Kenmare Resources Public Limited Company (KMR) Q2 2026 Earnings Call Transcript

Good morning and welcome to the Kenmare Resources PLC H1 2026 Results Investor 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&A tab situated on the right hand corner of your screen. Simply type in your questions and press send. 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 um while you're reading the disclaimer i'll uh just highlight that in the room with me i have james mcculler our cfo ben baxter our ceo killian murphy our head of marketing is also on the call and catherine sutton our head of investor relations so we'll be running through the the presentation today and hopefully answering any questions that you have just a few quick reminders about kenmer's business we operate the moma titanium minerals mine in mozambique we've been in Mozambique for nearly 40 years now we've been producing for nearly 20 and MoMA is a pretty unique resource it's got over 100 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 suppose if you're going to be in a country for a long time you've got to 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 to contribute to the country and and to the economy as a whole and i think that's recognized by us being included once again in the footsie for good index and i'll talk a little later about our negotiations around a critical agreement with the with the mozambican government where i think you may have seen we we've seen good progress in recent weeks our production we produce titanium minerals principally ilmanite and rutile you use them every day you see them every day they're part of everyday life we're a decent part of the world market about six percent uh and titanium minerals are they're part of the critical minerals is for europe the uk and the us so there is a lot of focus on them but i think we're you know as we hear when we come to talk about the market um the market has been through a couple of ups and downs in recent years and and to go back to my comments 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're working on WCPA to prepare it to work effectively at Nataka take a little bit longer than we would have liked and and that's still work in progress but Ben Baxter will run you through the good progress we've made there recently and what we expect over the remainder of the year um our strategy overall As I said, we want to operate responsibly. We have a 97% Mozambican workforce. We've spent nearly $25 million, or over $25 million, and working with the community over the last 20 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 4 million hours without a lost time incident, and our lowest ever all-injury frequency rate achieved in the first half. So we're very proud of that. It's something that we work on every day. We're very focused on our industry position and operating effectively. we've done a good job uh so far in 26 in managing and reducing our operating costs and enabling us to run through this point of of the price cycle and we do want to you know invest carefully uh and manage the cash flows that the that the asset gives us over the long term effectively um we paused 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 um and we have made over 300 million in shareholder distribution 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 um but it has been 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 era and in 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 performance of our assets and to conclude 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 2026 shipments guidance we've had some really good successes in the first half with our user type product you may have seen that that we were recording that in sales now as opposed to uh a credit to cost of sales 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 revenue mix for many years to come this is 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 um 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 illumination production a little bit softer than we would expect it um and we 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 on second half performance on the financial side you know our balance sheet has been an area of focus for us you know our net debt bounces around a bit you've seen it increase slightly in the in the first half um 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 and they've increased our revolving credit simply about 30 million dollars yeah we hope we won't have to use that flexibility additional flexibility and but it's nice to have it there because you know who knows what happens in the future um 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 uh 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 paying attention to things on a day-to-day basis um and we're positioning ourselves hopefully 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 i think we saw a luca comment this morning in a manner very similar to us and we do expect to see those price increases maintained. Ilma is taking a little bit longer and we don't currently see any near-term recovery although we will be hoping for next year but you know there have been some pigment price increases in recent months and Ilma 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 and we're working through punch list to to get us up to to nameplate capacity um 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 um this is an area that you know we focus a lot of time on um 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 the negotiations have continued constructively. I met the Minister for Mineral Resources in late July. It really helped the discussion to help understand what was important to their key stakeholders, you know, which we already understood well, but to kind of forge a path towards an agreement. And I think what the technical team in Mozambique are doing is, you know, just trying to foresee any questions or queries that they might receive during the run-up to approval of or consideration of this by the council administers we're in that usual part of the process now the back and forth of comments so while there's no express timeline we're very hopeful this will be we will the progress that we've achieved will be maintained and as you can probably tell um we're our language here is warmer than it has been in the past we certainly feel that there's a good understanding on both sides and a will to reach a conclusion and obviously we'll keep you updated as we go through that process so with that I'll hand over to James McCulloch who will run you through our financial results for the first half of the year thank you thanks Tom and good morning everyone

thanks for joining 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 if we start at the top line average prices received were down significantly in a half versus both h1 last year we were down 26 and h2 last year then 31 and so our average price came out of 242 dollars per ton and that's a reflection both of the the wheat 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 decline in prices, so revenue outcome was sort of 16% then, versus H1 last year. We did, as Tom mentioned, have a very strong focus on costs in the half and managed to reduce total cash operating costs by around $15 million, or 12%, I'll focus on that shortly. But notwithstanding that, we still saw the price impact fall through to the EBITDA line and came out at $4 million for EBITDA half. net debt went up to 176 million dollars 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 we shared in our q2 update that you know we had very strong receipts coming in at the beginning of july which which would have sort of largely offset the increase and so you know that that the loneliness is sort of part of the part of business but not assuming that an increase of um around uh 16 million dollars if you go to the next slide please so just um looking at a summary income statement you can see the revenue line there reflecting the the markets in the mix so and if we if we think about pricing for the different products that we sell. Imolite pricing for the half went from $286 per tonne down to $203 per tonne. Zircon from around $1,300 per tonne down to $1,100 per tonne, 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%, and Zircon is our most valuable product so that's positive but it's really offset by the increase in concentrates that we had in the year so that's particularly Zirti 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 revenue generation through a deterioration of product mix. Now, Zirti has been a tremendous benefit for us this year. Those sales came out of tailings that we previously hadn't valued, so it is very much a positive story, but we do see that reflection in terms of product mix impact on revenue. Look, notwithstanding the lower cash cost that we had, the cost of sales is up significantly from $150 million up to $175 million. That's really reflecting the inventory drawdown that we've had in this first half. So we've said all 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 NRB adjustment to it at the end of last year. So EBITDA from those sales is largely flat, but it does contribute significantly to liquidity, which has been very, very useful for us over the course of that. Finance costs up from last year, reflecting the increased debt that we have. So we're up at around $200 million of debt drawn. and all of that sort of, well not the finance cost, but the rest fall through to lower EBITDA at four million and all that falls through to a lower profit number, so a loss after taxes for thirty-four million dollars. Just looking at the cash, sorry at the cost side of things and so the bridge from cost of sales to cash costs, first of all admin expenses were down by around three and a half million dollars. That reflects the recognition of bilmanite stock, the recovery of out stocks from a sale that we had made to a customer last year which that 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 and you'll also see the contribution of inventory and the product stock movements of 20.5 million 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 million to just over 110 million so taking around 15 million dollars out of the cost base that's across all categories and so the major contributors there were labor where our cost reduced by around five million dollars which is over five million dollars versus H1 last year. Production overheads also came down by around $5 million. Major contributor to that was equipment rentals and reduction in the amount of heavy mobile equipment that we're renting. 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 U.S.-Aran conflict, our overall power, fuel, and chemical costs came down there around $2.5 million. Unit costs, notwithstanding the reduction in total costs, unit costs were up to $255 per tonne, and that's really the reduction in production overall. so a reduction in tons to absorb those total costs and that applies both at the total cost line as well as the net film and I cost line and just to note Tom mentioned the IA and the discussions ongoing there as we've disclosed before we're accruing at a rate of two and a half percent on the on the on the royalty that we pay under the IA but we're only actually paying at 1%, which are 1% being our historical terms, 2.5% being the terms that we've proposed to the government. So our total cash payment on that 1% royalty was 1.5 million and a half, over and above that we accrued further 2.2 million, and that total accrued amount now is 7.9 million, so that's the total amount that we've accrued since December 2024 under the proposed new Just looking at cash movements, you can see really the standout feature here is the contribution of liquidity or up cash from the inventory drawdown and as I said, given the net realisable value adjustment that we took predominantly to Ilmanaj, so $14 million at the end of 2025, those tons don't generate a 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 million of costs and paid out seven, so the cash outflow was $7 million and a half, leaving us with a cash flow before development CapEx of $6.1 and the development capex outflow was 23 million dollars a large chunk of that 12 million dollars related to spend from 2025 so there was 11 million of new incurrence effectively in 2026 h1 but a 23 million dollar outflow which led to a 17 million change in that 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 tonne drawdown of finished products all in. That's a mix. We had more than that, around 140,000, 150,000 tonne of Ilmanite drawdown, but we also had a Zirti buildup, which offsets some of that. The inventory value does include a further NRV adjustment at the end of page 1 of around $5.9 million. That's reflective of the current elevated unit costs that we have predominantly relating to the WCPA lamp up. Means that the cost of production is actually above the net realisable value of those products. And so we took a $5.9 million adjustment at the end of the half. Net current assets at 135 million, still a very comfortable position, a strong position on the net current assets side and just to note, we test for impairment at the end of each period moment and we had headroom of 67 million dollars on that and the RCF upsides that we did so as well as a 30 million dollars 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 uh reflecting kind of where we are in the cycle and and all of

those covenants have been have been met at the end of the half with that i will pass over to there uh good morning everybody um i'll commence with the uh our sustainability goals and how they've advanced in the year for to start off with let's talk about health and safety and it really was an excellent performance uh through the first half of the year we had zero lti's um and we've amassed more than four million hours now since our last recordable lost time 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 and then we've also launched what we're calling our Padrino projects and this is the outsourcing to small micro enterprises within within the local community for goods and services that can support the mine and that's that's a process that we've been working on for some time and it's now being launched this year and 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 EcoVedus this year 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 ARTH was the strong demand for the new product called Zirti and this partially offset the mining performance which where HMC production was down 34% and 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 paused dry mining that took part that we did in Q2. 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 from the other plants particularly from WCPP. Finished products were down 14% year on year and that was really down to the lower HMC 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 Zyrti. We prepared 102,000 tons of this former tailing and converted it to saleable product during the first half of the year and we'll continue to draw down those stocks with sales during the second half. 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 were consistent and supported by the consistent trans shipment performance to meet demand through through the first half. We drew down 128,000 tons of product stockpiles and our Ilmanite stocks on site are now what we would say is at normalized levels. There is a remaining 17,000 ton stock holding of our Ilmanite 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 Illmanite production which is expected to be approximately 800,000 tons for the full year. 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 spending profile we've spent 23 million dollars in the first half of the year of which 12 was an accrual coming from 2025 and we expect to only spend 7 million dollars in the second half of this year as we spend capital on the preparations for the transition to an attacker. Our performance, though, has been underwhelming so far. We have not got to the nameplate capacities that we had expected to in Q2. 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. There's a lot of focus on this area, as you would expect. We had some good breakthroughs in Q2 and those continuing into H2. The feed preparation units were de-bottlenecked 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 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 we had a good win in that we've redesigned with the OEM the dredge winch braking system that has been approved and we are now orders are 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. But overall we've seen throughputs and utilisations increase through Q2 into Q3 and we've taken an approach to 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 and our expectation to increase production from those units in the second half of the year. You'll recall that SM01 has been making a really valuable HMC contribution at particularly low capital cost, and it's been delivering to the expectation. That's prompted us to design and order a second S&O, which will be S&O2. It will have some upgrades on it based on the knowledge and the learnings that we've had with S&O1, and those design improvements will be brought into place to eventually to have a 1,000 tonne per hour sm02 in place construction of the first phase has just started and that will be for 500 tons 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 killian who's going to deliver the market update thanks ben and good morning everyone and start um really on this slide and the first half of this year

while challenging we saw strong demand across all of our products um however particularly on the yeomanite side there was sufficient supply to meet that and that's what resulted in the decrease in price uh through the first half um the second impact that's kind of clearly impacting pricing in the first half was the freight so uh following the us and iran conflict in late q1 we saw elevated freight increases particularly on nominate shipments into china and and given the weak market we've been unable to pass them through and that has impacted our received prices further and the steady demand has allowed us to destock which i think james was talking about um and that coupled with the strong zirti demand and strong zirti sales kind of resulted in the steeper gradient of uh lower prices lower average prices across all products as the product mix worsens in the first half and as a result of those sales. Zircon is the bright spot. We saw stronger Zircon prices in the first half across all of our products and that kind of accelerated 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 the i want to talk about the supply um 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 ilmanite production in china and we've seen that increasing in recent years and remain at elevated levels encouragingly the major reason in um for the major region in china pansahua has reduced over the last 12 months and that's being partially offset by increases in jang but that's uh on the back of environmental reasons which is encouraging that ilmanite really all enters the sulfate pigment market in china and the second place we're seeing strong competition is the import of hmc into china and And that's increased again over the last 12 months and principally from Mozambique, but there are other regions in Africa as well. And that's stepping up their competition. It's important to say that still this product, both the domestic and the ilmarine contained in HMC, it's all staying in China. So that's it's captive there. It's leading to intense competition there, but is captive. however you know lower prices in china do have the ability to impact global pricing and that is something we've seen really in the first half um move to slide the next slide yeah um encouragingly we are seeing strong demand and that's what supported the drawdown of stocks um and the third side demand um it's all in the back of i suppose improving uh pigment conditions so the graph on the left looking at pigment is uh chinese pigment production so record in the first half on both sulfate and chloride um which is a positive for us but what's particularly encouraging for kenmare is that the chloride pigment continues to gain market share that is accelerating at the moment due to the high sulfur and sulfuric acid prices and we have customers that are ramping up capacity of both chloride pigments and of beneficiation in order to take advantage of those micro conditions. So that's a real positive for the demand for Kenmare type ilmenite. And even outside China, I think the last couple of weeks we've seen results from the Western pigment producers, which 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 will continue to try and push more of our element towards. Just turning to the outlook then on the next slide. Those positive demand trends continue into Q3. Obviously, we have to compete on price, but the demand is there. As a result, we see a 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 um ip2 so our lowest to2 product so as as we move forward in the year we expect a more balanced um domain uh supply mix and therefore your higher value in my products being sold um on the zircon side we expect the momentum to continue um particularly in china and we saw European prices was more stable over the last 12 months and starting to increase now whereas China decreased so 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 our stockpile in Malaysia we have title 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 stock well and with that I will pass back to Tom.

Thanks very much Cillian, so look and thank you for your time today in summary before we move to Q&A you know at the half year we're still on track to achieve our guidance and deliver our 1.1 million tonne shipments which is the the biggest objective for us and as Cillian said the third quarter demand and order book certainly supports that objective but of course we have a keen focus as well on achieving all the other metrics and particularly the continued ramp of WCPA as we go through the work program that Ben mentioned but I think that there's certainly been some good achievements in the first half on all those areas and if we look more generally to the business um a 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 going to 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 a little more proof that needs to to come through before we we start to promote that a little bit more um 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 and we've worked hard at the first half to achieve operating cost improvements as james said uh and they've supported our liquidity objectives and i think that's been something that we've done well on 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 mitigate its impact you know the nature of the moma asset as killian said the quality of our our products means that we're a preferred supplier to most of our suppliers and our suppliers should be our customers and our customers stay with us a long time many of them with us 20 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 on our order book and means that we can achieve our shipment objectives and you know as you can probably detect we're certainly more hopeful regarding our position in Mozambique or the ongoing conclusion 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 20 years plus in modern b so thanks very much for your time this morning we'll now move to q 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 a tab situated on the top right corner of your screen while the company take a few moments to review those questions

submitted today i would like to remind you the recording of this presentation along with a copy the slides and the published q a can be accessed by invested dashboard and catherine at this point if i may hand over to you to chair the q a and i'll pick up from you from tom at the end thank you thank you so our first question comes from colin grant at davie you noted that production improved in july and august how does this shape your outlook for ilmanite production in 2027 maybe then we'll hand over on that i think that's something we will focus on over the remainder of year to finalise our plans for next year but Ben do you want to do a bit more clever yeah I was sort of going to say the same thing 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 and that will be the same next year so I think that's a main consideration there 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 that grade shortfall so it's certainly top of mind we're going through starting our detailed planning processes right now ready for 2027 and you know that's that's where we're going to be able to to get to by the end of the year.

The next question also from Colin is there a price level where you expect oversupply in the Ilmanite market to diminish?

You know I'll hand that to Killian but I think we are already seeing some distress amongst certain producers and I think when you know we've talked about Chinese concentrate producers or concentrate producers generally you know one thing we should emphasize is they're very dependent on diesel as their primary fuel source and obviously very exposed to the costs as a consequence of that but killian i'll let you jump into a bit more detail on that yeah uh okay i think i think that's a key point that we do here anecdotally that these diesel prices uh coupled with the lower price of finished products uh in the chinese market are really hurting these concentrate producers so that is an indication we're getting there um and then the other thing is we have seen significant supply come out of the market over the last 12 months um as a result of those prices uh and while maybe we're not seeing new announcements i think we're also not seeing the restart of those um and that's because they probably would have needed higher prices but it's not coming back in line at the moment because it's not profitable to do so so i think we're getting there but there's no clear sign yet that there's been sufficient um product taken out of the market that's gonna swing it in the near term the next questions or a few questions come from pete malin jones at pill hunt first question how much further cost cutting performance can we expect in h2 on h1

Good morning Pete, thanks for that. We're looking at it very closely obviously, there's a couple of things that I see as potential headwinds which is just as we ramp up production obviously we'll consume more electricity and more tons we produce more electricity will 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 you know i would expect we'll be able to offset that and i wouldn't be expecting that there would be significant uh other other cost areas that that we'll be able to get big benefits out of in the second half but i think it'll 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 so i mean there's a message in that as well yeah so we came out at you know we're right in the middle of guidance at the moment that guidance uh was 215 to 225 for the full year we came out of just shy of 110 and you know so if we continue that progress will be will be within that within that range but we're looking at it very closely and obviously we'll we'll execute many opportunities that we do see next question also from pete mallon jones can we expect to step up in realized ilmanite prices in h2 simply from selling more to western customers than in h1 does this come from a higher quality product mix or higher prices for like for like product yeah i think kilian touched on that and maybe i'll let you develop a little bit more yep um i think we'll guide on the h2 prices and

you know we've we've said we've got strong order book for quarter three um 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 h2 will have a better product mix and when i product mix and that is supportive for pricing um but we're not seeing a step up in uh 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 um yeah i think that probably answers it third question from pete malin jones how big a step up in output at wcpa in volumes mind

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 to get the utilizations up I think that you're looking at sort of between 10 and 15 percent is my rough 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 the ones which which we're actively talking with I mentioned the pumping system performance which is probably the net that's the one where we placing most of our energies with the with the manufacturer right now so I think you know we are 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% and as I said there's been some steady progress but before we sort of talk too much about those I'm looking for certain August and September to to really bet those numbers in and be able to be to to be more sure about them then we get to the the the winch break reach it or change out in hopefully in in earlier part of Q4 than later part of Q4, and we'll sort of bed 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. I'm confident that those things can be remedied where it's a bit more tricky to give detail is exactly how long it takes to fix those things because in some cases those pumping system challenges have not yet been resolved.

The next question comes from Jasper Mannering 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? uh i'd love to um look i i think we have to be cautious on this um the steps once we reach an agreement and an agreed form text with with the uh miram who are effectively the minister for ministry for mineral resources are that it goes to the council of ministers for approval uh and that's that's the key step council 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 the challenges that the government in mozambique can have from time to time with other priorities emerging uh and you know so i think we just need to be cautious and note that there's no set timetable um but we're very hopeful that that they are as committed to maintaining the momentum we have at the moment 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, a year and a half and I don't want to promise something that really isn't within our controls today.

The next question comes from Charles Lamport-Beal at Fortified Securities. Given the mixed results for H1 and promising outlook for H2 in 2027, do you expect the $230 million RCF to be sufficient funding for production against a mixed and unpredictable economic and market backdrop.

Thanks, Charles. Look, at the moment we haven't drawn, nor do we have plans to draw, the additional 30 million. So the upside is from 200 to 230 million in June. I think it provides buffer. We did have a shock or a surprise last year when we had a customer who had shipped tons to didn't pay that was nine million and now we've recovered uh substantially all of that but equally you know we need the flexibility to be able to to do that and to make some of the investments that ben has talked about in terms of uh selective mining operation too and renewal of hme fleet and that sort of thing so it gives us more flexibility and look as you know that 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 WCF upgrades to continue to see those as improvements that Ben has mentioned to see those added in and to start to see that the tons come out, and as Killian's gone through to see stabilisation at least in the TRT market. So those are our expectations. If there's deterioration from that, then obviously we'll have to look at what capital we have available, but that's the nature of being in the industry. So at the moment, quite comfortable, but always sort of looking at making sure we're prepared for anything that's going on the track.

Yeah, I suppose maybe just to say that the step up or the increase wasn't to address unidentified need. It was very just purely precautionary to reflect, you know, the volatility and uncertainty that's around.

Please give colour on development capex going forwards for the rest of 2026 and 2027.

Okay, I'll take that one. So we said in this release that we would spend about $7 million in the second half of this year. Those monies are related to infrastructure. So as the plant moves into the transition channel and starts its move towards an attacker, we have to bring in additional pumps, additional pipes, a terrace for stacking the HMC at and also electrical infrastructure. So nearly all of the seven million relates to those sorts of items. Now there are there are rectification costs and the bottlenecking 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 on the 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 this year 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 Mentaka itself 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 certainly that's our focus to try and close out there maybe in a more capital right form than previously but for now I would say go if you can take a look at the premium results presentation you'll see the curve of spend that's expected.

What cost quartile do you sit in?

Look I think we we've talked in the past about where we want to be I think probably at the moment we're sitting in around the midpoint and certainly our objective is to get well and into the lower cost quartiles you know of course some of the curve changes as the mix of participants in the market changes and I think what we've emphasized and Kylian talked about earlier was certainly over the last couple years the Chinese concentrate producers have lower operating capital costs they increase production quickly but you know when And perhaps the resources or bodies are mining become more challenging. Where costs increase, they can reduce that production quickly, too. So, look, I think 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.

Another question in a similar vein.

Where would Chemmer 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 as tom mentioned the cost curve is moving around quite a lot and certainly has evolved significantly over the last well a couple of years and you know you're now seeing q1 of the cost curves largely occupied by iron ore miners for whom ti02 is um is a is a a bi-product which means that you know we we're sort of looking at Q2 really as where we would like to get to in the context of the overall industry cost curve. So that's over, as Tom said, the left-hand side of the cost curve of mineral sales producers. When the TACA is up and running and under the terms of the IA, as you say, I think as Tom said we would be looking at being somewhere in the middle of Q2. Assuming nothing else changes.

Please give some colour on the underlying commodity markets you're in. Why are the prices down? Is it a supply or demand issue?

Yeah and look from our perspective we see it as mostly supply and see the increase of production of ilmonite in china and this new trend of shipping concentrates into china as adding a lot of supply to the market and that's the primary driver and demand could be better i think is the other thing you know we have seen slow uh housing markets in china um us europe you know improvement in them um would give a boost so demand isn't bad but it's not as 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 when will we be able to receive dividends again on a regular basis thanks maybe i'll i'll start with that and james can jump in um look as i said at the outset dividends we recognize has been an important part the investment case in the past and we'd like it to be in the future 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 uh 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 you know we will give good notice of our plans for resuming dividends or resuming shareholder return in any form um 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 we suspended our pause certain bit in in the first quarter this year haven't changed and until they do i think we'll have to assume that that will remain the case 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, I mean, it's very hard to be unremittingly positive 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 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 Luca Resources in Australia reported this morning and if you read their comedy 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 and I think we've made really good progress on on achieving them or working towards them and controlling the things that we can um and and the team has worked really hard on it you know our shipments have been good we're making progress on WGPA albeit slower than than we might have thought or liked at the start of the year we're making progress on our implementation agreement. And we've stabilized and maintained our cash flow and balance sheet. And these are all the things you do and the behaviors you show when you're at trough or difficult points in the market. As the market recovers, and as Cillian 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 re-rating look we we feel that uh ken mayor is well positioned for the long term i suppose it depends on your investment horizon it's worth noting that you know we all committed to investing you know our bonuses for 2025 in company stock and obviously there have been external factors that have limited our ability to do that but we all are holders of stock uh 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 uh on on how we see that trajectory playing out i think if you know many of our investors have been with us for many years and they take it a multi-year view um i suppose it just depends on people's investment horizon of course there's the risk at any point but certainly we believe that that you know if we continue to control the things we can control that can perform well over coming years assuming our markets are coming that was the final question coming back to you tom okay listen thank you all it was a good range of questions i think we've got good feedback on on the results today uh you know we've you know we've done a lot but we've quite a bit more to do in the second half of the year and we'll continue to report on that uh and uh obviously as ever if you have any queries or questions or anything you'd

like to follow up on or or omitted to question us on please get in touch and we'd be delighted to respond and and help you and i maybe thanks thank you all and have a good day fantastic thank you once again to investors today could i please ask investors not to close this session as you now be automatically redirected to provide your feedback which helped 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 you.