Kenmare Resources plc (KMR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the latest Yellowstone Advisory Webinar with Kenmare Resources plc, who released their full results on the 26th of March. With us today are Tom Hickey, the Managing Director; Ben Baxter, the Chief Operations Officer; and Katharine Sutton, Head of Investor Relations. Just while we're waiting for everyone to enter the webinar, wondered if I could ask you to respond to the poll on your screen. And while you're doing that, I'm going to go through a few admin points. Format today is a presentation of the full year results. This will take about 30 minutes and then we're going to hand over to Q&A. [Operator Instructions] Following the meeting, you'll be redirected to a short survey, really appreciate it if you could spend a few minutes completing that. I think most people have completed the poll now. We've got a representative audience of about 70% shareholders and 30% non-shareholders. So I think that's all the admin points covered. I'm now going to hand over to Tom to start today's presentation. And Tom, can I ask you to unmute yourself. And Katharine, if you could just share the presentation.

Thank you, everybody. Thanks, Alex, and thank you all for taking the time to join us today. As Alex said, we've announced our full year results this week and myself Ben, our COO; and Katharine, our Head of IR, will run you through the key elements of those results. But before we do that, we should start with just a reminder, Kenmare is currently in an offer period, and that was announced on the 6th of March, the offer or the possible offer results from an approach by Oryx Global Partners, a private equity business based in Dubai and Michael Carvill, who until last year was our Managing Director and is founder of the business. The proposal is at GBP 5.30 per Kenmare ordinary share. And as of today, the consortium has until the 17th of April, to either announce a formal offer or withdraw from the process. Now I would say or I should point out that the announcement on the 6th of March was made in response to a media story. And so it came perhaps earlier than the consortium or indeed, ourselves, would have liked in terms of their due diligence and preparedness to make a formal offer. They're now going through that diligence which we're supporting. In the event that they're not in a position to make the offer by the 11th -- by the 17th of April, they can apply for an extension, which assuming they've made sufficient progress, I suspect we would be happy to [ permit ], but that obviously depends on their diligence and progress against their objectives. The price of GBP 5.30 or 530p per share will be adjusted to reflect any dividends payable between now and the completion date of any transaction. And so based on the final dividend that we announced this week of [ GBP 0.17 ] or 13p a share, it would be adjusted down to GBP 517p. So just to bear that in mind when you're thinking about the dividend. Maybe a few other points to highlight and certainly in response to some queries that we've got already. This -- we are not running a sales process for Kenmare. This was an unsolicited approach. When we made the announcement, if we were in discussion with any other party as well as the consortium, we would have had to announce who they were and what their price point was. So at the point of making the announcement, we weren't in discussions with anybody else. As is common in a takeover process, however, our potential takeover process, should another bona fide offer approach the company, we will be obliged to grant them access to the same information, the same diligence materials [ as already ] being granted to the consortium. That can happen either before the consortium makes an offer, should they make one or during an offer period. So we will give as many updates as we can on this process. We're tightly regulated by the Irish Takeover Panel's Rules. And indeed, on this call, we have a chaperone from Peel Hunt, just to make sure those rules are observed. The next update in relation to the possible offer will most likely be in or around the 17th of April, the expiry date of the current period. If there are any other questions, we can cover those later on. But just please bear in mind, we may be restricted to what we included in the announcement just over 3 weeks ago. Thanks for -- that's the introductory portion. I will pass over to Katharine who will bring us into the presentation as a whole.

Thanks very much, Tom. I'll take you through what Kenmare does, a bit more about our products and also our strategy before I hand over to Tom and Ben to talk you through the results. The Kenmare operates the Moma Titanium Minerals Mine in Mozambique. We've been in production at Moma now just for around 18 years, and we've had a presence in Mozambique for around 40 years. Moma is one of the largest titanium mineral deposits in the world with a life of mine of over 100 years at the current production rate. We're very proud of our reputation as a trusted corporate citizen, and we benefit from having a very low environmental impact as around 90% of our electricity supply at Moma comes from a renewable source, which is hydro power, which means we have a very low carbon intensity. We also make a meaningful contribution to both the local and national economy with Moma's exports representing about 7% of Mozambique's total exports. We have a market-leading position in our industry as ilmenite and rutile, which together are called titanium feedstocks, our key raw materials in the manufacture of paper paints and plastics. So day-to-day quality of life items that we find all around the home and in our daily lives, and Kenmare represents around 6% of total global supply. We've invested heavily in Moma over the years. Our total capital expenditure to date is over $1.5 billion, and we're undertaking another significant capital project at the moment, which Ben will be telling you about more later in the presentation. If we just flip to the next slide, this tells you a little bit more about our products. So our main product, which is ilmenite, represents about 70% -- 70% to 75% of our revenue on a yearly basis. Ilmenite and rutile are titanium feedstocks, which in part -- and they're used primarily to make titanium dioxide pigment, which imparts whiteness and opacity into the manufacture of products like paints, paper and plastics. Titanium feedstocks are nonrecyclable and difficult to substitute, which obviously supports the market for our products. We say that pigment is a quality of live product as consumption of it grows as income levels increase. And you can see on the slide on the right-hand side, there's a graph showing world GDP versus titanium dioxide pigment consumption and they've grown in line since about the mid-60s. We also see that people living in developed economies grow -- consume about double the amount of pigment as people living in developing economies. So as economies like India continue to urbanize, we should see demand for our main product continue to grow. We also produce a number of coproducts, namely zircon and a rare earth element called monazite. Zircon is primarily in the ceramics industry, again, for its opacity, whiteness and its hardness. And the production of monazite gives us useful exposure to the energy transition. If we just turn now to the next slide, this gives a brief overview of our strategy. We have 3 strategic priorities that come there. The first of which is, of course, to operate responsibly. As I mentioned before, we're very proud of our reputation as a trusted corporate citizen, and of course, that begins with safety. During the last few months, we've worked for over 4 million hours without a lost time injury and the company is now at its safest it's ever been, as Ben will tell you about later in the presentation. We employ almost 1,800 people at the Moma mine and 97% of them are Mozambican including the General Manager. We're also very proud to contribute to community development through the Kenmare Moma Development Association, or KMAD, and in the 20 years since it was conceived, KMAD has built 3 community health centers, 30 water supplies which provide clean drinking water for around 45,000 people. It's built around 100 classrooms to schools, and it's invested in a lot of other very worthwhile community projects. The second prong of our strategy is to deliver long-life, low-cost production. As I mentioned, Moma is one of the longest -- is one of the largest titanium mineral deposits in the world with a life of mine of over 100 years at the current production rate. Just to put that into context, I used to work in gold mining. And a gold mine was thought to have a very long life if it had around 40 years of mine life. So the fact that Moma's current mine life is 134 years really shows what an exceptional asset it is. We're also very focused on maintaining our low-cost industry position. In 2024, we delivered an EBITDA margin of 40%, and Tom will be talking a bit more about that on the next few slides. And the final prong of our strategy is to allocate capital efficiently. We're comfortably able to fund both our development projects and our dividend policy. And since we first began paying dividends back in 2019, we've returned almost $295 million to our shareholders. I'll now hand over to Tom, who will take you through the financial results of 2024.

Thanks very much, Katharine. Look, in overview, '24 was a good solid year for Kenmare. We made our production guidance prices for the [indiscernible] we can sell everything we produce. We have very strong demand for our products because of their quality and versatility. We generate strong cash flow. Katharine mentioned the 40% EBITDA margin despite weaker pricing. And what we've seen since, I suppose, the high watermark in 2022. In 2020, '21 and '22, we were seeing a sort of a COVID surge of demand with people at home, investing in painting and DIY and effectively upgrading their surroundings because they couldn't move very far in spending their discretionary income on that, that drove a strong upsurge in demand. And that has leveled off with, obviously, economic uncertainty, the slowdown, in particular, in the Chinese economy and obviously, some of the other challenges globally arising from conflict. However, we are starting to see prices stabilize. We are starting to see clarity on volumes, and we have quite a lot of visibility on our volumes for this year, and that gives us a high degree of confidence in the business. During 2024, we generated just under $400 million of revenue, $160 million of EBITDA, and that translated down to just $65 million of profit after tax. We've declared a final dividend of $0.17 a share, bringing the total payout for the year to $0.32 a share. Because we're in an offer period that needs to be confirmed or approved by the Irish Takeover Panel. And just you should recall this will be a reduction from the consideration payable by the consortium in the event of a transaction. We're in the middle of a significant investment cycle. 2024, we spent over $150 million on CapEx, '25, we'll spend more. These are the 2 peak years of capital investment for Kenmare, following which we have no further obligatory investments. And Ben will talk a little bit about the progress of that investment. And we moved from net cash to net [ debt ]. Just maybe touching on some of the elements of the results. Our revenue was down 10% due to weaker pricing, but it was offset by higher volumes. Our costs were up slightly our operating costs, although we do have a strong focus, as Katharine said, on cost competitiveness. Some of the elements driving those costs up were normal operational costs associated with a more complex year of operation. And some of them were one-off costs specific to 2024. But despite all that, we maintained a 40% EBITDA margin. And we do have, as I said, very healthy demand for our products. We sold 1.09 million tonnes just slightly behind our production in 2024. And we did have slightly higher finished product inventory than at the end of the previous year in 2024. We would expect to sell some of that down in 2025. We have signed some new customers already in 2025. We have probably better visibility on the volumes for '25, both through contracted and spot customers than at any time over the last 4 or 5 years. And when Katharine talks about the market, she'll talk about the specifics of Kenmare's product suite and obviously, the quality and reliability of Kenmare as a supplier that makes us the first choice for customers. Finally, the question came in before the call around our agreement status in Mozambique. We're currently negotiating the renewal of our implementation agreement with the government of Mozambique. In summary, and this has come from meetings I had in Mozambique 2 weeks ago and meetings indeed the Irish Ambassadors had with the President recently. Mozambique is very comfortable to renew our agreements. The government regards Kenmare as a very much the type of company that they want operating with a good partnership, good employment practices, good commitment to investment, good social programs and good transparency. At the moment, we're just finalizing the arrangements or fiscal arrangements to increase slightly the return the government gets from the agreement. When we put this in place 20 years ago, we were one of the first investors in Mozambique, and we got a good deal. It's reasonable for the country to get a slightly better deal for the next 20 years, but we should also remember that we have the right to renew without any change to the term. So we have chosen to make a proposal to government, we're negotiating that at the moment, and we're hopeful that, that will be continued to over the coming weeks. Thereafter, the next meaningful renewal relates to our mining lease, which is until 2029. Touched a little bit already on some of the costs that Kenmare incurs on a day-to-day basis, most of them relate to people. Katharine mentioned the 1,700 employees or to power and fuel we pump a lot of materials. We use a lot of renewable electricity. And particularly in 2024, one of our plants -- our second biggest plant, WCP B, reached its furthest point away from our mineral separation plant, requiring us to pump back our heavy mineral concentrate significantly further than previously. And obviously, for pumping it further, you're using more energy and incurring more costs as a result. Both our labor agreements for the most part and our electricity contracts contain CPI-related escalators, and CPI in Mozambique last year was 3%. But there were a few nonrecurring items. Last year was an unusual year for the mine path that required us to cross a number of valleys. Crossing bodies requires a lot of civil work to build burns and barriers to ensure we can do so safely, and that requires a lot of heavy mobile equipment rental, and which -- that work is done now. And we had a period in Q4 of poor weather, which limited our shipping at a time when we would normally be shipping a lot and actually had ships waiting that requires us to incur demurrage costs. I mentioned that we're in the middle of a heavy CapEx cycle. We spent just over $150 million on CapEx last year. The bulk of that on our development program to move WCP to Nataka. Nataka is 70% of our reserves and all our mining plants will ultimately end up there. But from a cash flow perspective, this summary of the year is very simple, certainly, the way I look at it. And our operating cash flow plus the cash we generated from working capital management of a combined $163 million covered all our capital costs, covered all our financing costs. And the move from net cash to net debt was basically driven by shareholder returns and was entirely in accordance with our expectations. We have a very strong by the 40% EBITDA margin cash generation, if we go into the next slide, please. We have a very strong balance sheet. We have over $240 million of net current assets and over approximately $120 million at year-end of undrawn debt capacity. So if we look at what that actually means, our financial capacity versus our investment obligations, we have north of $350 million of either net current assets are undrawn debt capacity against in 2025, $150 million of development capital investment and another $45 million or so of sustaining capital investment. So we're very well funded by our balance sheet, by our facilities and by our underlying operating cash flow to safely fulfill our investment plans while still maintaining our dividend payout rate and strong shareholder returns. Okay. Just to touch on that shareholder return point. Since 2019, if we include the final dividend, Kenmare will have returned almost $300 million to shareholders. Many of you, I'm sure, bought shares in the last number of years, but the biggest buyer of Kenmare shares in the last 5 years is Kenmare. We bought back over 15 -- close to 15% of our stock. And we've maintained a dividend policy of 40% of our net profit after tax. Just a reminder, this will be deducted from the consideration should the consortium ultimately make a bid that progresses to a transaction. And the -- sorry, the payout ratio is approximately 40% of our net profit after tax, which we've adjusted slightly to reflect those nonrecurring items I mentioned earlier. So we will plan to keep making shareholder dividend payments throughout our investments cycle. And maybe to step back a little bit from the specifics and think about the financial strategy of the business. We have things we have to do, compulsory capital investments, although the plan for WCP A is our last nondiscretionary investment over the next significant period of time. So from 2027 onwards, we should be generating significant net cash flow year-on-year. We have a lot of financial flexibility between our debt facilities. We did a refinancing last year on our operating cash flow, and we maintained that dividend policy. After that, we have things that we may choose to do, make further investment in accelerating production. We have another orebody to the north of Moma called Congolone that may in time may comment our development thinking, but isn't an obligation. We have 100 years of mineral resources if we could produce them more quickly, fill our mineral separation plant. That will be a great thing to do, too, and that justifies capital. And we may, in the future, as we have in the past, do more buybacks or special dividends. Thanks. With that, I'll hand over to Ben to talk you through the operations.

Good afternoon, everybody. As Katharine said, operating responsibly is one of our key strategic pillars. And so I'll start with our focus around sustainability. We operate a safe and engaged workforce. And as she said, we are operating now at our safest levels ever. That's both in terms of the number of incidents and the severity of those incidents and it's very encouraging that, that takes place progressively as the business goes. We have thriving communities and our focus around that is to support health, education and clean water provision to those areas. And this year, we are contributing by the building of a district health facility, a hospital and Rehabilitation and development of a natural environment after mining are key components of what we do. And one of our proudest moments so far as we achieved our goals of a 12% reduction in emissions during 2024 relative to our 2021 baseline. And that's focusing on making our operations use less diesel and more and more cleaner energy sources. And then lastly, again, we are a trusted business. And for the fourth year in a row, in 2024, we achieved the award of being the most transparent extracted business in Mozambique. If you can go to the next slide and just to really talk to that health and safety piece. We only recorded 2 lost time injuries in 2024. And year-to-date in 2025, we've had no injuries. And this means that our lost time injury frequency rate is down at 0.06. This, along with the reduced number of injuries is coming through active management, focusing on authentic leadership, focusing on high standards of work, planning for safe work as a priority. So we make sure that work is done in a highly planned form rather than a rushed form, and then making sure that our leaders are in the field coaching and supporting the operating workforce. On to the production for 2024, it was a strong year. We produced a heavy mineral concentrate at the mine as per expectation, and that came through excavated ore volumes being at record levels, and that offset a slight fall in the head feed grades, which is associated to us coming to the end of the life in the Namalope ore body. This flowed through to final products, and we saw that we exceeded the midpoint of our guidance range for our main product ilmenite. And we actually exceeded the upper end of guidance for all of our co-products of rutile, zircon and the concentrate products. And that came about because of a focus on margin improvement and getting the most out of the heavy mineral concentrate that was produced. So we saw improvements in recoveries in the ilmenite section, had a very strong improvement on rutile improvement project, which improved rutile recoveries and the concentrates also benefited from the trial of a new product, which has been successful. And with this year, we plan to sell 25,000 tonnes of that product. Shipments improved year-on-year by 4%, and we expect that to continue through into 2025. On to the guidance for this year. Production is expected really to be very similar to last year, and that's taking account of significant weather events that are expected in the summer rainy season in the Southern Hemisphere, and we have experienced that. So we're glad that we've put that into the guidance scenarios. Then looking at excavated ore, we expect to mine more in the second half of the year, further improving that excavated ore levels. And that's because of the project that's being delivered in Q3. And then we've also taken a bit more effect of that project, because when you're implementing projects, you can expect that there's a higher risk of delays or schedule movements. And so hence, our guidance range this year is slightly wider at 120,000 tonnes. And so our guidance is 930,000 tonnes of ilmenite up to 1,050,000 tonnes. And that's our expectations, and we're happy with those expectations at this time. Around costs, we expect those to be broadly in line with 2024. We do expect to [ exit ] on shipments, we do expect those to be higher than production levels, and that's supported by the fact that we have some additional stock at the end of last year, and that we'll be drawing that down moderately during the year. And as well, we will be, as I said before, introducing the sale of this new concentrate product over and above our normal product suite. On the capital side, we are intensively spending capital at the moment for the WCP A project, and we expect that to be $150 million of the $155 million of development spend. And on improvement projects, we'll be spending $16 million, which includes for the fabrication and construction of a second selective mining operation, which I'll talk a bit more about in a few moments. Sustaining capital is expected to be $29 million, and that is related to -- largely related to the transshipment vessel, PEG, which requires it to go to its 5-yearly class certification and dry docking process. If I move on to now the capital projects update. And our focus really largely on the WCP A project, which is underway. We're seeing significant advancement of that project. It's composed of 3 components: the mining piece, which is the delivery of 2 more dredges. They're currently fabricated and being fitted out in Holland, and due for release and shipment to Moma in Q2. They will arrive and be commissioned in Q3. That aspect of the project is going very well. On the construction of a desliming feed preparation plant, this is at the front end of the WCP A plant. That's a replacement piece of kit, built to support the ability to take slimes, which is the clay-sized particles out of the run of mine feed and facilitate higher utilizations and higher recoveries in the concentration process. That piece of work is a construction project on site at Moma at the moment. It's progressing well. We have incurred some minor delays along the way, but those delays are within quarter delays. And our expectation is that the plant will be commissioned in Q3 as per its original expectations. The third element is the tails storage facility. So when you've created -- remove those slimes, they need to be stored in a safe manner, and we have developed a GISTM compliant tail storage facility design, and that is currently a civil engineering project, which is underway and going ahead of schedule, due for completion in Q4. You can visit the website and look at the link in the strap line of this presentation, and you'll see that we're regularly posting updates of how the photographic updates of the development of the project. On to the funding. The project is comfortably funded. We're using our existing debt facilities, which is the $200 million RCF that Tom referred to and also our operating cash flow to support the development of the project. The estimate, which was released in December 2023 remain and we believe remains at $341 million. And at this point in time, we are $102 million spent. More than 95% of the commitments for delivery in 2025 are committed. And the -- so that means that -- and it's those commitments that are delivered this year, which start delivering the benefits for the project. So by the end of this year, 75% of the funding will have been spent and we will be receiving the benefits of the project for in -- fully in 2026. The remaining 25% of bonds is for monies spent over the next 3 years whilst we move into the Nataka ore body, and that is in various infrastructures, pumps, pipelines and electrical reticulation. On to the next slide, Slide 25, I'll just talk a little bit about a new approach that we've been working through, and that is to the introduction of a selective mining operation or SMO. The idea here is to bring additional incremental production to Moma at very low capital cost. And the first SMO is in commissioning. It's delivering 300 tonnes an hour and that is for a cost of less than $6 million. And we see that so far, the development of that project has been very positive. We are getting product qualities, which meet the same specifications as our other larger plants, and we're seeing good recoveries from that equipment, too, which is making us rethink how capital should be spent going forward at Moma. Whilst we don't think that SMOs will replace our large, low-cost bulk mining and processing as the foundation of our business, we do think that SMOs can offer incremental tonnage improvements to help smooth out our production profiles in the years to come based on the fact that they will deliver these marginal tons to fill our mineral separation plant. And so that is the focus that we've been moving towards. That partially replaces the need for the 1,000 tonne an hour increasing capacity that we have been planning for at WCP B. And we've rather looked now that, that definitive feasibility study is complete, we've seen that the costs of a more traditional project are significantly higher than we had previously expected and that the SMO offers an alternative option to that. Meanwhile, we will do some selective debottlenecking of the WCP B plant over the coming years. And we have $26 million built into our cash flow projections for the capital upgrade of WCP B and SMOs over a 3-year period ahead. I think with that, I will pass over back to Katharine and she is going to talk us through the market briefly.

Thanks very much, Ben. So as Tom has already touched upon earlier in the presentation, 2024 was a good year for shipments. We saw a 4% increase in our shipment volumes, and that was supported by strong finished product production and strong and consistent customer demand. And our product marketing team often say to us that our ability to supply or rather the demand is greater than our ability to supply. If we could produce more products, our customers would buy it. You can see from the graph that prices are historically still very high. 2022 was a peak year for Kenmare's markets, and that was probably because of the COVID-19 pandemic. A lot of people were stuck at home, not able to spend their disposable income on holidays or other forms of entertainment. So instead, everybody repainted their houses. And that saw demand for products like titanium feedstocks, which are primarily consumed to make pigment and then house paint increase. And although prices have come down in 2023 and 2024, they're still historically at high levels. And that's been supported by both strong demand for pigment and also a thriving titanium metals market. The market is currently slightly oversupplied by new concentrate producers entering the market, and that make -- makes visibility in the market slightly more difficult than it had -- slightly weaker than it has been in the past, but we still believe that a supply gap for our products is emerging, and that will support the medium and long-term fundamentals of our products. If we just turn to the next slide, this discusses 2 market segments that we've been actively targeting as they're performing more strongly than the titanium feedstocks market as a whole. Kenmare produces 3 different types of ilmenite, which, as you remember, account for about 70% of our revenues each year. And because of this flexibility, we're able to sell our products to at least 3 different market segments. So at the moment, we're seeing that the beneficiation market and the titanium metal markets are particularly strong. So we've been over targeting these segments to ensure that we get the strongest prices for our products. And then finally, this last -- I'm sorry, [indiscernible] too far. This last slide looks at the outlook for 2025. We have a strong order book for 2025, and although we believe that titanium feedstocks pricing in the first half of this year will be slightly lower than 2024, our product marketing team tell us they're seeing prices starting to stabilize. We believe the demand for titanium feedstocks globally will remain steady during the year, and that will continue to be supported by a strong market for titanium metal. Looking at the zircon sector, unfortunately, that's a little weaker than the titanium feedstocks market due primarily to a weaker Chinese housing market. However, there does continue to be a deficit of high-quality zircon like Kenmare's. And as a result, the prices for low quality and high-quality zircon are emerging, so as a producer of this coveted high-quality zircon, the demand and the pricing for our zircon products remained strong. It's also just worth mentioning here that we started trialing a new product in 2024, which was a new concentrate product. Beforehand, this product was sent to waste, so we weren't making any money from it. So the fact that we're now able to monetize this product, and we're targeting sales of 25,000 tonnes in 2025 is pure margin expansion, which will help our cash operating cost per tonne. I'll now hand back to Tom to conclude and take you through the outlook.

Thanks very much, Katharine. Look, in summary, I think hope we've managed to demonstrate to you a couple of the key characteristics of Kenmare. One, We've got a really high-quality assets that -- with a long-term production profile, and that requires us to take a long-term view on our relationships, our investments and how we can do business with our neighbors in the community. We're very hopeful that we will conclude our negotiations with the government in relation to our implementation agreement before too long. And we know that Kenmare's efforts and the way we do business is appreciated by our stakeholders in Mozambique. We have an efficient operation, a low-cost industry position. We generate good cash flows, and that supports our investments and our shareholder returns. The market is very correlated to GDP, very correlated to day-to-day economic activity. And from our customer perspective, Kenmare's range of products consistency, quality and the low carbon footprint of our products is an important advantage, which keeps them working with us. And if you can imagine having a pigment plant or a smelter, a major industrial project you want, the same sources of supply and the same balance consistently month-on-month, year-on-year, and that's why the customers we had in 2010 are still the customers we have today, albeit we have added 2 more this year. And finally, while we're doing this capital investment, while we're focusing on the future, we are paying dividends. We are maintaining our shareholder returns. We're not far off $300 million now. And in the future, I suspect that our shareholder return strategy will be a combination of regular dividends, perhaps occasional special dividends and some share buybacks from time to time. Thanks for your time. I hope you've got the information you needed from the presentation. If you didn't, please ask, we would be delighted to answer your questions. And maybe just a quick reminder that the next you hear from Kenmare will likely be in or around the 17th of April, which will be the date for announcement of any extension into the offer period associated with the consortiums approach and most likely our Q1 production performance announcement. Thanks very much. Back to you, Alex.

Yes. Thank you, Tom, Ben and Katharine. [Operator Instructions] We had a couple of questions coming ahead of time. One of those you already covered, Tom, which is what's the time line for the possible offer from Oryx. But the second question relating to that is there, is there anyone else doing due diligence apart from Oryx?

So if we were talking to anybody else at the time we made that announcement, we would have had to say so. So we weren't speaking to anybody at that time. If anybody else makes an approach and they're making an offer, we have to announce that. Otherwise, if somebody makes an approach and confidentiality is maintained, there's no media stories, we're under no obligation to announce that. But I mean all we can say really is that we're supporting the consortium diligence at the moment. It's open to anybody else to come in and get access to the same information, assuming they're a bona fide bidder. And if there's a bid, it will be clear what the time lines are, should our people wish to get involved, but we're not running a sales process, just to be clear.

In addition to the implementation agreement, could you please talk us through any other agreements Kenmare has in place with the government and what they need to be done to be renewed?

The two principal agreements, and they are a little different in nature. One is our mining lease, which will be subject to renewal in 2029, most likely for a 15-year period, and it has the same entitlement to automatic renewal as the implementation agreement does. The other real main one is our power supply arrangements with EdM. I'd just add to Mozambique, which expire in 2029. And actually, that's an agreement we've already modified on a couple of occasions already, and that's just much more commercial in nature. So it's not something that caused us to lose any sleep.

Next question here. I have just one question regarding the acquisition offer. What are the long-term commodity price assumptions, which were used as the basis for the Board of Directors to unanimously determine that the offer undervalued the company?

Well, we won't disclose those. But I think if you look at our annual reports over the last number of years and in particular, at the fixed asset note, we're required to do an impairment test every year to determine if we're going to recover our investment in fixed assets, which is close to $1 billion on a net current or net value basis, and we haven't had to record an impairment. So you can assume that our pretax valuation of the business using audited assumptions at a cost of capital of, I think it was 13.5%, 13.8% this year is in excess of $1 billion. So you could understand that, that's the long-term value of the business, particularly as we move out beyond the capital investment phase, is driven by very strong cash flows. And I'm not going to speak for the consortium, but certainly, the reaction of significant institutional shareholders that we've spoken to today is that not all of them, but many of them would be of the view that the valuation of the company will be significantly higher in the future.

Are you able to provide any estimates on the time line for completing a renegotiation of the implementation agreement with the government of Mozambique?

We'd hope to do it in weeks, not months, maybe not 2, 3 weeks, but I think it's more important to do the right deal than a quick one. We have a very rational counterparty. The meetings have been very cordial. As I said, I met 2 ministers the week before last and the Irish Ambassador has met the President recently. We have written confirmation that while we're negotiating it, we continue to operate in the normal way as we always have done, and we are, we're exporting materials, we're producing. And it's an important discussion for Mozambique as well. But certainly, I mean, the agreement was due for renewal by the end -- before the end of 2024. Obviously, there were some challenges in Mozambique at that time. I think both parties are focused on concluding us quickly, but we won't agree until we have the right agreement because, as I said at the outset, the proposal we made to the government giving them a slightly better return was voluntary? Where would you go into dispute with the government and revert our resort to international arbitration, which is not our preference. Our legal advice is very clearly that our position is very strong.

Thank you. Next question here. With the current takeover interest in Kenmare comes to nothing, would you be interested in consolidating the market by acquiring assets from peers?

We're always interested in M&A, and we maintain a database of 200-plus projects worldwide and indeed, even within the last 12 months, our team more on the exploration side has looked at projects in Saudi Arabia, Cameroon, Namibia, South America and in Mozambique itself. But I think -- and I'd like to think that in 5 years' time, maybe we'll have additional assets in the business. But as you can probably detect from the presentation we gave today and the capital expenditures we're doing this year, our real objective for this year and the things that Ben and myself will be most accountable for are delivering the WCP A upgrade on time, because effectively, that's preparing us to go to an ore body that's 70% of our reserves and producing the tonnes to generate the cash flow [indiscernible].

Good related question here is, can you please discuss the key risks with regard to the WCP A move and the key milestones, which have or will continue to derisk the project over time until the move is complete?

I refer you to Mr. Baxter.

Yes. So I mean, the project is progressively derisking itself all of the time, and many of those milestones are now behind us. We will be -- Tom and I will be attending the launch of the dredge -- the official launch of the dredge is [ probably ] next week or the week after next. And then those ship -- those 2 dredges need to get put on a ship and brought to sites. So those are the sorts of milestones that are important for further derisking, but they are on track, and we are following those schedules extremely closely on the construction on site. The various construction phases are around preassembly of steelwork [indiscernible] steelwork being installed into the plant, the associated piping, electrical equipment. These are progressive steps through the journey and our scheduling takes us at a very detailed level right the way through to the completion in Q3. So those are the sorts of steps that we're working towards.

And Ben mentioned earlier in the strapline of one of the slides, there's a link to the photo, our image gallery, and that image gallery is updated very regularly. So if you want to keep an eye or look every week or a couple of weeks, you'll actually see the progress with your own eyes.

Next question here. Can you speak to your approach to the mix of distributions between dividends and buybacks, given how cheap your stock is, I would have preferred to see more buybacks at this time?

We've done 2 buybacks. As I said, we're just close to 15% of our register, which we did in 2021 and '23. And we have a mix of shareholders on the register, some who are very focused on income, maybe 10%, 15% of the register, others who are slightly more agnostic. We do want to utilize buybacks from time to time. But at a time in 2024, where we spent all of our operating cash flow on CapEx and effectively shareholder return -- to its shareholder returns are supplementary. And in 2025, our CapEx will exceed our operating cash flow. So it's not the most auspicious time from a cash management perspective and cash stewardship perspective to do buybacks. But as we emerge from the from the investment phase and in reality, we reach our kind of peak net debt or our peak expenditure exposure. Back end of this year, first quarter of next year, there will be -- I think those -- that will be firmly back on the agenda.

Next question here. Can you tell us whether the significant shareholders are open to engaging with the consortium at the current offer price?

I think that's a question for the significant shareholders. I would say that we've spoken to pretty much all our shareholders -- material shareholders in the last couple of weeks. They recognize that the bid was at a significant or the possible bid is at a significant premium to the pre-announcement share price, and by consequence that it is a credible approach and needs to be taken seriously. And they haven't really shared with us what their intentions about accepting a proposal at this level would be. But let's recall that the purpose of granting diligence to the consortium was to enable them to get their bid up. And should they achieve that and get to a higher price, obviously, shareholders [ would have sort of ] a different decision to make.

Is there any indication of the value of the Congolone could offer?

Do you want to touch on that?

So Congolone is an attractive ore body to the north of the Moma asset. That certainly -- we see the opportunity for the value in that deposit. And especially, if you think about what we were talking about a few minutes ago around selective mining operations and how we could lighten the potential capital intensivity of a project, which is essentially a greenfield project rather than a brownfield project to Kenmare because the distance is about 90 kilometers. There are some technical challenges to get over principally how to get the HMC, the heavy mineral concentrate from somewhere 90 kilometers away back to the mine or to the mineral separation plant at Moma. And those are studies which are currently underway, but certainly, we would -- we see that as part of our longer-term future, not [ obvious ] and as Tom said earlier, it's not our main focus for this year. We really are in the focus of delivery of tonnes and delivery of our near-term project this year. That's the main focus. But Congolone remains certainly a significant growth option for us for the future.

[Operator Instructions] We've got a couple more outstanding. Will the Trump tariffs have an impact on demand?

We've not seen it. I mean our products are sold internationally and only a comparatively small proportion goes into the U.S. and even within the U.S., titanium and related titanium dioxide and related minerals are subjected to a lower tariff as they are designated as critical minerals. What we -- maybe not the Trump tariffs, what we've seen is because China has a significant excess capacity in pigment plants and has been selling pigment into international markets at prices that western producers couldn't really compete with on a sustainable basis. The EU has imposed tariffs on Chinese pigment, and we have seen that redistribute demand a little bit, but not changes and certainly not change it from our customers. So, so far, so good. And as I said, we have good visibility on our supply -- excuse me, on our customer demand for this year. So we're certainly not seeing it in how our customers are engaging with us.

And the last question we have at the moment is, please, could you give us an update on the political situation in Mozambique, in particular? Have you seen any impacts from the disputes that followed the recent election?

Sure. We'd -- like December and January were more challenging months than usual in Mozambique. December, in particular, the defeated presidential candidate, Venancio Mondlane thorugh YouTube, through Facebook, through WhatsApp, through media, certainly mobilized a significant proportion of the youth of the country, people who are seeking employment opportunities, who have been dissatisfied with government performance. And that was reflected in disorder in the cities, but also outside the cities and not far from Moma, where which are mainly focused on destruction of government property and buildings, police stations being burned down. Local offices -- government offices being burnt down, threats to local politicians and members of the ruling party, which caused them to flee. That situation has stabilized with the inauguration of the President, the return to normal operations of the Parliament. And in more recent days, the first publicly acknowledged meeting between the President, Daniel Chapo and the popular opposition leader Venancio Mondlane, where they did agree certain that they -- they did agree on certain things, the need for peace, the need for stability, the need for economic -- improved economic fortunes in Mozambique and the need to create an economic vision for the country. And that's where we are now. Things have stabilized. The protests have been much more sporadic in recent weeks. They're not fully gone, but they're much more sporadic. They haven't impacted on our operations. Indeed, even the ones in December, December was still our best month despite all the uncertainty. And I would be hopeful that over the remainder of this year, things will stabilize further. So Kenmare has been in Mozambique for 40 years, in one form or another, 20 years almost as a producer. And we've been through occasional ups and downs in kind of civil stability. But we've always managed to operate and export our products. Our facilities, though, distributed over a wide area are kind of self-contained in that we have our own separation plant and our own jetty facility. So we certainly don't transport our final materials by road anywhere. And we have a good relationship with the local community because of the investments we've made, as Katharine said or Ben said, and -- local economic development in sanitation, health and infrastructure. So people appreciate Kenmare on the quality of the jobs Kenmare brings. It's something we're always alive to. But as an example, we've managed to bring a group of analysts and investors to Moma in January, and we had a very good visit with them, and there was no evidence or if you weren't looking for it, you certainly wouldn't have seen any evidence of disturbances.

Thank you very much. There are no further questions outstanding. So Tom, Ben and Katharine, thank you for that presentation. Could I remind attendees as they leave, please could they complete the feedback survey, it only takes a couple of minutes, it'd be very much appreciated. Perhaps if I could just hand back to you, Tom, to say a couple of words before people exit today.

Thank you very much. Thanks for the time you spent listening to the Kenmare story. A reminder that our next announcement will be in around the 17th of April related to any extension, if requested to the takeover proposal from the consortium and our Q1 announcement updates. If you do have any queries, anything -- any question that you didn't want to ask in this forum or occurs to you after the meeting, please feel free to e-mail [email protected], or even go through Yellowstone and we'd be happy to support you. Thank you.

Thank you, Tom.

Thank you.