High costs cited as Kenmare records pretax losses of $14m in Mozambique

KENMARE RESOURCES made a profit of $10 million from the operation of its titanium mine at Moma in Mozambique in the first six months of 2011, but finance and foreign exchange costs left it with a $14 million loss for the period.

Kenmare said yesterday that revenues rose 40 per cent in the first half of the year to $50.6 million from $40 million during the same period in 2010.

The Irish company had operating profits of $10 million during the first half, compared with a loss of $6.15 million last year.

However, finance costs of $15.6 million and a foreign exchange loss of $9.8 million left it with losses before tax of $14.1 million during the first half, compared with a $1.5 million gain during the same period in 2010. Losses per share were 59 cent against a gain of 7 cent.

The foreign exchange loss arose mainly because its sales are denominated in dollars, while just under half its $346.2 million in loans is denominated in euro.

The company pointed out yesterday that, as a result of currency fluctuations, a loss arose on principal and interest repayments. Kenmare actually gained $22 million on currency movements in the first half of last year.

Prices for ilmenite, the titanium-based mineral that Moma produces, were strong during the first half of the year, and increased 30 per cent over the December-to-June period in 2011. Zircon, a mineral also mined at Moma, was up 38 per cent.

The mine produced 323,700 tonnes of ilmenite and 19,800 tonnes of zircon during the first six months of the year. A number of delays meant production was slower and analysts yesterday cut their predictions for full year ilmenite output to a total of 675,000 tonnes from 720,000 tonnes.

Poor sea conditions meant that Kenmare was unable to book $20 million of revenues, which has now been deferred to the second half of the year.

Kenmare is working to expand the mine to increase capacity by 50 per cent. This will cost $280 million and commissioning of the extension is expected to start midway through next year.