Robust year for Kenmare Resources in 2019 but volumes dip

Company announces maiden full-year dividend


Kenmare Resources said it had a robust year in 2019 with revenue up, but noted volumes were slightly lower than in 2018.

The company, which operates the Moma titanium minerals mine in northern Mozambique, announced its maiden full year dividend of 8.18 US cents per share, in line with commitments.

Revenues were higher in the 12 months to December 31st 2019, up 3 per cent to $270.9 million, as the average sales price rose.

However, Kenmare noted reduced volumes throughout the year. Earnings were in line with 2018, with the company reporting $92.6 million in earnings before interest, taxation, depreciation and amortisation last year, compared with $93.3 million a year earlier.

Profit after tax was $44.8 million, a 12 per cent decline compared with the same period a year prior. Kenmare said this was mainly due to increased net finance costs, foreign exchange losses and increased depreciation charges. Its net cash was broadly the same at $13.7 million.

Ilmenite production was slightly lower than original guidance for the year, down 1 per cent for the period, while total shipments of finished products were 4 per cent lower as poor weather hit loading rates. That was partly offset by a record quarter in the final months of 2019.

Net ilmenite unit costs were $81 per tonne, marginally ahead of 2018’s $79 per tonne due to increased co-product revenues.

“While 2019 was another year of robust financial and operational performance for Kenmare, the recent outbreak of Covid-19 presents global challenges and uncertainties,” said managing director Michael Carvill.

“The safety and wellbeing of our employees and our host communities remain our overriding priorities.”

Mozambique has not yet reported a case of Covid-19, and Mr Carvill said that there have been no material adverse effects on production at Moma, with “stringent risk mitigation procedures” implemented at the site.

Average received prices rose 8 per cent year on year, and the company noted tight ilmenite market conditions continued in the first quarter of 2020.

“We see a positive long-term outlook for all our products due to the depletion of existing mines and limited supply from new mines in the coming years, coupled with continued demand growth,” Kenmare said.

“Ilmenite customer demand remains strong and market pricing has continued to advance year to date,” said Mr Carvill. “It is likely that there will be some adverse effects on the business this year but the extent is difficult to predict. We will continue to monitor the situation closely and adjust our plans as appropriate.”

Third project

In February, the second of Kenmare’s three development projects produced its first heavy mineral concentrate , with the third project on track for the third quarter of 2020.

Financially, Kenmare said it was in a robust position, with gross cash of $81.2 million at the end of 2019, with new debt facilities secured in the final weeks of the year.

Davy said the company had turned in a very reasonable performance, given the headwinds it faced.

“However, eaten bread is soon forgotten and the current year has elevated levels of investment workflow and uncertainty around Covid-19 impacts, even if pricing trends for its primary product remain strong,” Davy said in a note.

“That being said, and notwithstanding an expected contraction in global industrial activity, successful execution of its expansion plans in the current year will put the group in a very good position to maximise the benefit from the (for now) predicted V-shaped recovery and thereafter.”