Kenmare warns on production levels

Kenmare Resources, the titanium feedstock miner, has warned that as a result of production issues, it expects its full-year production to be lower than previous guidance of 630,000 tonnes of ilmenite and 50,000 tonnes of zircon.

The company said it expects the reduction to be "less than 10 per cent".

One problem is that due to technical reasons it requires the pond water level to rise from 12 metres to 32 metres above sea level (currently at 23 metres), a situation that has had an adverse impact on production to a greater extent than had been experienced in the third quarter and to a greater extent than had been anticipated for the fourth.

The second problem is that the upgrades being carried out to the national electricity transmission grid, although ultimately beneficial, have in the short term resulted in power disruptions that reduced production in the third quarter, and have continued into the fourth.

In relation to the current market situation, the group said: "A reduction in the market prices of zircon and titanium feedstocks has been widely reported. Kenmare continues to sell all zircon production at market price, but its principal revenue-generating product is ilmenite, which represents 70% of forecast revenue for 2012.

"While ilmenite has seen some price weakness, this has not been nearly as great as in zircon, rutile or synthetic rutile. Although the market for ilmenite is experiencing some temporary softness due primarily to inventory destocking in the pigment supply chain resulting in modest price reductions, the company believes the destocking process will complete in Q2 2013, followed by a recovery in demand and a return to stronger pricing levels."

Meanwhile, the group said the expansion of the Moma Titanium Minerals Mine is on track to commence commissioning by the end of this year.

In a statement the company explained that the new dredge has been mechanically complete for some time and said filling of the new mine pond with water will commence in December. The wet high intensity magnetic separation plant and the auxiliary ilmenite plant are also both set to start their commissioning process in December.

Shares fell 3.56% to 32.27p by 08:31.

NR