Irish-based miner Kenmare Resources, which owns and operates the Moma titanium minerals mine, in Mozambique’s Nampula province, has reported a net loss of $31.8-million for the first semester this year (for the first half of last year, the net loss was $10.2-million). The operating loss came to $17.9-million, compared with an operating profit of $6.9- million during the same period last year. Earnings before interest, tax, depreciation and amortisation were $2.3-million (as against $18.9-million for the first semester of 2013). Average realised prices for ilmenite were 23% lower, and for primary zircon 7% down, during the first half of this year, compared with the same period last year.

On the bright side, heavy mineral concentrate production in the first semester reached 604 200 t  (a 26% increase over that for the first semester of 2013). Ilmenite production increased by 47% to 445 600 t and zircon production rose by 12% to 21 400 t. Rutile production was up 47% to 2 800 t (from 1 900 t). Ilmenite, zircon and rutile together form the finished products that the company sells. The total of finished products shipped by Kenmare from January to June this year rose by 36% to 399 000 t. In fact, production of finished products hit a record during the first semester of this year. Cash production cost (per metric ton) for finished products was cut by 14%, compared with the first six months of 2013. Revenues were up, slightly, at $81.2-million as against $79.3- million for the same period last year. Greater financing flexibility has been achieved through the amendment of the debt repayment schedule. A diesel-powered generating plant has been successfully installed and tested at Moma to provide a secure electricity source.

“Revenues have remained broadly flat as higher sales volumes have been offset by a reduction in product pricing, particularly for ilmenite,” explained company MD Michael Carvill. “A significant proportion of global production is struggling to cover cash operating costs, before debt service or return on capital; this is an unsustainable situation. However, although there have been some production cuts these have been negated by new supply coming on stream which was incentivised by previously high prices and these new volumes are delaying a recovery in prices.”

“Kenmare has made substantial progress in reducing unit costs, conserving cash and improving production,” he assured. “We expect results for the full year to benefit from a more favourable sales mix, increased volumes and targeted cost reductions. “In addition, we are pleased to have recently concluded an agreement with lenders which provides Kenmare with greater financial flexibility during the currently subdued pricing environment.”

The company affirmed that there continued to be only a gradual recovery in the demand for titanium pigment. Recently, stronger demand has been reported in North America and Europe. But Chinese demand this year has been unimpressive and distant from the high growth rates of the recent past. While pigment demand is slowly increasing, demand for titanium feedstocks is not, because stockpiles of these feedstocks, although much reduced, have not yet been exhausted. Many ilmenite producers are currently losing money. “In summary, looking beyond the short-term horizon, Kenmare concurs with the general industry consensus that the ongoing recovery in the pigment market will gather momentum in 2015 and 2016, resulting in improved pigment plant operating rates and leading to stronger feedstock demand,” said the company in its half-yearly results report.

For zircon, demand has been gradually improving through the second semester of last year and the first half of this year in China, North America and parts of South America. In Europe, the recovery is even more gradual and largely in response to the requirements of export markets in South America and the Middle East. It is difficult to forecast the demand from China for the rest of this year, because of overcapacity and a slowdown in the construction industry. Zircon prices, which suffered from some weakness earlier this year, have stabilised more recently. “Demand for Moma zircon was strong throughout the first half of the year and this has continued into the third quarter,” noted Kenmare.