Like most people, I get sheaves of junk mail every day and the vast majority ends up in the bin. Some of the junk is cunningly mixed in with investing newspapers and magazines that I do subscribe to, and just occasionally something catches my eye.

That was exactly what happened in May. It was a solicitation for a share tip newsletter, and its teaser for subscription was the promise that it would tell you all about a supposedly tremendous mining company, based in west Africa.

The breathlessly-written copy let slip that the firm was planning to supply titanium dioxide, a pigment that is used in paints, paper and chemicals. If the newsletter was hoping to keep its tip a secret it had been a little too generous with information. There may be a thousand oil prospectors out there, but publicly-listed titanium dioxide ventures are rare. As much out of curiosity as anything I decided if I could work out which firm was being referred to.

It took just a few minutes searching on the internet to reveal that the firm in question was Kenmare Resources, a small company listed on London’s Alternative Investment Market. I hadn’t heard of Kenmare before. The advert’s mis-information, that the firm was based in west Africa didn’t fool me for a moment. Kenmare is based in the former Portuguese colony of Mozambique, an impoverished but stable east African country, but everything else about Kenmare fitted the description exactly. Indeed, at first glance it didn’t seem inspiring.

The firm is a one-project company, hasn’t yet produced an ounce of titanium dioxide and sported a silly historic price earnings ratio of 4,000, purely based on interest on its unspent cash resources. I certainly wasn’t going to part with a penny based on that.

However, after checking in mainstream publications, reading brokers reports and digging through the company’s website I discovered some plus points.

Most mining companies have only a geologist’s estimate for how much of the chosen mineral is lying underground. For gold and diamonds and much else, there can be a wide range of opinions which provides the speculative basis for many of these stocks. Kenmare was in a different position. Its rutile, ilmenite and zircon ore deposits are just lying there in sand dunes on the surface, waiting to be processed and shipped. This made for a predictible cost structure, with none of the anxiety about unforseen geological problems which bedevil many deep mines.

Conveniently, Mozambique is close to shipping lanes that serve the growing Indian and Chinese markets where the processed pigment would be used. Kenmare looked to be well placed as a low cost supplier, to earn gross margins of 70 per cent in a market which has been growing at a consistent 5 per cent a year. Though production isn’t due to start until September next year, 60 per cent of the first five year’s output has already been pre-sold.

The company had also shown its mettle in its financing. It raised $269m from eight banks in the largest single fund-raising by a small mining firm.

Encouragingly, given the poor reputation of some mining companies, the company developed social and enviromental plans right from the start to recognise its responsibilities within the host country. This included involving a Danish HIV/Aids charity in raising awareness about the disease. Though Kenmare is a tiny firm, it recruited the highly experienced former Anglo-American executive Chris Gilchrist as operations director.

Finally convinced, I bought shares in the company on May 16 at 24p. I have reaped a 30 per cent gain so far, but based on brokers’ forecasts, Kenmare still trades on around eight times 2008 forecasts. While there are still some execution risks or a sharp slowdown in Indian or Chinese economic growth, I still feel the company’s fundamentals are underpinned by its low cost ongoing structure. Once the major capital intensive infrastructure phase is over next year that will come into sharper relief and I expect the shares to make further progress.

I never did subscribe to that investment newsletter, though.

Nick Louth is an active private investor, writing about his own investments. He may have a financial interest in any of companies, securities and trading strategies mentioned.