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Kenmare: slime doesn't pay

The Mozambique-based mineral sands miner is generating more cash, but finding more slimes
August 21, 2018

Add slime to the list of things slowing down Kenmare Resources (KMR). In the first half of 2018, a “high slimes environment” – that is, tiny particles in the ore which complicate both the mining process and mineral separation – resulted in an 11 per cent reduction in finished products compared with the same period in 2017.

IC TIP: Buy at 230p

The titanium dioxide miner had already guided for a decline in production, to accommodate a first quarter shift in the mining plan at Moma. But while output is expected to step up in the second half, elevated levels of slime processed at wet concentrator plant ‘A’ has increased the need for dry mining elsewhere.

Managing director Michael Carvill described the issue as “an ongoing process of management”, and the first half step-up in total cash operating costs from $131 to $152 (£103 to £119) per tonne should unwind before the end of the year. And while a drawdown in inventories means shipments should soften in the second half, improving pricing conditions remain “favourable”. With three-quarters of second-half forecast output already sold, Kenmare is likely to move into a net cash position by the year-end.   

On average, analysts expect full-year pre-tax profits of $61.5m and EPS of 52.3¢, rising to $79.7m and 67.8¢ in 2019.

KENMARE RESOURCES (KMR)  
ORD PRICE:230pMARKET VALUE:£ 252m
TOUCH:226-233p12-MONTH HIGH:352pLOW: 205p
DIVIDEND YIELD:NILPE RATIO:9
NET ASSET VALUE:751¢NET DEBT:1%
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20171029.89.0nil
201814028.824.0nil
% change+37+193+167-
Ex-div:na   
Payment:na   
£1=$1.27