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. We're delighted to have with us the new CEO, Tom Hickey; Ben Baxter, the COO; and Jeremy Dibb, Director of Corporate Development and Investor Relations. While we're waiting for everyone to arrive, please could you respond to the poll on your screen. And while you're doing that, I'm just going to go through a few admin points. The format today is a presentation of the half year results. This will take about 30 minutes, and then we'll hand over to Q&A. [Operator Instructions] But if you do want to ask a question, please type it into the chat box at the bottom of your screen. And we've had a couple of questions in ahead of time and we'll try and cover all questions at the end of the presentation. And then following the meeting, you'll be redirected to a short survey and be -- it would be really appreciated if you could just spend a few moments completing that. I think most people now have completed that poll. So we've got a mixture of about 70% shareholders, 30% non-shareholders on the call today. And I think that's all the admin points covered. So I'm now going to hand over to Tom Hickey, the new MD to start today's presentation. And let me just -- before you start, Tom, let me just put the presentation up on screen.

Thanks, Alex, and thanks, everybody, for taking the time to join us today. For those of you who don't know me, I'm Tom Hickey. As Alex mentioned, I was appointed as Managing Director on -- well, today is first day actually, but we announced it on Tuesday. I've been with Kenmare for just under 2 years, but perhaps spent pretty much 25 years in the wider natural resources environment before that, mostly in oil and gas companies. And obviously, following on from Michael Carvill, after 38 years, those are big shoes to fill, but we've got a great team here at Kenmare and hopefully, we'll be able to demonstrate to you that our business is in good shape, and there are some interesting things happening over the next 6 months or even into '25. And that's what we hope to spend the next half hour or 35 minutes doing. And finally, in being appointed MD, I leave behind a vacancy for CFO, and we're going to get after filling that quite quickly. So maybe just moving on to the next slide. Look, Kenmare has been around operating in Mozambique for 35 years and producing for nearly 20. Our strategy has been consistent, and we've tried to have a couple of key elements to it. The first one is safety and operating responsibly, whether that's how we work as a corporate citizen with the communities adjacent to us, how we treat our employees or how we focus on doing our day-to-day work safely. All of those elements are important to us. We've had, in the first half of the year, 5 million hours worked without a lost time injury, although we did have a tragic fatality not associated with our work, but associated with the operations. 97% of the people we employ in Mozambique are Mozambican. So there's a big dividend and contribution to the economy and Mozambican GDP. And I suppose all of these activities are designed to help us deliver long-life, low-cost production. Why long life? Well, we've got a 100-year mine life. We're going to be here operating for a very long time. So we need to invest to be efficient and have the lowest operating cost to maintain a position in the first quartile of revenue to cost. These are commodity industries. Commodity prices can be volatile. But if you're amongst the most efficient producers, you'll always be able to ride the peaks and troughs. At the moment, we're investing heavily to bring in time, all our production facilities to Nataka, which is an orebody representing over 70% of our reserves. And that gives us -- that will give us the basis for planning and looking far ahead into the future in terms of our strategy. And look, I think the efficiency in which we operate, the markets in which we operate, the fact that we're an important part of world supply enables us to make attractive margins. And we were over 40% EBITDA margin in the first half of the year. Our EBITDA margin in 2023 was over 50%. So that means we generate good cash flow, and generating that sort of cash flow, we need to allocate capital efficiently. We had net cash at the half year. Over the last number of years, I'm sure you'd have seen, we've paid out a significant amount to shareholder -- in shareholder returns, whether by we have dividend or buyback. I mean, including this interim dividend, we paid out over GBP 2.40 per share. And for the half year, this year, it's a 15% (sic) [ $0.15 ] dividend per share. Just flicking on into the financial review and looking at that 40% EBITDA margin that I mentioned, a couple of things to draw out of the results here. Firstly, the first half of the year was a little mixed in terms of weather, and that impacted on our ability to undertake all the shipments we would have liked. And that means that, obviously, we didn't recognize all the revenue that we might have anticipated. Now that will all come back in the second half of the year. And indeed, many of those shipments have already been made in the third quarter. So while we're comfortable and confident around our full year outcomes, it appears on first look that the first half was slightly disappointing. But I think when we look at the shape the business is in, the progress we've made on our projects and how we feel about the wider market, I think we feel that the business is very well placed. So maybe just moving on into the income statement itself. Our mineral products revenue was down 33%. 14% of it was shipment and the rest was a reduction in average price. Now the average price is not -- the fall is not as material as that 22% implies because the average price we record is a mix between our ilmenite price and our co-product, zircon and rutile prices, which are much higher. We had a much smaller portion of co-products in our production mix in the first half of the year -- sales mix, sorry, excuse me. And in particular, there was a zircon shipment, which slipped over from Q2 into Q3. It's made now. If we had, had that shipment in the first half, we'd be looking at maybe closer to a 50% EBITDA margin than the 41% we see here. But nevertheless, we are still generating good cash. We're keeping our costs well under control. We do show in our finance fees, the effect of having done a very successful refinancing early this year, but that's a one-off. And we do see and do expect and are confident that second half financial performance will be significantly stronger due to increased shipments and improved product mix. And maybe just to touch on that and move to Slide 9, Alex. We've already touched a little bit on the fact that shipments were down 14% year-on-year due to the weather and partly and also due to some issues we had in our product conveyor. Ben will cover later. Those are fully remedied now. They're not a constraint in H2. We also saw a modest decline in the prices for -- sales prices of our products. ilmenite prices were down 14% year-on-year, but only 8% -- 7%, 8% in the second half of 2023. And actually more widely, when Jeremy talks later about the market, we see the market as quite balanced. And while we do anticipate some modest further softness in the second half of the year, it's $10, $12, $15 maybe. But certainly, we're starting to see from that balanced market and from Kenmare's strong position in it, the possibility of some green shoots emerging next year because the wider picture in the titanium dioxide market is that, that there's an emerging supply gap. Many mines are reaching the end of their lives, little new supply is coming on stream, and Kenmare is distinguished by its long mine life, making it a reliable counterparty for our customers and meaning we can always sell whatever we produce. Just touching on Slide 10, I mean, I talked about being an efficient operator. We want to be in the first quartile, and that means having an efficient and low unit cost of production. Our total cash operating cost per tonne in the first half fell by 5%, partly due to higher production year-on-year in the first half, partly due to some modest savings. Operating costs are under control, but we also benefited from a $3.3 million insurance receivable associated with a lightning strike we had last year. So it was a cost in last year's P&L account, it's a credit in this year's P&L account. While the operating cost per tonne in total was down, the operating cost per tonne of ilmenite was up, but that's more a mix -- sales mix effect. Again, we expect that to revert to a more normal number in the second half of the year and as we increase our co-product revenues. I think what that efficiency, what does the pricing that we've realized enables us to do and the financial facilities that we have enables us to do was to invest quite significantly. I mean we're moving -- sorry, next slide, Alex. We're moving into or already in a very significant capital program to move WCP A to Nataka. That's over $340 million. We spent about $30 million, $35 million on that in the first half of the year and that spending will accelerate in the second half. And so we moved from net cash at the end of December 2023 to a much stronger net cash position at the half year. Operating cash flow and CapEx were broadly similar. We had a big inflow from year-end receivables. Our year-end receivables at the end of 2023 were $137 million. All of those receivables flowed into the business in the form of cash during the first half. And because we had slightly lower sales in the first half, we obviously had a slightly lower debtors position. So it was a good working capital flow into the business. What that did was enable us to fund the CapEx, fund the dividends, repay -- and repay all our debt and leave ourselves in a very strong financial position. And I think what best demonstrates that sorry -- and in reality, that means that Kenmare probably has the strongest balance sheet it's ever had. I point in particular to the inventories we have there. Inventories are carried at cost on the balance sheet, but of that inventory position of $113.6 million, almost $80 million of it is final products. They're stated at cost. Obviously, the sales price of those and consequently, the flow of value into the business is much higher in due course. And so what -- maybe what I'd like to focus on is exactly what that balance sheet means for how we approach our CapEx and how we're funded to undertake it. And maybe if we move on to the next slide, Alex, I think it shows it very well. The business had net debt up until the end of '22. We've been in a net cash position since then. And you can see that makes a very significant difference to the net assets -- net current assets of the business. So at the half year, our net current assets were close to $200 million. In addition to that, we have a revolving credit facility, the product of our refinancing earlier this year of $200 million, which is undrawn. So that's $400 million of aggregate debt capacity within the business, which is available in addition to the ongoing operating cash flows, which is available to fund our WCP A CapEx, our ongoing maintenance CapEx, our shareholder returns and all other investment activities the company wants to undertake. So we feel we've got a strong balance sheet as we embark on this capital program. And indeed, we have -- we undertook a shareholder perception or shareholder sentiment survey earlier in the year. And one of the things that shareholders are very keen on us doing is maintaining a strong balance sheet and financial flexibility to ensure that we can adapt to movements in the market and take advantage of opportunities as they arise. Finally, I suppose that strong balance sheet and how we feel about the full year enables us to declare an interim dividend of $0.15 a share. A small decrease year-on-year, but I think we've been very clear that our dividend for 2024 won't quite be at 2023 levels because profitability is at lower levels. I think that we expect our dividend to be at the upper end of the 20% to 40% payout of -- profit after tax payout range that is our policy. And we just wanted to illustrate with the first year half -- first half year dividend, our confidence and comfort in the position that the business is in at the moment. With that in mind, maybe to -- and to go into a little bit more detail on some of the operational reasons for that, I'll hand over to Ben.

Hi, good morning, everybody. Thanks, Tom. So I'll start with our health and safety performance. And the graph shows an improving performance over the last 6 months to 9 months, where our lost time injury frequency rate has come down from 0.21 to 0.09. During that period, we had a period of working -- we had one lost time injury in the last 6 months. And -- but during that 8-month -- 9-month period, we had an 8-month period without lost time injury, representing more than 5 million hours of work. This is all coming around because we have a sustained approach to leading with safety. We've got to focus on our standards and on the way we are task planning so that work is done with safety at the front of mind. However, as Tom did mention at the beginning, we did have a fatality occur at the mine during the first half of the year. However, it has been declared as a nonwork-related incident, and this involved the police investigations that took place following that fatality, resulting in the arrest of 5 people. And that has not been declared as part of these statistics. Moving to the next slide, just a more broad approach review of our sustainability goals. Kenmare has always been high -- had sustainability high on its agenda, health and safety, but also the broader natural environment, the way we interact with them and support communities around the business and being a trusted business as well. A couple of highlights here is that we're seeing significant improvements in malaria frequency around the mine. Malaria is endemic at the mine site. And one of the good things to see here is that we're now seeing the children in the -- in and around the mine are being vaccinated against malaria, and that's taking place in the clinics that KMAD, our development agency has supported. One other thing that's notable here is that slimes, which is the clay-sized particles in the orebody that we mine, are now being reconstituted back into the soil post mining, and this is improving the agricultural competency of those soils. And we're expecting to see that crop yields for local subsistence farmers will start to improve with this additioning. Moving to the next slide and a little bit of a discussion through our first half production performance. Production was 4% up year-on-year, both heavy mineral concentrate production at the mine, knocking on into the final production -- final products production as well, 4% up. The reasons for the -- at the mine were that -- well, we did -- we had a difficult first quarter relating to weather and the knock-on effects of weather on to electricity supply. However, over -- we saw significant improvements in Q2 and ended up with a 7% increase over the half in the amount of mining that took place. We also saw good recoveries with some of the improvements that have been placed in the -- on the wet plants such as additioning clean water to the spirals. That offset a 5% increase in grade, which was expected because this year, the grades are really -- they're quite different first half into second half. And in the second half of this year, we're already now experiencing the increase in grades, which are expected to average 4.5% total heavy minerals in the second half, which is about a 15% uplift. On final products, ilmenite production was good. We did see a slight fall in the primary zircon production. This was an effect of us doing some increased maintenance and margin improvement work in the mineral separation plant in Q1. That allowed us -- we built up some intermediate stocks during that period. And some of those stocks were drawn down in Q2, but there are some further stocks that have been drawn down in Q3, and we expect that number to normalize in the second half. You see in the rutile production, we saw much more of the benefits of that improvement work coming through in rutile. And in fact, even in July, the first month of the second half, we've had a record rutile production. Shipments, Tom made mention earlier that we saw shipments less than expected due to the poor weather that we experienced, both some weather relation in Q1, but then also in Q2, high -- poor sea conditions with high swells and also the need to take the product transfer conveyor out on maintenance to do some improvement works there. And therefore, that meant that 2 of our zircon shipments didn't make it before the month end or before the half end. And they rolled on into Q3. Since the product conveyor works were completed, that conveyor has performed very well, reliably, and we don't see that impacting us in the second half of the year and already those zircon shipments have been shipped and are not expected to cause us any lag in our expected H2 shipments. Next slide, please. So for the rest of this year, our target is to make 1 million tonnes of ilmenite this year. That sits in the center of our published guidance. We're on track to do that. And in fact, we're on track to achieve our guidance in all of the metrics that we have publicized. The -- I've mentioned the rutile and the fact -- and really the point of mentioning that is to say that we've had a good start to Q3. We've seen grades, the grades, which I mentioned will be higher in the second half. They are starting to come through in the last parts of July and into the first parts of August. So we're comfortable that the rates of production will increase in order for us to bring production up to that 1 million tonne level in the half -- by the end of this half. On to 2025 and beyond. So 2025, we expect it to be similar to this year and last year around the 1 million tonne level. This is as -- and I'll come to this a bit more when I talk about projects. But next year is a big year for Kenmare in terms of the commissioning of new pieces of plants, dredges and concentrator equipment. And so we are currently working through the detailed planning of that and how that will affect us. But so -- but we expect the production to be broadly similar to this year. After 2025, our production profile really is dependent on making the decision on the WCP B upgrade. This upgrade increases production at WCP B by 40%, and so -- and the intention there is to bring us to the position where we'll make enough heavy mineral concentrate to fill the existing mineral separation plant and achieve 1.2 million tonnes per annum of ilmenite production. I'll talk a bit more about the projects now. The project portfolio at Moma is designed to secure production at Moma into the long-term. We have a 100-year mine life. You can see from the chart that most of the ilmenite sits in the Nataka mineral resource. And we're matching the WCP A plant to that new orebody that we expect to move into at the end of 2025, early 2026. WCP A represents more than 50% of the production at Moma. And so really, the changes which we'll be making to WCP A, which I'll go into on the next slide, they are marrying an existing plant to the new orebody conditions that we expect to see in that plant. This will be the last of the major cost -- costs for relocation because WCP B has already moved to Pilivili and will later move into the adjacent Mualadi and eventually the adjacent Nataka deposits. And WCP C is a very small plant planned to be in Namalope, close to the MSP until 2030. But thereafter utilizing existing infrastructure, such as the road from -- that was built for the WCP B move to move it into a new area around the end of the decade. So a bit more detail about WCP A and the project that we're currently undertaking. The majority of A in order to be able to deliver in the higher slimes orebody of Nataka, most of that equipment is being changed out. So slimes, which is the clay-sized material -- clay-sized particles within the orebody causes -- causes production to be more difficult to attain. So we need larger dredges with higher capacity, the ability to mine harder ore and deliver the tonnes. So we're changing out the 2 dredges at WCP A. And there's an added benefit here, which is that we will achieve -- we'll be able to remove as well the higher cost dry mining production. And in order to manage those slimes which increased in Nataka, we will be moving as well away from the traditional method of managing slimes with a tailing -- trailing paddock system where we do allow slimes to settle out, bringing clean water back to the plant, we will be moving to a tails storage facility. In order to separate the slimes out though, we need to implement some circuit changes. And hence, we are building a new desliming circuit and feed preparation plant, which will have new cyclones, new screens and the surge bin. You can see a picture of the current -- of a trial assembly that's currently been -- just recently been taking place for that new surge bin. And that's all gone very well. And then lastly, all of this upgrade work is taking place between now and the end of 2025. So actually, we expect to start to see some of the benefits of this even before we go to Nataka proper. In terms of the current status, the dredges -- sorry, if you could just nip back a second, Alex, the current status on the dredges, fabrication is underway in Holland. The first dredge is already on the slipway being -- the pontoons being welded together to create the dredge. On the plant, fabrication of the pontoons is underway in South Africa. We expect to start shipping before the end of this month and shipping pontoons as well as shipping the pieces of the surge bin so that construction can start in September at the site. The tails storage facility is being designed according to the new -- relatively new tailings standards that are now standard for the industry. And so that gives us confidence around how that will progress. Construction starts in Q4 for that, and we're starting the infrastructure early works as well. So moving to the next slide, please, Alex. What does this all look like in terms of the finances? Well, as Tom explained earlier, we're comfortably able to fund the $341 million that this project is expected to cost. We've completed the final piece of the Definitive Feasibility Study, which -- and so the cost of $341 million is now a number that we've had in the market since late last year, and we're comfortable with that number and remain comfortable with that number. We spent $33 million of it in the first half of the year, but more significantly is that we've now committed and contracted 54% of that money. And we're in the process of the fabrications and construction about to start. So we expect that commitment to increase to about 75% by the year-end. And that -- hence, we're progressively derisking this project as we go. As part of the last part of the Definitive Feasibility Study, we were able to smooth some of the CapEx out of 2024 and 2025 and push it to 2026, 2027, about $38 million of that. And that's really just us getting more detail on the project and more detail in the future mine plans and marrying those 2 together. And yes, just to reiterate that the CapEx there is to be fully funded through operational cash flows and our debt facilities. We do have 2 other projects underway. One is the upgrade of WCP B and the other is our growth opportunity project, which is called Congolone, referring to an orebody that's to the north of the Moma asset. On WCP B, we've continued to work on the Definitive Feasibility Study. And the purpose of this project is to increase -- we can see that there's a brownfields capability to increase the capacity of mining at that plant by about 40%. And that would deliver sufficient heavy mineral concentrate feedstock to be able to move to filling the MSP and produce 1.2 million tonnes of ilmenite. Those studies continue, but we haven't yet made the final investment decision on that project. We believe it's a very good project. But what we want to prioritize in the near term is making sure that the nondiscretionary WCP A work is completed and done well. And we don't want the WCP B project to, in any way, hinder us in making sure that WCP A is a successful delivery. That additional time that's created by that has allowed us to review more of that DFS, and we're doing some value optimization work at the moment. And we expect to be in a place by the end of this year to make -- to start reconsidering that final investment decision and whether then is the right time to move forward. So we'll be giving more information on that with our year-end update in January. Congolone, it's a growth project. It's a discretionary growth project. We see that there's the potential to produce an additional 300,000 tonnes of ilmenite at Congolone. It's an exciting orebody. We've been spending a lot of time on the mineral resources, understanding that orebody over the past 6 months. And we are comfortable there is at least 20 years of production and perhaps some more if we can find the right mining method to extract lower grade ore that's available there in the resource category. We also have been working on how to transport the heavy mineral concentrate down to Moma in the future, because we see the value of high-quality ilmenite that's there, but we also need to have -- add an additional step in our process because heavy mineral concentrate is 90 kilometers away from the mineral separation plant. So that piece of work is underway right now. I guess the last thing to say here is that the project is taking place. It's working in tandem with the other work. But for sure, this is a discretionary long-term project. And we've got our hands quite full with making sure that WCP A is delivered well over the next year. And so yes, it's happening in the background, but it's not our first priority at this point in time. So I'm going to hand over now to Jeremy Dibb, who will take us through the marketing piece. Thank you.

Thanks, Ben. Good afternoon, everyone. Here, the main takeaway really is that titanium has seen multiple decades of consistent growth. There's 3 main uses for titanium. One is pigment, which is about 90% of demand. About 5% goes into metal and about 5% is used in welding, particularly for large ships, large pieces of metal when they're welded together. The chart on the right-hand side shows the growth in titanium sponge in China particularly. And here, you can see there's been a 3x uplift since 2019 in terms of the rate of demand or the rate of production for Chinese sponge. And Chinese sponge is the precursor to producing titanium metal, which goes into many different applications. It's a very strong and lightweight metal. On the left-hand side, you see the correlation between global GDP and TiO2 pigment consumption, which has shown a strong correlation over time that as the world gets richer and countries urbanize, then demand for TiO2 pigment increases. And the reason for that is TiO2 pigment is used in the production of paints, paper, plastics and inks. There's no substitute for TiO2. It has what's called a refractive index second only to diamonds, which means it's very good at bouncing the light back and therefore, it's used in paint for both its coverage and for its whiteness. So all paints start white and then they tinted different colors. And that's really why there is a constant consumption of TiO2 because you never recover it from your walls. The additional growth that's come from pigment is really being met by increases from China. So China have been building pigment plants and like the rest of the world. And in 2023, they're about 37% of the titanium market. On the metal side of things, it's something that we've really been targeting. It's been growing rapidly, the demand for titanium metal, and it's a segment where we supply a lot of material into. And that's because of the quality of our pigment. And if we turn to the next slide -- sorry, the quality of our ilmenite. Kenmare has 3 different types of ilmenite at different grades. You can see on the top there is IP1, IP2 and IP3. And you can see the various uses. If you think about ilmenite as being broadly 50% TiO2, titanium pigment is 100%. And most titanium in any form is produced originally as an ilmenite. So that 95% is produced as ilmenite and about 5% is produced as rutile. And then there are various processes depending on what the final product is. So it can go -- our different ilmenites can either go into the direct chloride pigment process or it can be used as a sulfate pigment in China or it can be upgraded into a higher grade TiO2 product such as chloride slag, which is 80% to 85% or synthetic rutile. And the reason that, that gives us that flexibility is important for us is as the world changes, as we've seen a shift towards increased pigment growth in China, that's allowed us to target those markets that are growing and the metals market, the titanium metals market. And that's been really important to make sure that we have a balanced customer base, and we're able to maximize the value from the ilmenite that we're producing. So turning to Slide 28. Tom touched on this earlier. We can see that there's been some change in the mineral product revenues, the split that we've had, and that relates to the slightly lower shipments as a result of weather and some conveyor issues in the first half. We expect that to be better in the second half, weather is typically better in the second half and the conveyor is set up now to do the tonnes that we're expecting it to do going forward. And the split was really relating to some zircon shipments that moved from Q2 into Q3. They've now taken part and dispatched. Zircon, as a product for us, essentially costs a very similar amount to produce as the ilmenite, but it sells for about 5x the value. And therefore, it's a big contributor towards profitability, and we'll see the benefits of that in the second half of the year. And finally, turning to Slide 29. The outlook is good for us. We've got a strong order book for the second half of 2024. We sell all or the majority of our products directly to end customers. There's no intermediate traders that take part. And in those discussions, we have a largely committed order book for the second half. As Tom mentioned right now, we see the titanium market as being relatively balanced. So supply is meeting demand. And that's been as a result of Chinese concentrate production increasing, which has offset the decline in production from Kenya and Sierra Leone. However, supply from existing producers is expected to reduce in the coming years and demand is expected to grow, and therefore, new supply will be required to be built, which we think stands us in a good position. And the titanium metal sector, as I've talked about already, remains strong and is an important element of our offtake. If we talk about zircon briefly, the market was a bit weaker last year. Zircon tends to be more affected by house-builds rather than ongoing consumption. And we saw some early signs of recovery in Q1 '24. And that has continued in the ceramics industry in India and in Europe. There's also been a reduction in supply from some of the major producers, and that's helped balance that market, and we're seeing robust demand for those products in H2. And so in summary, we believe that the stockpiles that we have for finished products have put us in a strong position, along with the higher production levels we're expecting in H2 to deliver higher shipments for the full 2024. And with that, I'll hand back to Tom.

Thanks, Jeremy, and thank you all for your time. Look, I think what we're trying to share with you today is our confidence in how we feel about this year, how we feel about the market as -- will evolve over the next number of years, how we feel about the quality of our orebody and the progress of the investments we're undertaking at the moment to exploit it. I think a number of things characterize Kenmare, long-term, long-lived, high-quality assets and efficient cost of production, putting us in the first quartile of the industry revenue to cost curve. A market that while it has fallen from the highs we saw in 2022 is still well placed to demonstrate further growth and hopefully, stronger pricing in the medium term. And the fact that we are consistently generating significant amounts of cash flow and committed to maintaining shareholder payouts. Maybe one final point that we haven't touched on in detail here is that we are, at the moment, renegotiating one of our core operating agreements in Mozambique, the implementation agreement. I've been down a couple of times this year. We've engaged with the government. That license currently expires at the end of December. And I think what we've said to shareholders over the last few days is in the last set of meetings, we've made good progress. The government are bringing the issue through their approval processes, and we'd be very hopeful that we get that resolved before the end of the year. The only thing I would say, however, is that in processes like this, even though our agreement contains the right for us to renew on the same terms, really everybody has to win, and we've been very clear with the government that while we acknowledge that they need some additional return or additional take from the Moma project, that has to be done against background of realizing that this is voluntary on our part. We're negotiating is. They're not -- they can't set terms. So I think there will be some chip on value or some erosion of our position, but we don't believe or we hope it won't be material. And obviously, we'll keep the market updated as we progress through that approval process over the coming months. So thanks for all your time. Thanks for listening. And we're happy to take any questions that you may have.

Brilliant. Thank you very much, Tom, Ben, and Jeremy. And as Tom said there, we're going to move now to Q&A. And if you do want to ask a question, please type it into the text box at the bottom of the screen. So let's start now with the first question that's come in. And that's saying, please, could you share the time line when the new move -- when the new plant move will be complete and the production starts from that plant? Also what will be the capital allocation policy from that point?

Do you want to take the first bit, I'll take the second?

Yes. That's fine. So we're playing a balance. 2025 -- we expect the projects to be delivered in 2025. But as I was explaining earlier on, the -- there's a balance between a wish to deliver 1 million tonnes of ilmenite production and get those projects off the ground and delivered. So we -- obviously, we would like it to be as soon as possible, but we need to play that balance and -- but our expectation is during 2025, those projects will come online.

Yes. And on capital allocation, it's a good question because as I think we've tried to stress maybe not so much yesterday, but in general, this Nataka move is the last kind of obligatory piece of significant CapEx, the company needs to undertake. We will have our normal maintenance CapEx. We'll have occasional investments to move, beat the Nataka, but not of the order that the A upgrade represents. And we'll have voluntary or discretionary projects, as Ben mentioned, Congolone is a good example of something that might emerge over the coming years. So I think what we've been saying to shareholders over the next while is we recognize that, that's kind of a different shape of business in terms of its cash generation and we recognize that we may need to evolve our capital allocation policy. I think we hope to develop that and share it with the market, most likely with results next year. It's well ahead of completing the investment program. So it's something that's very much on our minds. As you know, we've -- Kenmare has been the biggest buyer of its own stock in the last 5 years. We've done buybacks to buy back -- to take 14%, 15% of the stock out of the market. And I think when a company is trading as we are 1/3 of our invested capital, your own stock is generally a good investment. But equally, there's always a good mix between ongoing reinvestment dividends and I suppose more occasional return exercises like buybacks. And I think we'll give a bit more detail on that in a few months.

Next question here, will the declining grades in ores as Kenmare transitions from Namalope to Nataka have a major increase in operating costs. And if so, what ore grades and costs should be expected by the completion of the transition in 2027?

Yes. So I mean, one of the main drivers of the work -- the significant amounts of study work that we've been doing for the move to Nataka has been around ensuring that we remain a first quartile producer and we keep our operating costs under control. And so in determining the mining method, that's why we've ended up spending money, additional money than what was previously or originally expected to purchase high-capacity dredges, knowing that, that will give us low-cost mining and remove -- give us the opportunity to remove the more expensive dry mining component. In addition, we see the opportunity for significant simplification with the use of the tails storage facility in the future, driving down the expected operating costs for how we manage tailings. And so these are the elements which are there to offset the fact that yes, Nataka is further away from the mineral separation plant. So there will be some additional pumping costs, but also that we expect long-term for grades to fall below the traditional grades that Momo has had. So after the transit, so we -- as we move from -- into Nataka and into the transition zone, we have a transition zone, which is quite low grade to 2.5% to 3% at Nataka for that specific area. And then -- but the long-term 20-year path for mining in Nataka for WCP A sits at between 3% and 3.5%. Now as I said earlier on, this -- well, this year's average grade for the overall mine was -- is 4%. So you can see that there is a slight fall there, but the improvements in the mining helped to offset that. And then the other aspect is the WCP B upgrade project, which offsets falling grades by bringing additional mining capacity. And that's for the WCP B operation. WCP B currently operates in good grades, 4%-ish, 4.5%. And as it transitions over '26, '27, '28, they moderate slightly down to sort of the 3.5% zone as well.

This question looks like it's for you, Tom. As the new MD, have you -- any plans to do anything differently going forward?

Look, I think we were asked that yesterday on the Investor webcast as well. It's very clear, I mean, from the shareholder sentiment survey that we did earlier in the year and indeed from our own discussions with shareholders that for the next 18 months, 2 years, operations is strategy to execute the move to Nataka, to do it safely, to do it within the cost envelopes that we've set out and obviously, to maintain our position in the market and strong balance sheet. They are the things that people want to see us doing. I think in the longer term, there's certainly ambition in the company and there may well be opportunities to step out, whether that's doing Congolone or looking at new projects elsewhere. Jeremy leads BD for us. And this year his team have looked at a number of new projects, more on the exploration side, which would be lower commitments of capital rather than acquisitions. Why would we buy some -- another producing interest for full value when we're trading at 1/3 of our invested capital. We see -- we feel that our own asset is very high quality and we focus on getting the most out of it.

We've got a couple of questions here, which have come in on M&A. So I'm just going to ask them together. Have you seen any interest in the M&A field from companies interested in acquiring Kenmare? And are you looking at expanding your sector and acquiring any other companies?

Well, I think I probably covered the second one there. I mean I think that's not something that's certainly top of mind at the moment. And in terms of Kenmare being a target, look, I think there was some talk earlier in the year, shareholders wishing us to consider that. It kind of feels on you -- like it will be unusual at a time when we're doing a major license renegotiation in the middle of a significant investment program. So I would say it's probably not no, but not now. But obviously, that's what we feel, other people can do what they like.

Next question here. Could you provide your view on how the European import tariffs on Chinese pigments could affect demand for your products and also the potential ilmenite prices within the market?

Yes, sure. [ I'll them on it ]. Look, I think the price of pigment doesn't change the demands for pigment. So people don't rush out and paint their houses, get into the DIY store when the price of pigment falls 10% or 15% because it doesn't have a big impact on the cost of the paint. And therefore, whilst there might be a change in trade flows, if Chinese pigment is taxed more highly in Europe, we believe that will just be a change in flows rather than a change in the underlying demand for pigment. And as I talked about, our ilmenite is very suitable for a range of different applications, and we sell to North America, to Europe and to China. So whilst there might be some change in trade flows, we don't think it will affect the sales of our product or really the price that we achieve for them.

Got a question here, which is to do with the dividend withholding tax and the domicile. And I think from a private investor, they're just asking to explain really the impact it could have on them as an investor.

Yes. I mean dividend withholding tax and the domicile. So if you are a private investor and you're based in the U.K., you are able to get a refund on that. If you hold your shares directly, you can potentially apply for an exemption, but the majority of people tend to hold through a nominee account, be that Hargreaves Lansdown or Interactive Investor or whoever it might be. On that basis, they don't tend to allow you to apply for an exemption, but it's relatively easy to be able to get a refund on that 25% dividend withholding tax in Ireland. You have to get confirmation of your tax status in the U.K. and get a tax certificate from the nominee and then you send that off to the Irish revenue and they send you a refund. So if anyone's got any questions on that or had difficulty in the process, get in touch with me, and I should be able to tell.

Brilliant. And if you don't have Jeremy's e-mail, you can just contact [email protected], and I'll forward that on. The next question here is, what's the possible impact on the -- of the U.S. decision to develop titanium metal production systems in the U.S.?

Look, I think we're seeing -- it's not just in the U.S. We're seeing a lot of focus on critical minerals and energy transition supply chains throughout the world. And I think the way we see it -- and Jeremy can jump in here, the way we see it is not so much with particular customers or in particular markets. It's more that -- and I kind of touched on it earlier, Kenmare, because of our long life, because of our stability and predictability in terms of being a counterparty and because we're independent, people like to deal with us and want to deal with us. And I think we see it as distinguishing our position in the market for the next number of decades. I mean, the energy transition and the critical minerals arguments will play out in many different environments in many different ways. And as Jeremy said, just making sure we have a balance of customers and destinations for our products and not being overdependent on any one counterparty should see us well placed there. I don't know if...

Yes. No, nothing to add. I think it's great to see that there's continued demand for titanium metal. We see that only continuing in the future, be it for vehicles or airplanes or other applications. And we're well placed to be able to provide feedstocks into that value chain.

Yes. And maybe to add one thing to that. It's a fast-growing segment of the markets we operate in. While it might only be 5% or 6% of the total usage of TiO2, it's about 17% of our sales. And the reasons why those people buy [ office ] are the reasons I mentioned, long life, predictable counterparty, predictable quality, and they're a major advantage for us.

Brilliant. You mentioned that a couple of zircon shipments got moved from the Q2 into Q3. Could you talk about the impact that perhaps had on revenue and EBITDA?

Yes. I mean, broadly speaking, the quantum of the revenues there is sort of $40 million to $50 million. If you look at average consensus numbers for the year, that's about $160 million of EBITDA, and we did $60 million in the first half. So that's obviously an element of higher shipments overall, but also the benefits that we get from the zircon shipments in terms of profitability adding more.

Yes. I mean we had a 41% EBITDA margin in the first half, whereas for full year '23, it was over 50%. And I suppose that's a more represent -- that depicts a more representative balance and mix of sales.

Okay. Look, just as a reminder, if you do want to ask a question, please type it into the chat box at the bottom of your screen. We've got one more question currently, but we probably got time for a couple more if they come through. But let me ask what's available at the moment, which is with this level of projections, what are the new challenges and needs that can be expected to be met by December of this year?

Do you want to talk about operations...

Yes, I can maybe take a couple of the operational points of that. I mean, I guess, what are the risks to production this year, second half is really is to realize the higher grades that we've been expecting, and I'm glad to see that those are coming through now. And so I don't see that -- I see that as a declining risk and something that we're seeing the additional HMC production coming through. So -- and we've had a good start to Q3. The -- more broadly speaking, we're in delivery mode at the moment. And it's about getting our projects delivered on time and on budget. And so those -- that's really where I see the main focus and what's really driving me and my team.

Yes. I mean, between now and year-end, obviously, we want to deliver our guidance. We want to transition the Definitive Feasibility Study numbers that we have for Nataka into hard contracts with firm numbers in them. And we want to finalize a renewal of our implementation agreement. I mean, they'll be the main objectives, I would think.

And doing it safely.

Yes.

Brilliant. We have no outstanding questions. So that brings us to the end of today's webinar. Thank you very much, Tom, Ben and Jeremy, for presenting and answering all of those questions. And thank you, everyone, for attending. We -- as you exit today, you'll come to a short survey. We really appreciate it if you could complete that. So look, thank you, everyone, for attending, and we hope to see you soon.

Cheers. Thanks very much.

Thanks.