Kenmare Resources product demand robust in Q3 2021, supporting strong sales volumes and further price increases

Kenmare Resources plc (LON:KMR), one of the leading global producers of titanium minerals and zircon, which operates the Moma Titanium Minerals Mine in northern Mozambique, has provided a trading update for the quarter ending 30 September 2021.

Statement from Michael Carvill, Managing Director:

“Q3 2021 represents the first quarter of ilmenite production at nameplate capacity of 1.2 million tonnes per annum, an 87% increase on the production achieved in Q3 2020. Despite expected lower grades in Q4, we remain confident in the outlook for 2021 annual production and re-iterate our guidance of 1.1-1.2 million tonnes of ilmenite.

Whilst we continue to remain vigilant against the threats posed by COVID-19, I am pleased to report that over 90% of our employees have now received two doses of vaccine. I’m also delighted to report that this quarter’s record production was achieved with no Lost Time Injuries (LTIs) and, in the past few days, we’ve achieved a new company record of 5 million man hours worked without an LTI.

Market conditions for all products remained strong in Q3 2021 with pricing strengthening quarter on quarter, a robust order book in place and positive outlook across markets.”

Q3 2021 overview

  • Improved Lost time injury frequency rate of 0.08 per 200,000 hours worked to 30 September 2021 (30 September 2020: 0.29), zero lost time injuries recorded during the quarter
  • More than 90% of Mine employees have now received two doses of COVID-19 vaccine
  • Heavy Mineral Concentrate production of 413,400 tonnes in Q3 2021, a 60% increase compared to Q3 2020, in line with expectations
  • Ilmenite production of 314,400 tonnes in Q3 2021, an 87% increase compared to Q3 2020, the first full quarter’s production at nameplate capacity of 1.2 million tonnes per annum of ilmenite, setting a new record
  • Primary zircon production of 15,700 tonnes, representing a 44% increase compared to Q3 2020, benefitting from increased HMC production
  • Total shipments of finished products of 322,600 tonnes, a 173% increase compared to Q3 2020
  • Guidance for 2021 reiterated at 1.1-1.2 million tonnes of ilmenite, plus associated by-prodcuts
  • Demand for Kenmare’s products remained robust in Q3 2021, supporting strong sales volumes and further price increases

Operations update

Operational results for the Moma Mine in Q3 2021 were as follows:

 Q3 2021
tonnes
Q3 2020
tonnes
 % varianceQ2 2021
tonnes
 
% variance
Excavated ore110,084,0008,333,00021%10,938,000-8%
Grade14.83%3.58%35%4.70%3%
Production     
HMC production413,400258,00060%436,600-5%
HMC consumption426,800260,40064%423,2001%
Ilmenite314,400167,90087%283,90011%
Primary zircon15,70010,90044%14,9005%
Rutile2,7001,60069%2,20023%
Concentrates211,9009,00032%11,8001%
Shipments322,600118,000173%249,60029%
  1. Excavated ore and grade prior to any floor losses.
  2. Concentrates include secondary zircon and mineral sands concentrate.

Kenmare’s rolling 12 month lost time injury frequency rate (LTIFR) for the 12 months to 30 September 2021 was 0.08 per 200,000 man-hours worked (30 September 2020: 0.29), with no LTIs recorded in Q3 2021. 4.9 million LTI free hours worked completed by the end of Q3 2021.

HMC production was 413,400 tonnes in Q3 2021, a 60% increase compared to Q3 2020 (258,000 tonnes) due primarily to a combination of higher tonnes of ore excavated due to a full period of WCP B mining in this period and higher grades. Ore grades in Q3 2021 were 4.83%, up 35% on Q3 2020 (3.58%) as a result of WCP B mining in the Pilivili zone. As previously announced, grades are expected to fall to ~3.8% in Q4 2021, before normalising at around 4.1% for 2022.

Production of all finished products increased substantially in Q3 2021 compared to Q3 2020. This was due to a 64% increase in HMC consumption, benefitting from higher HMC availability. Ilmenite production was 314,400 tonnes, representing an 87% increase compared to Q3 2020 (167,900 tonnes), higher than the increase in HMC consumption, benefitting from increased ilmenite content in the HMC and improved recoveries relative to Q3 2020.

Primary zircon production was 15,700 tonnes, representing a 44% increase compared to Q3 2020 (10,900 tonnes), lower than the increased HMC consumption, due to lower zircon contained in the HMC (particularly at WCP B) and a temporary increase in intermediate stockpiles. Rutile production was 2,700 tonnes, a 69% increase (Q3 2020: 1,600 tonnes) as the recovery improvement programme delivered positive results. Concentrates production was 11,900 tonnes, a 32% increase compared to Q3 2020 (9,000 tonnes), reflecting a temporary increase in secondary zircon intermediate stock.

Kenmare shipped 322,600 tonnes of finished products during the quarter, which represents a 173% increase compared to Q3 2020 (118,000 tonnes), as steady shipments were made through the period. This comprised 283,400 tonnes of ilmenite, 18,800 tonnes of primary zircon, 3,600 tonnes of rutile and 16,800 tonnes of concentrates.

Closing stock of HMC at the end of Q3 2021 was 21,000 tonnes, compared with 34,300 tonnes at the end of Q2 2021. Closing stock of finished products at the end of Q3 2021 was 186,300 tonnes, compared to 164,100 tonnes at the end of Q2 2021.

Capital projects update

The ramp up of the HMC pumping system from Pilivili has continued to progress. Less road haulage was required in the quarter and is now being wound down. The overall forecast capital cost for the WCP B project remains in line with prior guidance of US$127 million.

The Rotary Uninteruptible Power Supply (RUPS) project has moved into the execution phase with civil engineering and building construction underway. Fabrication of the RUPS units is complete and transportation to site is underway. The project is expected to be completed in Q1 2022.

Work on the Nataka Prefeasibility Study (PFS) continues. Detailed orebody investigations are progressing well with a view to optimally mining with WCP A at Nataka from 2025. It is expected that the PFS will be finalised in 2022.

Market update

Demand for Kenmare’s products remained robust in Q3 2021, supporting strong sales volumes and further price increases.

The recovery in the downstream titanium markets continued, supporting high utilisations at pigment plants globally and strong demand from titanium metal producers. In 2021, despite an increase in the supply of ilmenite from mines in China and concentrate products from Mozambique, the market has continued to be tight. Positive momentum continued in Q3 2021, as demand for ilmenite product to upgrade into high-grade feedstocks continued to grow strongly in China.

The outlook for Q4 2021 remains positive, with a strong order book in place. The Company continues to monitor the impact of power disruption to downstream industries in China, and the potential effect on demand related to the uncertainty in the Chinese real estate market. However, demand remains strong from our customers in China, and elsewhere, into Q4 and global feedstock inventories remain at low levels.

Demand for zircon improved in Q3 2021, as major economies continued the recovery from COVID-19 restrictions being lifted. Demand from the ceramics and foundry industries has recovered particularly quickly. In China, Kenmare Resources’s zircon concentrate benefited from a tight spot market. Coupled with supply disruptions, the strong demand has resulted in an undersupplied market and prices for zircon are expected to increase again in Q4 following increases in Q2 and Q3.

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