Kenmare swings to loss but upbeat about Moma potential

12th Mar 2014 07:37

- Pre-tax loss of 42.1m pounds- Revenues sink 41 per cent as prices fall- Moma expansion completed after recent investmentKenmare Resources swung to a loss in 2013 on the back of falling commodity prices but gave an upbeat outlook after completing its investment programme in the Moma Titanium Minerals Mine in Mozambique.The company, which mines titanium minerals ilmenite and rutile, as well as the zirconium silicate mineral, zircon, reported a loss before tax of $42.1m last year, compared with a profit of $52.8m in 2012, on revenues that fell to $137.9m from $234.6m.Some 677,900 tonnes of total products were sold in 2013, broadly flat on the previous year, but the weighted average product price dropped by 13%."2013 saw the end of a long period of investment in Moma," said Managing Director Michael Carvill. "With the expansion complete and commissioned, and with the capital cost behind us, the Moma Mine will reap the benefits of this investment not only in 2014 but for years to come."All processing plants at Moma became operational during the year, with the Phase II expansion programme, which began in 2010, increasing production capacity by 50%. Moma is now capable of producing 8% of the world's consumption of titanium feedstocks and 4% of global zircon. However, ongoing "optimisation work" at the mine has been hampered by difficulties faced by its electricity provider to deliver stable transmission of power. As such, the supply of electricity to the mine has been "highly volatile" over recent months, Kenmare said.Nevertheless, the company said that the Mozambique state electrical utility is in the financing stage of a major project to expand its network which should resolve power transmission issues "for the long-term future"."Despite power supply difficulties, the expansion has demonstrated its ability to run at nameplate throughput capacity," said Chairman Justin Loasby."Hence the company is well placed to benefit from the expected demand recovery in titanium feedstock and zircon markets, and we look forward to gaining the benefit from the major investment which our shareholders have supported for many years."Company "undervalued" some analysts sayFollowing today's results analysts at Westhouse Securities wrote that the lower debt repayments due in August 2015, together with the likelihood for improved operations as power supply and post-expansion teething issues are resolved, and an anticipated uplift in prices during this fiscal year suggest Kenmare is undervalued at current levels.BC