and will be the most likely outcome. It would add 14p to Kenmares NPV valuation. Earnings momentum and improving financial position The combination of the production ramp up, expansion and rising prices will drive a rapid increase in Kenmares earnings. We forecast EPS CAGR of 240% from 2011 to 2014. Strong cash flow will see net debt drop significantly over the next two years. This should enable Kenmare to readily fund further production expansion from its own cash resources or from borrowings. Target price points to 48% upside We set a target price for Kenmare of 63p per share based on our NPV valuation, pointing to 48% upside from the current level. Our target price factors in a 50% probability of further expansion. If we fully factor this in, our target price would be 69p.

Market Cap

Current Price

1,053m

42.46p

YTD abs perf (%) 12 mth abs per (%) 52 week high/low (p)

34.1 338.5 51.50/8.59

Source: Bloomberg

Year ended Dec Revenue (US$m) EBITDA (US$m) EBITDA Margin Net profit (US$m) EPS (dil)(USc)

10 92 21 23% -16 0.01

11f 144 70 48% 22 1.0

12f 296 211 71% 161 6.7

Source: Company data, Merrion estimates and Bloomberg

Merrion Stockbrokers 3rd Floor, Block C, The Sweepstakes Centre Ballsbridge, Dublin 4, Ireland Tel: +353 1 240 4100 Fax: +353 1 240 4101

Published By: Merrion Stockbrokers

This report is subject to important disclosures and disclaimers which can be found at the end of this report and which form an integral part of it.

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Table of Contents
Investment case -------------------------------------------------------------- 3 The case for Kenmare --------------------------------------------------------- 4 Favourable markets and product pricing momentum -------------------- 4 Titanium dioxide market ------------------------------------------ 5 Zircon market --------------------------------------------------- 11 Tight markets to lead to significant price increases---------------- 12 A new entrant with significant comparative advantages ---------------- 14 Resource size --------------------------------------------------- 14 Competitive operating costs ------------------------------------- 14 Favourable tax regime ------------------------------------------- 15 Aggressive expansion ------------------------------------------------- 16 Strong earnings momentum and financial position --------------------- 17 Valuation and financing ---------------------------------------------------- 18 Valuation ------------------------------------------------------------ 18 Target price ---------------------------------------------------------- 18 Sensitivity ----------------------------------------------------------- 19 Valuation risks ------------------------------------------------------- 19 Financing ------------------------------------------------------------ 20 Company overview --------------------------------------------------------- 21 Introduction --------------------------------------------------------- 21 Reserves and resources ----------------------------------------------- 22 Basic production process --------------------------------------------- 23 Production expansion ------------------------------------------------ 24 Management -------------------------------------------------------- 24 Financial forecasts --------------------------------------------------------- 26

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Investment Case
Although Kenmare has been a strong performer over the last year, we believe that the investment case for Kenmare remains strong. Commodity pricing, expansion and earnings as well as cash flow momentum are some of the factors we expect will drive further performance; Commodity prices may continue to surprise on the upside - Kenmares strong performance over the last year was largely on the back of upside surprises in announced mineral sands prices. We believe that these prices will continue to rise as the widening deficit (estimated at 25% of market by 2016) drives prices higher. Demand drivers are holding up and no new supply is expected to come on stream in the near future. Spot prices are above our peak forecasts and some 60% above recently announced contract prices, indicating potential for a significant increase going forward. Earnings and cash flow momentum - Once current expansion is completed, Kenmare will become the most efficient producer in mineral sands mining as measured by its revenue to cash operating ratio, the standard most commonly used in the industry. The effect of that operating efficiency and rising production is a substantial increase in Kenmares earnings over the next three years. We expect substantial earnings growth as the effect of the legacy contracts subsides and production expansion comes on stream. We are forecasting an EPS CAGR of 240% from 2011 to 2014. Likely further expansion not priced in - We believe that Kenmare is the best placed among the titanium feedstock producers to take advantage of the expected shortfall in supply as it has the largest reserves and resources and will be the lowest cost producer. Management has commented about further expansion beyond that which is already underway. We expect a positive conclusion from the prefeasibility study to be announced by early 2012. Assuming a further expansion of 800,000 tonnes of ilmenite capacity to 2 million tonnes per year in total, this would be worth 14p per share on a NPV basis and has yet to be reflected in the share price in our view. Share price weakness presents a buy opportunity - The share price has fallen by 16% since the beginning of April 2011 compared to 9% for the FTSE Basic Resources Index. However, mineral sands are not traded and prices reflect actual rather than speculative demand. These prices are still rising. We expect third quarter prices to be announced in July to be 15 to 20% higher than the second quarter prices. We believe the recent share price weakness presents an opportunity for investors to acquire the stock.

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The case for Kenmare

Favourable markets and product pricing momentum
Kenmare owns 100% of its sole operating asset, the Moma Titanium Minerals Mine in Mozambique. The mine produces the mineral ilmenite as its primary product, with zircon and rutile as co products. Ilmenite and rutile are titanium based minerals, mainly used as feedstock in titanium dioxide (TiO2) pigment production, which accounts for approximately 89% of global titanium feedstock consumption (Exhibit 1). Pigment is then consumed in the manufacture of paints and other coatings, plastics and as a whitener for paper, as well as a number of other applications, including cosmetics, food additives, ceramics, inks and textiles.

The remaining 11% of the demand for titanium feedstock is largely accounted for by titanium metal and welding electrode applications.

Zircon is a raw material for the ceramics industry as an opacifier (gives ceramics an opaqueness that allows colours to stay fixed in varying light). It is also used in the foundry and refractory industries and in a growing number of chemical applications.
Exhibit 1 Titanium feedstock consumption by end use Exhibit 2 Zircon consumption by end use

Metal Other 6% 5%

Zirconia and chemicals 19% Other 4% Foundry 11% Ceramics 56%

Pigment 89%
Source: Kenmare Resources

Refractory 10%
Source: Kenmare Resources

Developments in mineral sands prices over the next few years will have the most significant effect on Kenmare. Conditions are favourable for near term product price increases and for these price levels to be sustained for an extended period, as demand rises and supply remains sluggish. Mineral sands market pricing is opaque, with products usually sold on long term confidential contracts. However, independent reports suggest Q2 2011 contract price ranges of $130 to $175 per tonne for ilmenite and $1,400 to $1,600 per tonne for zircon, with spot prices higher, at more than $200 for ilmenite and $3,000 for zircon.

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We detail below the market developments in mineral sands and the effect on our price forecasts.

Titanium dioxide markets

Market structure Titanium dioxide feedstock is largely used to make titanium dioxide pigment (Exhibit 1). The feedstock miners sell their product to pigment manufacturers who then sell to end user manufacturers. The industry is highly concentrated with both the feedstock supply and pigment manufacturing controlled by a handful of players. Exhibit 3 Titanium dioxide pigment market structure

Source: Kenmare Resources, TZMI

Demand growing steadily, in line with GDP per capita growth Over the last twenty years, world titanium dioxide pigment demand has grown at a CAGR of 3.3%, largely in line with world GDP growth. Consumption is mainly concentrated in North America and Europe, which account for more than half of the worlds demand. China, which currently accounts for 18% of global pigment consumption has, in recent years become a major player, with consumption growing at approximately 16% per annum over the last twenty years as opposed to 2.2% for the world excluding China. Exhibit 4 illustrates this demand growth.

Pigment demand dropped sharply during the 2008 recession, with a more than 10% drop in European demand reported, mainly due to decreased demand from the automotive and construction industries. It recovered strongly in 2010 due to recovery in both developed and emerging markets. Industry consultant TZMI estimated 2010 pigment consumption at 5.3m tonnes, compared to 4.7m tonnes for 2009 (+13%).

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Exhibit 4 Pigment demand trend

6
Mt

World

China

World excl. China

1991 2010 CAGR = 3.3%

1991 2010 CAGR = 2.2%

1991 2010 CAGR = 16.0%

0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Source: Kenmare Resources, TZMI

Demand outlook The growth in titanium dioxide consumption largely follows per capita GDP growth and is mainly a late economic cycle product. Mature western economies, which account for more than half of world consumption, have per capita pigment consumption rates higher than 4/kg per person per year, while consumption in emerging markets is lower. Chinese consumption is currently about 1/8th that of developed countries. With consumption intensity dependant on the level of per capita GDP (Exhibit 5), rising per capita income in developing countries should provide support for future demand growth.

Exhibit 5 TiO2 consumption intensity historical and forecast

Source: Iluka Resources

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Demand drivers sustained mineral TiO2 demand growth With leading indicators in developed markets indicating moderate expansion, we expect TiO2 demand to be at least stable over the short to medium term. Exhibit 6 Indicators in key markets
65 60 55 50 45 40 35 30 03/2006 11/2006 07/2007 03/2008 11/2008 07/2009 03/2010 11/2010 Europe PMI China PMI US ISM

Source: Bloomberg

TZMI, the mineral sands consultant, is forecasting pigment demand growth of 3% to 4% per year, line with world economic growth and the total market to reach 8.8 million tonnes titanium dioxide units in annual demand by 2020. Conditions are favourable for this demand growth to be sustained as demand drivers in emerging markets, especially China, will continue to grow strongly. We expect continued per capita GDP growth, increased urbanisation and increases in vehicle sales to be the key drivers of this growth. We also expect niche applications for titanium to take a larger proportion of the metal.

Strong growth in housing development in China - The Chinese National Bureau of Statistics reported that floor space of houses under construction in the first four months of the 2011 was up 33.2% year-on year, with floor space of newly started houses up by 24.4%. According to the Economist Intelligence Unit, Chinas urban population is expected to continue growing until 2039. The urban population will grow by 26% or 160m people by 2020. At the same time, floor space per person is expected to increase from 30sqm in 2008 to 41sqm by 2020.

Large increase in motor vehicle sales - Motor vehicle sales are also expected to be a significant demand driver for pigments. In its projection for motor vehicle sales in China, Argonne National Laboratory, part of the US Department of Energy, is forecasting annual sales of 20 million units per year by 2022, almost four times the current level. Vehicle stock is expected to increase by 100 million units in just 10 years.

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Exhibit 7 Projected vehicle units in China

Source: Argonne National Laboratory

Pigment manufacturers adding capacity - DuPont announced in May 2011 that it will spend more than $500million to expand titanium dioxide production capacity by 350,000 tonnes in North America. This was the first investment announcement in the region for several years and it shows manufacturers confidence in the growth of pigment demand in North America. Other manufacturers commentary suggests that they are all running at full capacity at the moment and may need to expand in the near future. TZMI expects additional capacity to be added in China over the next few years with Huntsman expecting to add capacity in the region within the next few years.

Additional demand from niche applications - Titanium metal and welding electrodes are the other major uses of titanium feedstock and these are finding growing use. Titanium metal demand is expected to grow by 50% over the next five years as it finds applications in lightweight composite material. Titanium is used extensively in aircraft manufacturing and estimates are that the number of aeroplanes will almost double by 2030. The Boeing Dreamliner aircraft will be 18% by weight titanium, more than any other aircraft. Photocatalysts are a growing market for titanium.

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Supply growth sluggish at best

This outlook is the result of serious underinvestment in the feedstock industry over the last five years because of low industry profitability. This leaves the supply industry with very little scope for new output expansion in the short to medium term and higher prices are clearly needed to induce new project development Exxaro, 2010 Annual Report

A combination of low investment in exploration and development over the last decade due to low feedstock prices, significant depletion of existing resources and the closure of a number of large mines in the past three years has resulted in tighter supply. TZMI estimates that, without new projects, resource depletion for existing operations will see total supply from existing producers decline to less than 6 million TiO2 units by 2018, which is below the global peak production level in 2007 (Exhibit 8).

A combination of factors will limit any growth in supply: South African power costs have been increasing at 25% per year over the last two years and are expected to continue to increase. This will add significantly to unit production costs and higher product prices will be needed to increase supply. More importantly, there will not be much capacity for power supply to new large scale industrial projects in South Africa for the foreseeable future. Most existing operations are running at full capacity, with limited potential to expand production. Only Rio Tinto has the ability to increase production at its mine in Madagascar, but this will largely replace declining production at its operation in Canada. New supply faces significant barriers including the substantial capital cost, the time to production as projects generally take longer than planned to bring on stream and to ramp up to capacity, and the possibility of project failures. This means the timing of any new supply is highly uncertain. Exhibit 8 TZMI Ilmenite study forecast

Source: TZMI

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Market balance in favour of suppliers Titanium dioxide pigments are manufactured through two different processes: chloride and

It used to just be a given that if you build the TiO2 to capacity that the ore will always be there. And Im not saying that the ore will not be there. Im just saying that it may not be as plentiful as weve seen it in years past Peter R Huntsman, CEO, Huntsman, Feb 2011

sulphate. Chloride ilmenite has a higher titanium dioxide content, at above 57%, compared to sulphate ilmenite at 50% to 54%. Currently, Kenmares ilmenite production is about 60% sulphate ilmenite and 40% chloride ilmenite.

Demand growth for both chloride and sulphate ilmenite titanium feedstock, coupled with supply constraint, is expected to create a significant supply deficit over the next five years. Exhibit 9 shows TZMIs updated estimate of supply and demand for titanium feedstock for both chloride and sulphate titanium dioxide units up to 2016, including Kenmares current expansion. This shows a modest deficit of titanium feedstock from 2011 and, with no new supply, this deficit should increase to about 1.7m tonnes, or 28% of total demand by 2016. Ilmenite contains about 50% to 60% TiO2, hence a 1.7m tonne TiO2 shortfall translates into about 3 to 3.5 million tonnes of ilmenite.

Exhibit 9 Titanium feedstock supply and demand balance

Deficit about 28% of global supply by 2016

Source: Kenmare Resources

Although pricing for mineral sands is opaque, reported pricing trends clearly reflect the effects of this supply deficit.

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Zircon markets
Zircon is a co-product at the Moma Mine, accounting for about 35% of revenue. The largest consuming regions for zircon are Mediterranean Europe and Asia. China has a particularly large influence in this market. Recent years have seen a surge in Chinese demand for zircon, with the share of Chinese consumption rising from an estimated 35% of the global total in 2008 to an estimated 45% in 2010. Zircon is used mainly in ceramics. Urbanisation and rising per capita income in China and other emerging markets will drive demand growth in the medium term.

Like titanium feedstock, zircon supply will also be constrained over the short to medium term. South Africa and Australia produce more than 70% of the worlds zircon, with Australias Iluka Resources controlling more than a third of world supply. The closure of Ilukas Western Australia operation and the reduced output from South Africa have constrained supply growth over the last two years. Although new projects coming on stream in the near term will increase zircon supply, it will not be enough to meet the expected demand increase.

TZMIs demand and supply forecast for zircon (Exhibit 10) envisages a supply deficit of 500,000 tonnes per annum by 2020. Exhibit 10 Zircon demand and supply balance

Supply deficit

Source: Astron

Reported zircon prices have risen from $1,100 to $1,300 in the first quarter of 2011 to $1,400 to $1600 in the second quarter, almost double 2010 realised prices. With demand expected to grow due to urbanisation in developing economies and supply largely

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constrained for the same reasons as with titanium feedstock, zircon prices should continue to be strong, with prices greater than $2,000 per tonne by 2012 being forecast by market analysts. Our zircon price forecast for Kenmare reflects these estimates.

Tight markets to lead to significant price increases

Could we double our prices and get it? Yes, today it Aron Ain, CEO, Kronos, April 2011
Our price forecasts reflect this near to medium term demand and supply imbalance. We forecast Kenmares realised prices for products to rise significantly over the next few years. The demand drivers for mineral sands, being urbanisation and per capita GDP growth in China and other emerging markets, coupled with steady demand from the developing world, are unlikely to let up in the near to medium term. At the same time, supply will be constrained with no new major projects likely to come on stream.

we

could

just

double our prices and get

Exhibit 11 Ilmenite and Zircon price forecast

Prices ($) Ilmenite Zircon

2010 88 809

2011f 130 1,100

2012f 196 2,000

2013f 220 2,400

2014f 235 2,400

2015f 200 2,200

2016f 150 1,500

Spot* 240 3,200

Source: Merrion estimates

* Spot prices from press reports

Prices could be higher than forecast

Although we are forecasting significant price increases from current levels, we believe that our forecast prices could be conservative. TZMIs forecasts (Exhibits 8 and 10) suggest that the market the imbalance between supply and demand will only start modestly from 2012. However, prices have so far surprised on the upside and conditions are favourable for continued upside surprise: Demand drivers remain strong - As stated above, economic growth in developing countries is expected to be stable and hold up consumption. We expect a substantial increase in demand from emerging markets, especially China as per capita GDP increases and urbanisation continues. Demand should be price inelastic We expect the price of mineral sands to be price inelastic as there are no suitable substitutes for their applications and the cost constitutes a small part of the cost to the end consumer. For example, titanium feedstock represents about 2% to 4% of the price of a can of paint. We believe that even a doubling of the price is unlikely to lead to demand destruction as it can be easily passed on to the final consumer. Evidence from pigment manufacturers suggest higher prices - Comments from large pigment manufacturers suggest more of the value in the pigment chain is likely to go to miners. DuPont, Huntsman and Kronos have all recently commented on titanium feedstock pricing. They have been increasing pigment prices in anticipation of raw

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material price increases, with Kronos reporting a 32% year on year increase in prices in the first quarter of 2011. They have indicated that pricing will move towards shorter term contracts (see below) and closer to spot. They also expect prices increases to be gradual allow more time for customers to adjust to new pricing levels. Spot prices already higher than our peak forecasts - Current reported spot prices are already higher than our peak forecasts shown above. Prices for ilmenite are reported at $240 per tonne and at more than $3,000 per tonne for zircon. Historically, prices have been negotiated on long term contracts, typically running for one year or longer. However, as with other bulk commodities like iron ore and coal, the market is moving more frequent re-pricing, with contract prices moving closer to spot. This, as was also the case with other bulk commodities, will move more of the value in the chain to miners. For Kenmare, this is unlikely to have an effect for 2011 pricing as pricing has already been dtermined. However, 2012 pricing may be significantly higher.

Long term pricing

We forecast a reduction in long term prices of mineral sands prices from 2016 as we anticipate new projects will come on stream. To arrive at a long term price forecast, we have made the following assumptions: From Ilukas cost comparison for mineral sands producers (Exhibit 10), the average revenue to cash operating ratio in the industry is about 1.3. A new operation is assumed to have this ratio. Ilmenite to zircon ratio of 0.2 (Kenmares ratio is much lower at under 0.1), and 5% THM in ore. Capital intensity of $25.00 per annual tonne. A 25 year life of mine. Assuming a 20% IRR is required to obtain project approval, we estimate that the required long term prices to induce new investment would be $185 for ilmenite and $1,800 for zircon. However, due to the small size of the mineral sands markets (currently 6mt for TiO2 and 1.2mt for Zircon), a new start-up could have a significant influence on the market. We have therefore applied a discount to these prices and set our long term price for ilmenite at $150 and $1,500 for zircon.

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A new entrant with significant comparative advantages

Kenmare is a relatively new entrant to mineral sands mining. In spite of this status, we believe that it has comparative advantages to its peers that will make it a significant and efficient mineral sands mining operation. These stem from the size of Kenmares resources, its lower than average cash operating costs and a favourable tax regime in Mozambique.

Resource size Kenmares total reserves and resources are approximately 218 million tonnes of ilmenite, 14 million tonnes of zircon and 4.6 million tonnes of rutile. With exploration and drilling continuing, the resource is yet to be fully defined and we expect that it will continue to expand. At current production rates, the life of mine is well in excess of 100 years.

The size of resource compares favourably with the other large mineral sands producers. Exhibit 12- Comparison of resources
Mineral reserves and resources Reserves Kenmare Exxaro Iluka
Source: Company reports

Mt Ilmenite 220 102 62

Mt Zircon 14 6 16

Mt Rutile 5 8

With current tight mineral sands supply and favourable pricing momentum, Kenmares extensive resource gives it the flexibility to significantly increase production to become a large and significant mineral sands producer.

Competitive operating costs Iluka Resources published an industry wide comparison of cost competitiveness, based on the ratio of revenue to cash operating costs (Exhibit 13) for the period 2011 to 2013.

Kenmare will be one of the lowest cost producers in the industry.

As Exhibit 13 shows, Iluka is targeting a revenue to cash ratio of 1.8x for 2011 to 2013 vs 1.3x for 2006 to 2008. In comparison, we forecast that Kenmare will be more efficient with a revenue to cash cost ratio at full production, post expansion to 1.2 million tonnes per year ilmenite, of about 3 times, making it one of the most cost competitive players in the industry.

The reason for Kenmares lower costs include: Nature of its ore The nature of Kenmares ore resource makes it amenable to the low cost dredge mining method. Efficient materials handling All of Kenmares operations are located within a 2 mile radius, including the on sea terminal where ore is exported. There are no long distance haulage costs.

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Exhibit 13 Industry competitiveness - revenue to cash cost ratios

Source: Iluka Resources

No additional beneficiation costs Unlike other titanium producers, Kenmare does not have a further beneficiation stage (smelting) post concentration, due to the higher grades of its ilmenite concentrate (51% to 60% compared to less than 50% for some producers). Smelting introduces additional operational complications as well as substantial power costs. Cheaper labour and power costs The company has negotiated power costs of 2.5c per kWh for the first phase of production and we expect it to be 5c per kWh for the expansion, significantly lower than levels prevailing in South Africa and Australia, the other large producers. (As a comparison, South Africas electricity cost is about 11c per KWh). Labour costs are also lower compared to other major producers.

Favourable tax regime For tax purposes in Mozambique, Kenmare has structured its operations into two operating companies, mining and processing. The mining company sells its product (contained heavy minerals) at cost plus mark-up to the processing company. The mark-up is set at a floor of 15% and is adjusted by the

Kenmares effective tax rate will be less than 10% of pre-tax profit for the foreseeable future

extent to which the increase in product prices exceed inflation. The current mark-up is 23%. The mining company also incurs much of the capital cost and is able to write this off on an accelerated basis in the year incurred. It is then taxed at a rate of 32%. According to our estimates, given the level of capital expenditure to date, the mining company is not expected to pay tax in the medium term. However, it is subject to a 3% royalty tax on revenues. The processing company, which sells the final product, is located in a tax free zone and is not subject to income tax. However, it will also pay a 1% royalty on revenues from mid 2013.

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The net effect is that, in spite of its good operating margins, Kenmares tax burden will be less than 10% of pre-tax profit for the foreseeable future.

Aggressive expansion
Kenmares comparative advantages and prevailing market conditions provide it with a window of opportunity to expand production and become a significant player in mineral sands. A 50% expansion to 1.2 million tonnes ilmenite capacity per year is already underway, even though the mine is yet to fully reach its original design capacity of 800,000 tonnes. Post expansion, Kenmare will have a more than 10% share of the titanium dioxide feedstock market, making it one of the top four producers.

A further expansion of production capacity beyond 1.2 million tonnes per year is already being considered. A pre-feasibility study is underway and will be completed by the end of 2011, with a full feasibility study to follow.

We anticipate Kenmare adding an additional 800,000 tonnes per year capacity the end of 2015.

We expect a positive conclusion from the pre feasibility study given that: The market outlook is favourable with forecasts indicating a supply shortfall of 1.7 million tonnes titanium dioxide units by 2016 (Exhibit6); Kenmare is in a unique position to take advantage of this supply shortfall as it has the resources and, being one of the most cost competitive in the industry, will be most efficient in adding capacity. With strong cash flows expected from its operations, Kenmare will have the financial ability to carry out the expansion from its own cash resources and short term project financing. We believe that management will be aggressive in taking advantage of this window of opportunity and add an additional 800,000 tonnes per year ilmenite capacity, the same as Kenmares current operation. Post this further expansion, production capacity would increase to 2.0 million tonnes per year, making Kenmare the worlds second largest titanium dioxide feedstock producer. The additional production will add supply of just over 400,000 titanium dioxide units and, as industry forecasts suggest (Exhibit 7), this incremental production will not be sufficient to fill the expected supply deficit.

An extra 800,000 tonnes per year ilmenite capacity expansion will entail the construction of a new dredge mine and wet concentrator plant (WCP) at the Nataka deposit, Kenmares largest, and the construction of a new mineral separation plant. As the ore grades at the Nataka deposit are slightly lower, we anticipate that there may be a need for ilmenite upgrade to meet customer requirements. As a result, we have factored in higher unit operating costs that the current operation. We estimate the capital cost of new capacity to be about $600 million and the project to be completed by end of 2015.

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Strong earnings momentum and financial position

The effect of production ramp up, expansion and rising prices should lead to a rapid and significant increase in earnings over the next three years. We forecast diluted earnings growth from 1.0USc per share in 2011 to 14.1USc per share in 2014, a CAGR of 240%.

Earnings momentum will also lead to significant cash flow for Kenmare. Net debt, expected to increase to $260m at the end of 2011, should decrease significantly and, excluding any additional capacity expansion, there should be no net debt by the end of 2013. Our forecasts suggest that Kenmares cash flow generation, with some reliance on short term debt, should be enough to fund further production expansion.

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Valuation and financing

NPV Valuation
We value Kenmare on a NPV based on two scenarios: 1. Assuming no additional expansion once the current 50% expansion to 1.2 million tonnes per year ilmenite is complete. 2. Assuming an additional 800,000 tonnes per year ilmenite capacity expansion to 2 million tonnes per year in total. We believe this is the most likely outcome, as Kenmare has the resources whilst the market and operating dynamics are supportive. To arrive at our NPV valuation, we have made the following assumptions: Increases in titanium feedstock and zircon prices over the next three years and for these prices to ease off as new supply comes on stream. Appendix 1 shows our price forecasts. We have assumed completion of Kenmares expansion programme by the first quarter of 2012, with ramp up to 1.2 m tonnes per year ilmenite capacity at the end of 2012. Any further expansion to 2 million tonnes per year capacity will be at a capital cost of $600m and will be completed by the end of 2015. Assuming no further expansion and at a 10% real discount rate, our NPV valuation is 91USc per share or 56p at an exchange rate of USD1.61 per GBP. With further expansion to capacity of 2 million tonnes of ilmenite per year, our NPV is 111USc (69p) per share.

Target price We set our target price at 101USC (63p) being the average of the two valuation methods above.

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Sensitivity Shown below is the sensitivity of our NPV valuation. As is clear from the chart, the NPV is very sensitive to changes in the prices of products.

Exhibit 14 NPV sensitivity

% Change in NPV 20.0% 15.0% 10.0% % Change in Price 5.0% 0.0% -5% 0.0% -5.0% -10.0% -15.0% -20.0% 5% 10%

Product prices Capex Opex

-10%

Comparative valuation We show below the comparative metrics between Kenmare and Iluka, its closest peer. Ilukas estimates are based on Bloomberg consensus figures. Exhibit 15 Kenmare comparison with Iliuka
Company Iluka Kenmare Price (US$) 15.30 0.71 Market cap (US$) 6,435 1,670 2012 PE Ratio 10.2* 10.3
* Bloomberg consensus

2012 Adjusted PE Ratio 10.2* 5.9**

2012 EV/EBITDA 6.75* 9.57

2012 Adjusted EV/EBITDA 6.75* 5.46**

P/NPV 0.9 0.8

Source: Bloomberg and Merrion estimates

** Adjusted to take into account Kenmares expansion to 1.2mtpa ilmenite

Kenmare compares favourably, trading at a discount to Iluka, even though it has a superior near term earnings growth profile.

Valuation risks
Mineral sands prices We have assumed tight markets for mineral sands and significantly rising prices over the short to medium term. However, pricing for mineral sands is opaque as prices are usually determined through confidential forward sales contracts and are, therefore, hard to forecast. Though we do not envisage any significant new mineral sands supply

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sources, prices may be affected by significant previously unforeseen supply coming on stream. Production rates We have assumed certain rates of production for Kenmares existing and expansion projects. As with Kenmares experience at the start up of the Moma Mine, production ramp to design capacity can take longer. Mineral grades and recoveries may also be different to forecast. As a result, the rate of production may be different to forecast. Regulatory changes Mozambique is a largely stable democracy and policy changes are not anticipated. However, potential changes to tax legislation and other commercial terms in Mozambique may affect future cash flows and hence valuations.

Financing
Kenmare raised $257m net through a share placement in 2010 and had cash resources of $238m as at 31 December 2010. We forecast strong operating cash flows over the next three years as production is ramped up and mineral sands prices rise. We detail below Kenmares cash flow and cash requirement over the next four years.

We believe that Kenmare will have sufficient cash flows to fund further expansion from its own cash resources.

Exhibit 16 Kenmare cashflow and cash requirement 2011f 67 (200) (133) (102) (25) (260) 2012f 199 (35) 168 (260) (22) (118) 2013f 322 (25) 297 (118) (18) 160 2014f 385 (10) 375 160 (15) 520

Cash from operations Capex Free cash flow Opening bal net cash/(debt) Debt servicing Closing bal net cash/(debt)
Source: Merrion estimates

We have factored in $600m further capacity expansion to 2 million tonnes per year ilmenite. Actual outlay is unlikely to commence until late 2013 to 2014. At that stage, our forecasts suggest Kenmare will have the resources to fund this additional expansion from its own cash resources or short term project debt, without having to raise further capital.

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Company Overview
Introduction
Kenmare Resources is a mining company with a primary listing on the London Stock Exchange and a secondary listing on the Irish Stock Exchange. It owns 100% of its sole operating asset, the Moma Titanium Minerals Mine in Mozambique. The mine produces the mineral ilmenite as its primary product, with zircon and rutile as co products. Exhibit 17 Moma Mine and mineral resources location

Source: Kenmare Resources

llmenite and rutile are titanium bearing minerals, with ilmenite containing between 45% and 62% of TiO2 and rutile between 94% and 96%. Titanium based minerals are mainly used as feedstock in the production of titanium dioxide (TiO2) pigment, accounting for about 90% of consumption. The pigment is, in turn, used in the manufacture of paints and other coatings, plastics and paper, as well as a number of other applications, including cosmetics, food additives, ceramics, inks and textiles. The production of titanium metal and welding electrodes are other and growing important uses.

Titanium feedstock production is highly concentrated, with a few players making up the bulk of production. Rio Tinto, Iluka and Exxaro control more than 50% of the world market (2009) (Exhibit3). Following its 50% ilmenite expansion programme currently under way, Kenmare will account for approximately 11% of world production.

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Zircon is a hard, glassy mineral used for the manufacture of ceramics and refractories and also in a range of other high-tech industrial and chemical applications. It is used for ceramic glazes, most commonly applied in kitchen tiles, dinner-ware, bathroom products and decorative ceramics. It is also used as refractory material and in foundry sands and in the chemicals industry.

Reserves and resources

Kenmares mineral resource is extensive and is spread over a series of dunes in northern Mozambique (Exhibit 15), the main deposits being Namalope, where mining is currently taking place, and Nataka, a much larger resource and the long term future of the mine. Exhibit 18 shows the mines estimated resources as at 31 December 2010. The total mine reserve and resource was approximately 208 million tonnes of ilmenite, 14 million tonnes of zircon and 4.6 million tonnes of rutile. The company believes that the resource will continue to expand and become more fully defined with ongoing exploration and drilling activity. At the current planned rate of mining and taking into account the planned 50% expansion in 2013, the life of mine is well in excess of 100 years.

Exhibit 18 Kenmare Reserves and Resources

% ilmenite in THM 81 82 84 82 81 82 77 80 80 80 80 80 80 82 82 % ilmenite in ore 3.9 3 2.7 3 2.6 2.3 2.5 4.3 2.6 2.9 3.3 2.8 2.7 2.4 2.5 Million tonnes THM 9.5 10 14 34 10 160 5.4 12 10 10 2.2 2.5 2.4 220 254 Million tonnes ilmenite 7.7 8.4 12 28 8.5 130 4.2 9.8 8.4 8.3 1.8 2 1.9 180 218 Million tonnes rutile 0.19 0.19 0.21 0.59 0.2 2.7 0.1 0.3 0.2 0.2 0.1 0.1 0.1 4.0 4.59 Million tonnes zircon 0.58 0.61 0.73 1.9 0.62 8.6 0.4 0.8 0.7 0.7 0.1 0.2 0.2 12 13.9

Zones Reserves Namalope Namalope Nataka Total reserves Resources Namalope Nataka Congolone Pilivili Mualadi Mpitini Marrua Quinga North Quinga South Total resources

Category

Mt 200 280 445 925

% THM 4.7 3.7 3.2 3.7 3.3 2.8 3.3 5.4 3.2 3.6 4.1 3.5 3.4 2.9 3.0

Proved Probable Probable

Indicated Inferred Measured Inferred Inferred Inferred Inferred Inferred Inferred

320 5,800 167 227 327 287 54 71 71 7,400

Total reserves and resources 8,325 Source: Kenmare Resources THM = Total Heavy Minerals

Besides the mineral sands shown above, Kenmare has identified the presence of rare earth elements in the tailings of the Mineral Separation Plant (MSP). A study has commenced investigating how best to separate and recover monazite from the reject stream. As monazite

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is part of the heavy minerals, its content is accurately known (Exhibit 17). We have not included any Monazite recovery in our forecasts. However, it represents potential upside should it prove economical. Exhibit 19 Monazite reserves and resources
% Ore Zones Reserves Namalope Namalope Nataka TOTAL RESERVES Source: Kenmare Resources Proved Probable Probable Proved & Probable 200 280 445 925 4.7 3.7 3.2 3.7 0.59 0.57 0.54 0.57 0.056 0.059 0.078 0.190 Category (Mt) % THM Monazite in THM Monazite (Mt)

Basic production process

The mining method is dredge mining in artificial ponds. The dredges cut the ore at the base of the ore face, allowing the mineral bearing sands to collapse into an artificial freshwater dredge. The mineral-bearing sands are pumped by the dredges to a wet concentrator plant (WCP) which separates the heavy minerals (HMC) from the silica sand and clays (tailings). The HMC contains the valuable mineral sands, and is about 5% by weight of mined material. This is pumped to the mineral separation plant (MSP) which separates the three valuable minerals in several stages and produces further waste material or tailings.

The mine has a design capacity to produce 800,000 tonnes of ilmenite, 50,000 tonnes per annum zircon and 14,000 tonnes per annum. When the mine came on stream in 2007, it initially faced production issues and it took longer than expected to ramp up production to design capacity. These issues have largely been resolved and design production capacity is expected to be achieved in 2011 to 2012. Exhibits 18 and 19 show Kenmares historical ilmenite and zircon production since 2008

Exhibit 20 Ilmenite production profile

Exhibit 21 Zircon production profile

25,000 400,000 20,000 15,000 10,000 5,000 0 1H08 2H 08 1H 09 2H 09 1H 10 2H 10

Source: Kenmare Resources

300,000 200,000 100,000 0 1H08 2H 08 1H 09 2H 09 1H 10 2H 10

Source: Kenmare Resources

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Production expansion
To take advantage its of resources and the current market conditions, Kenmare is currently undergoing an expansion programme to increase ilmenite production by 50%. It is envisaged that, at the end of the expansion, the Moma mine will be producing 1.2m tonnes of ilmenite, 80,000 tonnes of zircon and 22,000 tonnes of rutile per annum. The main elements of the expansion are: An upgrade of the capacity of the existing two dredges and WCP to increase spiral feed capacity from 3,000 tph to 3,500 tph; The installation of a second WCP with a spiral feed capacity of 2,000 tph in a separate dredge pond, utilising a new third dredge on the Namalope reserve; The addition of a Wet High Intensity Magnetic Separation (WHIMS) circuit at the front of the ilmenite circuit of the MSP. WHIMS technology is commonplace within the mineral sands industry and will be used to separate magnetic and non-magnetic fractions within the HMC whilst in a wet state. This will replace the dry primary separation stage and its associated costs; The existing MSP will require some modifications, including an auxiliary 80tph ilmenite circuit, to increase throughput capacity from 135 tph to 220 tph; An upgrade of the product storage facilities to increase capacity of final products from 140,000 tonnes to 220,000 tonnes.

Further expansion being investigated Given the likely market deficit over the medium term, the company intends to take advantage of its resource flexibility by planning a further expansion. A pre feasibility study is underway and is expected to be completed by the end of 2011. If successful, a full feasibility study will be commissioned.

Management
Kenmare has experienced and qualified management in key positions. Listed below is a brief resume of the companys key personnel.

Michael Carvill CEO Michael Carvill holds a BSc in Mechanical Engineering and an MBA (Wharton School, University of Pennsylvania). He worked as a contracts engineer in Algeria and as a project engineer at Tara Mines, Ireland. He has been the Managing Director of Kenmare since 1986.

Jacob Deysel, Chief Operations Director Jacob Deysel was appointed Chief Operations Officer in February 2009 and was co-opted to the Board in June 2009. He joined Kenmare from Richards Bay Minerals, the worlds largest single producer of titanium dioxide feedstocks (part of the Rio Tinto Group). He holds a BSc

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in Mine Engineering and a Masters in Business Administration, both from the University of Witwatersrand in South Africa. He has worked in the titanium dioxide feedstock industry since 2003. Previously, he worked with Gold Fields Limited at Driefontein Mine where he was Operations Manager for the West Complex consisting of seven operating shafts. At Richards Bay Minerals, he has had responsibility for the mines five plants in addition to geology, mine planning and maintenance.

Terence Fitzpatrick, Technical Director Terence Fitzpatrick is a graduate of University of Ulster (Mech. Eng.). He worked as Project Manager and then Technical Director of Kenmare from 1990 to 1999. He was responsible for the development of the Ancuabe Graphite Mine in Mozambique, which achieved completion on schedule and budget in 1994. He was appointed to the Board of Kenmare in 1994. He served as a Non-Executive Director from 2000 to 2008. He was appointed as Technical Director in February 2009.

Tony McCluskey, Financial Director Tony McCluskey has worked with Kenmare since 1991. He was originally appointed as Company Secretary and Financial Controller, before becoming Finance Director in 1999. He holds a Bachelor of Commerce degree from University College Cork and is a Fellow of the Institute of Chartered Accountants. Before joining Kenmare, he worked for a number of years with Deloitte & Touche as a senior manager in Dublin and also worked overseas.

Riaan Lombard, General manager, Moma Mine Riaan Lombard has over 15 years experience in the mining industry. He was previously Mining Manager at AngloGold Ashantis mine in Mali where he was responsible for the mining operations of both the Sadiola and Yatela gold mines. He was General Manager of Weatherly Mining in Namibia and he also worked in various senior roles with De Beers at their Namdeb mine in Namibia. Riaan was appointed as General Manager of the Moma Mine in June 2010.

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Financial Forecasts
Assumptions Prices
Ilmenite Zircon

2009

2010
87.5 809

2011f
135 1100 700 40

2012f
196 2000 850 60

2013f
220 2400 1050 65

2014f
235 2400 1150 68

2015f
200 2200 1200 80

Production
Ilmenite Zircon 472 22 678 37

INCOME STATEMENT
Revenue YoY increase Operating profits EBITDA EBITDA Margin % Depreciation Net Finance costs Other Profit before tax Taxation/Royalties Net Profit Shares in issue (diluted) EPS USc (diluted)

2009
$'000 26,721 (13,050) 6,347 23.8% (18,458) (15,331) (2,910) (30,352) 0 -30,352 0 0.045

2010
$'000 91,587 242.8% (59,071) 20,883 22.8% (18,670) (29,502) 10,955 (16,334) 0 -16,334 2,403.9 -0.68

2011f
$'000 143,601 56.8% (63,219) 71,793 50.0% (20,537) (25,085) 0 26,171 (2,181) 23,990 2,403.9 1.00

2012f
$'000 296,060 106.2% (63,800) 212,257 71.7% (25,671) (21,839) 0 164,747 (2,201) 162,546 2,403.9 6.76

2013f
$'000 438,590 48.1% (77,400) 330,966 75.5% (32,089) (18,460) 0 280,417 (7,056) 273,361 2,403.9 11.37

2014f
$'000 515,253 17.5% (84,200) 395,314 76.7% (32,089) (15,242) 0 347,983 (8,057) 339,925 2,403.9 14.14

2015f
$'000 489,040 -5.1% (104,600) 351,371 71.8% (32,089) (12,025) 0 307,257 (8,499) 298,758 2,403.9 12.43

BALANCE SHEET Fixed Assets Current assets

Inventories Trade and other receivables Cash and cash equivalents

2009
540,924 21,951 13,311 17,408 52,670 593,594 237,817 (57,501) 41,795 222,111

2010
552,786 24,618 12,974 238,515 276,107 828,893 495,690 (43,694) 14,103 466,099

2011f
732,249 27,080 14,271 53,804 95,155 827,404 495,690 (19,704) 14,103 490,089

2012f
741,578 35,204 18,553 154,874 208,630 950,208 495,690 142,842 14,103 652,635

2013f
1,134,489 36,964 19,480 (8,720) 47,724 1,182,213 495,690 416,203 14,103 925,996

2014f
1,312,400 38,812 20,454 111,175 170,442 1,482,841 495,690 756,128 14,103 1,265,921

2015f
1,290,311 40,753 26,591 323,974 391,318 1,681,628 495,690 995,135 14,103 1,504,928

Total assets Equity

Share capital and premium Retained losses Other reserves

Total equity Liabilities

Non-current liabilities Bank loans Provisions Current liabilities Provisions Trade and other payables

358,381 4,347 303,845 650 8,105 8,755 371,483 593,594

340,560 6,750 261,579 279 15,205 15,484 362,794 828,893

313,560 6,750 320,310 279 16,726 17,005 337,315 827,404

272,982 6,750 279,732 279 17,562 17,841 297,573 950,208

230,748 6,750 237,498 279 18,440 18,719 256,217 1,182,213

190,529 6,750 197,279 279 19,362 19,641 216,920 1,482,841

150,310 6,750 157,060 279 19,362 19,641 176,701 1,681,628

Total liabilities Total equity and liabilities

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Cashflow statement
Profit For the Year Adjusment for: Foreign exchange movement Share based payments Finance costs Depreciation Increase in provisions Operating cash flow Working capital Cash used by operations Net cash used in operating activities

2009
(30,352) 2,910 796 15,533 12,871 739 2,295 (8,551) (6,256) (17,920) 0 (40,197) 0 (40,197) 0 19,582 0 (336) 15,890 (11,866) (286) 34,850 (23,267) 40,536 139 17,408 (340,973)

2010
(16,334) (16,691) 2,374 29,852 20,955 3,911 22,545 4,503 27,048 28,570 0 (34,790) 0 (34,790) 0 257,873 0 (26,962) 0 (10,191) 0 220,720 214,500 17,408 6,607 238,515 (102,045)

2011f
23,990 0 0 25,085 20,537 0 69,612 (2,239) 67,373 67,373 0 (200,000) 0 (200,000) 0 0 0 (27,000) 0 (25,085) 0 (52,085) (184,711) 238,515 0 53,804 (259,756)

2012f
162,546 0 0 21,839 25,671 0 210,056 (11,569) 198,486 198,486 0 (35,000) 0 (35,000) 0 0 0 (40,578) 0 (21,839) 0 (62,417) 101,070 53,804 0 154,874 (118,108)

2013f
273,361 0 0 18,460 32,089 0 323,910 (1,810) 322,100 322,100 0 (25,000) 0 (25,000) 0 0 0 (42,234) 0 (18,460) 0 (60,694) 236,406 154,874 0 391,280 160,532

2014f
339,925 0 0 15,242 32,089 0 387,257 (1,900) 385,357 385,357 0 (10,000) 0 (10,000) 0 0 0 (40,219) 0 (15,242) 0 (55,461) 319,895 391,280 0 711,175 520,646

2015f
315,758 0 0 12,025 32,089 0 359,872 (8,077) 351,795 351,795 0 (10,000) 0 (10,000) 0 0 0 (40,219) 0 (12,025) 0 (115,395) 226,399 711,175 0 937,574 787,264

Investing cashflows
Capital expenditure Further expansion Net cash used in investing activities

Financing cashflows
Proceeds on the issue of shares Dividends paid Repayment of borrowings Increase in borrowings Interest paid Finance leases Net cash from financing activities Net decrease in cash Cash at the beginning of the year Effect of exchange rate changes Cash at the end of the year Net cash/(debt)

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Disclosures
Merrion Stockbrokers Limited ('Merrion') is a member firm of the Irish Stock Exchange and the London Stock Exchange and is regulated by the Central Bank of Ireland.
For further information relating to research recommendations and conflict of interest management please refer to www.merrion-capital.com. The information contained in this publication was obtained from various sources believed to be reliable, but has not been independently verified by Merrion. Merrion does not warrant the completeness or accuracy of such information and does not accept any liability with respect to the accuracy or completeness of such information, except to the extent required by applicable law. This publication is a brief summary and does not purport to contain all available information on the subjects covered. Further information may be available on request. This report may not be reproduced for further publication unless the source is quoted. This publication is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any securities, or as an invitation, inducement or intermediation for the sale, subscription or purchase of any securities, or for engaging in any other transaction. Any opinions, projections, forecasts or estimates in this report are those of the author only, who has acted with a high degree of expertise. They reflect only the current views of the author at the date of this report and are subject to change without notice. Merrion has no obligation to update, modify or amend this publication or to otherwise notify a reader or recipient of this publication in the event that any matter, opinion, projection, forecast or estimate contained herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. The analysis, opinions, projections, forecasts and estimates expressed in this report were in no way affected or influenced by the issuer. The author of this publication benefits financially from the overall success of Merrion. The investments referred to in this publication may not be suitable for all recipients. Recipients are urged to base their investment decisions upon their own appropriate investigations that they deem necessary. Any loss or other consequence arising from the use of the material contained in this publication shall be the sole and exclusive responsibility of the investor and Merrion accepts no liability for any such loss or consequence. In the event of any doubt about any investment, recipients should contact their own investment, legal and/or tax advisers to seek advice regarding the appropriateness of investing. Some of the investments mentioned in this publication may not be readily liquid investments. Consequently it may be difficult to sell or realize such investments. The past is not necessarily a guide to future performance of an investment. The value of investments and the income derived from them may fall as well as rise and investors may not get back the amount invested. Some investments discussed in this publication may have a high level of volatility. High volatility investments may experience sudden and large falls in their value which may cause losses. International investing includes risks related to political and economic uncertainties of foreign countries, as well as currency risk. To the extent permitted by applicable law, no liability whatsoever is accepted for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this publication or its contents.

Merrion has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research business. United States: This report is only distributed in the US to major institutional investors as defined by S15a-6 of the Securities Exchange Act, 1934 as amended. By accepting this report, a US recipient warrants that it is a major
institutional investor as defined and shall not distribute or provide this report or any part thereof, to any other person.

Further details are available on our website http://www.merrion-capital.com/disclaimer.html and/or by contacting our Compliance Officer. Other countries: Laws and regulations of other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly

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Legal information
The information contained in this publication was obtained from various sources believed to be reliable, but has not been independently verified by Merrion. Merrion does not warrant the completeness or accuracy of such information and does not accept any liability with respect to the accuracy or completeness of such information, except to the extent required by applicable law. This publication is a brief summary and does not purport to contain all available information on the subjects covered. Further information may be available on request. This report may not be reproduced for further publication unless the source is quoted. This publication is for information purposes only and shall not be construed as an offer or solicitation for the subscription or purchase or sale of any securities, or as an invitation, inducement or intermediation for the sale, subscription or purchase of any securities, or for engaging in any other transaction. Any opinions, projections, forecasts or estimates in this report are those of the author only, who has acted with a high degree of expertise. They reflect only the current views of the author at the date of this report and are subject to change without notice. Merrion has no obligation to update, modify or amend this publication or to otherwise notify a reader or recipient of this publication in the event that any matter, opinion, projection, forecast or estimate contained herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. The analysis, opinions, projections, forecasts and estimates expressed in this report were in no way affected or influenced by the issuer. The author of this publication benefits financially from the overall success of Merrion. The investments referred to in this publication may not be suitable for all recipients. Recipients are urged to base their investment decisions upon their own appropriate investigations that they deem necessary. Any loss or other consequence arising from the use of the material contained in this publication shall be the sole and exclusive responsibility of the investor and Merrion accepts no liability for any such loss or consequence. In the event of any doubt about any investment, recipients should contact their own investment, legal and/or tax advisers to seek advice regarding the appropriateness of investing. Some of the investments mentioned in this publication may not be readily liquid investments. Consequently it may be difficult to sell or realize such investments. The past is not necessarily a guide to future performance of an investment. The value of investments and the income derived from them may fall as well as rise and investors may not get back the amount invested. Some investments discussed in this publication may have a high level of volatility. High volatility investments may experience sudden and large falls in their value which may cause losses. International investing includes risks related to political and economic uncertainties of foreign countries, as well as currency risk. To the extent permitted by applicable law, no liability whatsoever is accepted for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this publication or its contents.

Merrion has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research business. Merrions research analysts and other staff involved in issuing and disseminating research reports operate independently to other areas of the business. Chinese Wall procedures are in place between the research analysts and staff involved in securities trading for the account of Merrion or clients to ensure that price sensitive information is handled according to applicable laws and regulations. United States: This report is only distributed in the US to major institutional investors as defined by S15a-6 of the Securities Exchange Act, 1934 as amended. By accepting this report, a US recipient warrants that it is a
major institutional investor as defined and shall not distribute or provide this report or any part thereof, to any other person.

Other countries: Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly. Further details are available on our website http://www.merrion-capital.com/disclaimer.html and/or by contacting our Compliance Officer. Other countries: Laws and regulations of other countries may also restrict the distribution of this report. Persons in possession of this document should inform themselves about possible legal restrictions and observe them accordingly

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