Mozambique-focused titanium minerals producer Kenmare Resources on Wednesday announced “strong” preliminary results for the 2018 financial year.
Its flagship operation, the Moma mine, in northern Mozambique, is a tier-one asset with a resource life of over 100 years at planned production levels, supporting increased global demand for titanium feedstocks.
Kenmare MD Michael Carvill said he was “delighted” that 2018 was Kenmare’s third consecutive year of achieving its production guidance and delivering record shipment volumes.
The LSE-listed company recorded a 54% increase in earnings before interest, taxes, depreciation and amortisation to $93.3-million for 2018 and ended the year with a net cash position of $13.5-million, compared with $34.1-million in net debt at the end of 2017, which, as Kenmare COO Ben Baxter pointed out, is a “$47-million swing, despite the fact that we’re spending on development projects”.
Kenmare CFO Tony McCluskey noted that the 162% increase in profit after tax to $50.9-million and the 26% increase in revenues to $262.2-million, was primarily the result of a 17% increase in all product prices, as well as a 3% increase in total shipments of finished products to 1.07-million tonnes – a new record.
He noted that the improved product market offset the slight decline in production, adding that the company had benefitted from an 8% increase in ilmenite prices, as well as a 47% increase in zircon prices in 2018. About 69% of Kenmare’s revenue in 2018 was derived from its ilmenite sales.
The company ended the year with around 200 000 t of product stocks.
Ilmenite production decreased from 998 200 t in 2017 to 958 500 t, while primary zircon production decreased to 48 400 t, from 48 600 t in the prior year.
McCluskey noted that Kenmare experienced an 11% increase in cash operating costs to $145/t compared with $131/ t in 2017, as a result, in part, of the increased use of diesel-powered electric generators to offset electricity supply interruptions, as well as a full year of dry mining, which the company undertook to increase the heavy mineral concentrate production, and which came with an additional labour cost.
Carvill noted that the Mozambican electricity grid operator Electricidade de Moçambique has received delivery of the equipment it needs to repair a fault in its network and that installation of said equipment is imminent and, as such, the company expects supply stability to return to levels experienced in 2016 and 2017.
McCluskey said the preliminary results represented a “recovery from a deep economic downcycle.”
Carvill noted that the company made “good” progress in its development programme which aims to deliver an estimated 20% increase in Kenmare’s production rate to 1.2-million tonnes of ilmenite a year by 2021.
“The first of our three development projects, the 20% expansion of the wet concentrator plant (WCP) B, was commissioned during 2018, more than 25% under budget. The second project, WCP C, is well under way and expected to be commissioned in the fourth quarter 2019.”
Meanwhile, the definitive feasibility study (DFS) for the third project, the move of WCP B to the high-grade Pilivili orezone, is on track for completion in first half of this year.
Moreover, Projecto Oitenta (or Project 80) refers to selected projects aimed at increasing Kenmare’s mine utilisation from its current level of around 74%, to 80%. All the projects are expected to be concluded this year, at minimal capital cost, as many of the improvements are related to better business practices.
Carvill noted that some of the improvements included improved maintenance procedures, the automation of dredging (most of which was paid for in 2018) and the introduction of an alternative tailing stacking system.
Carvill described 2018 as a “significant watershed” in terms of the company’s ability to change its net cash position, as well as the implementation and completion of projects that will position the company for future growth.
He concluded that Kenmare was looking forward to paying its first dividend in October.