Good morning, welcome to the Kenmare Resources 2022 preliminary results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. Finally, I would like to advise all participants that this call is being recorded. I'd now like to welcome Mr. Michael Carvill, Managing Director, to begin the conference. Michael, over to you.
Thank you very much. Welcome everyone to Kenmare Resources 2022 results presentation. I'm Michael Carvill. I'm the Managing Director of the company. If I could just turn to page or slide 3. I'm joined in the room here with Tom Hickey and Ben Baxter, Finance Director and Chief Operations Officer of Kenmare. I'm going to make some introductory remarks. Tom is going to give a finance review and then an operation review. I will give you an update on the market and some comments on the outlook. Also with us is Jeremy Dibb, Corporate Development and IR Manager, and Cillian Murphy, Marketing Manager, who can help if we have specific questions on the market after the presentation. If I could just turn to slide 4, which is an introductory slide.
Kenmare has focused and continues to focus on three strategic priorities: operating responsibly, delivering low-cost production from our long-life resource, and allocating capital effectively. As far as operating responsibly, we were delighted in 2022 to have achieved 11.8 million hours without a lost time injury occurring. You know, that was a huge record for Kenmare, vastly more than any period of working that we had achieved before without a lost time injury. It's a credit to the leadership that our leaders team have shown in terms of safety and a credit to every colleague in the company in terms of the efforts that they've gone to ensure the safety of themselves and their colleagues. We were delighted by that.
Unfortunately, all great runs end, and in September, we had a lost time injury, and then a couple of small injuries towards the end of the year. However, we did finish the year with a lost time injury frequency rate of 0.09, well ahead of our three-year rolling average. Also, in terms of operating responsibly, during 2022, we relocated a small village called Isoa, which is in the path of the mine, as the mine moves to position itself, where Concentrate Plant A moves to position itself for its transition to the Nataka ore zone. Isoa was a small village, and village relocations are tricky things for mining companies. We're delighted to say that Isoa has been successfully resettled. The people are happy there.
We believe that this resettlement has, rather than causing friction with the community, has enhanced the community's trust in Kenmare Resources and the esteem that the company has held. So it's been a wholly favorable process. As far as delivering long life, low cost production, we have felt for some time that we've been in the first quartile of the industry margin curve. It's very nice in 2022 to get independent confirmation of that from TZMI, which is the leading analyst company in this particular industry.
In addition to that, the our production, our our management of costs and the good revenue per ton values that we're achieving for our co-products allowed us move our net production cost, ilmenite, down to a low level of $60 a ton, which again is a record for us. In terms of allocating capital efficiently, we're proposing a $51.5 million dividend payout for 2022, which is a significant enhancement on the previous year and again, a record for us. That was accompanied by $71 million worth of principal debt repayment, all the time while we continue to fund value-creating studies on the development of the project. If I turn to the next slide.
2022 was a record year for revenues, profits, and dividends. If you look at those graphs on the right-hand side, we had a record achieved price per ton of our weighted average basket of products of $463, which translated into a revenue of $498 million, and provided a profit of $206 million, all of which are records. That allowed us issue a dividend or proposed dividend of $0.543 per share, which is 66% up from the previous year, and allowed us, after having a significant net debt position in the previous year, report a net cash position of $28 million. Again, we're delighted to do that.
During 2022, we commissioned our Rotary Uninterruptible Power Supply project. This is a facility that we have created to provide steady and stable electrical power to our Mineral Separation Plant, which is the most sensitive part of our overall facilities. This is a positive NPV project, which is working very well. We believe it's the first deployment of this type of technology in the mining industry. It has improved our recoveries, improved the quality of materials, reduced our costs, and also reduced our CO2 emissions. We believe it's, you know, a very positive project.
During 2022, we spent a lot of time, a lot of effort, a lot of focus on a pre-feasibility study for the transition of Wet Concentrator Plant A from its present mining zone in the Namalope area to a new mining zone, which it will enter in 2027, called Nataka. It's very important that this transition is managed safely, effectively, efficiently, and that we have the right operating paradigm in Nataka. The pre-feasibility study has been long, very detailed, and has examined and tested all aspects of this transition and the operation in the new zone. We're very pleased with the overall outcomes of this pre-feasibility study. With those few just overall introductory remarks, I would like to pass over to Tom.
Tom, if you could do the meat of this presentation, which is reviewing the results for the year.
Thank you, Michael. Well, as Michael outlined, 2022 was a very strong year for Kenmare, operationally and from a financial performance perspective. We saw revenue increase by 19%. That drove an increase in EBITDA of almost 40% and profit of almost 60%. You know, each of those figures represents a new record for the company. I think, you know, a couple things to emphasize here. These record results were driven by two slightly offsetting factors. You know, due to the dry docking of the Bronagh J during the year, our shipments were down, but that was more than offset by average pricing, as Michael mentioned, being very strong and up 42%. We also had a slightly different mix to our revenue, with co-products moving from 21% to 32% of the mix.
There is probably one or two unusual factors here, which is you might notice rutile has gone from 1%-4%, and zircon from 15%-20%. That's both a factor of pricing, which was strongly up, and also the phasing of some shipments between 2021 and 2022. The lower shipment volumes translate into a slightly lower cost of sales, but that's offset by a slightly higher unit cost of production. We, like everybody else are experiencing some inflationary pressures, and I'll touch on those a little later on. As we go down the P&L accounts, our net finance costs are steady. I mean, as we, Michael mentioned, we're paying down debt, but that's slightly offset by higher finance, higher interest rates.
As we move down further, looking at the tax expense, clearly with a significant offsetting process, more of it goes to tax as you chew through your tax balances. That tax charge is increased. Overall, very strong performance at EBITDA of nearly $300 million and profit after tax of 60%, just over $200 million. Moving to the next slide. Moving to slide 8. 2022 pricing was very strong. I mean, continued to be strong. Ilmenite up nearly 30%, zircon up 38%, and rutile up approximately 40%. As we'll see later on, you know, that's driven by very strong demand that, you know, while that pricing has eased slightly towards the end of 22 and into 23, we still see good, strong fundamentals in the business.
We think the outlook is positive. The shipping, as I mentioned earlier, has shown, you know, two offsetting things here. A decrease in ilmenite due to the dry docking and increase in primary zircon, mostly due to the phasing of shipments between 2021 and 2022. I suppose the point to emphasize here is that, you know, post the dry docking, both our transshipment vessels are operating very effectively and normal services resumed in Q4. Moving on to slide 9. Couple of slightly offsetting factors here also. You know, as I've mentioned, I think you've probably seen elsewhere in the industry, we are experiencing some inflationary pressures. I mean, fuel costs were 64% up on 2021. We're experiencing slightly higher labor costs, and our hire amount is higher.
Those things drove an increase in absolute operating costs. That was, you know, significantly offset by continued strength in finished product production and very, very strong co-product revenues, which drove our total operating cost per ton of ilmenite or total cash cost per ton of ilmenite down from $95 in 2021 to $60 in 2022. That really is a very strong performance, and I suppose shows the value of the product suite. While we look into 2023, we are still seeing some degree of inflationary pressures, perhaps not at the same level as we saw in 2022, but it is something we're keeping a very close eye on and will update on as we move through the year. Moving on to slide 10.
With significant increases in revenue and profitability. Obviously, we get a significant increase in EPS, or excuse me, an operating cash flow of over $3 a share. That was mostly driven by pricing. The phasing of our activity during the year, and in particular, the fact that dry docking reduced our shipment capacity in the earlier part of the year, meant that our sales and our revenues were very much back-end loaded. 35% of our revenues arose in the last quarter of the year, that tracks through into our receivables balance at year-end under normal credit terms. Production maintained with shipments lower tracks through into higher inventory holdings at year-end. Our CapEx continued at consistent with 2021. Michael mentioned the RUPS.
We've continued our studies in relation to future growth programs, Ben will cover all of those projects later on. We had both the dry docking resettlements and our normal level of sustaining CapEx, just under $30 million. Finally, from a dividend shareholder return perspective, we paid out $35 million in 2022. Clearly, we're going to have a significant uplift on that in 2023 based on today's results. That enabled us to move into a net cash position by year-end. We have, as Michael mentioned, been making some debt repayments under our existing facilities. You know, we are looking at and considering the options or opportunities to potentially refinance that during 2023 to kind of prepare for the next phase of investment over the next number of years.
We've already had some preliminary discussions with our lending syndicate to consider that. Moving on to slides. From a balance sheet perspective, probably covered most of the considerations here. Property, plant and equipment additions were very much in line with prior year. We touched on the inventory uplift. 90% of it driven by increased mineral stocks, entirely ilmenite, due to production being greater than shipments in 2022. A slight increase in spare stocks. The trade and receivables and all the factor of timing, all receipts into year-end. You know, cash balances continue to be strong. That enabled us last year to make over $70 million of net debt repayments.
We're scheduled to make a further $31 million-$32 million of debt repayments this year. As I mentioned, you know, we may think about amending the terms or extending or amending our existing facilities, both to reflect Kenmare's improved financial performance, but also to more accurately match the term of our facilities, which currently turn out in 2024 and 2025 to our investment cycle over the next number of years. Finally, one small quirk, quite a decrease in creditors and provisions. Our mine closure provision is discounted back at a risk-free rate. A significant uplift in risk-free rate reduces that closure provision in accounting terms, but not in absolute terms. There has been no adjustment to that provision. Moving on to slide 12. All of these strong performance factors enable us to continue to increase our dividend.
When dividends were initiated by Kenmare a number of years ago, it was a policy of a minimum 25, 20% of profit after tax. We've increased that on the back of stronger performance. In 2022, it's 25% of profit after tax, representing a 66% increase. That also benefits from the buyback that the company did in late 2021. On a per share basis, stronger. Look, overall, you know, returns to shareholders over $185 million in 2019. As we, as we look to the future and think about what we're gonna do, how we're gonna invest, how we're gonna run the business over the next number of years, on slide 13, there's the obligation to balance what our returns are and investing in our resources.
I think we have three core elements to our capital allocation. You know, our normal capital requirements, sustaining capital and non-discretionary investments, which Ben will cover. Our debt repayment and servicing. You know, we've steadily paying that down. You know, it's a policy to maintain strong balance sheet and low debt. Those two things, plus the strong business performance, enables us to continue to implement a grow up a strong dividend policy. We will update on that in the context of our investment plans when we have our CMD, our Capital Markets Day in April. We have, you know, discretionary occasional projects that you may undertake based on cash flow, market conditions or opportunities that arise. You know, we spent quite a bit and we will continue to invest for, towards our next year objectives.
We have the RUPS, which gives us both resilience and decarbonization. We're looking at opportunities to reduce the production gap around 2025 as we transition to Nataka. As Michael mentioned, we've a very long resource, long dated resource base, which gives us the opportunity to invest. That will enable us to consider additional capital returns from time to time, depending on the conditions of the business, and M&A is always a possibility and something that we're continually assessing. I'll hand over now to Ben, who will run through the operations.
Good morning, everybody. I'll move straight to slide 15. As you know, sustainability is core to Kenmare, we divide our sustainability components into four strategic pillars. On this slide, I'm just listing a few of the key achievements that we've had during 2022. Regarding safe and engaged workforce, I was delighted with the improvement in health and safety performance, I'll touch on that on another slide just coming up, but with significant improvements in the Lost Time Injury Frequency Rate. Gender diversity remains a strong improvement, it improved in 2022 over 2021, but it's now up more than 10% absolute since 2016 to 14.5% female representation.
Regarding the natural environment, we were pleased with a 6% reduction in Scope 1 emissions, carbon dioxide emissions, relative to 2021. We'll talk a bit more about that in the coming slide. We also delivered more than 191 hectares of land rehabilitation in 2022. Not only that, we went back over previous areas of years of rehabilitation, improving quality, to enhance the future land use of areas we've previously mined. On thriving communities, our development association, KMAD, invested more than $3 million into community projects focusing on education, health, economic livelihoods, and sanitation.
We also have started to see quality improvements coming through not only infrastructure build, but in our education program, a 17% improvement in the literacy rates from the schools that we sponsor. Local procurement increased by 12% during the year relative compared to 2021, and we spent an absolute $116 million on local procurement in Mozambique and in the province of Nampula. Our governance continues to improve around sustainability, and we've now audited all the on-site suppliers for their compliance with Kenmare's sustainability policies. We have gap analyses on all of them, and we're now in an action plan to close any gaps that have been developed.
We've also spent time improving the training of our security department and the public security personnel by completing Voluntary Principles on Security and Human Rights training with all of them. On slide 16, I'd particularly like to focus on what. As Michael said, it is a significant milestone for Kenmare in its history. We achieved 11.8 million hours lost time, injury-free. That amounts to 19 months without an injury on, and is an industry-leading performance. It came about through the focus that we placed on understanding hazards, eliminating risk, and the leadership's focus on developing that.
Nevertheless, we ended up the year with a lost time injury frequency rate of 0.09, and that came about because of three injuries that took place in the late, during Q4 of 2022. Our zero rating rose slightly in the last part of the year. That's caused us to redouble our efforts. We're focusing not only on those items of risk assessment and leadership, but also on improving safety standards. On to slide 17. We're working hard on decarbonization, and we have an ambition to reach net zero by 2040. In 2022, we made a good step forward with a 6% reduction in Scope 1 emissions. It came from two areas.
From the commissioning and delivery of the RUPS project. We didn't get the full year's benefits of this project, but it contributed well. As Michael said earlier, it's a net positive, it's an NPV pro-positive project, but also is delivering good carbon reduction. The, we no longer need to use diesel generators in the summer months. We have seamless switching in of the RUPS as power instability comes along. This is expected to save us about 4 million liters of diesel per annum, about $5 million, and that's about 12,000 tons of carbon dioxide over a full year.
We also see from this project improvements in productivity with both utilization levels in the Mineral Separation Plant increasing and also because of that stable runtime, we're getting better recoveries, and that was came through, particularly in the zircon side of our business. On the MSP, the dryers that we use for drying minerals so that it separates well, they are the largest consumers of diesel in the process. Through a maintenance program and continuous improvement work that we did on our dryers, we were able to improve the diesel consumption by 7%, and that has also contributed to the 6% reduction. Moving on to slide 18 and the production performance. We saw consistent production in 2022.
This was really offset, though, by the highest slimes levels that we're experiencing at WCP A and WCP C. Slimes is the clay-sized particles that, when you start to see larger quantities in the ore body, start to present problems with the hardness of mining and also the ability to process and then manage tailings. We saw that in 2022, we had a record excavation.
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Okay. Sorry about that. We experienced some technical problem with the webcast there. We were just moving on to slide 18, and I'll start again from there. Focusing on the production performance of the year. We had a consistent delivery in 2022. This was despite the fact that we had some quite significant slimes in constraints. Slimes is the clay-sized particles that, when accumulating to larger %, start to deliver problems in both the hardness of the mining and the processing and the tails and placement. As the year has gone on, those slimes levels have become more problematic. We still managed to deliver record excavated ore volumes, up 2%, and that drove improvements in HMC production.
Although the HMC was of slightly lower quality because of those slimes levels. Particularly in H1, we were struggling, and therefore we implemented some near-term improvements throughout the first half. Both implementation of flocculation to try and improve settling of slimes and deliver clean water for the process. Also more dilution water was delivered to the mining plants. Nevertheless, slimes does remain a challenge for us at this point. So in our Nataka development studies, we have been spending a lot of time on ensuring that we have proper long-term slimes management, as part of that project. I'll come on to that later. In final products, we focused on efficiency for the year, and all the product areas experienced improvements in recoveries.
The ilmenite production, however, was down 3% at 1.088 million tons. This was because of the slightly lower HMC quality that we received at the Mineral Separation Plant. Recoveries drove records of concentration, though, and that was up 4%, benefiting from flocculation and the RUPS. Rutile was flat, and concentrates were up 3% on the basis of higher quantities of monazite in the mineral sand concentrate. Shipments, as Tom mentioned earlier, were down 16% because of the planned refurbishment of and dry docking of one of our transshipment vessels. However, I was particularly pleased with the performance of shipping, now that we have record cycle times between through loading cycles.
The vessels are once back in operation in the second half of the year, are delivering best ever levels of availability and delivery. Moving to slide 19 and the guidance. We're reiterating our guidance issued in January. We bring benefits. Nevertheless, we've had Q1 which has been a heavy weather quarter. In February, we Sorry, I think we've gone on the webcast again.
Have been advised that we are connected. Please go ahead.
Okay. On our guidance, we're expecting on slide 19, we're expecting production to be broadly in line with 2022. We do expect to experience lower average grades and those slimes challenges, but this is partially offset by the additional excavated ore that we're planning to mine and slimes mitigation measures that have been put in place. In Q1, we've experienced quite a lot of difficult weather conditions. This also including in early February, a lightning strike, which was in particularly close proximity to the mine. This resulted in quite significant damage in the electrical componentry of our mining and processing areas. The impact of that is that our ilmenite and rutile expectations for the year are now in the bottom half of the guidance range.
The recovery is fully in place now. When we made an announcement earlier this month, that was the case. However, we do, and we believe that we had the proper protection in place, but the lightning was of such severity that our protections were overwhelmed. As we move forward, we have a risk, which is that we are short on spares at this point in time for those electrical componentries, and that will remain in the coming months as we restock on those spares. Q1, as I said, is usually a difficult weather month, weather quarter, and that has been the case. We will be watching our guidance carefully as we move out of Q1, and we'll keep you updated on that.
On cash operating costs, we expect them to go slightly up, that's inflationary based. On capital expenditure, we're focusing on completing the studies for our development projects, including WCPA, Movet and Nataka. Also, we have relatively normal sustaining CapEx levels. Moving to the next slide 20, on to development projects. We're delighted. We have a strategy for Nataka, the mining and processing. It's developed and it's been tested. We'll be giving you a full update on that as part of our Capital Markets Day coming up in April. The definitive feasibility studies process is all underway now, and we expect to complete that this year. It's going in phases and the parts will keep being completed as the year goes on.
You'll recall Nataka is our largest ore zone, it represents 75% of our future mining in Moma, in the Moma project. Excuse me. That means that we've been putting a lot of effort into making sure we get it right, not just in the capital aspects, but our long-term operating costs as well. In this development work, we've come to realize that Nataka has a higher slimes level than the Namalope area that we're currently mining. This means that one of the key components of this process has been to develop a comprehensive slimes management plan, focusing on mining, processing and tails management. On the mining side, during 2022, we completed a trial that showed that we can successfully dredge mine in Nataka.
We've done hydro mining as a supplementary method, trialed it, seen that it's successful in the mining process. It's cost-effective. Then we've hybridized the hydro mining with our dredging and done successful tests in our current operations so that we can get really the leverage of low operating costs that dredge mining brings. Processing, we will need to implement a desliming circuit at WCPA, and that will be so that we can get the separation efficiencies that we need. That's relatively easy as it's very similar to the WCPB circuitry already in place.
On tailings management, as I mentioned before, the settling challenges of more slimes means that we will no longer use our current paddock slimes deposition method for tailings, and we will move to a Tailings Storage Facility. As we move forward, next steps, we're in the trade-off phase at the moment, balancing operating and CapEx, operating costs and CapEx, and we will present further on this at the Capital Markets Day. The aim being to make sure that we stay as a first quartile producer. With that, I'd like to pass on to Michael to do the marketing update. Thank you.
Thanks very much, Ben. If I could turn it immediately to slide 22, please. If we look at the graph on slide 22, the yellow trace is the average price we've been achieving for our products. You can see that from H1 2018 to H1 2021, there was a gradual increase in price, steady but gradual increase in price. Our perception, our, and our analysis suggests that during this period that there was a small deficit of supply compared with demand on a global basis. What was happening during that period was that there was an excess global inventory of feedstocks, which was gradually being drawn down through that period.
In H1 2021, it had been drawn down to the point where customers started to sense scarcity, and consequently, we had a point of inflection from that point and increased rate of the price increases from that point onwards to 2022 when we achieved record prices. During 2022, we experienced tight market conditions for all of our products, and that led to increased products. Shipment volumes in 2022 were low, and that was because our leading transshipment vessel, the Bronagh J, had to go to dry dock for a class-mandated inspection and refit, which happens every five years. The nearest dry dock to us is in Durban, which is quite a distance away.
By the time we go down, go through the refit and get back, it means that the transshipment vessel is out of operation for quite a while. It's now back. Its systems have been enhanced, and it's operating very well. During the year, we built up some inventory of final product, which we roll into 2022 with. Turning to slide 23. Kenmare is a leading supplier into the global feedstock market. In fact, we're the largest supplier into the global traded merchant market for ilmenite. We are working hard and continue to work with our customers to enforce our position as a reliable and trusted supplier to our broad customer base.
We have been broadening that customer base over the last couple of years as an active marketing strategy. The fastest-growing elements of the market are for the beneficiation of ilmenite into titanium slag and synthetic rutile, and Kenmare's products are suitable for that fast-growing section of the market. In addition to that, some producers have experienced constraints that have in supplying, which have resulted in customers valuing security and stability of supply more than they previously have done. That has consequently led us to be able to achieve higher value for similar products than some of our competitors. If I could focus for a moment just on the Chinese market, which is quite an important market for us. There has been significant development of new chloride process pigment capacity in China.
Titanium pigments can be made by two methods. A sulfate process and a chloride process. Chloride process has a lower environmental impact, lower environmental footprint, produces a more consistent and arguably a higher quality pigment. Consequently, there has been a recent expansion of this capacity in China. Also, the Chinese market for titanium, or the capacity in titanium metal has grown very strongly in recent years. While China is a significant ilmenite producer in its own right, its domestic ilmenite supply is unsuitable for these new growing markets, and consequently, more imported ilmenite is required. Kenmare is a preferred supplier into this market and is well-positioned to service this growing market. If I could turn to slide 24, just to review our good position in the market at the moment.
Our main market is the pigment industry. The pigment industry growth in demand for pigment is closely correlated with world GDP growth. There has been a global increase of interest rates by central bankers throughout the world with the objective of subduing GDP growth, and therefore subduing inflation, curtailing inflation in the world. This consequently has had exactly the desired effect. It has produced weaker demand for pigment in H2 2022 and has put pressure on our pigment, pressure on our feedstock prices, our ilmenite and rutile prices. In early 2023, we've seen some improvement in pigment demand in Western Europe. In China, we have seen actually some price increases.
Our view for 2023 is that we will continue to see prices that are lower than they were at the peak levels in 2022, that we do anticipate that we will be able to sell all production, and in fact, we expect a reduction of our inventory jobs through the year. Zircon had a similar trajectory. Demand weakened in H3 2022, has stabled in early 2023. We expect that stabilization to continue. While we don't expect significant price increases in 2023, we do note that inventories are at all parts of the zircon industry at quite low levels. Moving on, just, if I could just make a few remarks on outlook, I'd like to turn to slide 26.
Slide 26 is a chart of the ilmenite revenue to cost curve. You can see Kenmare's journey from 2013, where we are in the 4th quartile, 2018 in the 2nd quartile, and 2021. According to TZMI, we're in the 1st quartile, and I believe that in 2022, we were also in the 1st quartile. This was the result of a focused strategy and policy to achieve this goal. We believe that it's important for Kenmare, it's important for all our stakeholders.
An important focus of the efforts and the test work and the analysis that was done with regard to the pre-feasibility study on the Nataka was to ensure that we maintain this very positive position in the industry cost curve or the industry margin curve. Turning to slide 27, I mentioned our strategic priorities at the outset, just to return to them. In terms of operating responsibly, we have commissioned a RUPS project which has reduced our CO2. We have achieved a broad range of ESG targets. We have had record rehabilitation in the year. We have performed a village relocation and done that with, we believe, with an enhancement of trust and esteem by the local community.
That's a function of both the way the move was communicated and performed and the quality of the uplift in people's livelihoods that occurred with their move. For 2023, we have to refocus on safety. We are already climbing back up that hill towards that 11.8 million hours of lost time injury-free activity. We hope to surpass that. There is a huge emphasis on safety at the moment to ensure that everybody is focused on making sure that everybody is safe at work and returns home safely at night. We anticipate further reduction in CO2 emissions, and we're working hard to increase biodiversity.
In terms of our low-cost production, the maintenance of cost controls and the increase in ilmenite product revenues give us a 37% reduction in net cost of ilmenite production for 2022. In 2023, we're focusing on stable, steady production and optimizing our mining and slimes management. That's very important to us to get the slimes management right. It improves our recoveries, improves our costs. In terms of allocating capital efficiently, our dividends for 2022 are up 66% from the previous year. We've reduced net debt and moved to a net cash position. In 2023, We have effectively completed a pre-feasibility study. We've delivered pre-feasibility study, complete the definitive feasibility study.
As Tom mentioned earlier, we are looking at what the optimal configuration of debt, balance sheet robustness, et cetera, for the years ahead. Guys, that's pretty well our presentation. Thank you very much for listening. Our apologies for the difficulties with the transmission of the webcast. I know it must have been very frustrating for you all. Thanks for sticking with us and we'd be delighted to answer any questions that you might have.
At this time, I would like to remind everyone that in order to ask a question from the audio, please press star then one on your telephone keypad. We'll pause for just a moment to compile a Q&A roster. Our first question comes from the line of Peter Mallin-Jones from Peel Hunt. Peter, please go ahead.
Good morning, all. Well done on a pretty impressive dividend this year. If I could ask a couple of questions about 2023, really. One is, can you give us a handle on which sort of cost buckets you're seeing the worst inflation in or the highest rates of inflation year on year as we look into 2023? Slightly jumping the gun a bit, and I know the Capital Markets Day is coming, but are you able to give us an indication yet of any WCPA move spend that would be coming in this year on top of the studies as you perhaps start to work on the slimes mitigation for 2024 and 2025 ahead of that move?
Sure. Thanks, Peter. Tom Hickey here. I'll take the first one, and I think Ben will take the second. We did see quite a bit of inflation in 2022 and 2023, we're still seeing it on the labor side. We're seeing it less so on the fuel side. Obviously, oil prices moderated a little bit, although there is a lag between you see it in the market and we see it in Mozambique and our diesel prices. We're certainly seeing it on pumps. Overall, we expect it to be running at a lower level than it did in 2022 and hopefully significantly lower overall. You know, so far, so cautious, certainly not as bad as in 2022.
Thank you.
Morning, Peter. On the project side of things, I would not want to steal the thunder of the Capital Markets Day too much. At this point in time, we are packaging an optimized strategy of how the CapEx will play out versus the OpEx. We're not quite ready to give exact numbers at this point in time. Nevertheless, you can sort of split the way this project is going to work out into three areas. One is the mining side of things, making sure we've got an optimal mining solution. You know, historically, Kenmare has been mining constrained. We want to get past that with WCP A for the future. On the processing side, as I said, it's a fairly simple. It's well understood way of implementing desliming.
Once we've got the slimes removed from the process, it's about putting it into a repository where the rest of the process can work efficiently. You know, with that, there is quite a lot of trade-off required between what you wanna spend on capital upfront versus making sure that we are first quartile into the long term. Essentially, this Nataka ore body is our long-term ore body. You know, we want to make sure that the operating costs are well controlled long term.
Okay. Understood. Thank you. I'll keep things under wraps until we get to the Capital Markets Day next month.
Thanks, Peter.
Our next question comes from the line of Gary Martin from Davy. Gary, please go ahead.
Morning, Michael, Tom, Ben, and Jeremy. Hope you can all hear me all right.
Yes. Hi, Gary.
How's it going? Congrats on a really strong set of results. Just a couple of quick ones on my side. Just a quick one on China. Michael, you'd mentioned that in early 2023, you'd seen initial signs of stronger pricing in the region. We'll say based on your current order book and just what you're hearing on the ground over there, are you expecting demand to pick up overall throughout 2023? Just maybe one for Ben, just on the production range, just in terms of guidance. You'd mentioned ilmenite and rutile are expected to be at the bottom range of the guidance that you provided. Am I right in assuming that the weather issues earlier in the month will have no impact on zircon and concentrates production in 2023? Thanks.
Hi, Gary. With regard to China, you know, my personal feeling is that we have not yet seen the full benefit of the lifting of COVID restrictions in China. Cillian is on the line, and he is much more informed. Why don't we ask Cillian to give his views on that?
Morning, everyone. Morning, Gary. I think on China, we're seeing improvements, we're really been seeing monthly improvements in the part of the market we sell our product into since probably early Q3. You can see that in the graph we put in on page 23. Chloride pigment production has recovered quite quickly, titanium metal production is recovering as well. We've been seeing a steady increase. What we're hearing from the market at the moment is kind of corroborating that in that we're seeing strong orders there, probably getting more visibilities on our orders there at the moment as well. We're quite confident on the market there at the moment.
As we move further through 2023, difficult to say, but we expected to see a similar trend to what we saw in the rest of the world, that when COVID restrictions were lifted and government seemed intent on stimulating that economy as well, we should see that flow through to demand for pigment and our products too.
Actually, good call out.
Hi, Gary. It's Ben here. I'll take the question on the weather. Q1 has been a high rainfall quarter for us. It's not the normal way it is, but it has been more rainy than previous recent years. You will have recalled maybe that you saw Cyclone Freddy was in the news a few weeks ago as well. Your question on zircon. Zircon and concentrates guidance did not re-move down with ilmenite and rutile, largely because we're seeing good recoveries in the MSP, which is offsetting that view. Our expectation is those recoveries will continue into the rest of the year. That's why there's a difference. The weather conditions that we had since the lightning strike didn't actually end up hit.
Cyclone Freddy didn't actually hit Moma. It was on track for Moma, and we took some time to get some cyclone preparedness in place. We did lose a little bit of time in preparedness work, but not significant. The cyclone veered away, so we did not actually hit us, and we have continued to work in March reasonably well. I think that sort of answers that question.
Thanks, Ben. That's really helpful. Thanks, everyone. I'll pass it on.
Our next question comes from the line of Richard Hatch from Berenberg. Richard, please go ahead.
Yeah. Thank you very much, Michael and team for the call. I wonder if we can just dig a bit more into Q1, given the fact that it's nearly over. You've reiterated your guidance, but I'm just trying to work out how difficult Q1 really was. If for example, we look at Q4, you produced, just a shade over, 400,000 tons of HMC, 284,000 odd tons of ilmenite. You know, how if we're looking at Q1 quarter-on-quarter, like how bad, you know, should we be thinking, you know, versus what you did in Q4? How much of a, of an operational impact was it? You know, is it a 20% impact, a 30% impact quarter-on-quarter?
You know, what's the sort of order of magnitude that we should be thinking about, just so the market's sort of prepped for it?
Hi, Richard. Yeah, thanks for that question. I think, you know, really the severity of the weather in Q1 is really reflected in our guidance statement on ilmenite. Coming from if you assume the middle of guidance was our target for the year, and we've said that we're going to come into the bottom area of it, that's our expectation at this point in time. We do have some time to bring some catch-up things into place, and that's what we'll be looking at that as well. Yes, production has been lower in Q1, but I, you know, I think that's sort of really the line you should look at is the ilmenite reduction from middle of guidance to lower quarter guidance.
Okay. Thanks, Ben. I mean, just trying to think of ways you can catch it up just from an earnings standpoint. You've got inventory. Should we expect shipments to be higher than production, given that you know, you've got fairly robust inventories or not?
Exactly. Q1 has been a good quarter on shipping, and as you say, we have the inventories at the end of last year to take into this year, and we have been drawing down some of those inventories. I think, you know, from an earnings perspective, that will help.
Okay, thanks. Just on freight costs, I see, the accountants have made you split out freight and slightly changed the way you're reporting. Can you just give us a bit of color on what you're seeing in freight costs at the moment? How we should think about that, as we sort of go through the year. You know, what you're seeing versus, say, H2 versus what you're seeing now.
I.
Yeah, maybe I can jump in on that.
You should go ahead.
I think we saw obviously freight costs go up quite drastically in the 1st half of last year, and thankfully they came down almost as fast as they went up in the 2nd half. We're really back to pre-pandemic levels towards the end of last year. We have seen a small uptick early this year, but nothing near what we saw in the 1st half of last year. Really they're back to what we would've thought were around normal levels before the pandemic.
Okay. Order of magnitude on a dollar per ton basis?
It's somewhere, you know, probably Depends on the shipment size, but $30-$40 range probably.
Okay. All right. Much appreciated. Thanks. A couple more. One's just on receivables. Quite a chunky receivables build, second half of the year. What is the... make sure I'm right on that, but can you just give us a bit of color on what you're expecting to see in terms of receivables flow second half, just on working cap? Should we expect any comeback on that?
I mean, look, we'd hope to have a more normal and smooth shipment pattern in 2022-2023 over 2022. As I said, you know, 35% of our revenue came in Q4, and with our typical credit terms, that all ends up in debtors or receivables at year-end. You'd hope in a slightly more normal flow that that will tail off a little bit over the course of 2023. Obviously we update on our shipment profile as we go through the year.
Yeah. Okay. All right, cool. Then the last one is I mean, you kind of talked about the dividend 25%. You know, you started off, kicked it off at 20%, now at 25. Net cash balance sheet, you're about to go into a period of pretty significant capital spend on moving, but still, you know, you've got plenty of flexibility. Mineral sands market's in pretty good order. Do you envisage much of a material change to the dividend policy? You know, is it a policy where you move it to a percentage of free cash flow pre-development CapEx? Do you think an earnings payout ratio is still fair, but would you increase it? I mean, where's the board's head at on that at the moment? Thanks.
Look, I think, as you say, we're heading into a Capital Markets Day next month. We're looking at, you know, the amount of CapEx, the phasing of that CapEx, how that interacts with our cash balances, the opportunity we have potentially to refinance our debt and where that will leave us. You know, I think at this point we're comfortable saying the dividend policy will evolve, but we'll give you more updates when we meet next month.
Do you expect to see a revision of the policy or should we expect it to stand pat?
I think we can expect an evolution of the policy.
All right. I look forward to the evolution. All right, Michael, see you, see you, next month. Cheers.
Thanks. Thanks, Richard.
There are no further questions at this time. I would like to turn the call back over to our presenters.
Thank you very much. ladies and gentlemen, thank you very much indeed for listening to our presentation this morning, and thank you for all those interesting questions. Thank everyone for staying on and persisting through some breakdowns in the communication. That's the end of our 2022 results presentation. Thanks very much, everyone. Goodbye.
This concludes today's conference call. You may now disconnect.