Kenmare unveils 2.66 US c/share maiden dividend, but firm toils in H1 as less minerals shipped

Michael Carvill, MD, Kenmare Mining

KENMARE Resources MD, Michael Carvill, ushered in a period of shareholder returns following the announcement of a 2.66 US cents per share maiden interim dividend which is set amid improving market conditions for the firm’s mineral sands products.

The dividend announcement, however, was on the back of relatively muted numbers for the six month period. Lower shipping volumes – a function of the devastating Cyclone Idai that hit the Mozambique coastline during the first quarter – led to an 11% fall in earnings before interest, tax, depreciation and amortisation (EBITDA) to $42.8m.

Net taxed profit fell 17% to $21.9m for the period and cash as of June 30 was $3.5m compared to $13.5m at the close of the previous interim period.

Nonetheless, Carvill was upbeat. The company expected strong shipping volumes in the second half and “positive pricing dynamics” which combined would lift revenue and profitability. “We have already seen ilmenite price increases in Q3 2019 and markets are expected to remain tight, with positive long-term fundamentals,” said Carvill.

Shares in the company fell 5% in early trade on the London Stock Exchange. However, on a year-to-date basis, the share is up nearly a quarter.

The company booked a 7% increase in first half average received free on board prices to $239 per ton year-on-year reflecting stronger market conditions. It said the ilmenite market remained tight which would support higher prices in the second half.

The zircon market was stable in the first half and was expected to be subdued for the remainder of the financial year although “long-term fundamentals remain strong due to supply constraints,” the company said.

VOLUMES

Heavy mineral concentrate production fell 8% to 633,400 tons in the first half of the financial year owing to mining of lower ore grades, as planned. Kenmare said average grades would improve in the remainder of the year.

Ilmenite production was 2% higher, however, at some 458,200 tons and there was a marginal increase in primary zircon output to 23, 100 tons owing to stronger recoveries. Concentrates production was 82% higher as the firm commissioned its mineral sands concentrate product.

But “adverse weather conditions” led to much lower shipping: down 18% in finished products to 483,500 tons. Full year total shipment volumes are expected to be in line with 2018 numbers as there is capacity in the shipping schedule in the second half to ship additional volumes, the company said.

The company has guided to ilmenite production in the current year of between 900,000 to 960,000 tons and primary zircon of 44,500 to 52,000 tons.