Kenmare Resources (LSE:KMR) — H1 2026 Results

0:00 Good morning, and welcome to the KMR Resources PLC H1 twenty twenty six Results and Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and present. Before we begin, I would like to submit the following poll. And I would now like to hand you over to Managing Director, Tom Hickey. Good morning. Good morning, and thank you. Thank you all for taking the time to join us today to run through our half year 2026 results. While you're reading the disclaimer, I'll just highlight that in the room with me, have James McCullough, our CFO Ben Baxter, our COO Killy Murphy, our Head of Marketing, is also on the call and Katherine Sutton, our Head of Investor Relations. So we'll be running you through the the presentation today and hopefully answering any questions that you have.

0:51 Just a few quick reminders about KMRCES business. We operate the MOMA titanium minerals mine in Mozambique. We've been in Mozambique for nearly forty years now. We've been producing for nearly twenty. And MOMA is a pretty unique resource. It's got over a hundred years of mineral resources at our current production rate. So of course, we need to think about the long term, about living through multiple cycles, and about investing to produce for many years to come. And I suppose if you're gonna be in a country for a long time, you gotta behave well, and we believe we do. We're a good corporate citizen. We work hard to improve the lives and outcomes of the community around us, contribute to the country, and and to the economy as a whole. And and I think that's recognized by us being included once again in the FTSE for good index. And I'll talk a little later about our negotiations around a critical agreement with the with the Mozambique government where I think you may have seen we've seen good progress in recent weeks.

1:43 Our production, we produce titanium minerals principally ilmenite and rutile. You use them every day, you see them every day. They're part of everyday life. We're a decent part of of the world market, about 6%. And titanium minerals are are are part of the critical minerals is for Europe, UK, and The US. So there is a lot of focus on them, but I I think we're, you know, as as we hear when we come to talk about the market, the market has been through a couple of ups and downs in recent years. And and to go back to my comment about investing for the long term, we have made material investments in recent years to upgrade our biggest mining plant, WCPA, to move to our biggest ore body in Nataka. And Nataka is 70% of our reserves. It's the future of the company. All our mining plants will end up there, and we've been working on WCPA to prepare us to work effectively at Nataka. Take a little bit longer than we would have liked and and and it's still work in progress, but Ben Baxter will run you through the good progress we've made there recently and and what we expect over the remainder of the year.

2:41 Our strategy overall, as I said, we wanna operate responsibly. We have a 97% Mozambican workforce. We nearly $25,000,000 or over $25,000,000 in working with the community over the last twenty years plus. And for our own employees, we're really focused on safety. We had a really good safety performance in the first half. We're over four million hours without a lost time incident, and our lowest ever all injury frequency rate achieved in the first half. So so we're very proud of that. It's it's something that we work on every day. We're very focused on our industry position and and operating effectively. We've done a good job so far in 2016 managing and reducing our operating costs and enabling us to run through this point of the price cycle. We do want to, you know, invest carefully and manage the cash flows that the asset gives us over the long term effectively.

3:31 We paused our dividend early this year. It's been an important part of our investment case in previous years and hopefully will be again. But it's a sensible thing to do at this point in the cycle when debt is elevated, and we have made over 300,000,000 in shareholder distributions since 2019. So it is something that we do think about. So just to maybe recap on the first half of the year. I've already talked about about our safety performance, and I'm more proud of that. But it has been a a difficult market, and we are just after a big CapEx program. And when we we spoke to you all at the start of 2026, we spoke about our priorities for the year. And then reality, our priorities were to control the things we can, to ship as much product as we can, to generate as much cash as we can, to manage our costs well, to maintain financial flexibility, and and, you know, to continue to improve the the performance of our assets and to continue our agreements with the government around the implementation. I think we've made really good progress on all of those in the first half, but there's still plenty we can we can hope to achieve in the second half. So from shipments, we're on track to achieve our twenty twenty shipments guidance.

4:34 We've had some really good successes in the first half with our new Zyrtec product. You may have seen that that we're recording that in sales now as opposed to a credit to cost of sales, and and that's because it's it's an important part of our production this year, but it will be an important part of our our revenue mix for many years to come. This was something we trialed in 2024 with customers. There was strong uptake on it, and we sold over 80,000 tons in the first half of the year. We've done a good job on reducing our operating costs. James will run you through that, maybe a little bit more to go there. The one area where I think we would like to see improvements in the second half is our ilmenite production. A little bit softer than we would have expected, and we've kind of modestly adjusted our guidance to approximately 800,000 tons. And we are on track to achieve all our guidance at the moment with a close eye needed on second half performance.

5:23 On the financial side, our balance sheet has been an area of focus for us. Our net debt bounces around a bit. You've seen it increase slightly in the in the first half. But, you know, cost discipline gave us a 12% reduction in cash operating costs. Our lenders, as ever, have been constructive. They've assisted us with waivers where required. They've increased our our revolving credit facility by $30,000,000. Yeah. We hope we won't have to use that flex that additional flexibility, but it's nice to have it there because, you know, who knows what happens in in the future. But look, with the strong performance we had in the first half, we were cash flow positive before development costs in the first half, and development CapEx will be much lower in the second half. So we're managing what we can. We're maximizing our cash flow. We're we're we're paying attention to things on a day to day basis, And and we're positioning ourselves hopefully to to recover well when when the market recovers. And on the market, you know, we've seen some progress on on zircon in the first half, strong price increases, and and I think we saw a Luca comment a comment this morning in a manner very similar to us. We do expect to see those price increases maintained.

6:30 Ilmite is taking a little bit longer. We don't currently see any near term recovery, although we will be hopeful for next year. But there have been some pigment price increases in recent months and Illinois generally follows them, albeit with a lag. Just a moment on WCPA. We're making steady progress on the commissioning. Even in July and August, things have improved. We're working through a punch list to to get us up to to nameplate capacity. No fatal flaws in the project, but it is taking longer than we'd like and we know it's a focus of investor attention. And finally, in this area, just to talk a little bit about the implementation agreement. This is an area that that, you know, we've we focus a lot of time on. We work very closely with the government in Mozambique. We've had we've had really good engagement in the first half. There was a little bit of volatility in the first quarter related to the tax authority, but that's now concluded. We've had no more issues. We've had written assurances. We continue to operate under the old terms, and negotiations have have continued constructively. I met the minister for mineral resources in late July. It's a really helpful discussion to help understand what was important to their key stakeholders, you know, which we already understood well, but to kinda forge a path towards an agreement. And and I think what what the the technical team in Mozambique are doing is, you know, just trying to to foresee any questions or queries that they might receive during the run up to approval of of or consideration of this by the council of ministers.

7:55 We're in that usual part of the process now, the back and forth of comments. So while there's no expressed timeline, we're very hopeful this will be be will the progress that we've achieved will be maintained. And as you can probably tell, we're we're our language here is warmer than it has been in the past. We certainly feel this. There's a good understanding on both sides and a and a will to reach conclusion. And and, obviously, we'll keep you updated as we go through that process. So with that, I'll hand over to James McCullough, who'll run you through our financial results for the first half of the year. Thank you. Thanks, Tom, and good morning, everyone. Thanks for joining. Look, in summary, as Tom outlined, we have faced challenges in H1, notably the market and where prices are for our products. At the same time as we're ramping up WCPA and that's taking a little longer anticipated. So those factors are certainly reflected in our financial performance.

8:49 If we start at the top line, average prices received were down significantly in the half versus both H1 last year, we were down 26% and H2 last year then 31%. So our average price came out of $242 per ton. And that's a reflection both of the weak market conditions as well as changes in our own product mix. And I'll talk through that in a little bit more detail shortly. Shipments were strong as we disclosed back in July, 555,000 tons, that's up 13%. But that wasn't sufficient to offset the climbing prices. So revenue, I come with sort of 16% then versus H1 last year.

9:35 We did as Tom mentioned, have a very strong focus on costs in the half and managed to reduce total cash operating cost by around $15,000,000 or 12%. I'll talk to that shortly. And but notwithstanding that, we still saw the sort of the price impact fall through to the EBITDA to to the EBITDA line and came out at $4,000,000 for EBITDA for the half. Net debt went up to $176,000,000 from around 159 at the end of the year. That as we've kind of seen over the well, historically, that's a very lumpy metric. It depends very much on the timing of receipts coming in and cash going out. And we shared in our q two updates that's you know, we have very strong receipts coming in at the beginning of July, which which would have sort of largely offset the the increase.

10:29 And so, you know, that that that that the lumpiness is sort of part of the part of the business, but not the selling of that an increase of around $16,000,000 If you go to the next slide, please. So just looking at a summary income statement, you can see the revenue line there reflecting the markets and the mix. So if we if we think about pricing for the for the different products that we sell, in the light pricing for the half went from $286 per ton down to $203 per ton. Zircon from around $1,300 per ton down to $1,100 per ton and the average price from 326 down to 242. Looking at that product mix, our actual percentage of zircon tons sold stayed flat or went up a little bit from 3% to 4%, zircon is our most valuable product, so that's that's positive.

11:28 But it's really offset by the increase in concentrates that we had in the year. So that's particularly zirconia and which kind of brought us from a concentrates share of tons sold from 4% up to 20% or as a share of actual revenue generated from 60% to 17%. And those concentrates sell at a lower price and therefore impact the the revenue generation through deterioration of product mix. Now, you know, Zyrtec has been a tremendous benefit for us this year. Know, those those sales came out of tailings that we previously haven't valued. So it's it is very much a positive story. And but we we do see that, you know, reflection in terms of product mix impact on on revenue.

12:18 Look, notwithstanding the lower cash costs that we had, the cost of sales is up significantly from $150,000,000 up to 175. That's really reflecting the inventory drawdown that we've had in this first half. So we settle along that shipments is our primary focus and we intended to monetize the inventory that we had accumulated over the course of last year. That's provided very valuable liquidity for us. It doesn't provide as much EBITDA because we took an NRV adjustment to it at the end of last year. So EBITDA as it's from those sales is largely flat, but it does contribute significantly to liquidity, which has been very useful for us over the course of the half. Finance costs up from last year reflecting the increased debt that we have. So we're we're up at around $200,000,000 of debt drawn.

13:11 And and all of that sort of not the finance cost, but the rest fall through to lower EBITDA at 4,000,000 and all that fall through to a lower profit number. So a loss after tax of $34,000,000. Just looking at the cash sorry, the cost side of things. And so the the bridge from cost of sales to cash costs. For first of all, admin expenses were down by around $3,500,000. That that reflects the recognition of ilmenite stock or the recovery of ilmenite stocks from a sale that we have made to a customer last year, which a customer went into administration. We recovered those stocks last year and so or sorry, earlier this year. And so the recovery of those stocks comes through in the admin expenses line. There's also a reduction in head office costs there contributing to that reduction.

14:04 We also see the contribution of inventory and the product stock movements of 20,500,000. So that's really reflecting that inventory drawdown that we've had in the first half. And then when we get down to cash costs, you can see that reduction from 124,000,000 to just shy of 110,000,000. So taking around $15,000,000 out of the cost base, that's across all categories. So the major contributors there were were labor, where our cost reduced by around $5,000,000, which is over $5,000,000 versus h one last year. Production overheads also came down by around $5,000,000. Major contributor to that was equipment rentals and and reduction in the in the amount of heavy heavy mobile equipment that we're renting.

14:52 And power fuel and chemicals, so we had significant reduction in our diesel consumption and electricity consumption. So notwithstanding the increases in unit prices for those things, particularly diesel, reflecting the The US Iran conflict. Our overall power, fuel and chemical costs came down there and a 500,000. Unit costs notwithstanding the the reduction in total costs, unit costs were up to $255 per ton. And that's really the reduction in production overall. Not kind of a reduction in tons to absorb those actual costs. And that applies both at the total cost line as well as the net cost line.

15:41 And just to note, Tom mentioned the the IA and the discussions ongoing there. As we've disclosed before, we're accruing at a rate of 2.5% on the on the on the royalty that we pay under the IA, but we're only actually paying 1%, which are 1% being our historical terms, 2.5% being the terms that we've proposed to the government. So our total cash payments on that 1% royalty was 1,500,000 and 0.5. Over and above that, we accrued further 2,200,000 and that total accrued amount now is 7,900,000. So that's the total amount that we've accrued since December 2024 under the proposed new terms.

16:26 Just looking at cash movements, you can see really that the the standout feature here is the contribution of liquidity or of cash from the inventory drawdown. As I said, given the net realizable value adjustments that we took predominantly to ilmenite, so $14,000,000 at the end of twenty twenty five. Those tons don't generate significant EBITDA, but they do generate significant cash. That cash has been absorbed through both the higher interest costs, but also sustaining capital. So sustaining capital, we incurred $12,000,000 of of costs and paid out 7. So the the cash outflow was $7,000,000 and 0.5, leaving us with a cash flow before development CapEx of 6,100,000.

17:18 And the development CapEx outflow was $23,000,000. A large chunk of that $12,000,000 related to spend from 2025. So there was 11,000,000 of new incurrence effectively in twenty twenty six H1, but a $23,000,000 outflow, which led to a 17,000,000 change in net debt. Looking at the balance sheet, just a few things to note. First of all, that large inventory reduction. So we had a 128,000 ton drawdown of finished products all in. That's a mix. We we have more than that, around a 140,000,150,000 tons of ilmenite drawdown, but we also had a zuratite buildup, which offset some of that.

18:07 The inventory value does include a further NRV adjustment at the end of H1 of around $5,900,000 that's reflective of the current elevated unit costs that we have predominantly relating to the WCPA ramp up, means that the cost of production is actually above the net realizable value of those products. And so we took a $5,900,000 adjustment at the end of the half. Net current assets at $135,000,000 so a very comfortable position, strong position on the net current assets side. And just to note, we had we test for impairments at the end of each period moment and we have headroom of $67,000,000 on that.

18:58 And the RCF upsides that we did, as well as the $30,000,000 of upsides that we agreed with the banks. We also agreed a number of waivers and new covenants in the debt package. Those new covenants are predominantly balance sheet related, reflecting kind of where we are in the cycle and all of those covenants have been met at the end of the half. With that, I will pass over to Ben. Good morning, everybody. I'll commence with the our sustainability goals and how they've advanced in the year.

19:43 So to start off with, let's talk about health and safety. And it really was an excellent performance through the first half of the year. We had zero LTIs, we've amassed more than four million hours now since our last recordable injury. Over and above that, all injuries are also down and this was actually our best ever half year or it's our best ever year, but for all injury frequency rate and that's a record. So we're very chuffed about that. To support thriving communities around the mine, we've now completed more than 95% of the building of a hospital, a district hospital, which supports the other KMAD health centers that have been built over the years.

20:37 And then we've also launched what we're calling our Quadrini projects. This is the outsourcing to small micro enterprises within the local community for goods and services that can support the mine. That's a process that we've been working on for some time and that's now being launched this year. We continue to advance agroforestry and our waste management approaches. We get more yield from the farms that we support now and our recycling levels have increased dramatically over the last year. We now more than 97% of our waste is being recycled. And then lastly, on trusted business, our governance continues to improve and has been recognized by EcoVadis this year.

21:33 And on the ground to support the safety of the operation and the people there, We're making sure that all employees involved in security take part in voluntary principles training. Moving to the next slide, I'll talk to the production. The highlight of half was the strong demand for the new product called Zertile. This partially offset the mining performance, which where HMC production was down 34%. That was mostly 26% down due to lower ore grades at WCPA, but also due to the lower excavated ore volumes that were mined at WCPA because of the slower commissioning and also the pause to dry mining that took part that we did in Q2.

22:29 Right now production is improving and as we expect it to do through the second half of the year And that's supported by the fact that WCPA continues to make steady improvements. And also we're having very strong performance from the other plants, particularly from WCPP. Finished products were down 14% year on year, and that was really down to the lower HHC production that I've mentioned. However, it was boosted by the concentrates production. And the concentrates production was up 599% year on year, and that's principally due to this new product, We prepared a 102,000 tons of this former tailing and converted it to sale of the products during the half during the first half of the year. And we'll continue to draw down those stocks with sales during the second half.

23:29 Shipments are our main principal KPI metric for the year. They were up 14% year on year, and that's because of our focus on drawing down the stocks that we had and consistent and and supported by the consistent transshipment performance to meet demand through through the first half. We drew down a 128,000 tonnes of product stockpiles and our ilmenite stocks on-site are now what we would say is at normalized levels. There is a remaining 17,000 tonne stockholding of our ilmenite product that remains in Malaysia awaiting sale. So overall, we've got improved production through the into the early part of this half and that's giving us the confidence around our ilmenite production, which is expected to be approximately 800,000 tonnes for the full year.

24:33 On to the next slide, and I'll talk a little bit more about the WCPA project. We've been making steady improvements. As we've said before, the major construction and installation works are all complete, and you can see that in the spend profile. We've we've we've spent $23,000,000 in the first half of the year, of which $12,000,000 was an accrual coming from 2025. And we expect to only spend $7,000,000 in the second half of this year as we spend capital on the preparations for the transition to Nataka. Our performance though has been underwhelming so far. We have not got to the nameplate capacities that we had expected to in Q2.

25:26 And in the first half of the year, we averaged 2,800 tonnes per hour compared to the nameplate of 3,500 tonnes an hour. The there's a lot of focus on this area as you would expect. We had some good breakthroughs in q two and those continuing into h two. The feed preparation units were debottlenecks successfully and they're performing very well now. And the off plant tails management has been made significantly more reliable at the densification paddock and the tail storage facility. However, on the on the the what's holding us back or what's limiting production at this moment remains the dredge and throughputs and utilizations are being addressed with the dredge supplier in order to strengthen the consistency of the feed that we can get into the plant.

26:23 We had a good win in that we've redesigned with the OEM, the dredge winch braking system. That has been approved and we have now orders have placed and we expect to commission the new system in Q4. But we also do have remaining issues around the pumping system performance, and that's our main focus right now. We are mitigating that with continued improvements in the way we operate the plant and also making sure that we have increased levels of spares available to us to bring those mitigations when reliability fails.

27:11 But overall, we've seen throughputs and utilizations increase through Q2 into Q3. And we've taken an approach to make our improvement profile a more realistic forecast through the rest of this year. And that was incorporated into our guidance statement. I'll also talk a little bit on the next slide, Slide 17, about our selected mining operations expectation to increase production from those units in the second half of the year. You'll recall that SMO1 has been making a really valuable HMC contribution at particularly low capital cost and it's been delivering to the expectation.

28:02 That's prompted us to design and order a second SMO called which will be SMO two. That's an upgrade. It will have some upgrades on it based on the knowledge and the learnings that we've had with SMO one. And those design improvements will be brought into place to eventually to have a 1,000 ton per hour SMO two in place. Construction of the first phase has just started and that will be for 500 tonnes per hour. It's expected to be commissioned in Q4 of this year and Phase two will follow on in 2027. And so with that, I will pass on to Killion, who's going to deliver the market update.

28:52 Thanks, Ben, and good morning, everyone. To start, really on this slide. And the the first half of this year were challenging. We saw strong demand across all of our products. However, particularly on the yeomanite side, there was sufficient supply to meet that, and that's what resulted in the decrease in price through the first half. The second impact that's clearly impacting pricing in the first half was the freight. So following The US and Iran conflict in late q one, we saw elevated freight increases, particularly on normal shipments into China. And given the weak market, we've been unable to pass them through, and that has impacted our received prices further.

29:47 The steady demand has allowed us to destock, which I think James is talking about. And that coupled with the strong Zurichai demand and strong Zurichai sales kind of result resulted in the steeper gradient of lower price lower average prices across all products as the the product mix worsens in the first half as a result of those sales. Zircon is the bright spot. We saw stronger zircon price in the first half across all of our products, and that accelerated in in the second quarter. As we've said previously, we see that more of a supply constraint issue rather than an improvement in demand. So we move to the next slide.

30:34 The I'm gonna talk about the supply and really the reason we've seen the weaker prices, we believe, is is supply driven and coming from two main areas and centered around China. So firstly, the the major reason is elevated ilmenite production in China. We've seen that increasing in recent years and remain at elevated levels. Encouragingly, the major reason in or the major region in China, Panzahua, has reduced over the last twelve months. That's been partially offset by increases in Xinjiang, but that's on the back of environmental reasons, which is encouraging. That really all enters the the sulfate pigment market in China. And the second place we're seeing strong competition is the import of HMC into China. That's increased again over the last twelve months and principally from Mozambique, but there are other regions in Africa as well.

31:32 And that's stepping up the the competition. It's important to say that still this product, both the domestic and the contained in HMC, it's all staying in China. So that's it's captive there. It's leading to intense competition there, but it is captive. However, you know, lower price in China do have the ability to impact global pricing, and that is something we've seen really in the first half. So we move to slide the next slide. Yeah. Encouragingly, we are seeing strong demand, and that's what supported the this drawdown of of stocks and the demand. It's all in the back of improving pigment conditions. So the graph on the left looking at pigment is Chinese pigment production. So record in the first half on both sulfate and chloride, which is a positive for us. But what's particularly encouraging for KENMARE is that the chloride pigment continues to gain market share.

32:36 That is accelerating at the moment due to the high sulfur and sulfuric acid prices, and we just have customers that are ramping up capacity of both chloride pigments and of beneficiation in order to to take advantage of those market conditions. So that's a real positive for the demand for KMR type ilmenite. And even outside China, I think the last couple of weeks, we've seen results from the western pigment producers, talk of improving volumes and prices to levels we haven't seen recently. So I think encouraging both inside and outside China on the pigment side there. On the metal side, continue to see strong growth. It's a market that we like and a market that likes our type of product. So when we we'll continue to try and push more of our own like towards.

33:27 Just turning to the outlook then on the next slide. That those positive demand trends continue into q three. Obviously, we have to compete on price, but the demand is there. As a result, we see solid order book for the third quarter. One point probably important to make is in the first half as we were drawing down stocks, that was predominantly IP two, so our lowest tier two product. So as as we move forward in the year, we expect a more balanced supply mix and, therefore, you know, higher value products being sold. On the zircon side, we expect the momentum to continue, particularly in China. Think we saw European prices was more stable over the last twelve months and starting to increase now, whereas China decreased.

34:22 So it has a bit of catching up to do, and we expect that to continue in the third quarter. Finally, just to touch, Ben mentioned it, on on our stockpile in Malaysia, we have titled to it. We understand that sales process is ongoing. We're in discussions with the potential buyer, and we would hope to be a supplier to that plant in the future. So, yeah, we hope to see that concluded quickly and the plant restarting, and then we can restart our supply into it starting with that stockpile. And with that, I will pass back to Tom. Thanks very much, Kalyan. So look, and thank you for your time today. In summary, before we move to Q and A, at the half year, we're still on track to achieve our guidance and deliver our 1,100,000 tonne shipments, which is the biggest objective for us. And as Kalyan said, the third quarter demand and order book certainly supports that objective.

35:22 But of course, we have a keen focus as well on achieving all the other metrics and particularly the continued ramp up of WCP a as we go through the work program that Ben mentioned. But I I think that there's certainly been some good achievements in the first half on on all of those areas. And if we look more generally to the business, couple of things just to emphasize before we close. First, just to remind everybody, this is a, you know, a world class asset that's gonna be around for a very long time. We're investing to be ready for that and to be ready for, you know, the the recovery in the mark in our markets that, you know, maybe we're seeing signs of, but certainly, you know, there's there's a little more proof that needs to to come through before we we start to promote that a little bit more.

36:08 But we are invested for it. We're ready for it. Our development CapEx is behind us. You know, our SMO or second SMO is coming to help maintain and increase our production. So we're certainly prepared. We've worked hard in the first half to achieve operating cost improvements, as James said, and they've supported our liquidity objectives. And I think that's been something that we've we've done well on in the first half. And despite the wider geopolitical uncertainty, which obviously has caused some turbulence, but I think we've managed so far to navigate it well and and mitigate its impact. You know, the the nature of the moment asset, as Killion said, the quality of our our products means that we're a preferred supplier to most of our suppliers and our supplier excuse me, our customers. And our customers stay with us a long time. Many of them with us twenty years plus. We're amongst the first tons they buy that hasn't changed. And that's what gives us, you know, the visibility on our sales and our our order book and and means that we can achieve our shipment objectives.

37:05 And, you know, as you can probably detect, we're we're certainly more hopeful regarding our position in Mozambique, the ongoing inclusion of our implementation agreement, you know, the eagerness shared by government to get that to get that finished and to enable us to get back to our long term investments in the business, in the community, and work for the next twenty years plus in Mozambique. So thanks very much for your time this morning. We'll now move to q and a and take any questions you might have. That's great. Thank you all very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. Accessed via our investor dashboard.

37:57 Catherine, at this point, if I may hand over to you to chair the Q and A, and I'll pick up from Tom at the end. Thank you. Thank you. So our first question comes from Colin Grant at Davy. You noted that production improved in July and August. How does this shape your outlook for ilmenite production in 2027? Maybe Ben will hand over on that. I think that's something we will focus on over the remainder of this year to finalize our plans for next year. But Ben, do you want to give a bit more color? Yeah, I was sort of going to say the same thing. It's that, you know, I think we are entering the transition towards an attacker with WCPA and you saw that the grades came down this year because of that and that will be the same next year. So I think that's the main consideration there.

38:49 But to try and offset that, we have the SMO capacity that we need to bring further into place and we saw in the table on the slide there that we have an increase of 1,500 tons per hour of SMO capacity to try and offset great shortfall. So it's it's certainly top of mind. We're going through our starting our detailed planning processes right now, ready for 2027. And, you know, that's that's where we're to be able to get to by the end of the year. The next question also from KENMARE Is there a price level where you expect oversupply in the ilmenite market to diminish? Mean, I'll hand that to Killion, but I think we are already seeing some distress amongst certain producers. And I think when we've talked about Chinese concentrate producers or concentrate producers generally, one thing we should emphasize is they're very dependent on diesel as their primary fuel source and obviously very exposed the costs as a consequence of that. But, Killy, and I'll let you jump into a bit more detail. Yeah.

39:56 Okay. Think I think that's a key point that we do here anecdotally that these diesel prices coupled with the lower price of finished products in the Chinese market are really hurting these concentrate producers. So that is an indication we're getting there. And then the other thing is we have seen significant supply come out of the market over the last twelve months as a result of those prices. And while maybe we're not seeing new announcements, I think we're also not seeing the restart of those. And that's because they probably would needed higher prices, but it's not coming back online at the moment because it's not profitable to do so. So I think we're we're getting there, but there's no clear sign yet that there's been sufficient product taken out of the market that's gonna swing it in the near term.

40:52 The next questions well, few questions come from Pete Mallon Jones at Peel Hunt. First question, how much further cost cutting performance can we expect in h two on h one? Yes, good morning, Pete. Thanks for that. Look, we're looking at it very closely obviously. There's a couple of things that see as potential headwinds, which is just as we ramp up production, obviously we'll consume more electricity, more tons we produce, more electricity we'll consume. So that will be a headwind. Against that, we'll be looking to continue the programs that we put in place across all the different cost categories. So I think, know, I would expect we'll be able to offset that.

41:40 And I wouldn't be expecting that there would be significant other other cost areas that that will be able to get big benefits out of in second half. But I think it will be a series of incremental benefits across all the different categories. So I think you know, continuing on the same trend, keeping the sort of run rate that we have with with small gains where we can find Yeah. I mean, we haven't changed our guidance. Yeah. So, I mean, there's a message in that as well. Yeah. So we came out of of you know, we're we're right in the middle of guidance at the moment. That guidance was 215 to two twenty five for the full year. We came out of just shy of a 110. And, you know, so if if we continue that progress, we'll be will be within that within that range. But but we're we're looking at it very closely and obviously, we'll we'll execute many opportunities that we do see.

42:34 Next question also from Pete Mallon Jones. Can we expect to step up in realized ilmenite prices in H two simply from selling more to Western customers than in h one? Does this come from a higher quality product mix or higher prices for like for like product? Yeah. I think Kylene touched on that, but then maybe I'll let you develop a little bit more. Yep. I think we've guide on the h two prices, and, you know, we've we've said we've got strong order book for quarter three, but but we still have work to do on quarter four. Like, freight will come into it, but I suppose what we're what we are seeing is that h two will have better product mix and more product mix, and that is supportive for pricing. But we're not seeing a step up in, like, prices in the second half on the same product on as the first half. So it's not an increase in price. It's really product mix driven, particularly in quarter three that we can see at the moment.

43:33 Yeah. I think that probably answers it. Third question from Pete Mallon Jones. How big a step up in output at WCPA in volumes mined are you expecting when the new winch brakes are installed? Is that the single biggest factor in releasing increased asset utilization? It's certainly one of the big ones to get the utilizations up. I think that you're looking at sort of between 1015% is my rough answer to that in terms of how much extra utilization we will get out of the plant. But there are also the there are also other ones which are which we're actively talking with. I mentioned the pumping system performance, which is probably the next that's the the one where we're placing most of our energies with the with the manufacturer right now. So I think, you know, we are we we have made some improvements over and above the the numbers that were in the H1 report here. Probably they've come up already by a good 10%.

44:37 And as I said, it's been some steady progress. But before we sort of talk too much about those, I'm looking for August and September to to really bet those numbers in and and to be able to be to to be more sure about them. Then we get to the the the winch break change out in, hopefully, earlier part of Q4 than later part of Q4, and we'll sort of bet that in by the end of the year and be able to see the true benefits of that. In the meantime, the pump system will be we're working very closely with the OEM to get to a conclusion on that. So yes, there's more tons to come.

45:24 I'm confident that they those things can be remedied. Where it's a bit more tricky to give detail is is exactly how long it takes to fix those things because in some cases, those pumping system challenges have have not yet been resolved. Next question comes from Jasper Manning at Berenberg. Noting the more positive language around the implementation agreement, could you please provide a steer as to when you expect this to be finalized? I'd love to. Look. I I I think we have to be cautious on this. The steps once we reach an agreement and an agreed form text with with the we're we're effectively the minister for Ministry for Mineral Resources are that it goes to the council of ministers for approval.

46:12 And and that's that's the the the key step. Council of ministers meets regularly, probably three times a month, generally every Tuesday. And, you know, we certainly are are not far off being in that position assuming the current momentum is maintained. But I think the experience we've had on this process, you know, reflects challenges that the government in Mozambique can have from time to time with other priorities emerging. And, you know, so I think we just need to be cautious and note that there's no set timetable, but we're very hopeful that that they're as committed to maintaining the momentum we have at the moment as as as we are. So I'm sorry, I can't be more definitive, but, you know, we've had a couple of false starts on this over the last year, year and a half, and I I don't want to something that that really isn't within our control to do.

47:01 The next question comes from Charles Lamport Beale at Fortified Securities. Given the mixed results for H1 and promising outlook for H2 and 2027, do you expect the $230,000,000 RCF to be sufficient funding for production against a mixed and unpredictable economic and market backdrop? James, do you want to take this? I think touched on it earlier, but Yes. Thanks, Charles. Look, at the moment, we haven't drawn nor do we have plans to draw the additional 30,000,000. So the upside is from 200 to 230,000,000 at June. I think it provides buffer. We did have a shock or a surprise last year when the customer we had shipped tons to didn't pay, that was 9,000,000. And now we've recovered substantially all of that, but equally, you know, we need the flexibility to be able to do that and to make some of the investments that Ben has talked about in terms of selective mining operation too and and renewal of H and E fleet and that sort of thing. So it gives us more flexibility.

48:05 And look, as as you noted, it's it's a very uncertain market and it's, you know, we're still working through the the WCPA upgrade. As as we've said, you know, we we expect and we need the the WCR upgrade to, you know, to continue to see those those improvements that Ben has mentioned to see those embedded in and to start to, you know, see that the tons come out. And as Killion has gone through, you know, to to see stabilization at least in the in the tier two market. And so, you know, those are our our expectations. If if there's deterioration from that, then obviously, we'll have to look at our, you know, at at what capital we have available. But, know, that's that's the nature of of of being in the industry. So at the moment, quite comfortable.

48:59 But always sort of looking at at making sure we're prepared for anything that's coming on track. Yeah. Well, I suppose maybe just to say that the the step up or the increase wasn't to address an identified meeting, it was very just purely precautionary to reflect the volatility and uncertainty that's around. Please give color on development CapEx going forwards for the rest of 2026 and 2027? Okay, I'll take that one. So we we said in this release that we will spend about $7,000,000 in the second half of this year That those monies are related to infrastructure. So as the plant moves into the transition channel and moves starts its move towards Nataka, we have to bring in additional pumps, additional pipes, a a terrace for stacking the HNC at and also electrical infrastructure.

50:01 So nearly all of the 7,000,000 relates to those sorts of of items. Now there are there are rectification costs and debottlenecking costs that the project has been taking on, but they are so far small and they are sitting in in the contingency and they don't make a large difference to and certainly don't put us in jeopardy on the overall project costs that we've previously outlined. And of course, something many things are being done under warranty at the moment, which which so they're not reflecting as a cost project. Looking into 2027, it's a little bit more of the same. I don't have it to hand here, but the in our in our prelim results that she that we published in March, there is a there is a curve that showed that we have quite a tail in the in the development cost project in the development costs for the project as we progress quite a lot a lot of distance into Metaka itself.

51:08 That that remains broadly correct. In fact, I think that we certainly, we've been looking at 2027 to see where we could reduce some of those commitments. And and certainly, that that's our focus to try and close out there maybe in a more capital light form than previously. But for now, I'd say go if you can take a look at the premium results presentation, you'll see the curve of spend as expected. What cost quartile do you sit in? Okay. I think we've we've we've talked in the past about where we want to be. I think probably at the moment, we're sitting in around the mid midpoint. And certainly, our objective is to get well into the lower cost quartiles. You know, of course, some of the that that curve changes as the mix of of participants in the market changes. And I think what we've emphasized and Kylene talked about earlier was certainly over the last couple of years, the Chinese concentrate producers have lower operating capital costs. They increase production quickly, but, you know, when perhaps the the resources or or or bodies are mining become more challenging where costs increase, they can reduce those that production quickly too. So look, I think we're we're comfortable that we're working hard to be as efficient as we can be and to survive through cycles. And because of the long life of our assets, in many other cases, we're talking about assets with much shorter lives.

52:31 Now the question is similar vein. Where would KMR be on the global cash cost curve once an attacker starts production, assuming elevated diesel prices and your base case scenario for the IA? Yeah. Look, Tom mentioned, the cost curve is moving around quite a lot and certainly has evolved significantly over the last couple of years. And you're now seeing Q1 of the cost curves largely occupied by iron ore miners for TiO2 is byproduct, which means that, you know, we it's we're we're sort of looking at q two really as as where where we would like to get to and in in the context of the overall industry cost curve. So that's over as Tom said to the left hand side of sort of the cost curve of mineral sales producers.

53:24 When the attacker is up and running and under the terms of the AIA as you say, I think as Tom said, we would be looking at being somewhere in the middle of Q2 would be probably would be assuming nothing else changes, assuming nothing else changes. Give some color on the underlying commodity markets you're in. Why are the prices down? Is it a supply or demand issue? Liam, do want to touch on that? Think we've covered it in the slides, but probably just worth talking about some of the key factors. Yep. Look. From our perspective, we see it as mostly supply. We see the increase of production of ilmenite in China and this new trend of shipping constraints into China as adding a lot of supply to the market, and that's the primary driver.

54:12 Demand could be better, I think, is is the other thing. You know, we have seen slow housing markets in China, US, Europe, you know, improvement in them would give a boost. So demand isn't bad, but it's not as good as it could be, and we would expect it to improve. But I think the primary reason for prices being down is an oversupply mostly concentrated in China. Now a question on dividends. For someone who relies on dividends to finance my retirement, when will we be when will we be able to receive dividends again on a regular basis? Thanks. Maybe I'll start with that and James can jump in. Look, as I said at the outset, dividends, we recognize has been an important part of the investment case in the past and we'd like it to be in the future.

55:01 I think we need to see an improvement in the market. We need to see an improvement in our balance sheet. And I think that the important thing with dividends is when we recommence paying dividends that we we continue, you know, we can do it on a stable continuous basis. You know, we recognize that, you know, there we have investors on our register to whom this is important and we do speak to those investors regularly. And I think, know, we will give good notice of our plans for resuming dividends or resuming shareholder return in any form as as we navigate the next, you know, number of months and see how the market evolves. But certainly, from where we stand now, maybe the easiest way to say this, the reasons why we suspended our pause for dividend in the first quarter this year hasn't changed. Until they do, I think we'll have to assume that that will remain the case.

55:56 Next question. Why does the management team continue to be negative in relation to the company's announcements to the market? I don't think we do, but the market, mean, it's it's very hard to be unremittingly positive when when your resource price is falling. And look, I think, you know, we have a responsibility to be balanced in our commentary and to try and get people a fair fair view on what's happening in the market and what their expectations should be. It's worth noting, for example, that one of our peers at Inca Resources in Australia reported this morning, and and if you read their comment, it's pretty much exactly the same as ours. So I think we you know, as I said at the outset, we we've a lot of things that we want to achieve this year, I think we've made really good progress on on achieving them or working towards them and then controlling the things that we can. And the team has worked really hard on it, you know, our shipments have been good.

56:42 We're making progress on WCPI, albeit slower than we might have thought or liked at the start of the year. We're making progress on our implementation agreement. And we're, you know, we're we've stabilized and maintained our cash flow and balance sheet, and these are all the things that you do and the behaviors you show when you're when when you're at trough or difficult points in the market. You know, as the market recovers and as Kareem said, maybe there are some signs that it will, but we're not seeing it today. As the market recovers, our commentary will reflect that. Given the significant decline in the share price, does management believe the current valuation represents an attractive opportunity for long term investors? And what key factors could drive a rerating? Look, feel that KMR is well positioned for the long term.

57:27 Suppose it depends on your investment horizon. It's worth noting this, you know, we all committed to investing, you know, our our bonuses for 2025 in company stock and obviously, there's been external factors that have limited our ability to do that. We all are holders of stock. I think history would show that a cycle price cycles turn, significant returns are achievable. And and what we're trying to do is give people a view on on on how we see that trajectory playing out. I think it's, you know, many of our investors have been with us for many years, and they they take it a multiyear view. I suppose it just depends on people's investment horizon. Of course, there's there's risk at any point, but certainly we believe that that, you know, if we continue to control the things we can control, that KMR will perform well over coming years assuming our markets recover.

58:17 That was the final question. Handing back to you, Scott. Okay. Listen, thank you all. It was a good range of questions. I think we've got good feedback on the results today. You know, we've done a lot, but we've got a bit more to do in the second half of the year, and we'll continue to report on that. And, obviously, as ever, if you have any queries or questions around you'd like to follow-up on or or admitted or to the questions on, please get in touch and we'd be delighted to to respond and and and help you in any way we can. Thanks. Thank you all, and have a good day. Fantastic. Thank you all once again for our meeting investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback, which help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to