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Kenmare sticks to growth plan

Biggest spending year coincides with industrial demand hit, but the ilmenite miner can lean on contracted sales for income
March 20, 2020

Kenmare Resources (KMR) is hopeful of industrial demand keeping titanium prices high enough so it can maintain its new dividend. This is a big hope, as other signifiers of industrial strength in China like copper fall, although an existing tight supply and demand scenario will support prices. 

IC TIP: Buy at 176p

Kenmare’s principal product ilmenite is used for paint pigment and relies on the construction and automotive industries for demand down the supply chain.  Kenmare – still in an expansion phase at its mine in Mozambique – flagged higher returns in spite of the Covid-19 crisis.

“We currently expect this to position us to deliver increased capital returns to shareholders, notwithstanding the global impact of Covid-19,” said chairman Steven McTiernan. Managing director Michael Carvill said there had been no confirmed cases of Covid-19 in Mozambique to date. 

The company’s expansion works include a new plant, which delivered first concentrate last month, and moving another plant which is expected to be completed by the end of September. The anticipated spend on this move is $106m (£90m) in 2020, while overall capital expenditure is forecast to reach $120m, up from $44m last year. 

Revenue and cash profits were all flat in 2019, while cash costs per tonne grew 9 per cent to $158, although this was partly offset by an 8 per cent increase in the average sales price year on year.  

Peel Hunt forecasts 2020 cash profits increasing 2 per cent to $94.2m, rising sharply to $161m in 2021.

KENMARE RESOURCES (KEN)  
ORD PRICE:176pMARKET VALUE:£193m
TOUCH:176-180p12-MONTH HIGH:292pLOW: 138p
DIVIDEND YIELD:3.9%PE RATIO:5
NET ASSET VALUE:813ȼNET CASH: $9.2m*
Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
2015143-61.9-218nil 
2016141-17.1-28nil 
201720818.418nil 
201826256.146nil 
201927150.0418.18
% change+3-11-11-
Ex-div:16 Apr   
Payment:19 May   
£1=$1.19 *Includes $4.5m in lease liabilities