Kenmare Resources plc Falls 3% Despite Record Production

Kenmare Resources (LSE: KMR), the Ireland-based, London-listed mining company, published a second-quarter production report today.

Kenmare reported that it had achieved record production of ilmenite (a  titanium-iron oxide mineral) and primary zircon for quarter two of 2014, with ilmenite production in the first half having increased 47%, to 445,600 tonnes, and that of zircon by 12% to 21,400 tonnes. Total shipments of finished products in the first half rose by 36%, to 399,000 tonnes.

The company also reported that power stability has improved, thanks to an improvement in seasonal weather conditions and the implementation of a load management plan by its electricity supplier. Kenmare will also be installing a 7.5MW diesel-powered electric generating plant by the end of July, which, the company says, will protect against any unanticipated failure of the power transmission system.

Kenmare says that the recovery in the global pigment market is progressing slower than expected, suppressing titanium feedstock prices, and that  weakness in the Chinese market has led to lower prices for ilmenite. But it reports that market conditions are improving in developed economies, especially the United States and Europe.  Market demand for zircon was stable in Q2, with Kenmare’s customers buying all its production, although prices softened slightly compared with Q1.

Commenting on the production report, managing director Michael Carvill said:

“Kenmare continued to deliver increased production and remains on track to achieving name plate capacity on a sustainable basis. Though product prices remain subdued, we are focusing on the elements within our control to reduce unit costs and conserve cash in this subdued market environment.

“Unit cost reduction will be driven by further production increases in the second half of the year and complemented by the operational efficiencies we are targeting to reduce costs. We will provide a further update on these initiatives with our half-yearly results in August.“

Having fallen 3% by close today, at 15.75p, the share price of Kenmare Resources is down over 24% so far in 2014, compared to an essentially flat FTSE All-Share index. And the story over five years isn’t any better, with Kenmare Resources falling 18%, versus the the FTSE All-Share index’s 66% gain.