Mozambique mineral sands producer, Kenmare Resources, would try to match last year’s record ilmenite production in 2018, but the general outlook was a slight fade in output.
As a result, the company – which is listed in London – would spend $19m examining growth projects and studies at its Moma mine during the year in an effort to offset the plateau to downward shift in production. The mine is set to run into lower grades.
Michael Carvill, CEO of Kenmare Resources, said the company wanted to keep ilmenite production above one million tonnes in the long term. Production for 2017 was 998,200 tonnes of ilmenite. “In 2018, Kenmare will upgrade capacity of Wet Concentrator Plant B by up to 20% uplift in capacity.
“Further options are being examined which will both address grade reduction in future years and facilitate an increase in ilmenite production beyond one million tonnes per annum,” he said in the firm’s fourth quarter trading update published today.
Shares in Kenmare were up marginally by 1.45% in early UK trade. The stock has traded flat on a one-year basis, although that doesn’t tell the whole story of Kenmare’s last three years in which it nearly went bust. A $275m recapitalisation of the business eventually saved it which saw its share price rise from below £1/share in 2016 to £2.80 today.
The production numbers for 2017 were: an 11% increase in ilmenite to 998,200 tonnes, while a 9% lift was registered for zircon to some 74,000 tonnes. Ilmenite production for 2018 would be between 900,000 to one million tonnes while between 65,000 to 72,000 tonnes of zircon would be produced.
The markets for both minerals had significant improved over the last two years. Commenting on the outlook for sales, Carvill said conditions were looking positive. Demand for titanium dioxide pigment, which is the main market for ilmenite, had continued to increase in line with global GDP growth.
There are some headwinds for the mineral. The Chinese are able to produce ilmenite as a by-product of their iron ore mining, although production from this source was mostly likely capped as they were at capacity. But increased environmental regulations and enforcement regarding domestic pigment and ilmenite production had disrupted the market.
However, Kenmare agreed higher prices with customers for the first half of its 2018 financial year. It, therefore, expected spot prices would improve over the course of the year. As for zircon, prices “… grew strongly through 2017”, said Kenmare. “These market dynamics are expected to persist in 2018, potentially supporting further price increases.”
Kenmare’s financial numbers are due to be released separately but the firm disclosed that net debt had declined to $34.1m as of December 31 compared to net debt of $44.8m in the previous year.