Kenmare triples payout

Finishing a $127m (£92m) project put a rocket under Kenmare Resources’ (KMR) interim earnings. Now free of the capital spending from the Wet Concentrator Plant B move and seeing higher production come through, the company tripled its interim dividend payout to 7.29¢ per share. Ilmenite, an ingredient for ceramics and paint pigments and Kenmare's key product, has also seen higher prices because of undersupply concerns. 

The company’s Mozambique dredging operation hit a record ore quarterly production level of 11m tonnes (t) for the June quarter, contributing to a total ‘finished product’ output of 612,100t, an increase of a half on last year. Sales and earnings followed, with cash profits doubling to $82m, helped along by the lower capital spending this year. 

Some of Kenmare's half year sales and profits were lost to a shipment being delayed into the second half, while forecast stronger prices for the rest of the year should add to the 2021 numbers. Davy Research forecasts full-year cash profits at $190m, double last year’s $77m figure, which analyst Colin Grant said was even “conservative based on spot commodity prices”. 

Finishing the concentrator plant move was a “huge relief”, according to Kenmare managing director Michael Carvill. 

He said the next capital projects would be less intense: another concentrator move would be far smaller in scale, while a new backup power supply source would help protect operations from outages, with even millisecond electricity failures affecting production. 

Carvill said the ilmenite outlook was good for his end of the supply chain: “We don’t see any real inventory in the downstream pipeline”. 

Kenmare has moved into a solid period of cash generation and its dividend yield should keep climbing. Buy. 

Last IC View: Buy, 407p, 24 Mar 2021