London-listed mineral sands miner Kenmare Resources has declared a maiden full-year dividend of $0.08 for the year ended December 31.

The dividend comprised a $0.026 apiece interim dividend paid in October last year, and a final dividend of $0.052 apiece to be paid in May.

MD Michael Carvill considered the full-year maiden dividend declaration as the “end of the beginning” since Kenmare had gone through a long stage of expanding and ramping up to become a mineral sands producer at the Moma mine, in Mozambique.

He told Mining Weekly on Thursday that the dividend declaration marked a new phase for Kenmare as a company and said he was keen for the company to continue paying out dividends to shareholders in future.

Kenmare’s dividend policy entails returning a minimum of 20% of profit after tax, which in 2019 amounted to $44.8-million, to shareholders.

The company’s profit after tax was 12% lower, compared with profit after tax of $51-million reported in 2018, owing to increased net finance costs, foreign exchange losses and increased depreciation charges.

“There is grave uncertainty facing the world at the moment, which normally necessitates withholding dividends, but we decided that we will maintain our final dividend and I believe our board was courageous in doing so.

“With the new credit facility that we negotiated from a set of South African banks during [2019], those facilities provide us with a decent level of liquidity. With $81-million in the bank and significant undrawn facilities from our newly negotiated loan covenant, it will help us navigate through uncertain times,” said Carvill.

Kenmare continued to progress its growth strategy in 2019, with its Wet Concentrator Plant (WCP) C having produced its first heavy mineral concentrate in February this year.

The final project in the company’s strategy is the relocation of its WCP B, which is on track to be complete during the third quarter of this year.

The $160-million growth strategy is targeted at reaching production of 1.2-million tonnes of ilmenite a year by 2021, while about 100 000 t of co-products – zircon and rutile – will be produced.

The mine’s life extends beyond 2040, based on the expanded production rate of 1.2-million tonnes a year of ilmenite.

Carvill confirmed that the company would spend the next three years focusing on processing as much material as possible and making decent returns for shareholders.

Kenmare produced 892 900 t of ilmenite in 2019, compared with the 958 500 t of ilmenite produced in 2018. The company’s total finished product output was 988 300 t in the year under review, compared with 1.4-million tonnes in 2018.

The company shipped a total 1.02-million tonnes of finished products in 2019, representing a 4% year-on-year decrease.

This was primarily owing to poor weather conditions that impacted on loading rates in the first nine months of the year; however, record production in the fourth quarter helped to offset the lower numbers.

MARKET IMPACTS

The average received prices for Kenmare’s products increased by 8% year-on-year in 2019.

Responding to whether he believed the Coronavirus outbreak globally would impact on demand or pricing for the mineral sands that Kenmare produces, he said the company was not seeing any effect in the ilmenite market and was, in fact, experiencing good demand and positive pricing momentum.

However, the market for titanium feedstocks is directly akin to the volume market for titanium in the use of paints, pavements, paper, plastics, inks and dyes. Those manufacturers consume material in correlation to the size of the economy.

“Therefore, if there is a general slump in the world economy, it would affect demand for these products. There would likely be an effect, but not at the minute and it is unclear to what extent,” Carvill pointed out.

He added that, should demand for ilmenite, for example, decrease, the company would not need to lower production in response, since the market was undersupplied.

“Lower demand would actually put the market back into balance. Additionally, with the turmoil in the financial markets in recent weeks, it was unlikely for new mineral sands projects to be financed just now, and therefore we see the advent of new production as unlikely.

“Demand would have to drop very deeply for the supply in the market to be in surplus.”

As at Thursday, there had not been one confirmed case of Covid-19 in Mozambique, where Kenmare operates, however, Carvill confirmed that the company had been implementing a risk mitigation plan already, which involved ongoing awareness around health and safety, reduced travel, social distancing and increased hygiene practices.