Kenmare Resources plc

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Hey guys, er thanks very much for taking the time to come and see Ken Mayre today. I may be a new name for many of you, er, but the same disclaimer as you've probably seen all day, so I won't er bore you by reading it. So, who are Kinmaer? What do we do? What should you be thinking about? Well, Kenmare is the owner and operator of the MoMA titanium Minerals mine in Mozambique. We've been there for nearly 40 years, producing for nearly 20 years. We're a big part of the province where we operate. The biggest single industrial business. We're even 6% of Mozambican exports. We're a very big part of the national economy as well. we have a tier one asset, over 100 years of mineral resources at our current production rate. and we, you know, we, because we're so important in the region where we operate, we endeavor to be a very good corporate citizen and also because we're gonna be there a long time. we were included in the FTSE for Good index as of June 2025. We do a lot of, you know, community investment, community empowerment, community enablement, sanitation, etc. etc. to, to, to improve the lives of the people, and our neighbors and, and indeed many of our employees who live nearby. We produce titanium minerals, ilmanite, zircon, rutile. They're key key materials in the manufacture of, in the case of ilmanite and rutile, paints, paper, plastics, and titanium metal. In the case of zircon, ceramics and and ceramic tiles. We're 6% of global supply. We're probably the 4th biggest producer, the biggest being Rio Tinto, although Rio is evaluating a sale of its titanium minerals division. And titanium is on the critical minerals list in the EU, UK, and the US, so tariffs aren't so much of an issue. In fact, you know, trade measures have probably been a net benefit to us in that the EU, Saudi Arabia, most likely India have have erected trade barriers to imported Chinese pigments which are protecting many of our customers. And although we have a modest enough market capitalization south of $300 million we have invested north of a billion dollars in our assets. So, you know, we're probably sitting at the moment at a low point in our pricing cycle, which is probably not something you've heard from many of the other presenters here. So, and, and we've just come through a significant capital investment program which which prepares us for the next number of decades of mining. So mineral sands, a quality of life asset and very correlated to income and economic activity as you can see here in the bottom right, significantly greater consumption per capita in developed economies, North America, Western Europe, China catching up a little bit. A lot of the growth coming out of the, the developing world. India in particular is an area where we see a lot of growth potential. You know, titanium feedstocks are non-recyclable, difficult to substitute. So as people get richer they use more, and, and certainly we're seeing, you know, that, that correlation come through over like that's, you know, 50, 60 years per, per the graphic there. We do have a small exposure to the energy transition. We produce a small amount of monazite which is, used in, in magnets for, renewable energy applications. And you know, because we're very centered in an emerging market, we, we, we endeavor to employ and upskill as many of the population as possible. We're 97% Mozambican. Our general manager is Mozambican. We have a very small cadre of expats, 40, 50 who, who come in 6 weeks on, 3 weeks off, but we have very well skilled workforce, and the next generation of leaders for Kenmayer are, are, are certainly Mozambican. We've got, you know, a tier one asset, an asset that we can plan for multi-decades of, of life. We want to be in a low cost position within the industry revenue to cost curve. that means we can survive the troughs, and we're in a trough at the moment, er, and you know, we need to invest for the long term, and that's what we've been doing over the last number of years. And what we need to, you know, allocate our capital efficiency in, in, in the good times. This is a very cash generative business. In 2022 we had a 60% EBITA, EBITA rate, you know, we're in significantly weaker pricing now, so, we made, a modest loss in 2025, but we are starting to see some of the signs of, of market improvement emerging. Unfortunately. You know, having made a major capital investment, we are at a slightly higher level of net debt, so we're taking the, the, the, the necessary self-help measures you do expect producers to take. Deferring non-essential capital, cutting operating costs, focusing on our shipments and our sales rather than just tons. but certainly during the good times we're very committed to, to paying dividends and, and, and giving strong shareholder returns. Kenmare has been the biggest buyer buyer of Kenmare stock in the last 10 years. We've bought over 15% back on the market. you know, I talked about how important sustainability is for us. you know, 2025 was a really safe year for us, but, you know, the last two years have been outstanding in terms of safety performance, and the development project that we've just done went five years without an LTI, which is phenomenal given we had over 500 people there for multiple different contractors. We work closely with the local community, local hospital 80% complete. We've, we've equipped many, many schools, you know, lots of, of, you know, microfinance initiatives, lots of, lots of, supplier upskilling to support our activities. And that was the the return from that and the license to operate benefit from that was seen during 2024, 202025 when during. A period post the election of some civil unrest, our operations were unaffected and the assets that we put into the community were untouched. we're we are very committed to a healthy environment. 90+% of the energy we use is renewable energy, from the Kapora Bassa Dam, and we are a, very low carbon footprint player. And, and look, we want to be a long term player in Mozambique with a good partnership with the government. So, you know, a mine like MoMA, it's self-contained. We mine, we dredge mine the, the sands, but 95% of the material goes back behind us and is handed back to the community 18 months later. The 4 or 5% of, of heavy mineral concentrate goes into Processing facilities is separated into its constituent minerals and sold from our our port facilities on site direct to end customers. So it's very much from sand to end customers all at MoMA and all under our control. So we have had during because of our capital investment in 2025 that reduced our production very slightly and we were 20% down on almanite production in 2025 and 15% on heavy mineral concentrate. We do expect to see those those numbers pretty much there, thereabouts for 2026, but significantly increasing as we move to the new ore body and and ultimately our target is to get to 1.2 million tons of of of production per annum, which is the capacity of our processing plant. And you know, as I, as I touched on, trough pricing or falling pricing in our, in our, in our space has impacted on our revenue, impacted on our EBITA, impacted on our, our, our, our profitability, and I suppose combined with a very significant capital has, has led us into a net debt position. But our capital, we're, we're very much through our capital at this point. Our capital in 2026 will be 30% of last year's figure. And why do we make that investment? Well, we're going with our biggest mining plant, which is the one you can see there on, on the, the, on the graphic, to our biggest ore body. The Naka ore body is 70% of our reserves. All our three mining plants will end up there and will end their commercial lives there. and, and. To equip this particular plant to mine at Nataka, it needed an upgrade and it needed two new powerful dredgers, which you can see in the foreground of the picture there. Each of them is as long as a jumbo jet. This is a very, very significant operation in terms of its scale. our other two plants don't need to be upgraded in the same way. This is just our biggest plant which needs to be upgraded. So while we've had significant capex in the last couple of years, we've no obligatory capex going forward other than sustaining CAPE. So that our cash flows from the business are unencumbered from 26, 27 onwards. And you know, I've talked about the capital program, we're pretty much through it. 80% of the way through it, but at the end of 2025, the project's been handed over to operations. We're finishing the commissioning at the moment. The remaining spend is over the next 56 years. So we really are over the hump. We have delivered the project safely, we've delivered a project that works, and we're just completing the commissioning at the moment. So maybe just to switch on to the markets a little bit and I've touched a little bit on the on the impacts of, of market movements er on Kenmare, but of course those those impacts are not isolated to Kenmare. if you think back to 21, 22, during COVID, post-COVID, people were stuck at home. Yeah, all their disposable income wasn't being spent on holidays, wasn't being spent on entertainment, wasn't being spent on going out. It was being spent on DIY. Interest rates were lower, people were moving houses or redecorating houses. That's happened a lot less in the intervening period. Of course you don't paint your house. Every year you might paint it every 5 years, so you do have a natural painting cycle. But of course we've got higher interest rates. We've had the Chinese economy or Chinese property market stagnating, and we've obviously had conflict, regrettable conflict in a number of areas, and that has certainly impacted demand, but of course when you do have pricing spikes like this, you have new entrants, and we did see new supply coming into the market. So we have seen a little bit of a little bit of oversupply coming into the market over the last couple of years. You know, principally from artisanal or or less complex Chinese producers who are coming in, you know, picking out the sweet spots of, of ore bodies, and, you know, with quite rudimentary low capex, low cost approaches, but those approaches aren't scalable to the full ore body. They will only take, you know, the 20, 30%, which is the most attractive, highest grade, easiest to mine. And we've seen this in previous cycles as well, certainly in 2012, 2013, 2014. An equivalent set of behaviors happened in Indonesia and Vietnam came on very strong, came on very quickly and and er declined equally quickly. Now, from Khmer's perspective, actually, while these things impact the market, they don't impact our ability to sell. You know, the customers that we've had from the outset are still our customers. If you're building a pigment plant, if you're building a metal plant, if you're building a smelter, you want the same input, you want consistent quality, you want guaranteed availability, you want long duration assets. And so Kenmare's products are typically the first products, first tons. Of products that people buy. The customers we had when we started in 2008-2009 are still the customers we have today and will be our customers into the future. About 60% of our products are sold on long-term contracts. those contracts are volume certain but price revised every hour or twice a year. So we're well positioned in our market. we're seeing certainly the, you know, our, for our principal product Imanite weakened significantly in 25, stabilizing a little bit at the moment in 26, and, you know, because all producers, Kenmare included, are taking the necessary measures to address oversupply and address low prices. In our secondary product, Zircon, which is a smaller market, we actually Saw Zircon stabilize towards the back end of 25 and we've just in the last couple of weeks started to see pricing tick up and, and we are, we're certainly seeing better pricing being invoiced by us for Q2. So hopefully Zircon will be a kind of a will foreshadow a recovery in Ilmanite. We're not budgeting on it right now. We're planning for 2026 to be a a challenging year and you know, and for for prices to stay broadly where they are. But certainly the leading industry commentator TZMI. In its first quarter outlook changed its forecast significantly more positively for, for, both Illmanite and Zircon for the coming years. So that may, that may also be a foreshadowing of price improvements, but not just yet. Maybe one thing that er we've we've heard a lot about and we've spoken a lot to our shareholders and existing in perspective about over the last number of months er is our significant agreement with the government of Mozambique called the implementation agreement. The original agreement which governs our processing and export activities was signed in 2002. It was part of the framework that enabled the project to be built. And we got a very, very good deal. 1% royalty, no corporation tax, no VAT, no customs duties. and while we have the right to renew on those terms, that might be what the agreement says. Pragmatically, that's not really the the way that we should operate with our partner government. So we've proposed to the government a significant uplift in the royalty to overall on blended kind of 4% rate. the government has all, and I've met the president twice, I've met the minister many times, views Ken Mayer as, you know, effectively a case study of how co-participate effectively with international capital. but natural resources agreements for emerging governments can be controversial things, and it's taken a long time to get this sorted. and there's been a few ups and downs on the way. So we're very hopeful that we will be able to make progress on this. The government has said, and even the president said himself when he visited Brussels and the EU a couple of weeks ago, that they're committed to completing it. The challenge of course is that while everybody we speak to is very rational, the permanent civil servants, the technical team, the ministers, even the president, including the president, you know, at a certain point in time something stops being commercial and becomes either political or ideological. And and Mozambique has a number of challenges, you know, US aid has taken away a large swathe of the health budget. They've had catastrophic floods over recent months. They have Islamic insurgency in the north, nowhere near our operations. They're seeking to to renegotiate or to advance LNG projects with total and ENI. And you know, so when we have their attention, we need to capitalize on it. And certainly we have made progress in recent weeks and engaged in constructive discussions and hopefully we'll get a negotiated outcome. If we don't, we have the right to go to arbitration. That will be very much a last resort, and that will be international arbitration in Washington. So, looking at wrapping up where we are with Kenmare. In previous years we would have targeted tons and production as our big target, but for 2026 in particular because of where we are in the market and because we have slightly elevated stocks, we're looking at shipments being our principal target. Ship as much as we can, generate as much revenue as we can, you know, start to pay down our debt hopefully towards the back end of the year. You know, increase our production over coming years to bring our operating costs and our costs per ton down and position ourselves for the recovery. So overall, what have we got with Kenmare? Tier one asset, 100 years of resources, proven team, proven technology, you know, proven resource base. We've got a low cost industry position and we're investing to maintain it. We're preferred supplier to all our customers who've been with us for many, many years. And even when, as happened to us last year, one of our customers goes out of business, we end up, we still end up supplying the plant to the under the new ownership and that's happened with at least one plant over recent months. and, and finally, you know, very committed to generating value in the long term, both for the communities around us, for the government of Mozambique, and for our shareholders. So thank you very much, happy to take any questions. Thank you for that, Tom. I've learned a lot. I didn't know anything about titanium, and I feel like I know so much and can be dangerous to myself and others, so I'm gonna be very careful in some of the que the, the questions that, I ask. But before that, are there any questions from the audience? OK, that's a no, so I will ask some questions. so I'm interested in, in, in the, in the titanium market. You said you're the 4th, largest, producer. Is the titanium market, and you said I think Rio was the, the largest, is there cooperation between these the, the 4 or 5 large companies in terms of, you know, being able to take supply off the market to help stabilize the price, or how does that work? I mean. That would arguably be anti-competitive, Tanya. It's quite an opaque market, but what we do see is that, you know, we have a lot of customers in common. the market itself is maybe 1617 million tons, so it's quite finite and it's quite opaque. It's very hard to get a reference price. We would sell the same product to two different people at different prices, you know, for different reasons, because they have different needs or even in different locations. So what we are seeing is, is that when pricing is, is, is weaker, certainly the bigger producers, Rio will be one, Iluca on the Zircon side, and Australia will be another. They certainly would take volume off or or or. Try and manage supply to to to to accelerate price recovery and actually we're seeing this year because of all those measures, TZMI says there'll be a production deficit in Imanite and that will absorb a lot of this inventory, maybe not all of it, but a lot of it. And, and you know, I, I don't have any operate any mining companies I follow that have operations in Mozambique, so I would be very interested in, in your, you know, you mentioned your contract, you know, most mining companies in Africa. usually have participation or carried interest or something by the government. it doesn't look like Mozambique has that. It does now. It does now, but it didn't have it when, when we originated this project. So, and so and because we've got fiscal stability, there's no, no avenue for them to gain it. So their, their principal participation is taxes, royalties, and obviously the indirect benefits of payroll taxes from the employees. But they don't have, you know, a 10% or 15%, no, no, no, no, they, no, they don't, and they didn't at the outset. They weren't carried in development. We didn't buy it back off them. It just didn't exist at the time. It is provided for in the current legislation. And, and in the current, I think I also heard that you were not paying taxes for in the beginning, on one part of our operations. So our, our mining company pays corporation tax. This this, processing and export business doesn't pay corporation tax, but, but you know. If our proposal is, is accepted, we'll, we'll pay an elevated royalty. OK, so there would be an elevated royalty, and then longer term there would be some corporate tax. There is some corporate tax, but not within this business. It depends on what agreement we ultimately reach. And, and look, I'm very hopeful we will reach an agreement. And, and in, in terms of, you know, because I don't know much about this, titanium market, but what would, you know, what is an average EBITD for such a product in, in normal times for, for, for us, I mean, we, we were, I mean, I mentioned a 60% EBITDA margin in 2022, but in, in the years prior to it and the years following it, we were more like 40%. and certainly like this is a business that certainly has had reinvestment obligations, albeit they're fewer in the future. So it is, it is a cash generative business and, and obviously it's a very much a kind of a, a volume business because a lot of our costs are fixed and if you can, if you can cover those fixed costs and then sell extra tons, you're, you're, you're making a very good margin. You have a long life or body, so it's just a matter, and I, you know, you have a port for shipping. Are there any issues on the shipping front, you know, given everything that's going, I mean, cer certainly. Some of the routes we use may be more challenging. We have a customer in Oman at the moment who'd love to take volume but whose port is blockaded. you know, diesel, like a heavy fuel oil, like any shipping venture will be a challenge for our customers and potentially ourselves. We certainly have enough diesel on site for the next 2 months or so, and who knows what the world will bring in the next 2 months. so yes, we have an exposure to it, but it's, it's a modest enough one on a day to day basis. Any other questions? Oh, we have questions from the audience. Thank you. Thank you. Thank you, Tom. I was fascinated with your, the slide on sustainability goals. we, we are aware of the risks, in certain parts of Africa. I mean, of course we see that in the gold industry for titanium, what are the kind of risks you're seeing and what are you doing around, the sustainability? So we're, we're, we're very fortunate, firstly, If you came to MoMA we'd be very happy if you tried to steal and run away with as much ill night as you could carry because it's, you know, it's a, it's a, it's a bulk commodity we're selling it in thousands of tons. So, so there's no kind of nobody could take it away and sell it, right? That's first. We operate over a very large footprints. You go from one end of where we operate to the next, you know, driving will take nearly an hour. So we're in and out with the community every single day. When we go to site, when I go to site, I go for a run, I go to the local village. Our team go out cycling at weekends. We've been on the beach buying buying seafood off local fishermen. You don't do stupid stuff, but 99.9% of the time it's very, very safe, and the community appreciates that we're the biggest game in town, the biggest provider of, of, of, direct and indirect employment, and you know, the alternative is subsistence agriculture or fishing. So, you know, we don't, we don't, take that for granted. We invest in, you know, economic empowerment initiatives. Educational initiatives, water and sanitation initiatives, we're building hospitals, clinics, and, and, and we do that year on year. We spend 3 to $4 million a year through a not for profit organization and people value it. So I would never take it for granted, but it is something that I think we do well. visitors, when visitors come to MoMA, we've had our board there this year, we've had investors there every year. It's, you know, it's one of the things they're very struck by, and look, maybe we're fortunate because of the commodity space we're in, but, we do our best to make sure that, that we, we, we try and keep it that way. OK, well, thank you so much for that, Tom. Thank you very much for that informative, presentation, and that ends my session for today. Thank you everybody for attending and please note there is a panel discussion at 5:30 on mining and markets in transition. So thank you very much. Nice to meet you. Thanks very much, Daniel. Nice to meet you.