Kenmare Resources plc (KMR) Earnings Call Transcript & Summary

Good day, and welcome to the Kenmare Resources FY '23 Preliminary Results. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Michael Carvill, Managing Director to begin the conference. Michael, over to you.

Thank you, Paul. Welcome, ladies and gentlemen. Welcome to Kenmare's 2023 Results Presentation. I'm Michael Carvill, and I'd just like to -- change to Slide #3, please. I'm Michael Carvill, the MD of the company. I'm going to make an introduction. The body of the presentation today will be a financial review and operating review and a market update by Tom Hickey, Finance Director; Ben Baxter, Chief Operations Officer; and Cillian Murphy, Group General Manager of Marketing. And then finally, I'll make some comments on our outlook at the end. If I could turn to the next slide, please, Slide 4. As previously announced, I will be stepping down as Managing Director of Kenmare in August of this year. It's been a pleasure and a privilege to run the company during the period that I've been in tenure. And the company, in my view, is well set up and will hopefully move from strength to strength under my successor. We have very strong internal candidates for that role. And we have appointed an external search agent to turn up external candidates and the Nominations Committee is running that process, which will, I'm sure, produce a very strong successor to me. Anyway, as we move on to Slide 5. Kenmare businesses run on the basis of three strategic priorities, operating responsibly, delivering long life low-cost production and marketing that production effectively and then allocating the capital has created efficiently. So in terms of operating responsibly, we had achieved a Lost Time Injury period of no injuries of 12 million man hours worked up into to early 2023 -- '22. And then unfortunately, we had some injuries that occurred then in late '22, early '23 but I'm delighted to say that we have now stabilized that situation and we are somewhere around 3 million hours of operations without a Lost Time Injury. So we believe that, that's, that's back on a very, very positive trajectory, and so we're delighted with that. As far as delivering long life, low-cost production, the whole, the whole focus and goal and objective of the project to move Wet Concentrator Plant A to the new Nataka zone, and to equip it for mining in Nataka is to ensure that we manage to stay in the first quartile of the revenue to cost curve for the industry. And we believe that, that is going to be delivered well by the project and look forward to that. And then as far as allocating capital efficiently, we -- our dividend, we're announcing our final dividend for 2023, which will make the full dividend for '23 to $50 million, bring up the full dividend to $50 million. And that means between 2019 and now, we'll have distributed USD 250 million back to our shareholders in a mixture of dividends and share buybacks. So just turning to the next page, Page 6. 2023 was a very strong year for Kenmare. It was our second best year ever. We had revenues of $437 million and EBITDA of $220 million, which, in my view, is a good margin, giving us net profit of $131 million. We did a share buyback of $30 million during the year representing 5.9% of the outstanding shares, and we finished the year with $20 million with net cash. As far as our capital projects are concerned, the move of Wet Concentrator Plant A, to Nataka, which includes the development of infrastructure, the upgrade of the plant itself, the development of Tailings storage facility is all advancing according to plan. We're very happy with project we think it has been well designed, well engineered. We have a very strong project owners team and the contractors that have been appointed are all contractors that have worked with us before and who we know to be capable of delivering. So that's -- we're very comfortable with the way that, that's progressing. So with that, I might hand over to Tom Hickey to provide financial review on 2023.

Thanks very much, Michael. I think as Michael mentioned, 2023 was the second best year in Kenmare's history, delivering $220 million of EBITDA, slightly suffers in comparison to 2022, which was by any standards, a remarkable year. And I suppose the impact that drove those changes between '22 and '23 were slightly weaker product markets generally, and we'll talk a little bit about that later on with Cillian. And lower production, principally influenced by a lightning strike that we experienced in Q1 last year. So those two factors combined drove Mineral Products revenue down 12% with pricing being the bigger impact there. And in reality, the reduction in revenue basically [ falls ] all the way down to the P&L account. We did have slightly higher operating costs, about 4%. Our mine path last year was quite a complex one. It involved a lot of earthmoving and river traverses, and that drove higher equipment rental and [ contemplated ] the higher fuel consumption, but there is a more complex and hopefully better story to tell about cost control, which we'll talk a little bit on later on. Our net finance costs were lower, reflecting lower debt burdens and interest income as interest rates increased, and we made debt repayments. And -- we are showing a higher tax charge due to additional Irish Corporation tax on intra-group dividends. And we have spoken in the past by potentially doing a restructure to address this. But in late '23, the Irish Department of Finance initiated a consultation process around the story issue, which if progressed satisfactory would lead to no additional charge being incurred on these revenues or dividends when they're received in Ireland. Now that's currently the case in all other EU member states. We participated in that consultation process and the outcome is expected this year, could get first indications over the coming weeks. If adopted, that adjustment would remove the need for any amendments to the corporate structure. So we keep you posted on the progress of that as this moves through the system. Moving on to Slide 9. The pricing, while not as strong as '22 was still very, very strong. $418 a tonne significantly ahead of anything we would have realized on a year except '22. We had an 8% decrease in ilmenite prices in '22, 5% decrease in primary Zircon prices. And if you look at the mineral products bridge there, you can see that the reduction in revenue was pretty much broadly split between price at half the impact on the volume and mix, the other half of the impact. And we had a slightly lower level of shipping volumes in 2023, slightly weaker customer demand. We'll talk a little later about where we see that going this year, which is perhaps a more encouraging story and quite a bit of mix, particularly around the high-value co-products such as Zircon. Moving on to Slide 10. We are showing here a significant increase in our operating costs per tonne. I think part of that is the fact, as I said earlier, that 2022 was a remarkable year in terms of co-product revenue. If we look back at 2021, that's cash cost bill [ of ilmenite ] per tonne was $95 per tonne, just perhaps a more realistic [ comparator ]. But we did work hard in 2023 on cost control and operational efficiency. I mean there are costs that are external to us such as fuel and electricity, which we focus on efficiency of units per tonne. There are costs which are internal, such as repairs and maintenance, travel and logistics, et cetera, et cetera. In fact, in respect to 40% of our operating costs, the cost base actually declined in 2023. And that's going to be a focus again in 2024. So in '23, more heavy mobile equipment rental due principally to the mine part, costs associated with the lightning strike that $2 million in there associated with the lightning strike and materially higher diesel prices. We spoke last year about the fact that in '23, diesel prices for most of the year in Mozambique departed from the historic correlation to global oil prices. They have since returned closer to that and are lower in '24 than they were in '23 at the moment. Moving on to Slide 11, Mike, I think. Overall, that gave us -- as Michael said, a very strong operating performance, very strong cash generation performance. We paid out about $70 million in CapEx -- sustaining CapEx around our day-to-day operations, the start of some of the development costs around the WCP A transition to Nataka principally associated with contracting the two new high-power dredges and some studies to support those programs and others. We had a draw on cash from working capital, principally due to Q4 shipments, which is a very strong quarter for shipments with us and slightly higher inventories at year-end, again, Cillian, will speak about this later about perhaps where we see inventories going and how we feel about the market. And we spent or paid out over $86 million in shareholder returns between dividends of [ $57 million ] being last year's final dividend and this year's interim dividend the share buyback of 5.9% of our issued share capital. And interest leases FX at $4 million, reflecting lower debt levels and a little bit of interest income. Retained a good strong cash balance, $21 million, but I think, more importantly, a healthy balance sheet where we have quite a lot of effectively stored value there, higher inventories that give us the opportunity to release that stock into the market over the course of the year. About $130 million of conventional trade receivables, which we're seeing flow back into the business now. And I suppose an important point here is that we haven't, in the last 12 months, done any factoring. So effectively, all of this cash is available to the business. And we had over $100 million of eligible balances at year-end. Keeping a healthy balance sheet is important to us, one important component of that was -- in 2023 was renewing our debt facility. So earlier this year, we announced the continuation of a new resolve -- revolving credit facility with our four principal relationship banks, Absa and Nedbank, RMB and Standard Bank. This is significantly more advantageous to us than its predecessor term loan and smaller RCS in that, it has a higher overall [indiscernible], $50 million more of availability. No amortizing payments, so no obligation to repay during the period, full flexibility to draw and read off fully available for the 5-year term, pushes out the maturities to 2029, well beyond the conclusion of the current capital program. And we closed that and made the initial drawing just after -- earlier this month. So that's fully in place and available to us today. Michael touched a little bit on shareholder returns. It's been a priority of the company since 2019. And we, this morning, announced a final dividend bringing our total dividend payout for 2023 to $0.56 share, a 3% increase on 2022, reflecting the reduced share count following the buyback in October 2023. This payout is 38% of our profit after tax. It's within our dividend policy of 40% of underlying profit after tax and as we said, we expect over the coming years, our payout to be [indiscernible] brand of that other things being in. So looking forward, and Ben will talk in a few moments about where we're going with our capital programs and production expectations. I suppose we have two principal categories in terms of how we allocate capital. The first are the obligatory core day-to-day costs and investments we make. Our sustaining capital to maintain our operations, renew our HMEs keep our kitchen equipment in good operating order. And then the big occasional nondiscretionary capital investments, we're heading into a significant period of that in '24 and '25 with the WCP A transition. But I think an important point to emphasize is that we anticipate this will be the last significant material CapEx investment of the business we required to make for a number of years. Maintaining financial flexibility. I spoke about the RCF. Important to highlight also just in terms of adjusting to working capital variations. We have invoice discount facilities in place currently unused and maintaining shareholder returns. We have our target payout ratio of 20% to 40%. This year, we achieved 38%. Finally, then, we have, I suppose, discretionary or occasional investments growth and improvements. We spend a lot of time thinking about operational resilience. We're doing quite a lot of work on decarbonization. The RUPS project from a number of years ago is an important component of that far from the only one. We've talked about our deferral of the WCP B upgrade project, but that's something that's the circumstances are right, we would be pleased to advance. All focused around the fact that we've got 100 years of reserves here and making sure we're in the best financial operating and capital condition to exploit those in the most advantageous way is our priority. Above and beyond our dividends, we have done two buybacks in the past, certainly something we'd consider in the future. And I think it's always something we want to have in the locker. And finally, corporate development. We're always looking at things to make -- I suppose we have a high bar in terms of requiring projects that we would progress about to be strategically aligned and purely accretive to our business. We believe in the value of Moma, we believe in the value of the resource, and we would think very carefully before adding too much. I'll turn it over to Ben now to talk about operations.

Good morning, everybody. If you can move to Slide 17, please. I'll start with how we are continuing to operate responsibly and advancing our sustainability goals. They have moved forward nicely in 2023 under the four 4 strategic pillars that we have. Our safe and engaged workforce is now improving, and we're now at more than 3 million hours without a lost time injury at this point in time. Diversity and female representation in the business is improving. It's a 4x increase since 2016 and is now at 16%, and more than 40% of our senior management roles at Moma are now held by women. Regarding the natural environment, we continue to decarbonize and our focus is on reducing diesel consumption across the mine. And last year, there was a 14% reduction in Scope 1 emissions. And we continue also in improving biodiversity and future land use and rehabilitation. And that's signified by more than 200,000 trees planted during the year. We continue to develop thriving communities around us, and we've commenced the construction and the agreement for a construction of a district hospital in our local area, we're refurbishing water supplies and more than 385 people are directly benefiting from the sponsored micro businesses that have been initiated on site -- on and around the site. Regarding a trusted business, we have now $79 million of local Mozambican spend and improving supply compliance with those new suppliers who are coming to work with us. And around our security -- our voluntary principles and security and human rights training is happening on a biannual basis. On the next Slide 18, focusing specifically on our safety performance. We now, as I said, at 3 million hours without a lost time injury. And this is a return to a strong safety performance after an equivalent to 6 months since we had our last injury on site. That come -- follows a period where we did have other injuries in Q1, 2 and 3 last year. But we've changed that through the new initiatives that have been put in place to drive a stronger safety culture, focusing on leadership accountability, on improvements to the systems and protocols that we operate and through our new Trabalho Seguro“, meaning safe work communication strategy around Health and Safety. On Slide 19, I'll talk about production. So we achieved our revised Ilmenite production guidance and achieved our original guidance last year on co-products -- sorry, the revised Ilmenite production guidance. Final products were impacted in the year, and they were impacted predominantly at the mining -- in the mining of the heavy mineral concentrate by two areas. Firstly, a 4% decrease in ore volumes as a result of severe lightning strike in Q1 and some continued power supply interruptions through the year. These measures -- various measures have been put in place since that incident to improve our power supply, such as distribution relays for all of the plants, more reliable ones that are better than the ones that were in place before. Incoming -- an incoming breaker project which provides -- will provide a second line of defense to the transmission grids breakers and then additional maintenance support that we've put in place through the year to support the transmission provider. The second area of decrease in production came as a result of lower-than-expected ore grades when WCP B was mining through a wetland area in the Pilivili ore body. This was unexpected. And traditionally, the drilling work that we do ahead of all of our mining has delivered representative samples of the future mining areas. However, in this particular instance last year, we were mining wetlands for the first time, and those grades were not -- were expected to be higher than we were able to achieve. Our investigation showed that it was due to the difficult access for the drill rigs in those wetland areas and also for an overestimation of the sampling grades. We've since redrilled those areas on a comprehensive grade and combines the results of that with our experience of 2023 to remodel the grades going forward. And year-to-date, WCP B grades are proceeding as per the new expectation. Second half of the year, was a much better year -- much better, and we achieved run rates of production of greater than 1.1 million tonnes per annum. Moving on to the next slide, Slide 20. Our outlook for the year ahead. Our '24 production guidance is on track, and it's expected to be in line with the 2023 production levels. So this means that our guidance -- ilmenite guidance is 950,000 tonnes to 1,050,000 tonnes and this reflects higher excavated ore grades that we expect -- sorry, higher excavated ore volumes that we expect and -- but slightly offset by the lower grades which I've mentioned. Production for the year is second half weighted, and that's driven principally by the position of the mine of the dredges in the mine path. The second half is a richer area than the first. but also that we expect and have planned for power interruptions due to the southern hemisphere rainy season, which catches us in Q1. This means that Q1 production for 2024 is -- flight is expected to be broadly in line with Q1 2023. Thereafter, we'll see a significant improvement in the grades in the ground. And also, we'll have this additional operating time because of the better weather conditions and less impact on the mining plants. So during this first half period, we will be making use of the higher closing inventories at the end of 2023 and drawing those down to maintain sales volumes through H1 2024. Beyond 2024 and into '25 and beyond, in 2025, we expect production to be similar again to 2024. This is in consideration of the moderated grades, but also that we'll be in project delivery mode in 2025 with -- and balancing the downtime that comes with project delivery with the new capacity that comes with the delivered project. And then beyond 2025, production will be subject to a final investment decision on the WCP B upgrade, which is currently in DFS phase, we expect that to be -- once that decision is made, a 15-month execution time. And currently, our thoughts to that are around towards the end of 2026 that, that production could come on stream. Moving to Slide 22 to discuss our capital projects. As Michael stated at the beginning, one pillar of our strategy is to deliver long-life, low-cost production and our projects aim to secure this production at Moma and remain first quartile revenue to cost. The first area and the area where we're focusing most at the moment is on the Nataka transition for WCP A. We're marrying the large Nataka deposit, which is 72% of our resource base of heavy minerals with the production plant that delivers the highest capacity. So -- and that's how we expect to secure the production for decades to come at WCP A. There's an 18-month transition in our mining path to get from the finishing areas of Namalope to Nataka, and that happens in late 2025. And then we will be in Nataka for the decades to come with that plant. And we see no significant relocation costs post this WCP A transition. Meanwhile, at WCP B, we're mining in Pilivili, as right now, we expect to transition into the adjacent ore zone of Mualadi and then that transition then eventually into the adjacent Nataka deposit. And we've identified a pathway there that takes us through to 2050 with no further -- no further relocation costs. And as you're aware, we have a DFS currently underway for the WCP B to take further advantage of the dredge path by increasing capacity from 2,400 to 3,400 tonnes an hour and increased production going in the future. Meanwhile, at WCP C, this is a smaller operation. It has a dredge path in Namalope, adjacent to the minerals -- current mineral separation plant, it's expected to be there until at least 2030 and thereafter, there is a developing plan of how it would move to Nataka. However, that relocation is expected to be relatively minor in cost as it will make use of the existing infrastructure that has been established with the move of WCP A and WCP B, and also, it's a much smaller plant, so much easier to move. Moving on to Slide 23 and focusing specifically on WCP A and its transition. This project is really transforming WCP A's capability to mine in Nataka and deliver a high-volume, low-cost mining plan for Nataka. We do that by significantly improving the ability to manage slimes. This has been the thing that's held us back over the last few years in many instances. And we know that in Nataka, that slimes will be higher than we've received in our plant at -- during its life in Namalope. Extensive research is being undertaken through the PFS stage, through the DFS stage, it has continued, and we have done trial mines to the point where we are very confident about the design of the new equipment and the procedures that we'll be using to manage slimes in the future. So the majority of WCP A will be new equipment, and that consists of new dredges, which are high capacity, removing the need for the dry mining, which is more costly but also providing the upfront capability to fill the WCP. That WCP will be fed through a new desliming circuit, screens, surge bin. A new -- the back end of that plant will be completely new as per the diagram at the bottom there. Slimes will be transferred to a Tailings storage facility. This will be commissioned in 2025, and that removes the need for the large training paddock system that has proved now to be costly and cumbersome and we expect through that process of moving to the TSF to get higher cleaner water back to the plants and higher recoveries in the future. This work is all underway now to be delivered in 2025 prior to entering the transition channel. And so we can get -- because we will get benefits from these projects earlier as early as we can. In terms of current status, the dredges have been ordered steel -- cutting of steel for those dredges is about to take place, fabrication of the sliding circuits has now commenced with Pontoons already in construction. The TSF is in detailed design phase with community engagement well underway and the definitive feasibility study for the later WCP A infrastructure requirements in Nataka is expected to be completed in Q2 of this year. That's for things such as roads, stockpiles, pumping and piping. Moving to Slide 24. The capital costs for the WCP A move into Nataka are in line with the expectations that we delivered in December 2023. The CapEx is -- will be up to $341 million and is shared. And the completion of the definitive feasibility study for the infrastructure component of that will be completed in Q2 of this year. The cost for the main -- the bulk pieces of equipment for the future are the dredge -- being the dredge, the desliming circuit and TSF are estimated at $225 million. The infrastructure is weighted to the back end in preparation for moving into the Nataka proper and there is a $10 million tail for that later infrastructure spend. The CapEx will be funded through the operational cash flows in the meantime and also through the new debt facilities that Tom mentioned. And with that, I'd like to pass on to Cillian to deliver the market update.

Thank you, Ben, and good morning, everybody. I'm going to start on Slide 26. What we see is that 2023 was a relatively strong year for Kenmare's products despite headwinds in the pigment and the ceramic markets. Looking at what happened with ilmenite through the year, I think -- what we saw with ilmenite pricing was flat in the first half before weakening in the third quarter as we believe our customers decreased their inventories to a low level. And then since really September, October time, we've seen the spot price out night flatten out. So on a similar story about the first half pricing remained relatively strong before spot prices in Asia decreased in the second quarter and put pressure on -- in home market pricing through the second half. On zircon volumes, actually our customers remain committed to us, and we ended the year with low or minimal Zircon volumes in 2023. Moving to Slide 27, we look at the reasons why the market was relatively strong for ilmenite for us. And we look at two key markets for Kenmare ilmenite in China. And the chloride pigment market is what we've been focused on for a few years now. And we saw in 2023, strong growth. I think it was almost 30% growth in pigment chloride production in China this year as 2023 has plants that were commissioned in 2021, 2022 ramped up, but also new capacity was brought online. A similar story in titanium metal where we have been focusing on and actively marketing our ilmenite products team. We saw another strong year -- strong record year for metal production in China. These two and market segments to acquire high-quality ilmenite and we continue to be a leading supplier to those markets. And that was one of the reasons we saw a strong demand for our product. The other is that the ilmenite have performed other feedstocks in 2023. And that was primarily as Chinese pigment producers gained market share of Western pigment producers. Chinese pigment producers prefer to preferentially consume ilmenite and so that resumed more ilmenite in 2023, whereas Western pigment producers reduced production in response to market demand and therefore, consumed less high-grade feedstock. So there was a shift towards ilmenite away from other products, which benefited Kenmare as well. Moving to Slide 28. I think this slide relate and illustrates our view that the market demand is set to recover in 2024 after 2 years of decreasing demand. And what it shows is that the market is -- the industry is going to need significant investment to get new supply online to meet this demand, and this is exacerbated by the fact we have large industry players that are deep leading and reaching the end of their mine lives in the next year or next couple of years. For these reasons, we see that the long-term fundamentals for titanium feedstocks in particular, ilmenite remain quite strong. Finally, on Slide 29, I'll talk to a little bit of what we're seeing at the moment and I think as I touched on earlier, the year has started better than we expected, and that's coming from greater demand from the pigment market and [indiscernible] for any pigment then was expected there as well. So sales volumes have been strong and pricing holding up better than expected. When we talk to our customers, we believe that inventories of the ilmenite are low, and that means that as pigment produced or ramping up production, which they are in the first quarter, and this will flow through quickly to ilmenite demand. As a result of this, we have been drawing down the ilmenite inventories we built in the second half of last year, joined [indiscernible] quite quickly in the first quarter, and that will continue into the second quarter. As I mentioned earlier, spot prices decreased in the third quarter for ilmenite and then stabilized in September, October. And these have been relatively flat all way through the first quarter and into Q2 at the moment. On our rutile product, we continue to experience. The higher demand than we can supply for this product, albeit prices did come down in the second half of last year. Zircon underlying demand is a little bit more subdued than what we're seeing on the ilmenite side at the moment in early 2024. However, with our customers, we are seeing some brighter points and the disruption to shipping lanes in Suez Canal has led to less competition impacting our European customers and therefore, improving their demand situation. And in China, we've seen a strong rebound from the Lunar New Year with increased demand, particularly for high-quality zircon products, and our customers produce good quality zircon products from the concentrate we sell into China. And as a result, we have achieved a price increase in the first quarter for zircon concentrates. And as we look further out, Zircon demand right now is exceeding our supply as well. So with that, I will turn back to Michael.

Thanks, Cillian. And Mike, if we could just move to Slide 31. Slide 31, I think we've shown this slide before folks, but it shows the journey that Kenmare's taken from -- in 2013, where we were in the fourth quarter of the revenue to cost curve for the industry through to our present situation where we are in the first quartile. And the whole focus of the project that we're embarking on at the moment is to ensure that the company retains that position in the first quartile. We believe that we will do so and do so very effectively and are looking forward to that. So if I -- if I turn to Slide 32, please, Mike. So from my perspective, I think that Kenmare is ideally placed. We have a very long-life ore body. We are investing at the right time to create an operating paradigm, which will keep us as a low-cost producer. Cillian and his team had positioned our products very well in the market. We are in the fasting growing -- fastest-growing segments of our market with long-term customers who value our product, our stability and our relationship with them. And we're in a position where we believe that there are low levels of inventory in the overall supply chain. And so when interest eventually do turn to a downward trajectory throughout the world, that, that will flow pretty directly to the primary producers such as ourselves, and that we'll see benefits flowing through to the company which will, in turn, allow us to continue the strong returns to our shareholders that we have been providing over the last 5 years, I suppose, since we started paying dividends. And so I think the company is very well set. And so with that, perhaps I can transfer back to the operator controller of the conference call, and we can take questions. Thank you very much, everyone.

[Operator Instructions] Your first question comes from the line of Peter Mallin-Jones from Peel Hunt.

I just had a quick question around the plans for WCP B. I was wondering if you could give us, firstly, the sort of time lines for when the studies are due to be finished and therefore, when you'll be sort of approaching a go decision on the B expansion? And then secondly, if you can maybe touch on the factors that are going to go into whether or not you go immediately on the B expansion or whether there may be a pause, just so that we can start sort of forecasting out when we may be able to take views on when that investment is likely to come through?

Pete, it's Ben here. So WCP B upgrade currently in definitive feasibility study phase. That work is coming towards a conclusion, and we expect to complete it in Q2 of this year. So that will stimulate a conversation around what we expect to be a very strong business case to do that expansion. And the decision to defer though the final investment decision on that project really comes around financial flexibility and making sure that we cover the risks around the nondiscretionary project of WCP A moving to Nataka. We need to focus on that project and make sure we get that project thoroughly over the line. So there is no absolute decision on when WCP B upgrade would be commissioned. We have it in our plans. We've tentatively thought about a 1-year deferral at this point in time, which would mean that, that production could come in the second half of 2026. But that's not a decision that's yet been made.

Yes. Look, I completely agree with that, Ben. It's a decision based on financial flexibility and operating bandwidth not simply operating bandwidth for us but also for the contractors that are involved. We don't want to, by giving them too much work that they aren't able to effectively complete what they're doing.

Your next question comes from the line of Richard Hatch from Berenberg.

Thanks very much for the call, and Michael and the team and Michael, all the very best for the future. Just first one is just on WCP B. Just on the CapEx I think it was $41 million, plus $2 million of additional CapEx, so $43 million when you had your Capital Markets Day last year. Is that number still fair? Or do you think you've seen some inflation to that? That's the first one.

So that number was a PFS number, Richard. And the was $43 million, you're right, was at that time. A lot of work since gone in -- and as you know and we know that projects tend to get a little bit more expensive, I do expect some increase there, but I don't expect that number to be a massive increase. So but we will find that number out in the coming months as we complete this DFS.

Okay. And the second one is companies targeted 1.2 million tonnes of ilmenite for a long time. Do you think that, that's an achievable number? I kind of hear what you're saying about moving to high-grade zones. You've got a B upgrade, which hopes you get there too. But then I kind of look at the operational performance, the power issues that have been a challenge over a number of years. And I think you do a very credible job of producing in a tough environment, right? But is 1.2 billion actually a fair number for the market to hang its hat on? Or is it more like a $1.05 million, 1.1 million kind of number?

So I think that eventually 1.2 million tonnes is an achievable number. It requires that WCP -- the big ticket item after the Nataka delivery is that we do need to do that WCP B upgrade in order to deliver it. And I think when we look back over the years, we have expected that power would improve over the years, and we have expected and I think we also did not expect that slimes would have held us back in the 2018 to 2022 period as much as it has done. This project -- the WCP A project is designed to get over that slimes hurdle and put us in a better place to be able to deliver on those and fill the mineral separation plant. So I'm not -- it's not a lost goal for sure, it's not a lost goal. But I think we have experienced -- it's been harder to get there than we had planned it -- we had expected it to be.

Yes. Understood. Okay. And then the third one is just on the company just more strategically. I kind of look at the valuation, it's incredibly cheap. Fast forward 2 years, you've got a good free cash flow generation. But the stock's been under pressure. You've had shareholders come out and uncalled for a strategic review. So have you sort of thought about those strategic options. Are you sort of undertaking a strategic review to sort of consider whether what your options are, whether a sale is meritable at this point? Or can you just update on strategy?

We are not conducting a strategic review at this stage, Richard. And yes, look, we believe the company is performing well, and that is not being recognized by the market at the moment. I think our -- I'm not a believer in fully efficient capital markets, but neither am I -- I believe, are in highly inefficient capital markets. And I believe as we continue to derisk the move of Wet Concentrator Plant B and as the ilmenite price returns to an upward trajectory or upward gradient other than downgrade gradient, we'll eventually start to see that stuff being reflected in the market. We don't believe that it's appropriate time to sort of put the company up for sale at the moment, specifically because prices are low. And so we continually review and continually look at all of the options. That's an ongoing process that the company does. But have we embarked on a form of strategic review? No, we have not.

Okay. Appreciate the color, Michael. And then last one is just to Cillian on the ilmenite market. There's been some sort of questions and chat around kind of more informal supply out of Mozambique and potentially the Mozambique government looking to restrict that or at least get a little bit more financial share from that. Can you just talk a little bit about what's going on in Mozambique, just in terms of the informal supply if you're seeing any scope for disruption there if that does happen, potentially, that's positive for the ilmenite price?

Yes. Richard. Yes, I think there's been a lot of noise about the other Northern Beacon suppliers so far, well, late last year and early this year about thanks to the new taxes being introduced. And of course, that would affect their feasibility, some of them and affect supply. And in other cases, we have seen the suspension of, I think, one of the mines temporarily in Mozambique as well. So all of that is playing into the ilmenite market at the moment, and we hear that from customers, particularly in China where most of that material ends up that there is uncertainty around some of that supply. And that does support demand for our product at the moment.

[Operator Instructions] Your next question comes from the line of Colin Grant from Davy.

And I'd also like to echo the earlier comments wishing Michael, the very best. my question really relates to revenues. In the statement today, you break out the revenues you get from your four largest customers. And one of the things I was looking at there was just the trend in the share of what you generate from your four largest customers, which has declined significantly over the last number of years, which means your revenue base is becoming much more diversified and far less concentrated than it was a number of years ago. And I just wonder if you could give us a bit of color as to how you're managing that. Does it involve particular marketing, developing new customer relationships and whether or not there's any differences in terms of how those contracts are priced or shipped? Or just give us a bit of color as to how you're managing that, I suppose the growth and development of the business in that area.

Sure. I'll hand over to Colin for that -- to Cillian for that Colin, sorry. But just an overall comment from my perspective, we have always focused on ensuring that we have a broad customer base. And where we have had a situation where customers had particularly strong position vis-a-vis in the market. We have always thought to maneuver around that. And I suppose you're seeing the results of that in that broadening of the customer base. But perhaps I could pass over to you, Cillian to give more value-added answer than that.

No, I agree with that. I think that is something important that we do consider is trying to make sure we're not over reliant on any one region or any one customer. I think if you look at the last few years, something that's clearly been happening is the increasing share of China is playing in our market. So we have obviously placed more products there with several customers. So that will be one pipe that has grown and a reason for that. But another key part of our strategy is we have grown a lot in the last few years in terms of our supply and we find important to find the growth projects from our customers, which we see as most likely and try and support those. So we have supported the ramp-up of several different either Pigment or Mineral Separation Plant probably since the last 5 years. So as they look to start production, we made sure they had ilmenite available to them to start their plant and these type of plants don't like to change feedstock. So we have grown with them as they have ramped up, I'd say that probably the main reasons why that has occurred.

Great. And maybe just one final question. Just on the implementation agreement, you've made a comment that discussions are underway. Can you give us a bit of color maybe on potential timing as to when you think that might get concluded, if at all possible at this stage?

Yes. Look, I mean, the implementation agreement is -- it's time for renewal is the end of the year, I think 24th of December or something like that. And there's a process underway. There is a meeting scheduled for next week between the negotiation teams of Kenmare and the government. And it's progressing along. I would be sort of surprised, Colin, if it got fixed terribly early, I think that these things tend to run towards their deadlines. And if it happened on at 11:00 on the evening of the 23rd of December, I wouldn't be terribly surprised. We have been -- we have been encouraging the government for the last 15 months to get out and address it. And they sort of have been but have been slowly up bureaucratically. So it will get done, but it's hard to rational. There is an election in October.

This does conclude today's Q&A session. I'd like to hand the call back over to Michael for closing remarks.

Yes, this is Michael. Thank you very much. Well, well, look, Guys, thanks very much for listening to the call, listening to our story. And I suppose this is the last one that I'll be fielding. So thanks very much over at night.

This does conclude today's conference call. Thank you all for joining us. You may now disconnect.