KENMARE Resources said prospects for its 2017 financial year would be far improved owing to higher production at its Moma mine in Mozambique, as well as increased prices, especially among Chinese buyers.
This follows a period of tumult for the UK-listed company which was recapitalised to the tune of $275m last year amid rock-bottom prices for its products. Ilmenite is used in the production of paint pigments.
The company also said it was considering the merits of a capital project at its Namalope Zone where an expected decline in grades would otherwise see production flatten at one million tonnes for the next three years.
Ilmenite production would be up to 16% higher this year at some 1.05 million tonnes while total cash costs were expected to be in line with 2016 of between $131 to $141 per tonne. Output in the 2016 financial year was 903,300 tonnes, an 18% year-on-year increase over 2015 production.
“Production in 2017 is expected to rise further as mine optimisation continues while unit costs of production are anticipated to fall further,” said Michael Carvill, CEO of Kenmare Resources.
Demand for ilmenite had grown “strongly” during the last calendar year which had lifted prices. This was after prices bottomed out in the second quarter of 2016. “Average received prices for H1 2017 will show a significant improvement on 2016 benefitting from new contract prices and higher spot prices,” said Carvill.
Demand for imported ilmenite in China – the world’s largest titanium feedstock market – had grown by about 40% in 2016 owing to increased demand in the pigment and slag sectors, and a decline in domestic ilmenite production.
Average Kenmare realised ilmenite prices had lagged the spot market increases during 2016 as the company had locked in contracts prior to the market resurgence. “Spot prices have been steadily rising for the past nine months and Kenmare expects this trend to continue as demand remains strong,” said Carvill.
“The outlook for ilmenite prices remains positive for 2017, supported by low product inventories throughout the value chain and combined with increased titanium feedstock consumption, as pigment demand continues to grow in line with GDP,” said Kenmare Resources.
Commenting on the possibility of lifting capacity at Namalope Zone at Moma, where grades are expected to decline in the coming years, Carvill said work has begun to assess the feasibility of the project. If the capital project was not approved, ilmenite production will average about one million tonnes a year over the next three years.
“Approval of capital expenditure by management and the board will be subject to … positive outcomes from feasibility studies, attractive financial returns and supportive market conditions,” the company said.
