Buoyant Kenmare warns Ukraine disruption could have mixed results for heavy minerals market

KENMARE Resources is to pay a 25.42 US cents per share final dividend taking the total payout for its 2021 financial year to 32.71c/share, equal to $32.1m.

This was the outcome of one of Kenmare’s strongest showings in recent years in which the company produced record volumes of heavy mineral concentrate (HMC).

Ilmenite production was 48% year-on-year in 2021 at some 1.12 million tons (Mt) while shipments increased 51% to 1.29Mt. Combined with higher prices the outcome was a taxed profit of $128.5m compared to $16.7m in 2021.

Prices for ilmenite, which comprises most of total HMC, were 21% higher compared to 2021. In addition to ilmenite, Kenmare also produces zircon from Moma.

The payout was 25% of taxed profit which is in excess of Kenmare’s dividend policy of 20% of earnings. In December, the company completed the buy-back of some $81.6m shares.

Owing to the share buy-back programme, net debt increased to $82.8m as of end-December 31 compared to $64m in net debt at the close of the previous financial year.

Kenmare said the outlook for 2022 remained robust.

“The positive momentum we saw in all our product markets in 2021 has continued into 2022. Global demand for ilmenite, our primary product, continues to exceed supply and our production volumes are being well received by the market,” it said in a statement.

Shares in the company edged up 1.77% in London trade but over 12 months the stock is about 17% higher.

The first quarter’s production has been less than anticipated owing to inclement weather, but Kenmare is sticking by 2022 production guidance of between 1.16Mt to 1.2Mt. Sales for the year could also be influenced by the war in Ukraine, according to Kenmare’s outgoing chairman Steve McTiernan.

He commented in Kenmare’s results overview that “… the tragic conflict in Ukraine has created significant uncertainties in global trade routes and the wider economy.

“It is too soon to speculate on the overall effects on our business, but Ukraine is a significant supplier of titanium feedstocks, while lower global growth could reduce demand for our products,” he said.

McTiernan said Kenmare’s goal was to become a first quartile producer on the revenue to cost curve. “Achievement of these long-term strategic goals will support further increases in free cash flow and higher dividends, as well as improving resilience in case of potential cyclical commodity market downturns,” he said.

McTiernan will be replaced by Andrew Webb, a former MD of Rothschild & Co, the bank.