Mineral sands producer Kenmare Resources on Tuesday announced its dividend policy, a watershed moment for the company, with dividends to be based on a minimum of 20% of profits after tax.
Kenmare will start with an interim dividend for the first half of 2019, which will be paid in the second half of 2019.
This is on the back of supportive higher prices, solid production and global growth concerns and seasonal weakness lifting.
To prepare for payment of the maiden dividend, Kenmare intends to eliminate historic losses and undertake a group rationalisation. Kenmare’s lender group has agreed to provide the necessary approvals to enable the company to proceed with these steps.
Elimination of historic losses will also require shareholder approval and the sanction of the Irish High Court, and Kenmare will convene an extraordinary general meeting, for the approval of the capital reduction to eliminate historical losses, later this year.
Meanwhile, MD Michael Carvill said prices of ilmenite, Kenmare’s main product, remain at less than 50% of the previous peak and are unlikely to be sufficient to incentivize the necessary new supply to replace depleting mines and meet continued demand growth in the medium term.
The company plans to deliver 1.2-million tonnes a year of ilmenite, plus associated co-products, by 2021.
PRODUCTION & PLANS
Kenmare mined 8% more ore in the third quarter at 8.4-million tonnes, compared with 7.7-million tonnes mined in the third quarter of 2017, benefitting from increased supplementary dry mining.
The company’s heavy mineral concentrate production in the third quarter increased by 3% to 279 000 t, compared with 272 600 t in the third quarter of 2017; however, Carvill stated that production was impacted on by planned lower grades when compared with the second quarter of this year.
Ilmenite production for the period was 233 900 t, which is 9% lower than the 257 500 produced in the third quarter of 2017.
Zircon production decreased by 10% to 16 200 t, compared with the 18 100 t produced in the third quarter of 2017.
Carvill said Chinese ilmenite spot market conditions are improving, following cautious buying in recent months, while zircon prices continued to advance.
Following strong sales volumes in the first half of the year, ilmenite shipments slowed in the third quarter, owing to a seasonal variation and cautious buying behaviour in China.
Shipping volumes are still expected to be lower in aggregate in the second half of the year than in the first half of the year.
Shipment volumes in the third quarter were 198 900 t, which is 5% lower than the third quarter of 2017’s 208 400 t, but 38% lower when compared with the second quarter of 2018’s 322 000 t, primarily reflecting seasonal variation.
Sales in the third quarter comprised 184 300 t of ilmenite, 12 100 t of zircon and 2 500 t of rutile.
Meanwhile, the Kenmare board approved the development of a third dredge mining pond, in August. A 500 t/h dredge and wet concentrator plant, WCP C, will be developed in a high-grade area of the Namalope zone that is inaccessible to the existing dredge operations.
Resources to support a 20-year life-of-mine for WCP C have been identified. The project is expected to cost up to $45-million (including contingencies) and yield an internal rate of return of at least 30%. Commissioning is expected before the end of 2019.
Separately, the Namalope deposit will be mined until 2020 by WCP B and until 2025 by WCP A. The capital costs associated with the movement of the mining ponds from Namalope are in addition to the capital outlined to increase the capacity of the mining fleet.
WCP B will move in the second half of 2020, increasing production in 2021 to 1.2-million tonnes a year of ilmenite, plus associated co-products, through the mining of the higher-grade Pilivili deposit.
Following the completion of a prefeasibility study, capital costs are estimated to be about $100-million. A definitive feasibility study will be completed in the first quarter of 2019.
Plans for the movement of WCP A to Nataka in 2025 remain at an early stage.
Sustaining capital is expected to be within guidance of $22-million for this year and expected to be in the range of $20-million to $25-million a year over the next five years.source: miningweekly.com