Kenmare MD Michael Carvill
Titanium and zircon producer Kenmare Resources has confirmed in a July 17 trading update for the quarter and half-year ended June 30, that it is on track to achieve its full-year guidance on all stated metrics.
Kenmare operates the Moma titanium minerals mine in northern Mozambique.
“Higher ore grades in the second half are expected to support stronger production and shipments are also expected to rise. Demand for all of our products remains robust and ilmenite prices in the first half were above our expectations, bolstered by increasing global pigment production,” Kenmare MD Michael Carvill pointed out.
He said the company had ended the period with $58.5-million cash, having paid $34.4-million in dividends and repaid all debt.
“The company is well capitalised to fund the upgrade and transition of wet concentrator plant (WCP) A and to continue making shareholder returns,” Carvill said.
Kenmare reported a rolling 12-month lost-time injury frequency rate (LTIFR) of 0.09 per 200 000 hours worked to June 30, a significant improvement from 0.18 in the prior 12-month period.
The company produced 342 600 t of heavy mineral concentrate (HMC) in the second quarter, a 7% increase year-on-year, driven by an 8% increase in excavated ore volumes and higher heavy mineral recoveries, which offset a 5% decrease in ore grade.
Ilmenite production rose by 8% year-on-year to 238 600 t, supported by a 6% increase in HMC processed and greater ilmenite content in the HMC. Primary zircon production increased by 12% year-on-year to 13 000 t, benefiting from increased HMC processed, intermediate stock drawdown and higher recoveries.
Total shipments of finished products amounted to 234 700 t, down 18% year-on-year owing to poor weather conditions and additional operational maintenance, which limited shipping time.
The company experienced encouraging market conditions in the second quarter, with strong demand for ilmenite and a robust order book for the third quarter. At the end of the first half, Kenmare's net cash increased by $36.4-million to $57.1-million, compared with $20.7-million on December 31, 2023.
Kenmare confirmed that Carvill would step down from his executive role and board position on August 14. The process to find his successor is approaching its conclusion, with an update expected ahead of the interim results being published.
The company reported a fatality at the Moma mine on June 1, involving an excavator operator employed by one of its contractors. Investigations revealed the incident was related to activities outside the ordinary course of operations, and Kenmare said it was cooperating with authorities.
Finished product output increased by 8% in the second quarter compared to the previous year, mainly owing to a 6% rise in HMC processed. Rutile production increased by 32%, supported by intermediate stock drawdown and higher recoveries. Concentrates production grew by 13% to 11 700 t.
Additional maintenance on the product transfer conveyor system, now fully equipped for increased loadout rates, was required during the quarter. Shipments comprised 216 200 t of ilmenite, 8 200 t of primary zircon, and 10 400 t of concentrates.
Closing stock of HMC at the end of the second quarter was 24 600 t, compared with 25 300 t at the end of the first quarter. Closing stock of finished products was 273 000 t, compared with 241 800 t at the end of the first quarter, reflecting production exceeding shipments during the quarter.
Kenmare expects stock levels to remain higher than usual in the second half of the year before normalising in the first half of 2025.
Kenmare’s board approved the final part of the definitive feasibility study (DFS) for the WCP A upgrade and transition to the Nataka orezone, securing production from Moma for decades. The total capital costs for the project remain in line with previous estimates, at $341-million.
Detailed engineering and scheduling work has deferred $38-million of expected capital expenditure from this year into subsequent years. Work is progressing well for the upgrade, including the fabrication of new dredges and the upfront desliming circuit, with the detailed design of the tailings storage facility (TSF) on track for completion in the third quarter.
Kenmare is also working on the DFS for the WCP B upgrade, which is expected to increase WCP B’s capacity by over 40%, and the prefeasibility study for the Congolone orezone, a potential future growth opportunity.
Kenmare experienced robust demand for all its products in the second quarter, particularly for ilmenite. Spot prices for ilmenite remained stable throughout the first half, although the average received price decreased slightly in the second quarter compared to the first quarter owing to some shipments rolling over from the fourth quarter of 2023. Prices in the first half were above the company’s expectations.
Chinese pigment producers continued to produce at record levels and demand for Kenmare’s ilmenite was bolstered by increased operating rates among pigment producers in Europe and the US.
Global supply of titanium feedstocks remains sufficient to meet demand, with new supply from Chinese producers in African countries shipping concentrates to China for processing. However, this was partially offset by the suspension of operations in Sierra Leone and continued mineral resource depletion in Kenya.
In the medium to long term, Kenmare expects supply constraints to lead to global demand exceeding supply, supporting the fundamentals for all of the company’s products.
The zircon market remains relatively stable. Demand for zircon sand improved in Europe in the second quarter, particularly from the ceramics industry. In China, the market softened following the improvement in late the first quarter. However, Kenmare continues to experience robust demand for its concentrates in China owing to the quality of the contained products.
Kenmare has a strong order book for the third quarter as the company’s customers restock their titanium feedstock inventories, following Kenmare’s disrupted shipping performance in the second quarter. Zircon shipments delayed from the second quarter will also be shipped in the third quarter, with consequent positive impact on the second-half product mix and revenues.
On May 17, Kenmare paid its 2023 final dividend of $0.3854c a share. This was the balancing payment of a 2023 full-year dividend of $0.5604c a share, representing a dividend payout ratio of 38% of profit after tax in 2022, which was 25%.
Following the 2023 final dividend distribution of $34.4-million and principal debt repayments relating to the previous term loan facility of $47.1-million during the first half, cash and cash equivalents were $58.5-million at June 30. At December 31, 2023, cash and cash equivalents were $71-million. Kenmare had no debt at the end of the first half.
At December 31, 2023, debt was $50.3-million, and lease liabilities were $1.3-million. At December 31, 2023, lease liabilities were $1.5-million. As such, at June 30, Kenmare’s net cash had increased by $36.4-million to $57.1-million, compared with $20.7-million at December 31, 2023.