Kenmare Resources plc (KMR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to Kenmare Resources plc 2024 Preliminary Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Tom Hickey, Managing Director. Please go ahead.

Thank you very much. Good morning, everyone, and thanks for taking the time to join us for our preliminary results call today. Before we get into the detail of the call, I'd just like to highlight to everybody or remind everybody that Kenmare is currently in an offer period. As on the 6th of March, we confirmed we received a nonbinding proposal from Oryx Global Partners and Michael Carvill regarding a possible all-cash offer for the business at 530p per share. While this proposal was rejected, we have facilitated the consortium to improve their terms by providing them with limited due diligence. And we should be clear, however, that there's no certainty that an offer will be made. The consortium currently has until 5:00 p.m. on the 17th of April to either announce an intention to make an offer or to announce it does not intend to make an offer for Kenmare, although this timetable can be extended by consent. And finally, I should state that whenever we speak about dividends today, you should be aware that the proposed final dividend that we've announced today would be adjusted against the consideration based on the terms of the proposal we've received. Moving on to the next slide. Just a quick overview of Kenmare to remind everybody of the scale of our business, what we're doing and how we're trying to do it. We operate at the Moma Titanium Minerals Mine in Mozambique. We've been there producing for 18 years. We've been in Mozambique for over 40 years. This is a huge resource, and we have over 100 years of mineral resources at our current rate, and that informs how we think about our day-to-day activities, relationship with government and our investments. We try to be a good neighbor, a good citizen and a good operator. Most of the energy we use is renewable. We use no toxic chemicals in our processes. We make a big contribution to the local and the national economy, including specific programs aimed to improve the welfare of communities adjacent to the mine. We're reporting separately in connection with CSRD, Corporate Sustainability Reporting Directive for year-end 2004 and giving more insight into our day-to-day activities and key statistics. And we're working with the government in Mozambique regarding the extension of one of our principal agreements, the implementation agreement, and we give an update on that in our statement today. We produce titanium minerals. They're quality of life materials that everybody uses our seeds on a day-to-day basis, and we're a meaningful portion of global feedstock supply, approximately 6%. Within the business, we're in the middle of a major capital investment program. We had a separate announcement today giving an update on that. We've spent in our history over $1.5 billion. And the main project that we're engaged in at the moment is the upgrade of our biggest plant, Wet Concentrator Plant A to move to the Nataka ore body, which is over 70% of Moma's Mineral Resources. Moving to the next slide. We have a number of things in 2024 that we were proud of. And one in particular was a very strong safety performance. We just, within the last couple of weeks, passed 4 million hours without a lost time injury. And not just that, but we had our lowest in 2024 All Injury Frequency Rate. So, we've got a big focus on health and safety. We actually went nearly 18 months without an LTI back between '22 and '23, and it's a very important part of our day-to-day work with our team. We work, as I said, a lot with the communities, supporting their facility and welfare. I think that's part of our license to operate. It's part of us recognizing we'll be in the country for a long time, and it's part of our recognizing the footprint of our operation means that we encounter communities on a day-to-day basis. We have a long mine life, and we're focused on having a low-cost industry position with a 40% EBITDA margin for FY '24 despite slightly weakening prices. And in the middle of a significant investment program, we aim to fund that investment program from our cash resources and debt facilities while maintaining a dividend payment. We've returned not far off $300 million to shareholders by distributions since 2019. Moving on to the financial highlights. We reported just under $450 million of revenue, including freight, $392 million of revenue FOB and EBITDA of just under $160 million, which effectively covered all our investments. Prices in 2024 weakened slightly on '23 and are below the high watermark of '22. But we have seen some stabilization in recent weeks, and Cillian, when he speaks later, we'll talk about how we see the market at the moment. Our full-year dividend, $0.32 a share, represents a final dividend of $0.17 a share. Just a reminder, that would be deducted from the consideration from consortium should that transaction ultimately be affected. And we moved within 2024 from a net cash position to a net debt position in accordance with our expectations based on the fact that we spent over $150 million in CapEx. With a separate project update today on our WCP A upgrade and transition to Nataka. That remains within its guided cost of $241 million, and Ben will give an update on discrete elements of that later today. And maybe one more thing to highlight. I think in 2024, we introduced a new way of mining, or a new plant called a selective mining operation. Really, it gives us 2 things. It gives us tonnes, helps maintain tonnes during our investment program and the transition to Nataka, but it also gives us options for lower capital intensity investments and production in the coming years. And we'll talk a little bit about that later on. And finally, in 2024, we refinanced our bank facilities, pushing maturities out to 2029 and no amortization during that period. So, a lot of financial flexibility in [indiscernible]. Moving on to Slide 9. The product mix that we see in 2024 is very similar to '23, very little mix difference. And while we had stronger production in 2023, we had softer product markets. Product revenues were down 10%. Pricing was 14% off, pretty evenly split between ilmenite and zircon, but with higher sales volumes. Cash operating costs were up. Some of that was normal day-to-day increases related to inflation, some of it was due to nonrecurring elements that were specific to 2024. I'm going to touch a little bit on those later. And those items together combined to give us a 40% EBITDA margin, slightly lower than 2023. Maybe one point to highlight here that within the tax charge, we had approximately a 12% effective tax charge on our Mozambican income and the last, hopefully, incident of double tax on dividends that we upstream within the business. because Irish regulations or Irish tax law has now changed. Moving on to our product markets. While Cillian will touch a little bit on this later. We had a very strong second half in terms of shipping and much stronger in terms of mix and pricing. Although we still have some shipment challenges early in Q4, our total volumes were up 4% year-on-year. We did have slightly higher levels than usual levels of finished product stock at year-end. It was lower than at the half year, but those shipment challenges did impact slightly, and we expect our shipments to exceed production in 2025, delivering a small drawdown in finished product stockpiles. We actually had one shipment, which went down on the 1st of January, which had been a day earlier will be reflected in '24 numbers, that was about $6. Our average price was $260 a tonne in '24, down 14% year-on-year and a slightly lower value product mix, which meant although ilmenite was down 12% and zircon down 11%, rutile shipments being down slightly impacted on the price. So, the reduction in revenue was a modest amount of volume and mix, but mostly related to price. Our shipment, processing and shipment activities are covered by what's called an implementation agreement for the subsidiary that undertakes them. That agreement was in the course of renewal and negotiations for renewal in 2024. And as part of those negotiations, we proposed modifications to the investment regime to support the renewal process, even though we have a clear right to the renewal on the same terms. Those discussions are ongoing. Kenmare's existing rights and benefits remain in full force in effect and the conclusion of the process. In essence, the government, the newly installed cabinet is taking its time to review agreements of this nature. Kenmare is not the only company affected. We see it as an orderly process, and we hope that we will complete it before Q1. Moving on to Slide 11. I talked a little bit earlier about the trends in operating costs and the fact that cash operating costs were up 7%. About half of that was, as I said, normalization, labor costs, particularly our agreements with unions, which have CPI terms in them and power costs, which also have some CPI terms in them, but also reflect the fact that WCP B, in particular, approached what is likely to be, we expect to be almost its furthest point away from our mineral separation plans in 2024, requiring more electricity, more transportation, more piping of HMC and thus more costs. The nonrecurring items, and we highlighted some of these when we spoke to you last year, 2024 was a year when we had a lot of HME Heavy Mobile Equipment rentals for firm construction and valley crossings related specifically to the mine plan for '24. The shipment challenges that I mentioned earlier related to weather required, resulted in us incurring slightly higher than usual demurrage costs. And we have some senior management transition costs during the year as well. But the costs overall benefited from our higher production volumes. So, we do see an increase in total cash cost per tonne of ilmenite, mostly related to slightly weaker co-products. We are focused on continuing to invest to be one of the leading players in the market from a revenue cost perspective. And when Ben speaks about the Nataka transition, our investments have been designed to achieve. Just moving on to cash. As I mentioned earlier, we have moved from net cash at the end of '23 to net debt at the end of '24. That was very much in line with our expectations. And anticipating that, we undertook a refinancing of our debt facilities in the first quarter, giving, resulting in a new revolving credit facility of $200 million, which, as I said earlier, has no amortization to 2029. The story is really quite simple. If we look at our operating cash flow and cash from working capital management, that's about $160 million. That covered all our CapEx and financing and effectively the movement from cash to debt is our shareholder return. Within the CapEx, the bulk of it was development, the bulk of it was related to the WCP A transition, and those costs will continue. We had our normal sustaining CapEx investments some improvement work related to the SMO that we'll speak about a little later on and ongoing study. Moving on to Slide 13. Balance sheet continues to be in good shape. We have over $240 million of net current assets at year-end. We're seeing, in particular, our trade and receivables reflect the fact that we're actively managing that by selectively factoring those receivables to accelerate cash flow, minimize drawdowns on our debt facility and effectively minimize the overall cost of our financing. And that's something we do day-to-day, month-to-month, and we'll continue to do during the course of the year. We did have slightly higher inventory due to the higher finished product stock at year-end, but hopefully, we'll draw down some of that this year. And we feel that we're in a strong position, which we'll touch on in terms of our funding this year and the coming years of financing based on the combination of our current assets and our undrawn debt facilities. So, if we look at Slide 14, you can see that the combination of our net current assets and available RCF is more than twice our 2025 CapEx and almost twice our 2025 and '26 CapEx. So, we believe we're well placed to fund our ongoing investment obligations by combining our operating cash flows and the available and pay dividends and maybe moving on to dividends. We declared a final dividend of $0.17 a share, bringing the total proposed 2024 dividend to $0.32 a share and just under $29 million. I should highlight that because we're in an offer period, we do require takeover panel to confirm that our dividend proposal is in the normal course, and that confirmation has been received. We have a dividend payment policy of up to 40% of profit after tax. On a nominal basis, the payout represents 44%. But effectively in considering the final dividend, we adjust for the nonrecurring items I mentioned earlier. We expect generally our dividend payout ratio smooth our shareholder returns as we operate in a cyclical market. And one of the things we've emphasized for our shareholders is that while dividend payments may vary in periods of capital investment and based on business performance, we will expect to pay throughout our investment. Finally, just a reminder that this dividend will be adjusted against consideration payable by the consortium in the event that the current proposal results in a transaction. And looking a little longer, we have a number of ways we think about our financial resources, how we allocate them and what's most important. First of all, it's our capital requirements, our sustaining capital to maintain our day-to-day operating capacity and our occasional nondiscretionary capital like the WCP A upgrade. Now I should highlight that the WCP A upgrade that we're undergoing at the moment is the last nondiscretionary or effectively mandatory significant investment company needs to undertake. And so, as we move out of that, cash flow generation should improve. We want to maintain financial flexibility. We want to maintain conservative gearing. We have our RCF and our invoice discounting facility, and we manage those, or we combine the utilization of those for best effectiveness. We have a dividend policy, and we paid at the upper end of that payout ratio in 2024. And there, I suppose the core nonnegotiable in terms of capital allocation. Then we have discretionary capital allocation, decarbonization, production increases such as the SMOs, thinking about how we might expand our production or grow our production to accelerate the monetization of our reserve base. Additional capital returns, supplementing the regular dividend as we have done via share buybacks in the past and potentially by a special dividend in the future. And finally, corporate development, not a principal priority of us at the moment, but we do keep an active review of all projects that are in the market and emerging and certainly, we think it's something that will become more of a focus over the coming years. Thanks very much, and I'll hand over to Ben Baxter, our Chief Operations Officer.

Good morning, everybody. As always, I'll start with sustainability. And during the year 2024, we've advanced our commitment to the 4 pillars that we operate to. The first one being safe and engaged workforce, and I'm delighted that 2024 and moving into 2025, we're operating Moma at the safest level that it's ever had. The number of injuries is down with a frequency rate of 0.93 per 200,000. On thriving communities, we continue to support local communities, and we've particularly been focusing around health in the last year. We have a construction of a new local district hospital that's going to be, that's being built and is supporting the existing health centers that we have. And we've been focusing on the upfront clean water provision to all of the villages that are surrounding the mine. On the environment, we're proud that we've achieved a 12% reduction in carbon emissions in 2024. That's relative to a baseline from 2021 that we've been working to. And most of that's come from real savings in the business as we have become more efficient at using the mineral separation equipment and the dryers in our processing plant. And then lastly, on our trusted business, we continue to be awarded the most transparent company or extractive company in Mozambique, and we won that award again for the fourth time. On to the next slide and maybe just a little bit more building on the focus around safety. As I said, we're now safer than ever at Moma. And in 2024, we recorded only 2 Lost Time Injuries. That means that our LTIFR or Lost Time Injury frequency rate dropped to 0.06. And that's along with the low number of incidents means that we're now, we're recording both less incidents and incidents with lower severity. That's come about because of, we believe, because of the initiation of a process called Trabalho Seguro. It works towards the, to developing a strong safety culture in the business, and it focuses particularly on authentic and courageous leadership of our management, focusing on the standards of the way we work, planning for safety and doing proper risk assessment and the increased field time and coaching that we do on a day-to-day basis. Moving to production. We had a solid production in all of our products in 2024, particularly impacted by really very strong HMC production in the second half. That came around because in 2024, we had a record ore mined or excavated ore, and this helped offset the lower grades that we received as the WCP A plant is moving towards the end of its mine path in Moma. I was very pleased with the finished products performance. It led, we actually exceeded the midpoint of our ilmenite production guidance, and we exceeded the upper boundary of our range in the co-products that we produce. And this came really about trying to get the most out of the HMC that we had. And so, we saw improvements in recoveries leading to the 2% increase in ilmenite production year-on-year, a particularly strong rutile result as a result of the fact that we had a recovery improvement project in the rutile circuits. And those improvements are being sustained into 2025. And we also introduced a new concentrate product, which was successfully trialed and will increase our production in 2025. Shipments were, there was a 4% increase. And as Tom said, we did finish the year slightly with normal, higher inventories than we'd expected, but that will be brought into the 2025 production, sales profile. On to the production guidance on Slide 2021. Overall, production is fairly similar to 2024. We've given account in our planning to the impacts of the summer rainy season that we're currently experiencing, and that's been good because we've already experienced 2 major events, including Cyclone Jude. Then over and above that, we have increased excavated ore coming through in the second half of the year once the WCP A project starts delivering the new dredges. And then we've also put into this guidance this year a slightly wider range than it has been our previous norms, and that's just to reflect the risk potential that comes when you have a significant project like WCP A taking place during the year. On shipments, we're forecasting to exceed production in 2025, and that's supported by those inventory levels and also the new concentrates product. And then on operating costs, those are really broadly in line with the 2024 outcomes. On CapEx, as Tom was saying earlier, most of our focus on CapEx this year is the delivery of the WCP A project, and I'll talk about that in more detail in a moment. But we're expecting to spend $150 million there, and then on other improvement projects, we have, we're expecting to spend $16 million, including the purchase of a second selective mining operation. Sustaining CapEx is expected to be $29 million, and that's elevated because we are going to be doing our 5 yearly dry dock of one of the transshipment vessels called Peg. So, I'm going to talk on now on to slide, there we go. I'm going to talk about the projects now and WCP A particularly. This project is the project that secures our long-term production profile. WCP A is 50%, roughly 50% of our production, and we're placing it into our largest ore resource. And so, the project is now well into the execution phase and it's advancing forward significantly. We've got 3 main components of the project. The first is the 2 new dredges that we're building. Those have now been launched into water at the contractor yard in Holland. And they're expected to be complete. Their fitments are being completed right now and they're expected to be done by Q2. And before the plant, those 2 dredges will then be shipped to Moma, and we expect to launch and commission those 2 dredges in Q3 of this year. The second component is the new surge bin and desliming module. You see a photograph of it on the top right there. This project is advancing well. However, we do experience some, there's a modest risk of some delay on this, but within the quarter that we've expected to produce it in Q3. So, we're still expecting that, that plant will be commissioned in Q3 of this year. On the Tailings Storage Facility, that follows shortly after in Q4, but the construction of the starter wall, as you see in the photograph bottom right, has now commenced, and it's actually advancing ahead of schedule. So, we're looking at making good progress in that area. If you want to see some more photographs of the project and how it's progressing, I invite you to use the link there at the bottom in the strap line, and we're posting regularly as we go along. On to Slide 24 and looking at the funding of the project. The project is comfortably funded, and we're using our existing debt facilities and the operating cash flows for that. The project estimate remains at $341 million. And so far, we've spent $102 million of that by the end of 2024. The key components of the project going through fabrication, through construction and eventually into commissioning are allowing us to progressively derisk the project. And you'll see that for the components of the project, which are due this year that I've already just been discussing, we're more than 95% capital committed in those areas. And so, this means that by the year-end, when those projects have been commissioned and we're starting to see the benefits of those projects, more than 75% of the overall capital, project capital will have been incurred. The remaining 25% of the capital is in the tail of the project. And you can see here on the bottom right that '26, '27 and '28 have got capital expenditures and the commitments for those expenditures is not as far advanced, but that's deliberate, and we're only expecting to incur those costs as they are required on the ground as we move further into the Nataka area. Moving on to the last slide for me around this selective mining operation. This is a new concept for Moma. And what we're seeing is it's bringing additional incremental production at low capital cost. We're designing to produce 50,000 tonnes per annum from the unit that's currently in commissioning, and that's coming at a cost of less than $6 million. And whilst the commissioning has been a bit slower through this wet season than we previously expected, we're producing from now from a reliable plant and both the product HMC grade and the recoveries that are coming from this plant are exceeding our expectations. So yes, there's still further learnings and there's optimizations which are underway, but the project is viewed very positively, and it's informing our thinking for the future. And so, we're assessing now a lower capital intensity approach to increase our HMC production going forward. You'll recall that we've been working on a definitive feasibility study for WCT B to upgrade it by 1,000 tonnes per hour. And that work is now complete and the further optimization work streams that we've undertaken are complete. And whilst it's produced an attractive returning project, the more recent lighter capital opportunities that we're seeing from this SMO operation are prompting us to relook at how we might improve production in the future. So, we see that the base load of our production into the long term will continue to be from large-scale, low-cost bulk mining and processing. But we think that we can support that by more flexible, low-cost incremental production solutions, such as from the SMO and also from a debottlenecking of WCP B. So, the learnings from this first SMO are already informing the design and, of a second SMO, which we have catered for in our CapEx forecast for this year and will go into construction during 2025 to be able to deliver in 2026. And we're adopting a new phased strategy to debottleneck WCP B. This means that we can leverage existing dry mining equipment and potentially repurpose the redundant WCP A dredge that comes out of commission when the new dredges at A are brought in later on this year. And combine that with the learnings from this DFS process, which will allow us to then seek a low capital intensity and an optimized capacity approach to the future of WCP B. And so, with that, I'm going to pass over to Cillian Murphy, who is going to take us through the marketing report.

Thanks, Ben, and good morning, everyone. I'm going to start on Slide 27. And 2024 was really a rebound year for titanium feedstock demand after a weak couple of years in 2022 and 2023. This was led by the pigment market. We saw a recovery in the pigment production outside of China, which led to increased demand from our customers as they saw increased demand in their markets. But also in China, we saw further pigment capacity being brought online and 2024 was another record year of pigment production in China with record exports as well. Another large part of Kenmare's market is the titanium metal, and we saw the production and demand from that market increasing again in 2024. This supported increased sales of Kenmare's products in general, particularly ilmenite and led us to increase our shipments by 4%. And really, this was limited by our capacity to supply and not by demand. We had demand for more shipments in 2024. While prices are still at historically high levels, you can see in the graph that they've come down from the peak in 2022 as a result of slight market oversupply. This is being led by the production of heavy mineral concentrate primarily in Africa and then being shipped to China for further separation. And while the products produced from it tends to stay in China and be localized in China, the pigment from that then gets exported and therefore, it is having an impact on global market prices. However, in the first half of this year, we do see that prices have come down slightly, but there are signs that they're starting to stabilize on the ilmenite side. Moving to Slide 28. I want to focus really on a market that proved quite strong for Kenmare in 2024 and speak of the reasons. So, Kenmare's ilmenite products all contain very low levels of key impurities for ilmenite beneficiation. Low calcium magnesium mean that the products produced from Kenmare ilmenite provide a very good feed for chlorination for either the chloride pigment process or the titanium metal process. And the low phosphorus in our product means that the customers can produce a very good quality iron byproduct from Kenmare ilmenite, so supporting their markets, too. What we've seen in the last few years is that capacity has been beneficiation capacity has been built to consume our type of ilmenite. And at the same time, the supply of ilmenite products similar to ours with those low impurities is reducing, and that's giving Kenmare good opportunities. We are seeing that, that type of ilmenite is achieving a price premium now because of that. And compared to ilmenite that can only be consumed directly for sulfate pigments. This is why we've been targeting it, and you can see the graph on the right top corner has our sales have gone from just under 300,000 tonnes to now being a major part of our ilmenite supply at over 500,000 tonnes. One of the key drivers is the titanium metal growth. It's a market that we have been focusing on. And while it has grown, we have also grown our sales to it. And we think it now is roughly around 23% of our ilmenite sales now being consumed in the titanium metal market, which I think looks to be the fastest-growing market in our industry. Turning to Slide 29 and an outlook. We expect the titanium feedstock market to be relatively steady in 2025. And we're seeing strong demand off the back of that for our products. I think sitting here at the end of quarter 1, we have better visibility than we normally do at this stage on our order book for the full year 2025. So, we're very confident in our volumes. This has been supported by the addition of new customers as well on longer-term contracts, which is a positive as we look to the year. One uncertainty that we are watching is the anti-dumping duties. We've seen lots of regions bring in anti-dumping tariffs against Chinese pigments. It is having different impacts at the moment. So, in Europe, we have seen the exports from China into Europe come down quite significantly since they were introduced, but other regions the level of tariffs doesn't seem to be sufficient, and therefore, we expect Chinese pigment to continue to go into there. Throughout the year, it's likely that more tariffs will be implemented. So, we need to watch that and see the impact it has on our market. On zircon, the market remains relatively subdued. We did see more sales activity in the first quarter in our downstream markets, but there continues to be an oversupply, and therefore, pricing hasn't reacted. The heavy mineral concentrate being shipped into China, it's also having an impact on the zircon market as it contains zircon. A lot of that is low-quality zircon in the concentrate. And therefore, there has been a divergence in pricing between lower quality zircon and the premium or higher quality products. Kenmare's zircon concentrate contains very high-quality zircon and therefore, we are not being dragged down with the low-quality products, which is a positive. And then finally, I think Ben mentioned the new product that we trialed in 2024. We visited the customers who trialed that 3 weeks ago, and they were able to show us that they produced valuable ilmenite, zircon, rutile and monazite products from that concentrate and would like to take commercial size shipments in 2025, along with a couple of other customers who are interested. So, I think that's a big positive as you look through the year. And with that, I will hand back to Tom.

Thanks very much, Cillian. Ben. Look, I think if we sit here at the end of Q1 2025, 2024 was an eventful year. And one of the things we did during the year is we spent a lot of time revisiting the company's purpose and emerged with a purpose of transforming resources into opportunity for all. And I think it's doing that, trying to balance all the various objectives and stakeholders we have in the right way that takes a lot of our focus. We've got a high-quality project. We've got a huge reserve base. We're very focused on our current objectives in terms of 2025, as Ben said, production and delivering the capital projects. And we're very focused on looking beyond that and thinking about how the business will operate thereafter. We have, as Cillian said, a very strong position in the market, customers that are working with us over many, many, many years and adding new customers. We have good visibility into 2025 from those customers. And despite the fact that we're in the middle of a significant investment, we're continuing to pay out dividends at the top end of our payout range, bringing our distributions to nearly $300 million since 2019. We're working with the government of Mozambique to conclude the renewal of our implementation agreement. That's part of our wider aspiration to be a trusted citizen and behave properly for the full duration of our hopefully very long tenure in Mozambique. And thank you all for joining us today. Our next update will likely be our Q1 production output in mid-April and we're happy to take questions from now. Thank you.

Thank you. [Operator Instructions] And your first question comes from the line of Richard Hatch. Your line is now open.

I just wonder if we can drill a bit more into the Q1 operations and just how much you think you're going to be disrupted. I think if I look at Q1 '24, you produced 206,000 tonnes of ilmenite, Q1 '23, 204,000. Like should Q1 '25 be more in that range? And then how much should we expect to see a destock over the course of 2025? And can you just give us a little bit of sort of color as to how we should think about modeling that destock, please?

Hi Richard, it's Ben here. I'll take that question. So broadly speaking, we planned 2025 Q1 to be taking the same considerations as we've experienced in 2024 and 2023, as you say. So, our expectations for the quarter are broadly the same. And we have had 2 significant weather events, including Cyclone Jude just 10 days ago, which, so it does seem that it's, the Q1 summer wet season of, does impact [Technical Difficulty], and we do experience a reduced production profile during that time. In terms of the inventories, we do expect those inventories to be drawn down through the year. But what we're balancing is the time for shipping with the transshipment vessel that's required to go to dry dock, which takes one of the vessels out for up to 3 months. So, we do expect a modest reduction in the stocks through the year, but not a complete reduction.

So Ben, can I sort of push you a bit harder on that? So, what is modest? So, is modest kind of 10,000 tonnes? Is modest more than that? What's kind of a sensible way to think about that? And then I guess, if you think modest for '25, does that mean there's more destocking to come '26 or not?

Maybe Cillian can touch on that because I think we spoke about where we are with volumes earlier on our new products. So, he probably has the best perspective on it right now.

Yes. Thanks, Richard. So, look, I think Ben is right in that the main determinant there will be shipping time, and that will be key. But at the moment, so far, we have drawn down quite a significant amount. And I would think something in the range of 50,000 tonnes would be a modest decrease. And to your second part of your question, yes, it will, should suppose the demand we have right now exceeds that. So then going into 2026, we would expect to draw that down.

Okay. And then can I just ask, Cillian on the market, you said that the prices have come down. But can you quantify like sort of say, for example, if you take your Q4 average price, like how much has the ilmenite price come off sort of versus Q4?

Yes. I don't think we guide on the prices like that, Richard, but we've seen the rate of decrease of pricing reduced quite a lot in the first half. And we also have contracts for the full year that will, I suppose, also show that, that will be similar to the first half of this year, and that's why we think they're starting to stabilize.

Okay.

[Operator Instructions] There are no further questions at this time. I would now like to turn the call back over to Mr. Tom for any remarks. Please go ahead.

Thanks very much. Thank you, everybody, for joining us. If you do have any questions that occur, please feel free to come through to any of us or our particular IR team who can certainly help. And otherwise, thank you, and good day.

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