Good afternoon and welcome to the latest Yellowstone Advisory webinar with Kenmare Resources, who released their full-year results on the 20th of March. We're delighted to have with us today Michael Carvill, the Managing Director, and Jeremy Dibb, Director of Corporate Development and Investor Relations. While we're waiting for everyone to arrive, please could you respond to the poll on the screen, and while you're doing that I'm just going to go through a few admin points. Format today is a presentation of the full-year results. This will take about 30 minutes and then we'll hand over for Q&A. You're currently on listen-only mode, but if you do want to ask a question please type it into the chat box at the bottom of your screen. We've had a few questions sent in ahead of time and we'll cover all questions at the end of the presentation.
And then following the meeting you'll be redirected to a short survey. We'd really appreciate it if you could just spend a few moments completing that. I'd now like to hand over to Michael to start today's presentation.
Thanks very much, Alex. Welcome, ladies and gentlemen. My name is Michael Carvill. Alex, would you like me to go on video or off video?
That's entirely up to you, Michael.
Go on video, if that's. So, welcome to the presentation of our 2023 results. I will give a quick introduction and Jeremy will give the guts of this presentation, which is financial review. I'll provide some update on operations in the market and an outlook. So, if we could just move to Slide 4, please, Alex. I am the MD of Kenmare and have been the MD for quite some time, but all good things have to end and I will be leaving my position as MD in August of this year.
I will continue as a consultant to the company, working on particularly the renegotiation of our investment agreement with the Government of Mozambique and on the organization of project to move : Wet Concentrator Plant A in Nataka until the end of the year, and then after that we might continue on with the consulting period or not, depending on whether the new CEO of the company wants to. There is an executive search company called Korn Ferry has already been appointed to conduct a search process and a selection process for the new CEO. That's been run by the Nominations Committee of the Board. We have very strong internal candidates, but they are also looking more broadly to see whether they can find a new candidate. So that's that. This will be my last results presentation, but I am delighted to be here and chatting with you guys.
So if we move on to the next page, please, Alex. We have operated the company on the basis of three strategic pillars. One, operating responsibly; two, delivering long-life, low-cost production; and three, allocating the capital that's produced efficiently. As far as operating responsibly is concerned, we have achieved a lost-time injury frequency rate of 0.15 per 200,000 hours worked. And so that's a good step forward. We had achieved in the middle of 2022, I think it was in the middle of 2022, 12 million hours without a lost-time injury, but then we went through a period with quite a few injuries, and none of them serious, but nonetheless, quite a few injuries. And we've had to really pick up our boots and readdress operating responsibly and safely, and we're delighted to see that now delivering in terms of a significantly reduced frequency rate in the industry.
We believe it's really important that the company delivers low-cost production. Our position in the first quartile of the revenue-to-cost curve of the industry is something that we guard very jealously, and a lot of the investment associated with Wet Concentrator Plant A move is to copper-fasten that position in the first quartile. We believe that that will be very beneficial for the shareholders and the stakeholders of this company in the many years to come. In terms of allocating capital efficiently, we believe that a mix of strong dividends and share buybacks has been beneficial and is a positive way to pay back our shareholders. With that in mind, we've declared a final dividend of $50 million for 2023. Just reviewing highlights of the cash flow generation, our revenue was $437 million, producing an EBITDA of $220 million and a net profit of $31 million.
So we were delighted with that. We finished the year net cash at $20 million despite having spent $30 million on a share buyback and the significant interim dividend that we had already paid. Our capital projects, the Wet Concentrator Plant A upgrade, and then its transition to Nataka, that project is in execution phase. We're very comfortable with it. It's moving along as expected, and we believe that the project is well in control, and we're very happy with it. We have to build some infrastructure at Nataka for WCP A operation when it's there, and we're completing the definitive feasibility study on that infrastructure at the moment with that DFS expected to be delivered in the second quarter of 2024. With that, I might ask Jeremy to give you a more insightful view of the financial results.
Thanks for that, Michael, and thanks to everyone for joining the call today. 2023 was the second-best year in terms of profitability for Kenmare with a strong 50% EBITDA margin. That said, it came off an even stronger 2022 where mineral products were more than 12% higher due to slightly weaker pricing, slightly lower volumes, and also a slightly negative product mix impact. Cash operating costs were up only 4%, which was due to some strong cost control in a strong inflationary environment and was affected really by some equipment rental that we had and slightly higher fuel prices. As you follow down the P&L, you can see that net finance costs actually dropped quite substantially, and that was due to the lower amount of gross debt that we were carrying and also the benefit of the higher interest rates on the cash on hand.
Tax went the other way. So there was some additional Irish Corporation tax on some intergroup dividends. We've talked about this before, and the Irish Department of Finance is currently running a consultation process, which we've been taking part in, and should have an outcome later this year. So we'll wait to see where that lands before deciding what we do next. We've previously talked about otherwise having a restructure of the group to deal with that. And so the outcome of all of that was the EBITDA was a strong $220 million for 2023. Turning to the next Slide 9. On the bottom right here, you can see that mineral product revenue bridge from the $498 to the $437 as a result of volume and mix making up about half of that and price being the other half. The mix element is that zircon sales were lower.
There was a higher percentage of ilmenite sales, and that was due to a lower production of primary zircon in 2023 versus 2022. However, you can see from the chart above that whilst pricing was weaker, it was substantially stronger than it has been historically, still maintaining very strong pricing. And that's really been as a result of a slight dip in demand whilst there hasn't been much additional supply coming into the market, and that's why pricing has been resilient and hasn't seen the falls that it has in some other commodities. Michael will come on later to talk more about the commodity market. So turning to the next slide. This is a reconciliation of our P&L costs to the cash operating costs of the business.
If you drop to halfway down, you can see that cash operating costs I'd previously mentioned were up 4% from $218.7 million to $228.1 million due to those heavy mobile equipment and diesel prices that I mentioned earlier, and also some costs associated with the lightning strike in Q1. What you can see is that production was down 9%, which led to an overall cash operating cost per tonne of 15%. As Michael talked about earlier, being a first quartile producer is an essential part of our strategy, and it really shows here in terms of the ability to produce at higher rates, which is what we're planning with the projects at WCP A and WCP B really feed through into the unit costs.
That was then magnified to some degree by the lower amount of co-products and the lower pricing of those co-products, which meant cash operating costs per tonne increased 74% to $108 a tonne of ilmenite. Now, the important thing to bear in mind there is that in 2023, even at those lower prices, we were selling ilmenite for $337 a tonne on average, which gives us a $229 a tonne margin on those ilmenite productions. So it's still a very profitable mine, generating strong free cash flow and maintaining that first quartile position, which is what our target's been. Turning to the next slide. This is a chart of our net cash position. So you can see that opening net cash in 2023 and closing net cash were broadly similar.
A very strong operating cash flow of $196 million, and then some capital that was spent on sustaining as well as development studies, which was $67 million. We had a working capital draw of $44 million. That was despite pricing being lower as it was due to some strong shipments in the fourth quarter that meant there was an increase in the receivables that were due to us, so product that we'd shipped but hadn't yet been paid for, as well as the fact that we actually built inventory, primarily inventory for ilmenite through 2023. And so that led to an increase, and that will reverse back as we sell that product. It's on the balance sheet at cost, so the profits will be added on into the P&L as we sell that material through 2024. There was also the dividends that Michael referred to.
So that was the cash dividend of H2 2022, as well as the H1 2023 interim dividend and the buyback that he mentioned. And then, as I talked about earlier, the financing and FX costs were lower as a result of those lower interest rates and lower amounts of gearing. The one other element that isn't drawn out here because it's a net cash reconciliation is that in 2023, we made $31 million of debt repayments. I'll talk about the new structure for our debt on the coming slides, but those sort of repayments won't be required. There's no mandatory repayment of that facility as it's a revolving credit facility, and therefore, that will increase our financial flexibility moving forward. So turning to Slide 12. You can see that the balance sheet is incredibly healthy.
The capital investment of $67 million was $22 million of projects plus some additional sustaining capital that we always have in the business that tends to average between $28 million to $32 million per year. Therefore, once you take into account the depreciation, the property plant and equipment was only marginally up over the year. Again, noted here is the $15 million higher of ilmenite stock at the end of the year, which we would expect to sell down, particularly in the first half of this year when production isn't expected to be as strong in the middle half of the year.
Then the other item that I think is particularly important is that as we've been net cash for the last couple of years, we haven't been using factoring facilities the same amount as you have done previously because if you have net cash, there's no need to accelerate the repayment of those receivables. And therefore, we have about $100 million of receivables that could be factored as at the end of 2023, which is essentially additional financing that we can draw instead of the RCF. And actually, our factoring facilities are slightly cheaper than the RCF, and so could be a better way to help fund some of those payments that will be required through 2024 and 2025 for the development of the WCP A project. Moving to the next slide. We're focused on the new financing facilities that we've put in place.
So it's a $200 million facility that is a revolving credit facility for the whole amount. So the last debt that we had in place was $110 million of term loan and $40 million of RCF. We'd drawn on that term loan in order to fund the WCP B move to Pilivili, and we had the RCF available to us. And so whilst we were repaying that term loan, as I mentioned earlier, the capital repayments that we had in 2023, this now gives us an increase from $40 million of cash available to be drawn in an RCF up to $200, which is an additional $160 million, no amortizing repayments, fully available for the next five years, and extends that maturity profile from 2025 to 2029, which is substantially beyond our expectations of capital investment.
That was done with the same lending group who've been very supportive as we had last time around. That facility is now closed, and we've drawn to repay the existing, or sorry, the previously available term loan on the 11th of March. Stepping on again. Over the last five years, we've returned more than $250 million to shareholders by way of both dividends and share buybacks. We completed a share buyback that reduced the share count by 5.9% in 2023. That was $30 million and followed on from an $80 million buyback that we did at the end of 2021. The final dividend that we've announced of $0.385 a share is in line with our dividend policy, which is 20% to 40% of profit after tax.
And it's at the higher end of that range to compensate for the fact that pricing has been lower in 2023. So we've tried to use that policy to smooth out the dividends to shareholders. And that's actually an increase on 2022 as it on a per-share basis as it benefits from that buyback that we did and the reduction in the share count. Moving forwards, we expect to stay within that range of 20% to 40% of profit after tax. The record date for the dividend is the 12th of April, and that will then be paid out on the 17th of May. So turning to Slide 15. When we look at our capital returns and the investment plans, there are core elements to that, and they're a discretionary.
So the first of the core elements is the capital requirements for the business, and what comes first is the sustaining capital within that, so making sure that we're spending the money to maintain this asset that's going to be producing free cash flows for the next 100 years plus according to our resources. We then have some elements of additional capital spend such as the transition of WCP A, which Michael will come on to talk about as an essential project for us. And then we want to maintain financial flexibility. And so I talked about the RCF and the discounting facilities we have in place, which are currently unused.
The combination of those, our existing net cash position and the free cash flow that we'll be generating will fully finance our capital requirements while also allowing us to maintain our dividend policy of 20% to 40% as we have done in prior years. And then with any other cash that's available to us, we have these discretionary elements. So we've talked previously about a very compelling project we have at WCP B that would help increase the tonnes per hour by about 1,000 tonnes per hour from that project, a high-returning project that could be completed after the WCP A project. That's under feasibility at the moment. But we've also got more than 100 years of mineral resources, and so that's very hard to capture for shareholders and their valuation. And therefore, we've been looking at opportunities.
So at the right point in time when the market is aligned and needs that material and the share price would validate making further investments into the property plant equipment of the company, we have the facilities to be able to do that and have done the studies that are required. But historically, in 2023 and 2021, the best investment that we could see was to do a share buyback because of the multiples that we were trading on. And we think that that will continue to generate stronger EPS and DPS for our investors over time. And that was really a compelling thing for the company to do given the multiples we were trading on. And then finally, M&A. We always look at any opportunities that are out there, but right now, that hasn't been a focus for us as a business.
With that, I will turn back to Michael to talk through our operating projects.
On mute. Thanks, Jeremy. If we could turn to the next page, please, Alex. So because it's a very long-life project, partially because it's a very long-life project, it's important that we operate sustainably and that we operate in a harmonious cohabitation with the host communities and that we cherish the workforce and develop the workforce to become better all the time. We therefore have four sustainability goals. In terms of the safe and engaged workforce, we are now at three m illion man-hours worked without a lost-time injury. We've moved our female representation at the mine to 16%. It wasn't long ago that that was 4%. So that's a very significant advance. 40% of senior management roles at the mine are actually held by ladies.
So it's a very positive movement, and it creates a much better atmosphere at the mine. And everybody is very pleased with the change to having more women involved. In terms of our thriving communities, we set up a not-for-profit organization, KMAD, before we even started working. And we continue to work through KMAD to improve the lives of the local citizens. So we are refurbishing a district hospital at the moment. The contract for that is signed. We have constructed three water systems and continue to sponsor more microbusinesses, and we have brought in new microbusinesses that are now directly employing 385 people. In terms of the healthy environment, we're very lucky in that we operate with hydrogenerated electric power. So all our dredging equipment, the wet concentrator plants, all the pumping, and the mineral separation plant, it's all driven by hydrogenerated electric power.
So we don't have anything comparable with our peer group in terms of carbon emissions. But nonetheless, we have managed to shrink those emissions by 14% vis-a-vis 2022. And during 2023, we planted more than 200,000 trees. We also work hard to ensure that we have an effect on the economy in Mozambique. We work hard in bringing local suppliers up, their capacity up, so that they're able to be competent suppliers to us. We've spent $79 million during 2023 with Mozambican suppliers. We ensure that they have a code of conduct, and we actually go and audit them to ensure that they are complying with their assigned code of conduct, as well as that we have security force members in the area. And we provide them with training in the Voluntary Principles on Security and Human Rights twice a year, so they're well-versed. Thanks, Alex.
Could we move to the next? This is the point that I was making earlier. We had a very good lost-time injury frequency rate with 12 million man-hours worked, but it slipped a little bit. We then had to revise our processes and really refocus our culture on ensuring that these lost-time injuries reduce to as low a number as possible. As I mentioned, we're now at about three million man-hours worked without a lost-time injury. Could we move on, please, Alex? Thank you. Last year was a pretty challenging year for us. We got hit by a lightning strike that was of severe magnitude and very proximate to the mine. And the transmission grid to the mine gets hit with lightning strikes regularly. And so this was a very extreme example of it. And it coincided with the transmission line circuit breakers not working.
And the result of that was that a lot of the variable speed controllers in the whole project were burned out. And we had a long period where we were trying to get by these controllers from all over the world, bring them in, replace them. But if you remember, in early 2023, there were supply chain difficulties. And all in all, that created a 4% decrease in ore volumes as a consequence of that. And also in 2023, we went through areas where there was lower grade than we had been expecting. And these are wetland areas. They had been drilled. And like every and this is the first time we had gone through these wetland areas. But our drill indications are normally a very, very good predictor of what we will eventually mine.
But in this case, when we started to mine the area, we found that we got less than the drill indicators had shown. So we had to do new drilling programs. And we've done that with all the new information that we have. And we now have what we believe very good understanding of what we will achieve when we're mining in the wetlands. But at the start of 2023, we didn't have that information, and it caused a decrease from our expected production. We did produce 986,000 tonnes of ilmenite, 51,000 tonnes of primary zircon, and 8,400 tonnes of rutile, plus 45,000 tonnes of concentrate. So after the lightning strike, we revised our guidance, and we hit that revised guidance. And in fact, with regard to zircon and rutile, we actually hit the original guidance.
So it was a year with challenges, but we believe that the guys, the operations team, dealt with those challenges well and did meet their revised guidance post the lightning strike. So thanks, Alex. Could we move to the next slide? So for 2024, we have issued guidance of between 950,000 and 1.05 million tonnes of ilmenite. And this production guidance reflects higher mining rates, but we have lower grades. And so therefore, we're going to mine more ore, but that will contain slightly less ilmenite and rutile and zircon. And so therefore, we will end up with these guided numbers. The other thing to note about 2024 is that our grades in the first half of the year are significantly lower than the grades in the second half of the year. So 2024 production is expected to be weighted strongly towards H2.
2025, we expect it to be roughly the same. Beyond 2025, it depends on exactly when we operate Wet Concentrator Plant B, which will take about 15 months from when we make the final investment decision. Thanks, Alex, if we could turn on. I'll talk about our capital projects. The main project is the relocation of Wet Concentrator Plant A in the Nataka ore zone and the equipping of it in that ore zone to effectively mine the material there and continue to operate in the first quartile of the revenue-to-cost curve. If you can see the pie chart on the left-hand side, it shows you how important Nataka is to us. It represents 72% of the drill-indicated resources that we have at the project.
It's really, really important that we mine this material effectively and that we mine it in a cost-efficient manner. Consequently, that's why we are spending so much on the relocation. It's to ensure that at Nataka, Wet Concentrator Plant A is able to mine effectively and in a cost-effective manner. When it gets to Nataka, Wet Concentrator Plant A will not have a further move to do. It will continue there for the rest of its economic life. Wet Concentrator Plant B is in Pilivili at the moment, and then it moves into Mualadi and eventually into Nataka. Mualadi and Nataka are congruent or directly beside Pilivili. There is no move. It just transitions from one area directly into another area and directly into another area. They're actually named after the local villages that are right there.
So it's not as if there is anything particularly different as they move. Wet Concentrator Plant C, which is the much smaller wet concentrator plant, it's 500 tons per hour compared with Wet Concentrator Plant A, which is 3,250 tons per hour. So Wet Concentrator Plant C, much smaller unit. It will move in 2030, but its move will be done the road that we have already established that we built to move Wet Concentrator Plant B. And most of the cost of moving B was in building the road. So the road's already there. So the move of Wet Concentrator Plant C is not a major capital expenditure. Thanks, Alex. Could we turn, please?
If any of the ladies and gentlemen on the call have been following Kenmare over the years, you will know that management of slimes in the ore body is a very significant operating challenge that we have always had. Slimes are ultra-fine particles that whenever you mine them into a pond, they remain in suspension in the pond and can affect our recoveries in our wet concentrator plant and our throughputs and the ease of mining. All in all, they're very difficult things to manage. We have been managing slimes to the best of our ability, and we believe better than any other mining company in the world in that we've been able to mine and use Wet Concentrator Plant A without a specific desliming circuit. However, as we move to Nataka, the level of slimes grows a little bit.
We've come to the end of the capacity envelope of this existing equipment. We have to create a new facility on Wet Concentrator Plant A, which will separate the slimes, and those slimes will then be pumped away to a new tailings storage facility where they will be deposited, and that's where they'll stay. This will greatly ease our processing and operation with Wet Concentrator Plant A. It's a significant investment, but it will create a much, much more capable wet concentrator plant. If you look at the photograph or the drawing on the right-hand side at the bottom, you can see the new plant is practically as big as the existing spiral plant. It's a pretty big piece of equipment that will be added onto Wet Concentrator Plant A and consequently allow it mine in much higher slimes environment. Thanks, Alex.
So it's going to cost a bit of money to do all of this. And the assessment from the definitive feasibility study is that we will spend up to $341 million on the re-equipment of Wet Concentrator Plant A and the move. That cost includes two new dredges, which are bigger, stronger, much more capable dredges than we have been using before, and the tailings storage facility . It has historically been the issue with this project that it's actually winning that ore and processing it through the wet concentrator plants has been the bottleneck in the business. And by equipping Wet Concentrator Plant A with its new desliming circuits and by creating and buying and creating new, much bigger, much stronger, larger dredges, we believe that in the future, this will no longer be the case and that we will not be constrained by our mining capacity.
We believe it's a significant upgrade in the capacity of the overall project. Thanks, Alex. I just turn to the next page, which is an update on the market. Demand for our products remained robust during 2023. However, with global movement to increase interest rates by central banks all around the world, there is a consequent effect on economic activity and also people's perceptions of what levels of inventory they should keep. And consequently, we saw some significant drop in prices in H1 and H2 to 2023 in ilmenite prices, as we would expect. But this was anticipated. It was exactly what the central banks had planned to happen. It did happen. And we're now looking forward to a period when interest rates will be plateaued for a while and eventually start to fall down. Some segments of the market performed particularly well, particularly the titanium metal market.
And there's been a 52% increase in titanium metal production since 2021. So it's really moving forward very strongly. And we are targeting that titanium metal market. TiO2 prices, again, like ilmenite prices, decreased somewhat in 2023, but we got strong sales volumes and benefiting from some existing contracts and higher prices that were received. So if we could turn on, please, Alex. Okay. One of the key factors in our market is that there is being a gradual movement of the manufacture of titanium pigment from Western producers through to Chinese producers. And those Chinese producers have been building chloride process pigment plants. And the interesting thing about those chloride process pigment plants is that they need supply from outside China. China does have domestic ilmenite. That domestic ilmenite is suitable for making sulfate process pigment. But sulfate process pigment is not quite as good as chloride process pigment.
And so therefore, the pigment companies are moving towards chloride, and they're therefore having to increase their imports. There's another phenomenon also that Chinese pigment producers tend to buy the base ilmenite product, the natural ilmenite product, and upgrade it themselves rather than buying an upgraded product from a Western mining company. So there is a process to take ilmenite and upgrade it to produce titanium slag or synthetic rutile, which then can be sold as a feedstock to the pigment companies. But the Chinese guys don't tend to do that. They like to buy the ilmenite and upgrade it themselves, which suits us as a primary ilmenite producer very well. So the market is moving in our direction. Thanks, Alex. If we could turn to the next slide.
As we can see from this very simple graph, but it's the result of a huge amount of work where every single pigment plant, every single titanium metal plant in the world that we are aware of and its operating rate, its type of consumption is all involved in a great big database that we manage all the time, maintain all the time. You can see that from existing production, existing mines, the total supply of feedstock will reduce over the next few years, the next several years, while demand will continue to increase in line with world GDP increases. There's a gap. That gap has to be filled by new production. That new production has to be based on good economics.
I suppose if you look at Kenmare Resources at the moment, we have invested $1.5 billion in the mine, but our market capitalization is more like $380 million. So I suppose if we were to go to say to a whole bunch of new shareholders, "Let us invest in another titanium pigment mine," they'll say, "Well, not on your nelly because you will result in lower value than you have to start." So that's an untenable situation. We feel that therefore, in order for that new supply to come on board, existing mining companies have to see significant improvement in the value of their equity. Thanks, Alex. If we could move on. In terms of 2024, we have been very pleased to see that the pigment producers are reporting stronger than expected sales in Q1.
We are seeing that as the evidence of that in increased draws. Now, prices have not come up. Prices are still flat or maybe even slightly lower than Q4 2023, but demand is up and volume is up. So pretty well all of our long-term customers are saying, "Look, we had a variation, and we had previously we had a range of volume that we could take from you under contract. We had previously said the bottom of the range. Now we want to revise to the top of the range." So it's not a great bull run or anything like that, but it does suggest to us that the inventory destocking that was happening in 2023 is now over, that if the customers are experiencing improved demand, that's flowing straight through to their primary producers such as ourselves.
Recoveries normally come in terms of volume first and price later. Zircon demand remains subdued. But the zircon business is a highly concentrated oligopoly, and consequently, it seems to us that production will continue to be balanced with demand. And so we don't anticipate seeing any great improvements in zircon price, but we don't anticipate seeing it drop off the horizon either. And demand for our zircon products remains high. Thanks, Alex. So just to outlook, I think we've shown this slide before, but it shows the journey that this project, this company has taken from 2023 sorry, 2013 when we were in the fourth quarter producer, is the independently sourced analysis from a company called TZMI to 2021 when we were just tipping into the first quarter. And we believe we are well into the first quarter at the minute.
Upon completion when we have completed our Nataka move, and we move fully up to 1.2 million tonnes per annum, we will be well in the first quartile. So that's sort of it. We believe the company is positioned well in the market. We believe that it's selling into the areas in the market which are growing fastest. We believe that the project for Wet Concentrator Plant A is a very well-developed project. We spent a long time, a lot of money on the pre-feasibility study to ensure that we had the right development paradigm. The project is well manned, and we're very comfortable with the cost estimates for it. We have a good set of contractors who we've all worked with all of them before, and we know that they can deliver.
We have been very careful to weed out any contractors who were not or our view was that they weren't capable or would cause us slowdowns or whatever. We think it's a good project, well-engineered, and it will create a good operating environment for the company for the many years to come. Strong market dynamics, as I just mentioned, first quartile position. And so therefore, we believe that the shareholders' returns will be strong in the future and that it will also provide the company with growth options. And so with that, I think we've finished our presentation, Alex, and we'd be delighted to take questions. Thanks.
Thank you, Michael. Thank you, Jeremy, for that very clear presentation on the performance of Kenmare during 2023 and the prospects looking forward. We are now going to take questions.
Just a reminder, if you would like to ask a question, please type it into the comment box at the bottom of your screen. Let us start with a couple of questions here. Congratulations to Michael on his retirement. The market doesn't appear to be rewarding all his hard work, with the shares trading at around a third of book value. Is not now a good time to sell the company? Surely a major would pay two to three times the current share price given the outlook for HMS supply.
Interesting question. Well, I'm sure most people are aware that there has been some activist shareholder involvement in the company, and they have indicated their interest in selling the company.
And basically, that's been sort of like a shop window, and nobody's been banging on our door to say, "Yeah, they'd like to buy it." So I think if I was an executive in a large mining company, I would be saying to myself, "Look, I'll let those guys finish that project, and then I'll consider it," rather than stepping in right now.
Okay. Thank you. Next question. With Base Resources ending production at Kwale later this year, is the company expecting increased demand for Kenmare's HMS products?
Yes.
That's a very simple answer there, Michael. Question here on the dividends. I guess a statement and a question. Not all investors want dividends. They create some unwelcome tax liabilities.
Why not use surplus cash for buybacks that enhances the capital value of shares and provides investors with the option of selling some of their holding in lieu of dividends if they do need the income? And for those that would rather remain investors, they can benefit from gross compounding. Dividends are not forced upon them. Dividends make no sense at the current multiples of which Kenmare is currently capitalized. Do you have any comments on this?
I'll let Jeremy answer that in a much more sophisticated way. But my response would be, "Look, we have a constituency of different shareholders who have different desires."
Yeah, that Michael's absolutely right there. We've got some funds that are income funds that hold us, and they can't recognize a sale through a buyback as income.
Therefore, the payment of dividends is an important part of our investment case, those constituents of our shareholder register, as Michael mentioned. We tried to do both. We've tried to establish a dividend policy that meets their requirements, but all additional capital returns have been via share buybacks. We've tried to blend the two. Those buybacks that we've done, just to note, have been at a zero premium. That has given people the option to either take part in the buyback and release some capital or to not take part in the buyback and increase their percentage shareholding in the company. They're happy to have that debate with various people and appreciate the different perspectives that different shareholders have.
We've got a linked question on the dividends. It's regarding Irish withholding tax.
So Irish withholding tax is a major impediment for U.K.-based shareholders to owning Kenmare while it pays out significant dividends. What can the company do to remove this fiscal drag and make the company more attractive to U.K.-based investors?
So I'll turn that to Michael if it's okay. There shouldn't be any fiscal drag. So any of the institutions that invest with us are exempted from that, and they work with their nominees to make sure they get their dividends in full. I completely understand that private investors, particularly those that hold through nominees, be it Interactive Investor or Hargreaves Lansdown or whoever else that might be, will be getting that 25% dividend cut. But look, feel free, get in touch with us. We can help you with that. If you are not an Irish resident, you should be able to reclaim that.
There is a bit of paperwork that goes with it, but it's a relatively painless process. You can do that running back a few years. There shouldn't be any need for anyone that is U.K.-based to pay that dividend withholding tax.
Thank you. Michael, question for you in some appreciation. Thank you for your service, Michael. How do developments at Sierra Rutile affect market supply, and is Toliara a long way away?
Well, Sierra Rutile, it's the same as Base. I mean, it's just self-evident. If somebody's not supplying into the market, then there's more demand for those that remain in the market. So we just believe it can only be positive for the remaining participants in the market. Toliara is, we believe, a very fine project, and it is in process of renegotiating its fiscal terms with the government of Madagascar.
And so we really don't know where that is. But what we do know is that Base Resources said that post-finalization of their agreement with the government of Madagascar, it would take them about a year to get to final investment decision. We think that's quite a reasonable estimate, and then probably about two years to build it. So that's, I suppose, as close as it can get.
I could just add a bit to that, Hannah. I think you don't need to go to it now, but on Slide 28 of the presentation, we've got our supply-demand outlook there. And we can see that supply peaked somewhere between 2022 and 2023. But then going forwards, there, existing supply will dwindle as grades drop.
I think just in the same way that we believe the company is undervalued, trading at less than the 3x EBITDA multiple for a life of mine that's more than 100 years, when people are coming to build new projects, we don't believe that they're likely to be able to get easy access to funding to build those if existing producers are trading on those types of multiples. And therefore, you're unlikely to see the supply growth. And therefore, if demand continues to grow in the coming years as we expect it to, then that leads to a very favorable supply-demand outlook. And so the pause that we've seen in pricing here, I think, goes back again to show that the drop in ilmenite prices really hasn't been anything significant, particularly when you compare that to some other commodities that may have been more volatile during that period.
Thank you. We've got a couple of questions here on pricing. How good are you at forecasting pricing for your product? Are you normally in a sort of ±5% to 10%, or do you occasionally get surprised by market pricing?
I think that in general, it depends on what time horizon you're looking at. We're very good at forecasting pricing in the short term. In the longer term, I think that it really depends on how that market balance sits. As producers, we're always much more concerned about an increase in supply than we are concerned about demand being weak. We've done analysis going back to the 1960s looking at that supply-demand imbalance. It's very unusual for demands to be down more than two consecutive years in a row. The world typically grows. We're a GDP-plus business.
And therefore, as it continues to urbanize and grow, we expect demand for TiO2 to grow. But some of the mines in our industry can be quite big. And so it can take time if there's a lot of supply that comes on for that demand to grow its way out of that supply. But as I say, at the moment, we don't really see any significant supply being built. And therefore, you would expect pricing to trend more towards incentive pricing. When the market's oversupplied, it tends more to cost of production. And as you saw from our numbers, there's a big delta between that cost of production and the sales price that we're getting right now. So I think it's a very positive outlook for the commodity in the coming years.
But if I could just add that if anyone ever tells you that they can, in a foolproof fashion, forecast a commodity market, count your fingers.
Thank you. We've got one more question on this pricing issue, which is, the presentation shows significant shortfall in HMS supply versus demand. What impact does the company expect to have on HMS pricing going forward?
Well, I suppose the reason we showed that slide is because it seems to us that the market is fundamentally supportive of improved pricing in the future in order to provide the incentive to create the new capacity that the market will demand.
Okay. Thank you. And then on production, 2023 production was impacted by lightning strikes and lower-than-expected grades. Yet 2024 and 2025 guidance is for similar production due to lower grade. Is this reduced grade now the new normal for the company?
We go through particularly low-grade during the transition of Wet Concentrator Plant A through to Nataka. There's a transition zone. It takes about 18 months to move through that transition zone. And I mean, there's nothing we can do about that. It's just lower-grade. And then when we get to Nataka, the grades rise up again. And then our grade profile is pretty static, I think, for the next 10 years. So no, I think there's an 18-month transition zone that is affecting that.
And then I guess this is a linked question. When do you think that you'll be able to achieve the production capacity of the plant of 1.2 million tonnes per year? And is this a sustainable production target?
When we have all that kit on board and we're in Nataka.
Yeah.
The main element there is the investment decision for the WCP B project, which Michael talked about earlier. With WCP B and the move to Nataka for WCP A, we will have enough mining capacity to produce 1.2 million tonnes of final product, Ilmenite.
Brilliant. I think we've just got time for one more question here. And that's on the security situation in Mozambique. Would you be able to provide any further details on this of the security situation currently?
So the security situation, as far as we're concerned, is that occasionally people steal copper wire and our Coke cans or our Coke bottles full of diesel fuel. And we have to be careful to make sure that pilfering is at a minimum. And we believe that it is at a very, very low level. It's not something it's well in control. And our security forces are well on top of it.
So we don't consider it to be a difficult situation at all. As far as the country is concerned, there is an Islamic sort of force in the north of the country that is causing some trouble in the Cabo Delgado province. And that is an insurgency which has a sort of a lid put on it by the presence of Rwandan forces. And they're keeping everything at a simmer. But it hasn't completely gone away and will continue to cause the country difficulty until the government actually deals with the grievances that are the fundamental root causes. But that's a very regional, very, very regional insurgency. It's about 800 or 900 kilometers from us. And it has no effect whatsoever on our operations.
Okay. Thank you. Look, we've had one last question come in, which I think is worth asking. Can you talk about the deposit at Nataka?
Is it similar to what we've seen in the last years in terms of production volumes in Rutile, zircon, Ilmenite mix? And will there be a drop in volumes as you move the equipment to Nakata?
Nataka. And so just to answer the last part, yes, there is a drop in production volumes. As we have indicated, we will only be doing about a million tonnes a year during that period when we're transitioning. And if we hadn't been transitioning, we would be hoping to be above that. So that's one part of the question. And the second part of the question, the mineral sand suite of valuable heavy minerals is pretty well identical in Nataka. So it's the same. From one tonne, we get the same proportion of Ilmenite, zircon, and Rutile and monazite concentrate as we do from where we're presently mining.
Just one thing to clarify it.
I think you're right, Michael. It's a drop relative to our nameplate of 1.2, but it's not a drop relative to the production we're expecting this year or next year. So we don't expect production in any year to drop meaningfully below a m illion tonnes around that.
Great. Thank you.
Thanks, Jeremy. You're right.
Michael and Jeremy, thank you very much for presenting the full-year results and the outlook for 2024 and for answering all those questions. That brings us to the end of today's webinar with Kenmare Resources. As you leave today, you'll be asked to complete a short survey. It will be really appreciated if you could do that. I just wanted to remind you there's one more webinar that we have at Yellowstone coming up this week, and that's with Rotork, who are presenting tomorrow all details on the Yellowstone Advisory website.
As we leave today, Michael just wishes you all the best. Thank you again for presenting today. Thanks for everyone attending.
Thanks very much.
Thanks, all. Bye.