Kenmare Resources revs up shareholder payouts

Even with lower output of titanium and zircon-bearing sands at its Mozambique operation, the company saw a 6 per cent increase in Ebitda for the half-year, at $110mn, although the margin dropped from 57 per cent to 48 per cent. That rise was driven by stockpiles, given cash costs per tonne of finished product rose 28 per cent on last year, to $230.  

Kenmare mined 14 per cent less in the period – 633,900 tonnes of heavy mineral concentrate (HMC) – because a “severe lightning strike” knocked out automated production at a wet concentrator plant. Shortages of power also had an impact, with interruptions to grid supply shortening operating hours as well. The company said production would recover in the second half. Managing director Michael Carvill noted: “Production in early H2 2023 has been strong, supported by higher grades, better HMC recoveries and increased tonnes mined,” he said. 

At the same time, titanium and zircon prices are unlikely to set the world alight in the second half. Peel Hunt analyst Peter Mallin-Jones said there were still positive signals for the rest of the year, however. “ With increased output and shipments to match, we assume higher Ebitda in H2, despite the assumption of softer pricing,” he said. 

A higher-margin second half is likely to encourage another strong payout. Buy. 

Last IC View: Buy, 468p, 17 Aug 2022