News Column

Kenmare Increases Production, but Runs At a Loss

August 28, 2014

The Irish company Kenmare resources increased production of ilmenite (iron titanium oxide) at its dredge mine in Moma district, on the coast of the northern Mozambican province of Nampula, by 47 per cent in the first half of 2013.

According to the Kenmare statement on its results for the first six months of the year, 445,600 tonnes of ilmenite were produced, compared with 302,600 tonnes in the same period of 2013. The production of rutile (titanium dioxide) rose from 1,900 to 2,800 tonnes (also 47 per cent), and of zircon (zirconium silicate) from 19,100 to 21,400 tonnes (12 per cent).

The total finished product was thus 469,800 tonnes, a 45 per cent increase on the January-June 2013 figure of 323,600 tonnes. The total amount exported was 399,000 tonnes - 36 per cent more than the 294,100 tonnes exported in the first half of 2013.

Nonetheless Kenmare's total revenue from its Moma operations, of 81.2 million dollars, was not much higher than the January-June 2013 figure of 79.3 million dollars. The problem is the declining world market price for titanium minerals - between the first half of 2013 and the first half of 2014, the average price of ilmenite fell by 23 per cent and of zircon by seven per cent.

The company is still running at a loss. Indeed, net losses were three times larger in the first half of 2014 (31.8 million dollars) than in the same period of 2013 (10.2 million dollars). Looking on the brighter sides, Kenmare says it has successfully negotiated with its creditors, and the amended debt repayment schedule "provides greater financing flexibility".

Summarising the situation, the company's managing director, Michael Carvill, said "Revenues have remained broadly flat as higher sales volumes have been offset by a reduction in product pricing, particularly for ilmenite".

"A significant proportion of global production is struggling to cover cash operating costs, before debt service or return on capital: this is an unsustainable situation", he added. "However, although there have been some production cuts these have been negated by new supply coming on stream which was incentivized by previously high prices and these new volumes are delaying a recovery in prices".

Carvill said that Kenmare "has made substantial progress in reducing unit costs, conserving cash and improving production".

He expected that the results for the entire year would "benefit from a more favourable sales mix, increased volumes and targeted cost reductions".

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Source: AllAfrica

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