Kenmare Resources cut its guidance for production of ilmenite, it’s most important product, amid power cuts in Mozambique impacting its operations there.
The rare earths miner said it now expects to produce between 1.08 and 1.11 million tonnes of ilmenite this year, down from a range of 1.125 to 1.225 million tonnes previously. Kenmare also cut its forecast for rutile, another mineral, to 8,500 to 9,500 tonnes down from 9,500 to 11,500 tonnes. Guidance for zircon and concentrates are unchanged.
Ilmenite and rutile are two of the main ores from which titanium is produced. As titanium dioxide they are used in a host of items from plastics to cosmetics.
“A recent issue in the electricity transmission grid has created unplanned power outage,” managing director Michael Carville said in a statement. “Kenmare is actively working with the state electricity provider, Electricidade de Moçambique, to identify and rectify the problem, but the outages have resulted in lower production and, consequently, we are revising our ilmenite guidance.”
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The fourth quarter “is expected to be our strongest quarter of shipments, which will not be impacted by lower production”, he added, while fourth quarter prices “remain strong”.
Kenmare shares were little changed in Dublin.
The company expects costs to be “very slightly above the top end of 2022 guidance due primarily to higher fuel prices”.
Cash operating costs per tonne will be a function of lower production volumes and higher operating costs, it added.
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Despite the production cuts, Davy analyst Colin Grant won’t be changing his earnings forecasts for Kenmare, he wrote in a note to clients. “The production issues will not impact shipment volumes and the minor cost increase is likely to be offset by pricing strength,” he said.
“In 2023 cost assumptions will need to be increased but we assume an ilmenite price of $300/tonne, which is conservative even allowing for potential downward movements in spot prices due to macro weakness,” Mr Grant added.
