Kenmare Resources: ‘higher profitability and dividend expected in 2022’ says Peter Mallin-Jones

Kenmare Resources plc

Kenmare Resources plc (LON:KMR) announced its preliminary results for the twelve months to 31st December 2021. DirectorsTalk Managing Director Darren Turgel caught up with Peel Hunt Research Analyst, Peter Mallin-Jones, to discuss its latest results.

  1. What are the highlights from the FY2021 results? The real highlight for us was the strong dividend of 32.7cts, ahead of our 31ct estimate. This came from the better than expected sales prices dropping through to stronger than expected EBITDA and net income. 
  1. How do you see the outlook for the company? Presently the mineral sands industry looks to be in a healthy place. Demand at present looks strong as end demand for pigment remains high. This is allowing pigment producers to increase their pricing, in turn allowing ilmenite producers like Kenmare to benefit from increases in their pricing. With limited new projects that are financed and permitted, supply growth looks constrained, something that could well see prices sustain elevated levels for an extended period of time. 
  1. What are your 2022E forecasts? We are expecting a step in in EBITDA for 2022 on 2021 to US$235m, something that has relatively conservative pricing assumptions within it. Higher profitability means we are also expecting a bigger 2022 dividend than that declared for 2021, and with ~US$70m debt being repaid through 2022E the balance sheet flexibility is increasing steadily over time.
  1. What’s your view on Kenmare’s share price? At present we don’t think Kenmare’s share price is reflecting the long life nature of the Moma deposit and improved competitive positioning within the mineral sands industry. The broader market focus on capital discipline and share holder returns from the mining sector has meant that the industry growth pipeline is substantially smaller at this stage of the cycle versus prior cycles, something that will dampen down the industry’s ability to respond to higher prices. This is certainly true of the mineral sands industry at present.

Kenmare Resources plc (LON:KMR) is an established mining company, which operates the Moma Titanium Minerals Mine, located on the north east coast of Mozambique.

Kenmare is a leading Titanium minerals producer who’s raw materials are strongly linked with global growth and urbanisation. The company is a standout example of a mine that operates to the highest standards of governance, social and environmental policy and performance. This low-cost, bulk mining operation predominantly utilises hydro-generated power (c. 90%)  and progressive rehabilitation processes, and aims to be a catalyst for positive change in its host communities. It aligns with a number of voluntary programmes including the EITI, TCFD and IFC.

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