Kenmare Resources plc (LON:KMR) announced its preliminary results for the twelve months to 31st December 2021 on Wednesday 23 March 2022. DirectorsTalk Managing Director, Darren Turgel, caught up with Roger Bell, Director of Mining Research at Hannam & Partners, to discuss its latest results.
Q1. What’s stood out in the FY2021 results?
A1. In general it was a very solid set of numbers with few surprises, but the extent to which Kenmare was able to realise higher prices on the back of ilmenite and zircon market strength in H2 was impressive and led to a 4% EBITDA beat vs our estimate. The 12% carbon reduction target by 2024 and net zero aspiration by 2040 also stood out and demonstrated how far Kenmare has come, maturing into a sustainable, long-life, cash-generative company.
Q2. What’s been the overall dividend performance?
A2. The dividend per share broadly in-line with our estimate at 32.7c/sh, more than tripling year on year, to give a 25% payout ratio as guided by the company.
Q3. How do you see the market and pricing outlook for its core products?
A3. Chinese ilmenite spot price indices have continued to soar in early 2022, which should drive further price increases this year for Moma’s ilmenite, although we note upward pressure on freight rates could temper the upside to prices received by Kenmare in Mozambique.
Q4. Does Kenmare still represent a buying opportunity for investors?
A4. We continue to see a buying opportunity at current price levels with our 650p DCF-based valuation implying approximately 40% upside.
The Mine has been in commercial production since 2009 and is recognised as a major supplier of mineral sand products to a global customer base operating in over 15 countries. Kenmare’s products are key raw materials processed into intermediate products and ultimately consumed in everyday “quality-of-life” products such as paints, plastics and ceramic tiles.