Profits soar at Kenmare as market conditions improve

PROFITS AT Kenmare Resources soared in the first half of the year as market conditions improved and the company moved towards market-based contracts.

The Dublin-listed mining and exploration company reported pretax profits of $38.8 million (€31.3m) in the six months to June 30th, a reversal of its loss of $14.2 million for the same period in 2011.

Revenue for the period advanced by 95 per cent to $109 million, with earnings before interest, tax, depreciation and amortisation at $55.5 million, a rise of 182 per cent on 2011.

Managing director Michael Carvill said revenues and profits had benefited from price increases and the falling away of legacy contracts. The group predicted a “significant” improvement in its production of ilmenite and zircon in the second half of the year.

The company produced 276,600 tonnes of ilmenite and 23,600 tonnes of zircon for the first half of the year, and Mr Carvill said it was on target to meet its full-year production targets (630,000 tonnes of ilmenite and 50,000 tonnes of zircon).

“I’m comfortable with that target. The future is always uncertain, but we’re on a trajectory that will get us there reasonably comfortably,” he said.

The sector had faced some uncertainty with regards to pricing, but while Zircon prices were under pressure, ilmenite had held up well, and, according to Mr Carvill, was “off marginally”.

He notes that Kenmare recently offloaded a shipment to China, where the pricing was down “maybe 6-7 per cent from the peak”.

The company has raised $60 million in equity, which will mainly be used for its phase II expansion.

The expansion, which will increase production capacity by 50 per cent, is expected to be completed by the end of the year, and the expanded facility will be at full production next year.

Job Langbroek, analyst with Davy Stockbrokers, said that the group looks to be “back on track” and “should now be able to begin to deliver on the mine’s cash-flow potential”.