Kenmare says interim results ‘stronger, more resilient’ than expected
Kenmare Resources FD Tony McCluskey speaks to Mining Weekly regarding the company's interim results. Video: Recorded via Zoom. Editing: Creamer Media's Nicholas Boyd.
LSE-listed Kenmare Resources’ results for the interim period ended June 30, were “stronger and more resilient” than what was expected, given the global Covid-19 pandemic and subsequent challenges.
FD Tony McCluskey told Mining Weekly on August 19, that the titanium minerals and zircon producer achieved earnings before interest, taxes, depreciation and amortisation (Ebitda) of $37.2-million, which compares with $42.8-million for the first half of last year.
This marks a decrease of 13% year-on-year.
Although production was weaker in the first half of the financial year, Kenmare, which operates the Moma titanium minerals mine in northern Mozambique, announced an interim dividend of $0.0231 a share, which McCluskey notes represents 20% of profit after tax, in line with the producer’s dividend policy.
“I see that as a step to larger returns for shareholders, which has been one of the foundational pillars that we put out there, and so . . . the performance in the first half of the year has enabled us to continue with that,” he comments, noting that he sees these numbers “increasing in 2021”.
Market conditions for titanium feedstocks, meanwhile, continued to strengthen during the period, driving a 28% increase in received ilmenite prices, to $217/t, compared with last year.
Kenmare has agreements for the majority of its ilmenite production for the remainder of the financial year, although market conditions are expected to become more subdued in the second half of the year.
In addition, taking Covid-19-related disruptions into account, in respect of the relocation of Kenmare’s Wet Concentrator Plant B, the company remains on track to start mining in the Pilivili region during the fourth quarter of the year.
The move is expected to start in the third quarter of the year, and once mining starts in the quarter thereafter, McCluskey explains the key benefit for Kenmare will be in that the grade is “more than double” what is currently being mined.
This, he notes, increases the amount of heavy mineral concentrate being produced and what will be fed into the mineral separation plant, thereby enabling Kenmare to increase production.
In terms of benefits, Kenmare will produce additional products, while operating costs remain relatively fixed.
“As we move into 2021, the increased production will increase operating costs to some extent, but generally we’ll be driving them down, increasing our margins and increasing our turnover. That’s what drives the generation of the additional cash flow,” he comments.
OPERATIONAL OVERVIEW
During the interim period, Kenmare excavated ore volumes of 18.5-million tonnes, including a quarterly record of 10.3-million tonnes in the second quarter of the year.
Heavy mineral concentrate (HMC) production was 558 400 t, a 12% decrease compared with the 633 400 t produced in the first half of 2019. This decrease is primarily owing to lower ore grades, the miner says.
Total finished product production of 410 600 t marked a 19% decrease compared with the 505 200 t of the first half in 2019, owing primarily to reduced HMC supply as a result of lower production.
Total shipments of 413 700 t were 14% lower owing to lower production volumes, although shipment volumes are expected to be stronger in the second half of the year.
Wet Concentrator Plant C, meanwhile, delivered a throughput of 500 t/h on a consistent basis in the second quarter, a rate which Kenmare expects will be maintained going forward.
FINANCIAL UPDATE
During the interim period, Kenmare had total operating costs of $96.9-million, in line with the first half of 2019’s $96.6-million, but unit costs of $183/t were 20% higher year-on-year.
This, Kenmare says, was driven by lower production volumes and a largely fixed cost base.
Revenue for the period amounted to $116.8-million, down 5% owing to reduced shipment volumes and lower freight costs.
At the end of the six months, cash and cash equivalents were $98.6-million and gross debt was $151.3-million, resulting in net debt of $52.7-million owing primarily to scheduled capital expenditure.
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