Kenmare notes soft markets

Kenmare Resources said its markets remained weak but that it was confident of a pick up in the medium term.

Kenmare Resources said its markets remained weak but that it was confident of a pick up in the medium term.

The firm said output from its mining operations improved in the third quarter with 229,100 tonnes of heavy mineral concentrate produced, a 16% increase on the second quarter.

The firm deals with titanium mineral feedstocks, which are used for the manufacture of titanium dioxide pigment.

The pigment is used in the manufacture of paints and other coatings, plastics and paper as well as a number of other applications, including cosmetics, food additives, ceramics and textiles.

Kenmare said pigment demand in the US held up relatively well in the first half of 2012 but started to deteriorate in the second.

"Demand in Europe has contracted this year, while Chinese demand growth has been subdued," the firm added.

"The expected seasonal improvements in pigment demand in the second and third quarters did not materialise, leading to downward pressure on pigment prices."

However, it views this as a temporary situation caused by the general global economic slowdown, and particularly weakness in the housing and construction sectors.

"We remain confident that the fundamentals of supply/demand for titanium feedstock remain favourable in the medium to long term," it said in a trading update.

The company also said global zircon demand continued to be weak, particularly in China and southern Europe, where there is greatest demand.

"The main zircon producers have reduced their supply to the market resulting in a build-up of producer inventories," it said.

"This inventory overhang will continue to create some pricing uncertainty in the short term until demand returns to more regular levels."

The firm added that its Moma expansion in South Africa would be ramping up during the first half of 2013 and start producing at full levels in the third quarter.

This would allow it to take advantage of an expected recovery in US and Chinese housing markets, it said.

However, Kenmare warned a truck drivers' strike in South Africa was hampering transport operations and could have a knock-on impact on commissioning.

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