Kenmare Resources H1 Earnings Call Highlights

Kenmare Resources LON: KMR reported lower first-half revenue and a loss after tax as weaker titanium minerals prices outweighed higher shipments and a reduction in cash operating costs.

Managing Director Tom Hickey said the company remained on track to meet its 2026 shipment guidance of 1.1 million tonnes, supported by a solid third-quarter order book and sales of its newer ZrTi concentrate product. However, Kenmare modestly reduced its full-year ilmenite production expectation to approximately 800,000 tonnes as the ramp-up of its upgraded Wet Concentrator Plant A, or WCP A, continued more slowly than expected.

Prices pressure revenue and earnings

Chief Financial Officer James McCullough said Kenmare’s average realized price fell 26% from the first half of 2025 and 31% from the second half of 2025 to $242 per tonne. Ilmenite prices declined to $203 per tonne from $286 per tonne a year earlier, while zircon prices fell to about $1,100 per tonne from around $1,300 per tonne.

Shipments rose 13% to 555,000 tonnes, but the volume increase did not offset lower pricing. Revenue declined 16% year over year. EBITDA was $4 million, while the company recorded a $34 million loss after tax.

McCullough said the decline in the average realized price also reflected a changing product mix. Concentrates represented 20% of tonnes sold in the first half, up from 4% a year earlier, principally due to sales of ZrTi. While the product sells at a lower price than Kenmare’s other products, he described ZrTi as a positive development because it is produced from tailings that had not previously been valued.

Kenmare sold more than 80,000 tonnes of ZrTi during the first half and produced 102,000 tonnes of the material for sale. The company said it expects the product to remain an important part of its revenue mix for years to come.

Cost reductions and liquidity focus

The company reduced total cash operating costs by about $15 million, or 12%, to just under $110 million. Lower labor costs, reduced equipment rentals, and lower diesel and electricity consumption contributed to the improvement, McCullough said.

Unit costs nevertheless increased to $255 per tonne because lower production volumes provided fewer tonnes over which to absorb operating costs. Kenmare maintained its full-year cash-cost guidance of $215 to $225 per tonne and said first-half performance placed it near the midpoint of that range.

Net debt rose to $176 million at the end of June from about $159 million at year-end. McCullough said the measure can be affected significantly by the timing of customer receipts and cash payments, noting that the company received strong payments in early July.

Kenmare generated $6.1 million of cash flow before development capital expenditure during the first half. It spent $23 million on development capital expenditure, including $12 million relating to 2025 expenditure, resulting in a $17 million increase in net debt.

The company also drew down finished-product inventory by 128,000 tonnes, including a larger reduction in ilmenite stocks. McCullough said the inventory sales provided meaningful liquidity, though they generated limited EBITDA because Kenmare had recognized net realizable value adjustments on much of the material at the end of 2025. The company recognized a further $5.9 million inventory adjustment at the end of the first half, reflecting elevated production costs during the WCP A ramp-up.

Kenmare’s lenders increased its revolving credit facility to $230 million from $200 million and agreed waivers and new balance-sheet-related covenants. McCullough said the company had met all covenants at the half-year point and had not drawn, nor planned to draw, the additional $30 million facility capacity.

WCP A ramp-up remains operational priority

Chief Operating Officer Ben Baxter said WCP A averaged throughput of 2,800 tonnes per hour in the first half, below its nameplate capacity of 3,500 tonnes per hour. Major construction and installation work has been completed, but the project’s performance has been “underwhelming,” he said.

Kenmare has successfully debottlenecked feed-preparation units and improved the reliability of off-plant tailings management. The remaining constraints include dredge throughput and utilization, as well as pumping-system performance.

The company has redesigned the dredge winch braking system with the original equipment manufacturer and expects to commission it in the fourth quarter. Baxter estimated that the change could add roughly 10% to 15% to plant utilization. He said performance improved through the second quarter and into the third quarter, although the timing of a full resolution to pumping-system issues remains uncertain.

Development spending is expected to fall to about $7 million in the second half, mostly for infrastructure needed for WCP A’s transition toward the Nataka orebody. Kenmare is also constructing the first 500-tonne-per-hour phase of a second selective mining operation, SMO 2, which is expected to be commissioned in the fourth quarter. A second phase is planned for 2027 and is intended to bring SMO 2 to 1,000 tonnes per hour.

Market conditions and Mozambique agreement

Head of Marketing Cillian Murphy said demand was strong across Kenmare’s products in the first half, but adequate ilmenite supply kept prices under pressure. He attributed the oversupply largely to elevated Chinese ilmenite production and increased imports of heavy mineral concentrate into China, including from Mozambique and other African regions.

Zircon was the brighter market segment, with stronger pricing during the first half, particularly in the second quarter. Murphy said this appeared to be driven more by supply constraints than stronger demand. Kenmare expects zircon pricing momentum to continue in the third quarter and expects a more favorable ilmenite product mix in the second half, though it does not anticipate higher like-for-like ilmenite prices.

Hickey also said discussions with Mozambique’s government on a new Implementation Agreement had progressed constructively. Kenmare continues to operate under its previous terms while accruing royalties at a 2.5% rate proposed under the new agreement, compared with the 1% rate it is currently paying. The cumulative additional royalty accrual since December 2024 was $7.9 million at the end of June.

While Hickey said both sides appeared willing to reach a conclusion, he cautioned that there was no defined timetable for approval by Mozambique’s Council of Ministers. The company continues to have its dividend suspended, with management saying the conditions that prompted the suspension earlier in 2026 had not yet changed.

About Kenmare Resources (LON:KMR)

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