Titanium minerals and zircon producer Kenmare Resources, which operates the Moma mine, in Mozambique, remains on track to achieve its production and cost guidance for the 2025 financial year, but has warned shareholders that it expects to recognise an impairment charge for the first half of the year.

“Kenmare continued to experience consistent demand for all of its products in the second quarter, with ilmenite prices remaining stable during the first half of the year, and we have a strong order book for the second half of the year.

"However, uncertainty regarding market conditions in the medium term has led us to slightly lower our long-term pricing assumptions. Primarily because of this, we expect to recognise an impairment charge on our assets for the first half of the year that is not expected to exceed $125-million. While this is disappointing, it will be a noncash charge with no anticipated impact on our operations, projects or financing facilities or the company’s ability to pay dividends," says MD Tom Hickey.

Moma produced 670 600 t of heavy minerals concentrate (HMC) in the first half of this year – a 2% year-on-year increase.

Ilmenite production also increased by 2% year-on-year to 449 900 t, while primary zircon production was 28% higher year-on-year, at 27 200 t.

Rutile production increased by 20% year-on-year to 4 800 t.

The company expects to achieve higher production in the second half of the year, compared with the first half of the year, supported by higher excavated ore volumes from the installation of two new higher-capacity dredges as part of the Wet Concentrator Plant (WCP) A upgrade project.

This is anticipated to offset the three to four weeks of downtime for WCP A while the upgrade work is undertaken, bolstered by production from the selective mining operation (SMO).

Earlier this year, Kenmare began commissioning a small-scale, low-cost dredge mining and concentrating operation, or SMO, to enable mining in peripheral areas of Moma’s mineral resources. The SMO has a targeted run rate of 300 t an hour, delivering 50 000 t/y of HMC production.

Due to its simple modular nature, it has a low capital cost of less than $6-million, Kenmare points out.

Building on the success of the SMO to date, an order has been placed for a second unit, SMO 2, with capacity of 1 000 t an hour. SMO 2 is expected to be commissioned in the first half of 2026 and Kenmare anticipates that it will be fed exclusively by dry mining.

The expanded unit, with additional capacity and upgraded design features for reliability, is expected to cost about $15-million, which will be incurred in 2025 and 2026. The two SMOs, in combination with some debottlenecking work at WCP B, represent a highly capital efficient alternative to the previously planned WCP B upgrade project, says Kenmare.

Hickey states that the WCP A upgrade project continues to progress to plan and that commissioning of the upgraded plant and dredges is on track to start later in the third quarter.

WCP A is Kenmare’s largest mining plant and the company is undertaking a project to upgrade it in advance of its transition to Nataka – the largest orezone in Moma’s portfolio. It contains about 70% of Moma’s nine-billion tonnes of mineral resources.

The capital cost estimate for the project remains at $341-million and, by the end of this year, over 75% of the project budget is expected to have been successfully incurred and deployed.

In early June, the two new high-capacity dredges left the contractor’s dockyard in the Netherlands and were transported to Moma by sea. They anchored to the north of Moma in early July and the first dredge is due to be landed on the beach at Moma before the end of the month. The second dredge is expected to be landed soon afterwards, with timing dependent on favourable weather and calm sea conditions.

Reflecting on market conditions, Kenmare says it experienced consistent demand for its products during the second quarter of the year.

"Global demand for titanium feedstocks remained robust, supported by improved sentiment among pigment producers outside of China. This followed the introduction of anti-dumping duties on Chinese pigment producers, which Western producers responded to by increasing plant utilisation rates, leading to anticipated stronger margins and bolstering demand for Kenmare’s products.

"Chinese pigment production continued at healthy levels in the second quarter, but moderated slightly from the record highs of the first quarter. The titanium metal market remains strong and currently accounts for about 20% of Kenmare’s sales," the company points out.

Further, it says the growth of HMC production from Chinese concentrates producers in countries like Mozambique, Sierra Leone and Nigeria continued in the first half of this year, although at a slower rate than in the second half of 2024.

"This, combined with higher domestic ilmenite production in China, means the feedstock market is currently oversupplied. Rutile and lower-quality ilmenite producers have been most impacted by this oversupply, with some producers likely to be operating at or near marginal cost.

"The zircon market remained subdued in the second quarter due to persistently weak demand, particularly in China’s construction sector, and greater substitution of lower-quality products in downstream markets. Recent improvements in this sector have not yet been reflected in market demand for zircon.

"The increased supply of concentrates has also added more lower-grade zircon to the market, although demand for high-grade products, such as Kenmare’s zircon, remains robust. The company continues to experience consistent demand for zircon, exceeding its ability to supply," it says.

Kenmare adds that it enters the second half of this year with a strong order book.

"However current market dynamics and outlook, including the oversupply position outlined above, have led Kenmare and external commentators to take a more cautious view on the likely pace of pricing recovery and market growth in the medium term, and to slightly lower long-term pricing assumptions," it notes.