LSE- and ISE-listed titanium minerals and zircon producer Kenmare Resources recorded a 19% year-on-year decrease in heavy mineral concentrate (HMC) production in the second quarter of this year as a result of a 10% decrease in ore grades to 4.23% and an 8% decrease in excavated ore volumes to 10.1-million tonnes.

Kenmare, which operates the Moma titanium mine, in northern Mozambique, also had a negative impact on HMC production as a result of increased slimes levels during the quarter, primarily at wet concentrator plant (WCP) A.

WCP capacity was limited as a result of higher levels of slimes recirculation from the mining pond, which necessitated a reduction in supplemental dry mining, lowering the grade mined. Higher slimes also led to poorer recoveries and reduced HMC quality.

However, although Kenmare expects slimes in the ore to remain at similar levels in the second half of the year, it has improved management of slimes controls, reducing recirculation. This should enable increased excavated ore and improved recoveries, leading to higher levels of production in the second half.

Ilmenite production in the second quarter was 14% lower year-on-year at 242 900 t, falling broadly in line with decreased HMC processed. The lower HMC quality also had a slight impact on lower ilmenite output.

Primary zircon production was down 9% year-on-year at 13 600 t, while rutile production was down 5% at 2 100 t, reflecting lower HMC processed, as well as lower HMC quality, but partially offset by increased recoveries.

Concentrates production was down 17% at 9 800 t owing to reduced HMC processed and lower quality, and stronger primary zircon recoveries reducing zircon available for concentrates.

As a result of the reduced production in the first half, Kenmare expects the output of all finished products to be at the bottom of the full-year guidance ranges of between 1.12-million and 1.22-million tonnes of ilmenite, 54 400 t and 63 200 t of primary zircon, 9 500 t and 11 500 t of rutile, and 40 300 t and 46 800 t of concentrates.

Also impacting Kenmare’s logistics in the second quarter was the five-yearly dry dock maintenance of the company’s transshipment vessel – the Bronagh J, which left site in early May.

This halved Kenmare’s transshipment capacity, as it has only one other vessel to rely on.

This reduction will continue during the third quarter, until the Bronagh J returns to site, which is expected in mid-August. However, there will be sufficient capacity to catch up when both vessels are operating, with finished product inventories expected to return to normal levels during the first half of 2023.
 
Total shipments in the second quarter were 192 800 t – a 23% decrease year-on-year, owing to reduced shipping capacity and compounded by poor weather conditions and some customer-chartered vessels being delayed.

Shipments comprised 179 300 t of ilmenite, 8 700 t of primary zircon and 4 800 t of concentrates. No rutile was shipped during the second quarter.

PROJECTS & MARKETS 
In May, the rotary uninterruptible power supply project at the Moma mine became fully operational, improving power stability at the mineral separation plant and making a significant contribution to Kenmare’s goal of further reducing its greenhouse-gas emissions.

Also, Kenmare is continuing work on the prefeasibility study (PFS) for Nataka, where WCP A is expected to start mining in 2025.

As part of the PFS, WCP A is expected to have a desliming circuit installed to more efficiently mine the Nataka orezone. A cost-benefit analysis is being conducted to investigate the acceleration of the installation of the desliming circuit ahead of the move.

This has the potential to increase the effective WCP capacity and better mitigate against the slimes levels at the end of the Namalope mine path.

In terms of sales, Kenmare achieved higher prices for its ilmenite and zircon products in the second quarter, representing the seventh consecutive quarter of ilmenite price increases.
 
Global demand for ilmenite grew as a result of robust downstream demand for titanium pigment, with pigment producers continuing to operate at high utilisation rates, particularly outside of China.

However, economic activity in China has been impacted by several city-wide Covid-19-related lockdowns, which reduced demand for titanium pigment and, therefore, ilmenite. Despite this, chloride pigment production continues to increase in China, resulting in growing demand for ilmenite of Kenmare’s quality.

Moving into the third quarter, lower anticipated global growth is expected to reduce demand for titanium pigment. Despite this, Kenmare continues to experience demand for its ilmenite in excess of its ability to supply, as high-quality ilmenite remains in short supply.
 
The zircon market tightened further in the second quarter, as inventories in the global supply chain were largely drawn down in 2021. Demand for the mineral has been strong in all major regions except China, which was also impacted by Covid-19 lockdowns.

Kenmare notes that with no significant new supply entering the market, zircon remains in short supply and prices increased throughout the first half, with positive fundamentals for zircon expected to continue into the third quarter.

MD Michael Carvill says the company’s balance sheet continued to strengthen, with a $17.3-million reduction in net debt at the end of the first half, after paying the $24.1-million 2021 final dividend. “We are targeting a dividend payout ratio of 25% profit after tax for 2022.”

Following the 2021 final dividend distribution, Kenmare’s cash and cash equivalents are $30.7-million as at period end, down from the $69.1-million as at December 31, 2021.

Kenmare’s gross bank loans, including accrued interest, are $96.2-million, down from the $151.9-million as at December 31, 2021.