Kenmare Resources sees brighter prospects for second half of 2023

Mining company Kenmare Resources said production had shown signs of picking up in the second half of 2023, following weaker production in the first six months of the year.

Kenmare, which produces titanium minerals and zircon and operates the Moma titanium minerals mine in northern Mozambique, said good product pricing and strong shipment volumes in the first half of the year drove record revenues.

“Production in early H2 2023 has been strong, supported by higher grades, better HMC [heavy mineral concentrate] recoveries and increased tonnes mined,” said Michael Carvill, Kenmare Resources managing director. “Production in H1 2023 was unfortunately lower than our expectations, primarily due to a severe lightning strike in Q1 and its lingering impact.”

Production of HMC was down 14 per cent to 633,900 tonnes, while total finished product production was 10 per cent lower at 472,600 tonnes. Total shipments were up 31 per cent to 556,800 tonnes.

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Earnings before interest, tax, depreciation and amortisation (ebitda) rose 6 per cent to $110.4 million (€100.7 million) for the first half, with profit after tax rising 8 per cent to $67.8 million.

Finance director Tom Hickey said the financial outcome was a positive one, against a reasonably turbulent first half that suffered production challenges.

“The first half was a more challenging period operationally than we might have liked,” he said. “But I think if you lift your head and look forward and look at the business performance over the last couple of years, we’ve maintained very strong performance. We’re in a strong financial position. We have a strong shareholder list. We’re making good shareholder returns. We have the resources to continue to operate effectively over the next significant number of years.

“Natural resources will always give you some surprises. But if you’ve got a quality asset, and you’re operating it effectively, and we have kind of comparatively low operating costs, then you’re able to ride the peaks and troughs.”

[ Production at Kenmare Resources hit in first half ]

Revenue from mineral products was $229.7 million in the first half of 2023, up 26 per cent compared to to 2022. That was driven by a 31 per cent rise in shipment volumes, with the drawdown of finished product stockpiles offsetting a 4 per cent fall in average realised prices.

Ilmenite prices were stable, although the titanium pigment market slowed in the second half of the year. Kenmare said the global macroeconomic conditions were also hitting demand for zircon, with spot prices moving below contracted prices.

“As interest rates rise, people tend to moderate their longer-term investments,” said Mr Hickey. “We’ve seen a slowdown in growth in China, and some uncertainty in terms of the growth path for China in particular.”

At the end of the first half of the year, net cash was $42.3 million, up from $25.7 million at the end of December.

The company said it planned to increase its interim dividend by 59 per cent to 17.5 US cents per share. That is in line with Kenmare’s policy to maintain dividend payments of about $50 million a year.

Kenmare has also announced a share buyback of $30 million through a tender offer. Each shareholder can have up to 5.9 per cent of their shareholding bought by the company, with the total investment being funded from cash and existing facilities. Kenmare last held a tender offer in December 2021.

“We’re heading into a major capital expenditure phase in the next couple of years, so it’ll probably be our last chance for a couple of years to do it,” said Mr Hickey. “I think those measures are an indication of our general confidence in the business, in the longer-term performance.”