KENMARE Resources is to buy back £61.8m worth of its own shares after generating “stronger free cash flow” this year.
The Mozambique-based mineral sands producer said in an announcement today it would seek approval for the share repurchase at an extraordinary general meeting scheduled for December 9.
Kenmare is to offer £4.17 per ordinary share up to a total of 13.5% of its issued share capital. Shares in the company are currently trading slightly above the offer price of £4.20/share. They have gained 42% in the past year peaking at £4.66/share in May.
Kenmare said it was “generating stronger free cash flow, providing an opportunity to deliver increased shareholder returns. The company said in March it was targeting an increased dividend payout for 2021 of 25% of profit after tax.
It announced the reinstatement of the dividend in October 2018 following an improvement in its net debt position, better pricing for its mineral sands products, and a reduction in its capital project burden.
As of June 30, Kenmare had net debt of $76.2m compared to $64m. The year on year increase in net debt is mainly due to the timing of capital expenditure payments and a reduction in the use of invoice factoring.
Heavy minerals include the products ilmenite and zircon which are used to make paint pigments. The minerals are also used in the ceramics and welding industries.
Kenmare reported a taxed profit of $48m for the six months ended June which compares to a $12.7m profit for the interim period in the previous financial year. It consequently tripled the interim dividend paying 7.29 US cents per share (2020: 2.31 cents per share).
“The board believes that a return of capital in the amount proposed represents an effective use of shareholder funds and that the continued strength of the group’s balance sheet, and its cashflow generation after the return of those funds, will be sufficient to pursue the group’s strategic objectives,” said Kenmare.