All eyes are on the second half of the year for mineral sands miner Kenmare Resources (KMR) as it looks to complete a capital project that could see its production capability soar and, according to analysts, drive an upward re-rating of its share price.
The Irish-headquartered firm, which has its operations in Mozambique, is in the process of moving its Wet Concentrator Plant B (WCP B) to its Pilivili mine, where the company is able to mine significantly higher grade ore.
Once complete the project - the last of three big capital projects the company flagged in 2018 - will enable Kenmare to produce 1.2 million tonnes of ilmenite a year, a 35% increase on its 2019 level, and given the company’s fixed cost base is also expected to drive profit margins higher.
Shares in Kenmare dipped 1% to 206p as the company said the project is approximately 70% complete based on its work plan, and mining continues to be expected to begin at Pilivili in the fourth quarter of the year.
‘GAME-CHANGER FOR KENMARE’
Speaking to Shares, Kenmare’s finance director Tony McCluskey called the project a ‘game-changer’ for the company, allowing it to unlock higher revenue and cash flow from next year.
He said, ‘At the moment we’re mid-table for revenue to cash cost, which is how investors compare us to our peers. By completing the WCP B move, it will put us in the first quartile. We will be able to increase production, reduce our cost per tonne, improve our margins and it will give us more cash we can return to shareholders.’
It comes as the company largely managed to weather the impacts of the coronavirus pandemic, reporting a 5% drop in half-yearly revenue to $116.8 million, with earnings before interest, taxes, depreciation, and amortization (EBTIDA) subsequently falling 13% to $37.2 million.
Davy Research analyst Job Langbroek said Kenmare’s first-half performance was ‘solid’, but added that ‘now it gets interesting’ with its WCP B move.
Langbroek said, ‘Confirmation of the relocation will be an important de-risking event. We expect that this, taken with the evidence of strong titanium feedstock pricing and guidance tracking, should lead to an upward re-rating of the share price.’
