Kenmare Resources recovers from slow start to the year, but global uncertainty poses future risks

Geopolitical tensions, especially between China, Taiwan and the US, remain a concern for the mining company

Kenmare Resources managing director Michael Carvill, Picture Jason Clarke

Irish mining firm Kenmare Resources predicted it will achieve its estimated earnings this year but that the results will be “at the bottom of the range”.

The Irish mining firm, which is one of the world's leading producers of titanium feedstocks via its Moma mine in Mozambique, gained momentum at the end of May after a difficult five months at the start of 2022.

“After a challenging first five months of the year, production improved in late May and this has continued for the 12 weeks since then,” said Michael Carvill, managing director.

Geopolitical uncertainties could impact this momentum however. The tensions between China, Taiwan and the US could affect Kenmare Resource's business if the situation escalates. For example, its ability to transport product to China could be restricted. China is one of the the mining firm’s biggest markets.

The war in Ukraine is also another cause for concern for Kenmare Resources. Ukraine is also a huge supplier of titanium feedstocks, which ultimately go into the making of everything from paper and packaging to paints and carpets, and the mining firm identified the war there as an emerging risk for its business.

Supply chain risks have also increased for Kenmare Resources. The company said that its ability to carry out capital projects may be affected by the timing of those projects and the costs entailed due to inflation. Supply chain issues may also affect the availability of critical spare parts.

Demand for titanium feedstocks and zircon strengthened throughout H1, despite emerging risks. This allowed Kenmare to achieve consecutive prices increases in the early quarters and a record average received price of $429 per tonne for H1.

The zircon market tightened further in H1 as inventories in the global supply chain were largely drawn down in 2021. Demand has been strong in all major regions except China, which was also impacted by severe Covid-19-related lockdowns.

With no significant new supply entering the market, zircon remains in short supply and prices increased throughout H1.

The company’s operating profits were $75m (€74m), an increase from $59m (€58m) in the same period last year. Revenue, before taking into account delivery and packaging costs, increased by 9% in H1 to $182m (€179m), up from $168m (165m) during the same period last year.

“We expect that our financial position will continue to strengthen in H2 2022, as shipments are anticipated to increase and our order book is largely committed,” said Mr Carville.

Kenmare Resources increased their interim dividend to USc10.98 per share, which is a 51% rise compared to last year’s interim dividend which benefitted from the share buy-bac scheme in December.