KMRPF (KMRPF) Q2 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the Kenmare Resources plc H1 2026 Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. 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, I have James McCullough, our CFO; Ben Baxter, our COO; Cillian Murphy, our Head of Marketing, is also on the call; and Katharine Sutton, our Head of Investor Relations. So we'll be running you through the presentation today and hopefully answering any questions you have. Just a few quick reminders about Kenmare'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 the 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 to the economy as a whole. And I think that's recognized by us being included once again in the FTSE4Good Index. And I'll talk a little later about our negotiations around a critical agreement with the Mozambique government, where I think you may have seen we've seen good progress in recent weeks. 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 the world market, about 6%. And titanium minerals are part of the critical minerals for Europe, the U.K. and the U.S. So there is a lot of focus on them. But I think we're -- 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 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, WCP A 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 WCP A to prepare it to work effectively at Nataka. Taking a little bit longer than we would have liked 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. Our strategy overall, as I said, we want to operate responsibly. We have a 97% Mozambican workforce. We spent nearly $25 million or over $25 million in working with 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 so far in '26 in managing and reducing our operating costs and enabling us to run through this point of the price cycle. We do want to invest carefully and manage the cash flows that the asset gives us over the long term effectively. 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 million 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 our safety performance, and we're proud of that. But it has been a difficult market, and we are just after a big CapEx program. And when we spoke to you all at the start of 2026, we spoke about our priorities for the year. 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 to continue to improve the performance of our assets and to conclude our agreements with the government around the implementation. And I think we've made really good progress on all of those in the first half, but there's still plenty we can hope to achieve in the second half. So from shipments, we're on track to achieve our 2026 shipments guidance. We had some really good successes in the first half with our new ZrTi product. You may have seen that we're reporting that in sales now as opposed to a credit to cost of sales. And that's because 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 take on it, and we sold over 80,000 tonnes 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 kind of modestly adjusted our guidance to approximately 800,000 tonnes, and we are on track to achieve all our guidance at the moment with a close eye needed on second half. 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 first half. But 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 revolving credit facility by $30 million. We hope we won't have to use that additional flexibility, but it's nice to have it there because who knows what happens 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 paying attention on a day-to-day basis. And we're positioning ourselves hopefully to recover well when the market recovers. And on the market, we've seen some progress on zircon in the first half, strong price increases. And I think we saw Iluka comment this morning in a manner very similar to us, and we do expect to see those price increases maintain. Ilmenite is taking a little bit longer. We don't currently see any near-term recovery, although we would be hopeful for next year. But there have been some pigment price increases in recent months and ilmenite generally follows them, albeit with a lag. Just a moment on WCP A. We're making steady progress on the commissioning even in July and August, things have improved. We're working through punch list to get us up 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 attention. And finally, in this area, just to talk a little bit about the implementation agreement. This is an area that we focus a lot of time on. We work very closely with the government in Mozambique. We've had really good engagements 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's a really helpful discussion to help understand what was important to their key stakeholders, 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 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 of Ministers. We're in that usual part of the process now the back and forth of comments. So while there's no express time line, we're very hopeful this will be the progress that we've achieved will be maintained. And as you can probably tell, 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 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 McCullough, 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 WCP A and that's taking a little longer than 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 the half versus both H1 last year, we were down 26% and H2 last year down 31%. So our average price came out at $242 per tonne. 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 tonnes, that's up 13%, but that wasn't sufficient to offset the decline in prices. So revenue outcome was sort of 16% down 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 cost by around $15 million or 12%. I'll talk to that shortly. But notwithstanding that, we still saw the sort of the price impact flow through to the EBITDA line and came out at $4 million for EBITDA for the half. Net debt went up to $176 million from around $159 million 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 Q2 update that we had very strong receipts coming in at the beginning of July, which has sort of largely offset the increase. And so the lumpiness is sort of part of the business, but noting that an increase of $16 million. 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 market and the mix. So if we think about pricing for the different products that we sell, ilmenite 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 average price from $326 down to $242. Looking at that product mix, our actual percentage of zircon tonnes sold stayed flat or went up a little bit from 3% to 4%. And zircon is the most valuable product, so that's positive but it's really offset by the increase in concentrates that we have in the year. So that's particularly ZrTi, which kind of brought us from a concentrate share of tonnes sold from 4% up to 20% or as a share of actual revenue generated from 6% to 17%. And those concentrates sell at a lower price and therefore, impact the revenue generation through deterioration of product mix. ZrTi 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 costs that we had, the cost of sales is up significantly from $150 million to $175 million. That's really reflecting the inventory drawdown that we've had in the first half. So we 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 NRV 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 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 up at around $200 million of debt drawn. And all of that sort of -- well, not the finance cost, but the rest through to lower EBITDA at $4 million and all that fall through to a lower profit number, a loss after tax of $34 million. Just looking at the cash -- or sorry, at the cost side of things. So the bridge from cost of sales to cash costs, first of all, admin expenses were down by around $3.5 million. 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 that customer went into administration. We recovered those stocks last year -- sorry, earlier this year. And so the recovery of those stocks come through in the admin expenses line. There's also a reduction in head office costs there contributing to that reduction. We'll also see the contribution of inventory in the other stock movements of $20.5 million. So that's really reflecting that inventory drawdown that we had in the first half. And then when we get down to cash costs, you can see that reduction from $124 million to just shy of $110 million. So taking around $15 million out of the cost base. That's across all categories. So the major contributors there were labor where our costs reduced by around $5 million, just over $5 million 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.-Iran conflict, our overall power fuel and chemical costs came down around $1.5 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 tonnes to absorb those total costs. And that applies both at the total cost line as well as the net ilmenite cost line. Just to note, Tom mentioned the IA and the discussions ongoing there. As we've disclosed before, we're accruing at a rate of 2.5% 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 proposed to the government. So our total cash payments on that 1% royalty was $1.5 million in the half. Over and above that, we accrued a 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 terms. Just looking at cash movements, you can see really that the standout feature here is the contribution of liquidity or cash from the inventory drawdown. And as I said, given the net realizable value adjustments that we took predominantly to ilmenite of $14 million at the end of 2025. Those tonnes 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 million of costs and paid out $7 million. So the cash outflow was $7 million in the half, leaving us with a cash flow before development CapEx of $6.1 million. The development CapEx outflow was $23 million. A large chunk of that $12 million related to spend from 2025. So there was $11 million of new incurrence effectively in 2026 H1, but a $23 million outflow, which led to a $17 million 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 128,000 tonne drawdown of finished products all in. That's a mix. We had more than that, around 140,000 tonnes, 150,000 tonnes of ilmenite drawdown, but we also had a ZrTi buildup, which offset some of that. The inventory value does include a further NRV adjustment at the end of H1 of around $5.9 million. That's reflective of the current elevated unit costs that we have predominantly relating to the WCP A ramp-up means that the cost reduction is actually above the net realizable 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, so a very comfortable position, a strong position on the net current asset side. And just to note, we test for impairment at the end of each period at the moment, and we have headroom of $67 million on that. And the RCF upsize that we did as well as $30 million of upsize 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. With that, I will pass over to Ben.

Good morning, everybody. I'll commence with our sustainability goals and how they've advanced in the year. But 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 0 LTIs and we've amassed more than 4 million hours now since our last recordable lost time injury. Over and above that, all injuries are also down, and this is actually our best ever half year or it's our best ever year 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 Padrinho 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 been 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, and we're now more than 97% of our waste has been recycled. And then lastly, on trusted business, our governance continues to improve and has been recognized by EcoVadis 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 talk to the production. The highlight of half was the strong demand for the new product called ZrTi. This partially offset the mining performance, which -- where HMC production was down 34%. That was mostly 26% down due to lower ore grades at WCP A but also due to the lower excavated ore volumes that were mined at WCP A 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 WCP A continues to make steady improvements. And also we're having very strong performance from the other plants, particularly from WCP B. 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 concentrate production. The concentrate production was up 599% year-on-year, and that's principally due to this new product type. We prepared 102,000 tonnes of this form of tailings 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 consistent and supported by the consistent transshipment performance to meet demand through the first half. We drew down 128,000 tonnes of product stockpiles and our ilmenite stocks on site are now what we would say is a normalized level. 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. On to the next slide, and I'll talk a little bit more about the WCP A project. We've been making steady improvements and 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 spent $23 million in the first half of the year, of which $12 million was an accrual coming from 2025. And we expect to only spend $7 million 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. 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 debottlenecked successfully and they're performing very well now. And the off plant tails management has been made significantly more reliable at the densification pad and the tailings 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 have 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 throughput and utilization 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's what's incorporated into our guidance state. I'll also talk a little bit on the next slide, Slide 17, about our Selective Mining Operations and our expectation to increase production from those units in the second half of the year. You'll recall that SMO 1 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 SMO called which will be SMO 2. That's -- it will have some upgrades on it based on the knowledge and the learnings that we've had with SMO 1. And those design improvements will be brought into place to eventually have a 1,000 tonne per hour SMO 2 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 2 will follow on in 2027. And so with that, I will pass on to Cillian, who's going to deliver the market update.

Thanks, Ben, and good morning, everyone. Start really on this slide. And the first half of this year was challenging. We saw strong demand across all of our products. However, particularly on the ilmenite 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 kind of clearly impacting pricing in the first half was the freight. So following the U.S. and Iran conflict in late Q1, we saw elevated freight increases, particularly on ilmenite shipments into China. And given the weak market, we've been unable to pass them through and that has impacted ROC prices further. The steady demand has allowed us to destock, which I think James was talking about. And that, coupled with the strong ZrTi demand and strong ZrTi sales kind of resulted in the steeper gradient of lower prices -- lower average prices across all products as the product mix worsened 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 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. I want to talk about the supply and really the reason we've seen the weaker prices, we believe, is supply driven and coming from 2 main areas and centered around China. So firstly, 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, Panzhihua, has reduced over the last 12 months. That's been partially offset by increase in Xinjiang, but that's on the back of environmental reasons, which is encouraging. So that ilmenite 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. 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 the competition. It's important to say that still this product, both the domestic and the ilmenite 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, lower prices 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, yes. Encouragingly, we are seeing strong demand, and that's what supported the drawdown of stocks and the ZrTi demand. It's all on the back of, I suppose, 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. 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 market 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 one, we will continue to try and push more of our ilmenite 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. And 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 2, so our lowest TiO2 product. So as we move forward in the year, we expect a more balanced ilmenite supply mix and therefore, higher value ilmenite products being sold. On the zircon side, we expect the momentum to continue, particularly in China. I think we saw European prices was more stable over the last 12 months and starting to increase now, whereas China decreased. So it has a bit of catching up to do, and we expect that to continue in the third quarter. Finally, just to touch, I think 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 yes, we hope to see that conclude 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 you, Tom.

Thanks very much, Cillian. So look, thank you for your time today. In summary, before we move to Q&A, at the half year, we're still on track to achieve our guidance and deliver our 1.1 million tonne shipments, which is 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-up of WCP A 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 of those areas. And if we look more generally to the business, a couple of things just to emphasize before we close. First, just to remind everybody, this is 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 the recovery in our markets that maybe we're seeing signs of, but certainly, there's a little more proof that needs to come through before we start to promote a little bit more. But we are invested for it. We're ready for it. Our development CapEx is behind us. 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 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 mitigate its impact. The nature of the Moma asset, as Cillian said, the quality of our products means that we're a preferred supplier to most of our suppliers and our suppliers -- excuse me, our customers, and our customers stay with us a long time. Many have been with us 20 years plus. We're amongst the first ones they buy. That hasn't changed. And that's what gives us the visibility on our sales and our order book and means that we can achieve our shipment objectives. And as you can probably detect, we're certainly more hopeful regarding our position in Mozambique, the ongoing conclusion of our implementation agreement, the eagerness shared by government 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 Mozambique. So thanks very much for your time this morning. We'll now move to Q&A and take any questions you might have.

[Operator Instructions] While the company take a few moments to read those questions submitted today, I would like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor dashboard. Katharine, 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. 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 and finalize our plans for next year. But Ben, do you want to give a bit more color?

Yes. I was sort of going to say the same thing. I think we are entering the transition towards Nataka with WCP A. 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 a main consideration there. But to try and offset that, we have the SMO capacity that we need to bring further into place. And you saw in the table on the slide there that we have an increase of 1,500 tonnes 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 that's where we're going to be able 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 ilmenite market to diminish?

I'll hand that to Cillian, 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 to the costs as a consequence of that. But Cillian, I'll let you jump into a bit more detail on that.

Yes. Okay, I think that's a key point. We do hear 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 12 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 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 product taken out of the market that's going to swing it in the near term.

The next question -- well, a few questions come from Peter Mallin-Jones at Peel Hunt. First question, how much further cost-cutting performance can we expect in H2 on H1?

Thanks for that. Look, 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 the more tonnes 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 I would expect we'll be able to offset that. And I wouldn't be expecting that there would be significant other cost areas that we'll be able to get big benefits out of in the second half. But I think it will be a series of incremental benefits across all the different categories. So I think continuing on the same trend, keeping the sort of run rate that we have with small gains where we can find them.

Yes. I mean we haven't changed our guidance. So I mean, there's a message in that as well.

Yes. So we came out at -- we're right in the middle of guidance at the moment, that guidance was $215 million to $225 million for the full year. We came out at just shy of $110 million. So if we continue that progress, we'll be within that range. But we're looking at it very closely. And obviously, we'll execute on any opportunities that we do see.

Next question also from Peter Mallin-Jones. Can we expect a step-up in realized ilmenite 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?

Yes. I think, Cillian, touched on that, and maybe I'll let you develop a little bit more.

Yes. So I think we'll guide on the H2 prices, and we've said a strong order book for quarter 3, but we still have work to do on quarter 4. Freight will come into it. But I suppose what we are seeing is that H2 will have better product mix, and that is supportive for pricing, but we're not seeing a step-up in prices in the second half on the same product as the first half. So it's not an increase in prices. It's really product mix driven, particularly in quarter 3 that we can see at the moment. Yes, I think that probably answers it.

Third question from Peter Mallin-Jones. How big a step-up in output at WCP A 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 utilization up. I think that you're looking at sort of between 10% and 15% is my rough answer to that in terms of how much extra utilization we will get out of the plant. But there are also other ones which we're actively talking with. I mentioned the pumping system performance, which is probably the -- that's the one where we're placing most of our energies with the manufacturer right now. So I think we are -- we have made some improvements over and above the numbers that were in the H1 report here. Probably they've come up already by a good 10%. And as I've said, there's been some steady progress. But before we sort of talk too much about those, I'm looking for August and September to really bed those numbers in and to be able to be more sure about them. Then we get to the winch brake change out in, hopefully, in earlier part of Q4 than the 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 tonnes 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 Mainwaring 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 think we have to be cautious on this. The steps once we reach an agreement and an agreed form text with the MIREME who are effectively the Ministry of Mineral Resources are that it goes to the Council of Ministers for approval. And that's the key step. Council of Ministers meets regularly, probably 3 times a month, generally every Tuesday. We certainly 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 reflects challenges that the government in Mozambique can have from time to time with other priorities emerging. And so I think we just need to be cautious and note that there's no set timetable, but we're very hopeful that they're 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 we've had a couple of false starts on this over the last year, 1.5 years, and I don't want to promise something that it really isn't within our control.

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 million RCF to be sufficient funding for production against a mixed and unpredictable economic and market backdrop?

James, do you want to take that? I touched on it earlier.

Yes. Thanks, Charles. Look, at the moment, we haven't drawn nor do we have plans to draw the additional $30 million. So the upside from $200 million to $230 million at June. I think it provides buffer. We did have a shock or a surprise last year when we had a customer who we had shipped tonnes to didn't pay, that was $9 million. Now we've recovered substantially all of that. But equally, 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 Supplemental Mining Operation 2 and renewal of HME fleet and that sort of thing. So it gives us more flexibility. And look, as you noted, it's a very uncertain market, and it's -- we're still working through the WCP A upgrade. As we've said, we expect and we need the WC upgrade to continue to see those improvements that Ben has mentioned to see those added in and to start to see the tonnes come out. And as Cillian has gone through to see stabilization at least in the TiO2 market. So those are our expectations. If there's deterioration from that, then obviously, we'll have to look at our -- 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 and making sure we're prepared for anything that's coming down the track.

Yes. I suppose maybe just to say that the step-up or the increase wasn't to address an identified need. It was just purely precautionary to reflect the volatility and uncertainty that's around at the moment.

Please give color on development CapEx going forward for the rest of 2026 and 2027.

Okay. I'll take that one. So we just -- we said in this release that we will 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 moves -- starts to move towards Nataka, we have to bring in additional pumps, additional pipes, a terrace for stepping the HMC at and also electrical infrastructure. So nearly all of the $7 million relates to those sorts of items. Now 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 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 -- 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 prelim results this year that we published in March, there is a curve that showed that we have quite a tail in the development cost project -- in the development costs for the project as we progress quite a lot of distance into Nataka itself. 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-light form than previously. But for now, I would say if you can take a look at the prelim results presentation, you'll see the curve of spend that's expected.

What cost quartile do you sit in?

Look, I think we've talked in the past about where we want to be. I think probably at the moment, we're sitting in and around the midpoint. And certainly, our objective is to get well into the lower cost quartiles. Of course, some of -- that curve changes as the mix of participants in the market changes. And I think what we've emphasized and Cillian talked about earlier was certainly, over the last couple of years, the Chinese concentrate producers have lower operating capital costs. They increased production quickly. But when perhaps the resources or ore bodies they are mining become more challenging, where costs increase, they can reduce those -- 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 Kenmare be on the global cash cost curve once Nataka starts production, assuming elevated diesel prices and your base case scenario for the IA?

Yes. Look, as 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 curve largely occupied by iron ore miners for whom TiO2 is a byproduct, which means that 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, to the left-hand side of sort of the cost curve of mineral sands producers. When Nataka 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 would be where we would be assuming nothing else changes, assuming.

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

Cillian, do you want to take that? I think you covered it in the slides, but probably just worth talking about some of the key factors.

Yes. 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 concentrates into China as adding a lot of supply to the market, and that's the primary driver. Demand could be better, I think, is the thing. We have seen slow housing markets in China, U.S., Europe. 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 able to receive dividends again on a regular basis?

Maybe I'll start with that, and James can jump in. Look, as I said at the outset, dividends, we recognize it has been an important part of 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 the important thing with dividends is when we recommence paying dividends that we can do it on a stable continuous basis. We recognize that we have investors on our register to whom this is important, and we do speak to those investors regularly. And I think we will give good notice of our plans for resuming dividends or resuming shareholder return in any form as we navigate the next number of months and see how the market evolves. But certainly, from where we stand now, maybe the easiest way to say this is the reasons why we suspended or paused our dividend in the first quarter of 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 we have a responsibility to be balanced in our commentary and to try and give 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, Iluka Resources in Australia, reported this morning. And if you read their commentary, it's pretty much exactly the same as ours. So I think we -- as I said at the outset, we have a lot of things that we want to achieve this year, and I think we've made really good progress on achieving them or working towards them and controlling the things that we can. And the team has worked really hard on it. Our shipments have been good. We're making progress on WCP A, 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'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 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 rerating?

Look, we feel that Kenmare is well positioned for the long term. I suppose it depends on your investment horizon. It's worth noting that we all committed to investing 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. I think history would show that the cycle -- price cycles turn, significant returns are achievable. And what we're trying to do is give people a view on how we see that trajectory playing out. I think it's -- many of our investors have been with us for many years, and they take a multiyear view. I suppose it just depends on people's investment horizon. Of course, there's risk at any point. But certainly, we believe that if we continue to control the things we can control, that Kenmare will perform well over the coming years, assuming our markets recover.

That was the final question. Handing back to you, Tom.

Okay, thank you all. It was a good range of questions. I think we've got good feedback on the results today. 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. And obviously, as ever, if you have any queries or questions or anything you'd like to follow up on or prompted to question us on, please get in touch and we'd be delighted to respond and help you. Thank you all, and have a good day.

Fantastic. Thank you all once again to investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback, which will 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 you all.