Kenmare Resources plc (KMR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the latest Yellowstone Advisory webinar with Kenmare Resources who released their half year results yesterday morning. What an impressive set of results they were with strong performances across the board, including a dividend up over 200%. While we're waiting for everyone to arrive, please could you respond to the poll on the screen, asking if you're a shareholder at Kenmare. And while you're doing that, I'm just going to go through a few of the admin points. We've got a presentation today, will last about 30 minutes, and then we'll hand over to Q&A at the end. [Operator Instructions] Following the meeting, you'll be redirected to a short survey. Really appreciate it if you could spend a few minutes completing that. I know management really appreciates hearing feedback from you. So please, as I said, just spend a couple of moments completing that as you exit. I think most people have completed the shareholder poll as we come through. So I'm going to end that. We've got around 80% shareholders and 20% who don't hold shares in Kenmare. So nice to have the shareholders back and also some new people to hear the story. I'm now going to introduce today's speakers. We have Michael Carvill, MD of Kenmare Resources; and Jeremy Dibb, Director of Corporate Development and Investor Relations. Michael, over to you to start today's presentation.

Thanks, Alex. Welcome, everyone. Thank you very much, indeed, for your time. And welcome to Kenmare's H1 2021 Presentation. Just before we move into the presentation, for those people who are not shareholders of Kenmare, maybe I could just give a very quick thumbnail overview of the company. Kenmare is a mining company, which is quoted on the Main Board in London. Our activity, our operations are the operation and further development of the Moma Titanium Minerals Mine in Northern Mozambique. And so this mine produces titanium feedstocks, which are the naturally occurring minerals of titanium and titanium dioxide, which we, in turn, use to make titanium metal, but that represents only about 5% to 7% of total demand. Most titanium feedstocks are used to make titanium dioxide pigment, which is and then turn -- used to manufacture -- any manufactured item, which has either color or opacity, from paper, plastics, fabrics through to inks, feedstock, stuff out of those, basically, anything that's manufactured. And consequently, when we become a bit richer, we use more stuff and we use more titanium feedstock. We are quite a large mine. We represent about 8% of the world's supply of titanium feedstocks. And we have a coproduct called zircon, and we represent about 4% of the world's supply of zircon. We're the largest supplier into the world's titanium feedstock merchant market into the world -- sorry, into the ilmenite merchant market. Ilmenite is the actual mineral that we have the largest -- the large proportion of our ore body. So with that, if I could turn to Slide 4, please, Jeremy? Thank you very much. So we have a strategy, which is based on 3 pillars: growth, margin expansion and shareholder returns. I'm delighted to say that our -- that this strategy has resulted in us being able to deliver increased production and increased profitability, record production and record profitability for the first half of 2021. We have implemented 3 growth projects over the last 2 years, 2.5 years, and those have resulted in a 49% increase in production between H1 2021 and H1 2020, which has allowed our margin expand to coincidently 49% from previously 33%, and that has allowed us triple our -- more than triple our interim dividend payout at $0.0729 a share. Thanks, Jeremy, if I could turn on, please? So just looking at this slide, I think the interesting thing is that while shipments are up and sales prices are up a bit, it's the combination of both of these plus good discipline on costs has led EBITDA and profit after tax to expand quite significantly. This operation is relatively fixed price. It's a high proportion of fixed price and a small proportion of variable price. So as you increase your volumes, you have a very significant effect. I'm also delighted to say that our first carbon emission reduction project that we specifically developed is underway, and that is expected to reduce our diesel consumption by 15%. It's a positive NPV project. So it's as well as being a good project for the planet, it's a good project for our shareholders as well, and we're very pleased with that. And the Nataka PFS. PFS stands for prefeasibility study. Nataka is a new ore zone, which we intend to move into in 2025. And so we're examining how best to mine Nataka, what is the most optimal way to mine it and to start our drilling, et cetera, et cetera. And that study is underway at the moment, well before the moment when we move in 2025. Thanks, Jeremy. Kenmare has been committed to the safety of both its employees and the local community members really from the start, and we believe we've demonstrated that and believe that it's understood through the communities. We have also been committed to run our project in a sustainable fashion, and we continue to do so. Just as a reminder or as a point of interest, Kenmare made a major investment right at the start of our production to build 170-kilometer-long, 110-kilovolt overhead transmission line to connect the project with a sustainable power source. And it is a sustainable power source, which is a hydroelectric dam on the Cahora -- on this called Cahora Bassa on the Zambezi River, which preside -- provides more than 90% of the consumer product used -- is used by Moma. Hence, in terms of carbon emissions per tonne of product, we consider ourselves to be a factor better than any of our peers. We're generally -- the project I mentioned yesterday are just on the previous slide, the RUPS project. We issued our first sustainability report this half. And if you have not the opportunity to see it, we're very proud of this report. And if you've got a chance to give it a quick look on our website, I think you might find it interesting. Finally, we have a long-term sustainability strategy in development, which includes a carbon emission strategy, and that will be available and ready for our next annual report and sustainability report. We have record safety performance. We -- our safety statistics for the first half of 2021 are that we have 0.14 lost time injuries per 200,000 man hours worked, which is a record for our company and [ also shows ] dedicated focus by management and personnel at the mining operation. And finally, COVID-19 has been a scourge on the planet and has been extremely difficult for Kenmare as well. However, I'm delighted to say that we have worked with the Mozambican government and have acquired vaccines for our employees, for their families and for the local community. And so the first round of those vaccinations is now complete, and we are in process of the second round of vaccinations. So when we're all double -- when our team is all doubled and their families and local community are all double-vax-ed, I think that we will be approaching the end of this terrible COVID chapter. And so Jeremy, maybe you feel like giving the guidance -- a little run through the financial results.

Thanks a lot, Michael. Here's the P&L for half. And as Michael says, it reflects the strong uplift that we've had in production and an increase in commodity prices as well, which has flowed through to the bottom line to drive an uplift in our EBITDA of nearly 3x to $82.3 million, which is a record for the half. We did have a slight adverse variance with the mix of products, and that was just a result of the timing of shipments. We had fewer zircon concentrate and retail shipments as a proportion of our overall shipments than we normally would do, but we will see that reverse back in the second half of the year. And so if you look at the revenue bridge in the bottom right-hand corner, you can see the benefit that we had from the increase in the volumes that we produced and the uplift in the volumes sold. The uplift in the pricing with average prices up 5%, and then the impact of that mix, which I said, will reverse in the second half of the year. Despite oil prices being up 5%, ilmenite prices are actually up 18%. And therefore, again, the mix factor here means that we haven't had the full benefit of the uplift in oil prices, but we will see that in the second half. But what we have seen is half-on-half since 2017, we've seen a very steady increase in the prices of all of our products. And we expect that to continue into the second half of the year as pricing for ilmenite has been increasing sequentially through Q1 and Q2 and into early Q3. Moving to next slide. The uplift in production has not been matched in our uplift in sales, and therefore, we've seen a 22% reduction in our cost of production coming down from $183 in the first half of 2020 to $143 per tonne in 2021, which is in line with our guidance for the full year. We haven't seen the commensurate reduction in the cost of ilmenite production. And that again plays back to those coproduct revenues not coming through in the shipments in the first half but will be there in the second half where we expect that average cost of ilmenite to drop further from the $113 per tonne that we achieved in the first half of 2021. And so if you look at our costs over time, with the movement of B and the increase in production we've seen in H1 2021, that cost per tonne has now trended back down from over $180 in the second half of 2020 to the $143 per tonne. Although there were some additional costs with regards to COVID and some HMC road haulage costs that led to a cost increase, we expect those co-written HMC road haulage costs to be lower in the second half of the year. And Mike will go into that when he talked about operations. The online cost per tonne, as I previously mentioned, we expect to come down in the second half as the coproduct sales increase and inventories normalize. And so what's that meant for the net debt position? Well, operating cash flow was $74 million. We spent $32 million on property, plant and equipment. This is the additional CapEx with regards to some of the WCP B moves, which, although we made -- the majority of the project was completed at the end of 2020, some of those project costs were invoiced at the beginning of this year, and so we've seen that cash outflow. And we've had some working capital changes, which have been negative to $42 million, with half of that coming from an increase in trade and receivables. And this is basically as a result of us selling more products and at a higher price, and therefore, you'd expect that increase in receivables. But also, that because we've had so much cash on the balance sheet available to us, we haven't needed to factor our invoices to the same degree. And that means that it's used up to some working capital. We don't expect that to continue in the second half. And therefore, with higher operating cash flow being generated from higher production in sales and the benefit of the coproduct sales and without these working capital changes, we should expect to see the free cash flow increase and, therefore, net debt coming down in the second half of the year. And so when you look at the balance sheet, really, what I'd like to highlight here is that we maintain a strong balance sheet with $56.5 million of cash, and we have reduced the bank loans by about $20 million with a repayment of the half of the revolving credit facility, $20 million was paid in H1. And we expect with the trajectory that we're on to repay the second half of that revolving credit facility in the second half of 2021. And that brings me to dividends, which as a result of the increase in the profitability of the company and the commitment to target a 25% payout ratio for 2021, which is up on our minimum dividend policy of 20%, has led to a dividend being tripled for the interim up from $0.023 to $0.073 in the first half of 2021. The way we split the interim and final dividend is to target a 1/3 interim, 2/3 split, but the actual final dividend will be a balancing payment based on that 25% to reflect the profitability in the second half of the year, which, as I've mentioned, could potentially be higher than first half. And so with that, I'll hand back to Michael to talk through the operational overview.

Thanks, Jeremy. I mentioned earlier that we believe that we have always been committed to sustainability. However, we are enhancing that commitment. I think everyone has been watching fires ravage through California, Greece and just recently, Southern France. So I think we're all very conscious of the increasing requirement on companies today and in the future to upgrade their operations in a way which will not contribute to further increase in temperature in the planet. And so we're working towards that as well as many other companies. We have a client resilience and decarbonization strategy under development. I mentioned that we expect to have that available for our next sustainability report and our next annual report. We already are investing in rotating uninterruptible power supply, which will reduce our diesel consumption by 15% with a consequent similar level of reduction in carbon emissions. Our carbon emissions are already absolutely at a very low level compared with our peer group. We have planted about 120,000 trees over the last 3 years -- 3 or 4 years, and we will continue with that. So we are already working strongly to get towards a position where we have a very sustainable operation. We rebuilt it as we go. We don't leave a grid scar on the planet that our method of mining doesn't require cyanide or sulfuric acid or any chemical addition. We simply mine the material by dredge, separate the titanium minerals that we want and replace the ore behind us. And consequently, we compensate farmers for the use of the land. And then about 18 months later, that land is back in active farming again. So if you go to an area that we have mined and go to an area which we intend to mine, I don't think you would really recognize any difference between them. There might be slightly more gentle undulations in the topography, but otherwise, it'd be exactly the same. We are working strongly to increase our gender diversity. It's not the easiest business to attract a female workforce into, but our workforce is not -- our female membership of the workforce is now more than 11% and is increasing. And finally, we have starting to notice an interesting phenomenon where customers are not asking us what is the content of our -- of carbon emissions included in our product. And in this, we have a great advantage compared with any of our peer growth. And so we are now tracking that, and the customers are tracking our performance. I mentioned in terms of safety that we've got a record performance. That means that we have worked for 3.1 million hours without having a lost time injury. I think that's a good performance. It doesn't happen by accident. It's careful assessment of the risk of every single task. It's focus by site management, senior management, by every single person to take responsibility for his own and his colleagues' safety. Thanks, Jeremy, we could move on. So the -- we have recently implemented several projects. The last of which was the movement of our Wet Concentrator Plant and their dredge from 1 area called Namalope to a new ore zone called Pilivili, which is high grid. We finished mining Namalope. And as you come to an end of any particular ore zone, you end up just taking the stuff that you didn't take previously, and it's a great attempt to diminish. That was quite a project. We had to lift this plant, which is weighs somewhere around 8,000 tonnes and transported 23 kilometers down a road that we constructed especially for the purpose, and then we placed it in a new plant at Pilivili. That went well. We were happy to announce the completion of that project in September of last year. And with the new plant in Pilivili and another plant which we have recently commissioned, Wet Concentrator Plant C and Wet Concentrator Plant A, working well, we have excavated record tonnes of ore in H1, approximately 20 million tonnes. And we expect to continue this way through the second half of the year, which would leave us with 40 million tonnes ore excavation for the total year, which would be a record and is quite a significant mining project that moves 40 million tonnes of ore. Thanks, Jeremy. So just reviewing our production, the -- after we mine our material, after we mine the ore, we put it through Wet Concentrator Plants, which produce heavy mineral concentrate. So they separate the minerals from the [ gaming ] material, which is then deposited behind them. And that heavy mineral concentrate is transported to a Mineral Separation Plant where it's separated into final products. So we produced 798,000 tonnes of HMC, heavy mineral concentrate, in H1. And from that, we made 559,000 tonnes of ilmenite, 28,200 tonnes of primary zircon, 4,200 tonnes of rutile and 20,000 tonnes of concentrates, which we sell for further processing before they become into final products. And we shipped 594,000 tonnes of product. So this is -- these are all good numbers as far as this project is concerned, and anyone who has been following us 3 years will see that as a pretty strong period of production, and we see that it should continue into the second half of the year. Thanks, Jeremy. I mentioned the Wet concentrator Plant B move. That is the one that was completed during the year, during 2020. It includes -- that whole project includes a pumping system that pumps heavy mineral concentrate back 22 kilometers to the Mineral Separation Plant. That pumping system has had some teething problems. Some of the parts have been wearing more rapidly than we supposed to. And that has meant that we have had to continue trucking concentrate back through the first half of the year, which has contributed to slightly increased costs. We understand the issues associated with the pumping system. We are making new replacement parts, which are of higher quality than the existing ones and won't wear out as rapidly, and we believe that this will all get resolved reasonably shortly. And the utilizations for the pumping system will increase to the level that we need and can start trucking. Wet Concentrator Plant C, which we also completed last year as a smaller Wet Concentrator Plant but also a good one, it's performing above its expected levels. There were some small negative points that needed to be resolved. At the end of the project, those have been satisfactorily resolved, and we're closing out the project at this stage and closing it under budget. And finally, the Rotary Uninterruptible Power Supply units, that project is underway, and it will cost us about $18 million but will be a positive NPV project providing greater stability for the operation of Mineral Separation Plant. And therefore, a line that's producing more product and reducing the usage of diesel, which is where we get our savings. Thanks, Jeremy. So in 2025, we are going to move Wet Concentrator Plant A to a new mining area called Nataka. So it's necessary for us to take a very close look at the type of ore body that we're going to be mining to understand in great detail both the grids but the inability and all other aspects associated with this ore body, and we have been working hard to do that over the last while with geotechnical testing -- testing of hydrological -- the hydrology associated with the water model around the ore body and also how we will mine it. And one of the possibilities is that we will mine by dredging but use supplemental hydro mining units. And hydro mining is really high-pressure housing of the ore done towards dredged, which makes the dredged work more efficiently. And we have done a test that tests -- the results that those -- that test has been very positive, and we will do more test work before we complete PFS, which is due for completion in the middle of 2022. Our ore body is very large. We expect to continue to mine with the resources that we have identified already by drilling for about 100 years, somewhat more than 100 years. So therefore, it beholds us to get -- to really optimize our [ style of mine ] because they -- this will continue to pay us and provide returns for our shareholders for the long term. And you can see on the chart on the bottom right-hand side of that screen that is plot of the output from the mine plan through until 2049, which is a long time. Jeremy, do you want to give the ladies and gentlemen a quick review on the market and then we'll sort of make some closing comments?

Absolutely. So just to remind everyone, ilmenite is our primary product in terms of revenues, typically around sort of 2/3 to 70% of our revenues, with the majority of it coming from zircon. The titanium feedstocks, about 5% of them going to welding rodes, so primary use things like shipbuilding; and 5% goes into titanium metal, which is used in the aerospace industry and for medical applications; and then 90% is used in paints, pigments and plastics. And so that's been something which has been actually very strong through the COVID period. Lots of people have been painting their houses at home and consuming paint in that manner. And that's led to a very robust market for us with all of our product prices increasing. Zircon tends to be used more in the ceramics industry and refractories and similarly, as people have been doing work in their homes, has been in demand for zircon and zircon tiles. And on top of that, there have been some constraints on supply to a number of different producers around the world and partly because of interruptions to production for social and other reasons, but also because a lot of mines are towards the end of their lives and reducing production as a result of that. And as I mentioned previously, these strong prices have continued into Q3. We tend to find that our ilmenite price slightly lags the spot market. There's a couple of reasons for that. One is that we set a lot of our volumes to long-term offtakers who may have 3- or 5-year volume uptakes with 6 monthly price resets. And so as the market moves up, our contract pricing moves up every 6 months. But the sales to China, which are shown on the next slide, on Slide 23, you can see represent about 40% of our sales of ilmenite, and the majority of those sales in China were done on a spot basis. So we have a blend of good contracts. In China specifically, it's really where there's been the growth in the pigment market where new pigment plants have been built and titanium sponge production, which is an intermediate product for producing titanium metal in the mine, both of those markets have been growing strongly in China. And our feedstocks are ilmenite specifically because not all ilmenites are equal, are very well suited to those growth markets. There's also been some specific constraints in the high-grade feedstock market as a result of some production being shut in South Africa. And therefore, our feedstock fee is very suitable for upgrading to replace a portion of that supply that hasn't been there. And as a result of this, we saw uplift in Q1 and Q2 and flowing into Q3 in terms of pricing. And so to summarize the outlook throughout the value chain, so we have ilmenite, which then gets turned into sort of an intermediate titanium slag product, which then goes to pigment, which then ends up in paint formulation, which might then end up as DIY paint or to paint cars or other white goods. There's quite a long value chain there. But throughout that value chain, we see normal or low levels of inventory, which we think is very supportive for the market going forward. And the additional production that we produce, whilst it's up dramatically from the levels we were producing last year, that's been absorbed into the market very well, and there's still a healthy amount of demand for all of our products. On the zircon front, the market has been weakened in the last couple of years, but that has tightened substantially. But demand is coming up but also some supply shortages and inventories are very low on zircon front. And therefore, we expect to see some significant increases, and we have been seeing some significant increases in the zircon pricing front in the third quarter, and we expect that to feed through into higher realizations for us in the second half of the year, benefited also by a higher volume of those coproduct sales as that mix returns to normal. And so with that, I'll pass it back to Michael to make some concluding remarks.

Thanks, Jeremy. The -- it has been an objective of our strategy to become the first quartile margin producer in the revenue to cost curve for this industry. We are now in a position where the projects which have been implemented over the last couple of years and the improvements in utilization and organizational systems that we have put in place in the -- at the mine are propelling us to that first quartile position. And this will give us increased cash flow stability and allow us to maintain positive cash flow throughout the commodity cycle. It's a significant advantage for our stakeholders, for our shareholders, if we achieve and maintain this position, and we believe we will. And we believe we will maintain it. And therefore, we will make better margins during periods of scarce commodity situation. And then as the market cycle, commodity cycle occurs and prices cycle downwards, as will inevitably happen at some time in the future, we will maintain most of the cash flows. Thanks, Jeremy, if you could move forward. Our strategy has been based on the 3 pillars that we explained earlier on. And the growth projects associated with that have been low capital intensity projects, which have been very specifically designed to fill unused existing installed capacity. So we had more capacity in our Mineral Separation Plant. So therefore, we had -- all we had to do was create Wet Concentrator Plant C and build that additional capacity. And in many other instances, we've made similar investments to ensure that the installed capacity is operating at its maximum level throughout the system. That has allowed our margins to expand, and that has allowed us to increase our shareholders' returns today but also for the future. And as I mentioned, we have a very long-term project. So we can expect to see good returns for our shareholders and our stakeholders generally well into the future. So thanks very much, Alex, and thank you, ladies and gentlemen. So we're happy to answer any questions.

Jeremy and Michael, thank you very much for that presentation. We are now going to go to questions. Had a couple, as I said, coming ahead of time. [Operator Instructions] The first question sort of covers -- and there have been a number of questions on this, so I'll try and group them together, about product pricing. The first question is, what was the realized sales price for ilmenite in the first half? And then the second question related to that. In the last 3 to 4 months, all of the reported spot ilmenite prices mentioned in the media have been within the range $280 to $380 a tonne. Do you think that Kenmare will be able to achieve realized sales prices higher than $300 a tonne in the next 6 months?

So with regards to the first one, I think $254 was the realized sales price for ilmenite in H1. And so it's easy to look at a Bloomberg screen and get a spot price. And those prices, if they're coming from China, our prices were delivered [ main port ] China, while the prices that we quote are quite -- are prices under the Term 3 on board. So they mean loaded at our jetty into customer vessels. So between us and [ main port ] China, there is a shipping and shipping agent and insurance cost, CIF, and -- current, insurance and freight. And the freight cost between Moma and main port China at the moment is about $60. So what I would say to the question is that we get very good prices for our ilmenite. We are probably the most expensive ilmenite for any particular quality that is on the market. And we leave no additional money on the table. So what we get is what the market is available to pay. And what point you see on a Bloomberg screen should be taken as an indication of trends rather than specifically thinking that this is the absolute price that we could get. Another point about that is that because we agree shipment price and agree with our customer, we then complete documentation and then they have to provide letters of credit. And then we have to find a shipping slot, a loading slot and get a vessel and then ship that to China. By the time that arrives in China, it's maybe 2, 2.5 months after we conclude the price negotiation. And so if a person then looks at the price -- the instantaneous price in China compared with the price that we have achieved and you're in an upward price environment, whether it be a discrepancy and the discrepancy is caused by: a, the freight; and b, the timing.

Brilliant. Thank you, Michael. That was a very clear explanation of the price differences and the prices you achieved. We've had 4 questions on the next topic, and I'm going to group these all together. And they're really asking for an update on the political and security situation in Northern Mozambique and whether that's had any impact on your operations and how you view the situation evolving over the coming 6 months.

So look, firstly, we'd like to say that we are aware of the tragedy that has unfolded in Northern Cabo Delgado in the last couple of years. It's -- for ordinary citizens living in that area, it has been an enormous travesty and tragedy, and we don't make light of it. However, as far as Kenmare and Kenmare's operations, 7,800 kilometers [ south of ] there is concerned. It does not have an effect other than it causes our investors' concerns and difficulties. How the project has -- or how the situation has evolved over the last while is interesting. The Mozambican government signed an agreement with SADC, which is South African Development -- Nation Development Cooperation (sic) [ South African Development Community ] group. And the Rwandan army have arrived in Cabo Delgado, and the Rwandans have effectively brought the pipe to the rebels. They have pushed them back along through a broad suite of the country. The Rwandans have retaken the port, tying up Mocimboa da Praia, and then are pushing them further back into the area close to the Tanzanian border. So militarily, the insurgents have suffered a major blow over the last period. And there, the situation is right now for the government to do the right thing and address the underlying facilitation of the interaction, which is lack of economic development, lack of economic opportunity, lack of education, lack of government services. And the government has to step in now and start to answer those issues. But over the last month, the situation has improved dramatically.

Thank you. Again, another couple of questions linked together here is about the strength of the balance sheet and capital allocation. You should be debt-free in full year 2022. In press reports, you signaled that M&A is not on the agenda. Can you comment on your capital allocation priorities beyond 2021?

Jeremy, do you like to take that one?

Sure. Yes. Absolutely. So we have obviously a dividend policy that we need to make. And also, we need to take into account the fact that Michael talked about, the requirements for some cash expenditures. So we've got the RUPS project, which is both a carbon reduction but also important in maintaining the stability of our power supply. So we think that's an NPV-positive project on certain pre -- consensus assumptions. But also, we need to think about the way in which our project for the move from the [indiscernible] is going to happen. So that's a project which we're doing the PFS on, which will be out next year that will give us an indication of costs. But people should think about it as being in the same ballpark as the move WCP B, which ends up costing $127 million. And so whilst commodity prices are high now and we think there's lots of reasons why they should maintain at high levels in the next coming years, we can't rely on that. And so we need to make sure that we have some cash available to pay for that project to move away because it isn't something which is a discretionary project. The move of A has to happen as we mine the ore in Namalope B [ and needs to move to the trucker ]. And so these things are all taken in balance. For the first half of this year, we haven't reduced our net debt. As you say and as consensus numbers look, that looks like it's happening some point next year. And if we don't have a better use for the cash and we don't think that we need it, then we will look to return that to shareholders. And that might come in the form of a special dividend or it might come in the form of a share buyback or it could come in increased base dividend. But we are cautious that we don't want to increase our standard payout ratio too much at a point in which the commodity prices are very high, and we think that, that 4x dividend cover is something which is very valuable to and hope that shareholders are pleased with the 3x uplift in the dividend that we'll hope to be delivering this year. Anything on that, Michael, to add?

No, I fully agree with everything you said there, Jeremy.

Thank you, Jeremy. A linked question. We've got a couple of people congratulating on the dividend increase. So a couple of people saying it would be nice to have some return of capital through share buybacks. So looks sort of split from the investors on this call. I wondered if you could just comment on the balance of your -- how you think about share buybacks versus dividends.

Yes, look we always consider the potential for share buybacks, and that's always something which is discussed by the Board as well. And when we're doing that, we look at the equivalent rate of return, and that equivalent rate return to share buyback versus a normal dividend is going to be something which changes with the share price at a point in time, and it also changes with our projections of what future profitability might be. And so we've got a base dividend policy. As we go forward, we'll continue to weigh up whether a buyback is the right thing to do or not for the business as we see the value being generated [indiscernible].

Okay. Thank you. Nice comment here. Delighted to hear your reinforced commitment to sustainability. However, I've not heard mention of when you plan to reach carbon net-zero. Surely setting this target is crucial to the development of your climate resilience strategy.

Yes. We are developing climate strategy at the moment. And so the selection of a target requires an understanding of how we need -- what we need to do to achieve that target and how we can achieve that target. So I don't think we can turn around and just say, "Oh, well, look, we're going to get to net-zero," without knowing how we're going to get to net-zero. And so that's where the work is on. That's the work that is underway at the moment. And hopefully, we will be able to come up with a very solid strategy that pleases our stakeholders. But it has to be granted in some form of reality, and we need to understand how we can technically achieve what we commit to achieve.

Yes. We've just recently hired a new sustainability -- manager, sorry, Anna Brog. She joined us from Tullow, actually, only about a month ago, I think. So she's busy working on developing that plan. And we plan to announce that, as Michael said earlier, with our second sustainability report and the annual report next year.

So there's a lot of work going into that, not simply by Anna, but lots of consultants, lots of technology specialists. So we have to be able to figure out how we can do it.

Got a question here specifically on the accounts. Could you comment on invoice factoring? How much are you still utilizing?

Yes. Absolutely. So we're using, as I mentioned earlier, less invoice factoring than we have done previously. But we are still using some form of invoice factoring, which really relates to our 40% of ilmenite sales to China. When those sales take place, they're done on a letter of credit basis. So we're not taking the underlying credit risk on the Chinese parties -- counterparties, so there are some costs that are associated with that. I mean if you look currently, our days of sale of our receivables based on an annualized revenue is probably about 30 days, and our credit terms are typically longer than that. So there is a bit of that benefiting from those sales into China, and we're continually sort of reviewing that and trying to find the best balance. Obviously, we don't want too much money tied up in receivables. But equally, when we're strong with a good cash balance, we don't need to be paying high fees for those. So it's something that's constantly monitored and reviewed by [indiscernible].

Got a couple of questions to go through. One of them is about the valuation and saying that the company looks very good value relative to peers. What is management doing or what can management do to narrow the gap between the valuation and that of your peers?

Well, pleased to say that the valuation gap is less than it was 6 months ago with the share price being higher. But obviously, it's about continuing to deliver on what we said we were going to do, deliver to our guidance, deliver the cash flows that we have been doing and doing events like this and getting out to speak to as many people as possible. Unfortunately, Kenmare doesn't sit in the 52 50. And therefore, we're not in a meaningful way in any indices. And therefore, we need to try and convince investors of the value that we believe that we have, both in terms of the size of the Kenmare deposit but also the scale and the quality being hundred ages life of mine in the first quartile production. And as Michael was alluding to earlier, more and more in terms of the benefits that we think our customers get from buying our product in that the low capital intensity, which is something which we're looking to try and outline and define more.

Great. Thank you. And one last question, specifically here on CapEx. Can you provide some CapEx guidance to '21 and '22?

'21, we've given CapEx guidance of $85 million. For 2022, it will be -- the majority of it will be sustaining capital, which is between $25 million and $30 million a year. It can be slightly lumpy depending on what's going on, and we'll give full guidance for that in January. And there's also likely to be some costs in 2022 with regards to the ongoing studies for Nataka. I think the total studies for Nataka through 2021 and 2022 are about $10 million. Is that right, Michael?

Yes, something around that. Yes.

Some of that will be in this year, and some of it will be next year. I don't have a precise split.

I suppose, Alex, just to remind everyone that continue to progress towards carbon reduction doesn't come for free. And there probably will be some CapEx involved in the next 4 or 5 years in implementing a carbon emission reduction projects.

Brilliant. Thank you, guys. Thank you for answering those questions. So clearly, that comes to the end of today's webinar with Kenmare Resources. Just want to remind you of a couple of things. As you leave today, you'll be asked to complete a short survey. If you wouldn't mind spending a couple of minutes completing that and giving the feedback, that will be very much appreciated. And just to advise you of a couple of webinars coming up now in September. On the 16th, we have Capita plc, and on the 23rd, we have Crossword Cybersecurity. If you want to hear about any further details on those 2 webinars, please visit the Yellowstone Advisory website, www.yellowstoneadvisory.com. And just before you visit there, I'll hand you back to Michael just to say a couple of concluding remarks.

Well, look, firstly, thank you, Alex, for hosting this webinar and giving us the opportunity to speak to the investors who are on the -- potential investors on the call. And just to thank everyone for their time, and I know it's at the end of the day. Thursday is getting towards the end of the week, so we really appreciate your dedication to follow us through and our presentation. It's very kind of you all and appreciate it.

Thank you very much. And please, if there's any outstanding questions, if anyone wants to get in touch one-on-one, please e-mail our IR at kenmareresources.com, and I'll come back to you as soon as I can.

Thanks, everyone.

Thank you now. Bye-bye.

Thanks. Bye.