Mining group Kenmare Resources has suspended its guidance for this year due to the uncertain outlook caused by the Covid-19 pandemic and drawn down debt facilities to cope with the crisis.
The Irish company, which operates the Moma Titanium minerals mine in northern Mozambique, said on Thursday its mine has not been materially impacted by the crisis but restrictions are having an operational impact. As a result, the company has taken the decision to suspended its guidance for 2020 "until further notice".
Davy analyst Job Langbroek said the decision to suspend guidance was "sensible" given that the company's production scheduled for this year "assumes a successful outcome to planned expansion".
Kenmare has also taken the decision to draw down its debt facilities to provide it with the “maximum liquidity and flexibility during this unprecedented period”. It noted that at the end of the first quarter, it had $100 million in cash.
From its Mozambique mine, Kenmare produces titanium minerals such as Ilmenite and Rutile which are used to make titanium dioxide pigment used to manufacture paints, plastics, paper, cosmetics, food additives, ceramics and textiles.
And the company said that ilmenite prices increased for the fourth consecutive quarter by the end of March “as demand continued to outstrip supply”.
“Whilst there is evidence of near-term disruption to both the supply and demand of titanium feedstocks, inventories in the supply chain remain low and the market is expected to require additional production to meet future demand,” the company said.
Kenmare had expected the final three months of 2020 to be the company’s strongest quarter as a result of its expansion plans. And though there are no known cases of Covid-19 at the company’s mine or in local communities, some restrictions introduced by the government of Mozambique, such as a state of emergency declaration, is “impeding Kenmare’s ability to operate normally”.
In line with the group’s commitment to return a minimum of 20 per cent of profit after tax to shareholders, on March 19th, Kenmare announced its intention to pay a 2019 final dividend of 5.52 cents per share, to be approved at the company’s annual general meeting on May 13th.
“For now at least, the dividend remains on track,” Mr Langbroek said.