Operating losses widen at Irish-listed Kenmare Resources

Irish titanium and zircon miner Kenmare Resources said net losses narrowed during the first half of the year, despite a sharp decline in production at its flagship Moma Mine in Mozambique following a string of power outages.

The company reported a $27.9 million (€24.7m) net loss for the six months to the end of June, compared to a $31.8 million loss for the same period a year earlier.

Operating losses widened however to $27.2 million from $17.9 million.

Revenues were down $7.3 million in the first half from $81.2 million to $73.9 million, principally as a result of an 18 per cent decline in ilmenite prices

The group announced an earnings before interest, taxation, depreciation and amortisation (ebitda) loss of $10.6 million as against a $2.3 million profit in the first half of 2014.

Operating costs increased by $5.5 million to $84.5 million, which included a $8.6 million inventory write-down. Total cash operating costs declined by 17 per cent to $69.1 million as a result of lower plant availability and implemented cost control measures, Kenmare said.

Production at the Moma mine was severely constrained after 57 days of storm-related grid power outages, which occurred primarily in the first three months of the year. As a result, iImenite production for the first half fell by 27 per cent to 324,100 tonnes compared to 445,600 tonnes for the same period in 2014. Zircon production increased by 11 per cent to 23,800 tonnes as against 21,400 tonnes for the first six months of last year.

Total shipments of finished products in the first half rose 3 per cent to 412,000 tonnes versus 399,000 tonnes in 2014.

The miner said production in the second quarter rebounded significantly but was constrained by sporadic power outages due to remediation of power lines damaged earlier in the year at the Mona mine. It was also impacted by unofficial industrial action, which in itself led to the loss of 9 days production. The strike action came after the company introduced changes to working patterns. Kenmare announced plans to make 162 workers at the site redundant in February because of falling mineral prices.

"Average daily ilmenite production in the third quarter to date is up 50 per cent when compared with the first half of 2015 as a result of increased power stability. The outlook for the rest of the year will be further supported as the national power utility commissions equipment that will increase grid power capacity and stability. We are pleased to have reached agreement with our lender group, which has reduced our fixed loan payments and provided us with additional headroom and are in constructive dialogue regarding further loan disbursements," said managing director Michael Carvill.

Kenmare said despite the current challenging pricing environment, the long-term outlook for Moma remains positive due to the favourable cost position of the mine and a positive outlook for titanium dioxide in the medium-to-long term.