Good afternoon, ladies and gentlemen, and welcome to the Kenmare Resources PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time via the Q&A tab that's just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish our responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll. If you could give that your kind attention, I'm sure the company would be most grateful, and I would now like to hand you over to the executive management team from Kenmare Resources PLC.
Tom, good afternoon, sir.
Thank you very much, and thank you all for joining us today, taking time out from watching Donald Trump in Davos. I didn't think I'd be clashing with him, but anyway, glad to draw some sort of an audience at least, so hopefully we can give you a good update on our Q4 performance and 2026 guidance that we've released this morning. Just as a quick reminder, and I'd encourage you to read the disclaimer that is included in the presentation. But just as a quick reminder of who Kenmare is and what we do, Kenmare is the owner and operator of the Moma titanium minerals mine in Mozambique. We've been in Mozambique for nearly 40 years. We've been producing at Moma for just over 18 years. Moma is a unique resource. We have close to 100 years of mineral resources at the current production rate.
When we make investments, when we think about the business, we always think about it with the long term. I suppose if you're thinking about the long term, you have to be thinking about the communities and stakeholders that are around your mine and make sure that they respect you as a good neighbor, a good corporate citizen, and somebody who attempts to leave a better environment and a better economy than you discovered a number of years ago. Certainly, Kenmare makes a very significant contribution to the local and national economy in Mozambique. We're about 6% of Mozambican GDP and the biggest employer in the Nampula province where we work. That, plus our low carbon footprint and strong attention to sustainability, means that we became a constituent of the FTSE4Good Index last year, which I think was very pleasing for us.
It's, I suppose, part of the foundation of our long-term tenure in Mozambique. Many of you may know that we've been working with the Mozambican government to extend one of our most important agreements, the implementation agreement, over the course of 2025, and hopefully we'll get that done in 2026. From the Moma mine, we produce titanium minerals, ilmenite and rutile, which are key materials in the manufacture of paints, paper, plastic, and titanium metal. We're the biggest vendor of ilmenite in the world into open markets, so we're about 6% of global supply. I suppose as we hear a lot about rare earths, critical minerals, titanium is on the critical minerals, it's for Europe, the U.K., and the U.S. I think that is very good for us in the long term.
I think in the more recent short term, the market into which we sell our products has been a little weaker over recent years than it was post-COVID in 2021 and 2022, and that creates challenges for us and other producers, and today's announcement is very much about how we're reacting to those challenges and adjusting our business to reflect a lower pricing environment. Finally, with a long-term asset such as Moma, you need significant investment to operate it effectively and efficiently, and 2025 for us has been very much about a significant capital program to upgrade our largest producing plant, our largest operating plant, WCP A, to move to a new ore body called Nataka. Ben will talk later about Nataka. It's over 70% of our reserves. In essence, it's the future of the company.
We're investing to make sure that we can operate efficiently and profitably there for many years to come. We'll move on to the next slide now, please. Kenmare's position in the market is based on a very clear strategy and a strategy that, first of all, makes responsible operation and a committed and capable workforce as a firm plank of it. Keeping that workforce safe is very important to us. We've had one of our best years ever for safety. It's a big emphasis for us, not just in operations, but in the development project where we undertook most of our capital investment last year. 97% of our staff are Mozambican, and we only had three lost time injuries last year, of which two were comparatively minor. Aside from our own staff, as I mentioned, the community is important to us.
We've invested north of $23 million into community, excuse me, $25 million into community initiatives since 2004. Economic development, health, sanitation, infrastructure, all of these elements and the environment, of course, are all important to us to gaining the respect, trust, and support of the local community for our work. We're very much focused on maintaining a low-cost industry position, being successful in maintaining our operations profitably, even in the down parts of the cycle for the products we produce, and of course, over Moma's 100-year life, we'll see a number of those cycles, so being effective and efficient and having the playbooks to work our way through those cycles is important for us, and I think one of the things we talked about in today's release is how we're changing our approach a little bit in 2026.
Not so much focusing on just production, as we would have in previous years and setting targets for production, but setting real targets for shipments, sales, revenue, cash, the things that will effectively maintain the business and allow us to maintain our investments. And of course, making investments, making efficient investments, utilizing your cash flows, all of these, and providing returns to shareholders, that's really what we're about. Kenmare has returned nearly $300 million or over $300 million to shareholders since 2019. And over the next five, 10 years, we expect to return a lot more. But of course, when prices are lower, dividends will naturally be lower too. And we'll need to just pay careful attention to our cash positions in 2026. So with that, I'll move on to the next slide, if you don't mind. I've talked a little bit about our sustainability goals.
I've talked a lot about how important our workforce is to us. We spent a lot of time over the last couple of years on an initiative called Trabalho Seguro, which came literally from the shop floor or the plant floor in Moma. It's a greeting. It's a wish for safe work. It's a way to support your colleagues, and it's been very, very successful with our lowest ever all-injury frequency rate in 2026, '25, and with the 97% Mozambican population, we try and our Mozambican workforce, we try and recruit as many people as possible from the region or the nation, and that will continue. Kenmare, I've touched on it a little bit earlier. We consistently invest in livelihoods, healthcare. Our most recent projects are a new district hospital, nearly 80% complete.
A lot of work goes into ensuring that the students coming out of the local schools and technical colleges will now or in later be suitable for employment by Kenmare. So that's a big investment for us. On a day-to-day basis, making sure that we manage our waste properly, that we respect the local environment, recycle as much as we can. A big source of success in 2026 or 2025, we're now over 60% of waste recycling. A big uptick means that the existing landfill we have will last much longer. Being a trusted business in the community is very important to us. We've consistently won for each of the last five years the prize for most transparent company in Mozambique.
When I met the president twice in 2025, he commended Kenmare on its social programs, its commitment to transparency, and the quality of the jobs that it creates, and I think they are the foundations of what we do and hopefully will continue to do, so with that, I'll now hand over to Ben who will talk a little bit more through the day-to-day operations and capital projects that we undertook in 2025.
Thanks, Tom. Let me first start by giving an introduction to Kenmare's operations. We are a low-cost bulk mining operation, and we're mining up to 50 million tons per annum of materials. We've been operating, as Tom said, since 2007 and so far have made more than 15 million tons of final products. The plants that we operate are dredge mining operations, and each of the three units that we have, our three ponds that we have, have floating wet concentrator plants. These are cost-efficient because we literally put the processing operations right next to the mine as opposed to having to transport ore for long distances. We also have a selective mining operation, which is a new unit that was commissioned in 2025 and successfully delivered its expected production during the year.
The concentrates that the mines produce are transported to a mineral separation plant, and that's a place, a factory environment, where we separate ilmenite, rutile, and zircon and a monazite concentrate. That's all done with physical separation methods and no chemicals. In terms of then those products, they are then transported. The mine is adjacent to the coast, so we have a short conveyor routing to our own jetty, and then we transship onto customer vessels parked right off the coastline of the mine. In terms of our environmental impact, most of our electricity is coming from hydroelectricity from the Cahora Bassa Dam. We operate, because the mine is a moving mine, moving laterally, we're constantly rehabilitating the ground that has already been mined and last year planted more than 200,000 trees as part of that rehabilitation process.
As I said, there are no toxic chemicals used in the mining or processing of the minerals that we produce. Moving to the next slide, maybe to talk a little bit more now about the 2025 production performance. The mine was impacted by the delivery of the WCP A upgrade, which Tom alluded to earlier on. This caused us to be 15% down year on year on our heavy mineral concentrate production. And that was a conscious decision was made not to try and counter the shortfalls by mining using higher-cost supplementary mining operations. That shortfall in heavy mineral concentrate rolled into a roughly equivalent shortfall in ilmenite production, although the ilmenite production we did attain our revised guidance.
The good news, I'd say, about our production was that we saw a significant improvement in the zircon production, and we were able to achieve our original guidance level by the processing of some intermediate stockpiles and also materially better recoveries that were seen in the mineral separation plant during the year. And then on the concentrate side of things, we particularly beat our original guidance very much significantly due to the fact that we were able to produce a new product called ZirTi. This is a product that is made up of previous stockpiles of material that were previously not valuable. We retained them available and have translated those into production, and we now have a new product that we are able to sell. And that will be continuing into 2026 and beyond.
In terms of shipments, we were down on shipments largely due to poor weather in the first half of the year, and then one of our transshipment vessels was on its five-yearly compulsory dry docking during the second half of the year. That meant that we were down on overall shipping. That's a major focus for us going forwards into 2026, and we're expecting to produce or to ship, should I say, more than 15% increase on 2025 in the current year, and that's largely because we have both of the vessels available this year. On to the next slide, please, so Tom discussed that we've been doing our WCPA upgrade project, and the idea of this project is to secure the long-term future of the business. Our largest plant, WCPA, has been pretty much renewed, and we're matching the largest plant with the largest ore body of the future.
This ore body represents more than 70% of the mineral resources that the mine has, and we expect this new mine to operate for in excess of 20 years with this equipment that we're in the process of implementing. The cost of that project is $341 million, and by the end of the year, it was more than 80% spent, and the project is now essentially de-risked. We are now in the commissioning process. The new equipment comprises two new dredgers, you can see in the photograph there. Also, a new slimes handling facility, which is parked just behind the dredgers there. And then on a future photograph in this presentation, you'll see the tailings storage facility, which is the way that we will manage our long-term slimes handling. On to the next slide. Just to walk through the commissioning, all of the major construction is now complete.
The installation is done, and the plant is in use. We're going through the final stages of the commissioning and ramp-up, and the operation has been handed over to the operations team to run. The progress has been positive. It has been slightly later. Some parts took longer than we anticipated to do, but the remedial measures that we discussed in announcements during Q4 have been working well, such as the slimes handling facility and the new tailings storage facility that's now working according to expectations, and the dredge solutions that we've come up with are not impacting our ability to produce. Additional debottlenecking is still required, however, and process optimizations are underway. We expect those to continue through Q1. We're busy implementing low-cost solutions to some of the things that we've found as we've put each part of the new operation together.
The integration of that has revealed that there are some improvements required, and we expect those improvements to be completed during the current quarter, and so with that, I'm going to pass over, and Tom is going to take the marketing presentation.
Thanks very much, Ben. So as you can see, a lot of work going on in Moma over 2025 and on into 2026 to prepare ourselves for our long-term future. And I suppose we've got a long-term future selling products that are in daily use worldwide and very correlated to global economic growth. I touched earlier on our markets, which have been weaker in 2025 than in previous years. I'd like to draw quite a distinction between demand and supply. Certainly, from Kenmare's perspective, and indeed even globally, demand for all the products was stable. And we could certainly sell as much as we produce and maybe even more. We completely sold out indeed of zircon and rutile towards the end of the year, and I'll talk a little bit about those later on.
But what we've seen in recent years is that increasing supply and production of ilmenite in China and production of ilmenite derived from concentrates from other countries in China has been impacting supply and creating a period of oversupply and impacting prices as well. And companies have to respond to this imbalance between supply and demand. Some are managing their supply or reducing their production or selling from stockpiles. And some of the measures that Kenmare announced today, focusing on shipments rather than production, is a response to that and a way of managing our own costs during the period. We are, however, seeing that the demand for the particular types of ilmenite that Kenmare produces, and we have three ilmenite products plus Zerti, which contains ilmenite.
We are seeing the demand for ilmenite suitable for beneficiation, which includes some of our product suite and is an area we focus keenly on, has continued to grow and is very strong. So we're well positioned in the stronger parts of the market. It's just that the overall market is oversupplied, and that is impacting our pricing. We're seeing similar factors in the zircon market. There is, because mineral sands and mines typically will produce a range of ilmenite, zircon, and rutile in different proportions. If ilmenite is oversupplied, then zircon will have similar characteristics, and the market was subdued. But what we have seen is that that stabilized towards the end of the year. Producers and indeed significant producers took measures to take supply out of the market, and the market has reacted well to that.
We effectively sold our zircon inventories down to zero at the end of the year. Towards the end of the year, we started to see prices stabilize. Overall, while pricing is weaker, we're still seeing demand for our products in the segments in which we target. We have a strong order book for the first quarter of 2026. We signed a number of new sales contracts last year, and we are seeing strong demand. We do need to be more cautious on what future pricing might look like. Our assumptions and our expectations of when the price might recover and what levels it might reach are probably more conservative than they have been in the past. That impacts on our financial statements. It impacts on our accounts. James will talk a little bit about that over the next number of slides. Thank you.
Thanks, Tom, and good afternoon, everyone. I might just point out at the outset that this is not a typical financial announcement or release. Focuses on production, so there is limited financial information in this. And what we do share is unaudited at this stage. So our full year results, which will be published in March, will have our final information. And look, Ben touched a little bit already on the development CapEx. So look, today's on the project, $341 million total budget. We've incurred about $280 million of that so far, so over 80%. In 2025, about $168 million was incurred. $12 million of that will actually be spent in cash terms in 2026. So it's just the timing of payments into 2026. So the cash spend on the development project last year was around $156 million.
We expect about $30 million of development CapEx this year in 2026. That's including that $12 million rolled over. That's a significant step down as we come to the end of the WCPA project in terms of our development CapEx. On sustaining CapEx, look, we don't publish our sustaining CapEx number for 2025 today. We're comfortable that it's within our guidance that was issued, which was around $50 million for 2025. We're issuing guidance for 2026 of around $30 million of sustaining capital. Looking at the financial outcomes that I can share with you today, we ended 2025 with around $48.5 million or $48.6 million in cash and net debt of just under $159 million. Clearly elevated from this time last year as a result of that significant capital spend. We're not disclosing or sharing our full year EBITDA number today.
As I said, that'll be in March, but we did share in the announcement that we have agreed with our lender group for a revolving credit facility, a relaxation of the net debt to EBITDA covenant from two times, where it has been set at the outset, to three times, and we consider that to be a fairly safe level for us to be onside at the end of 2025. We'll stay in very close contact with our banks through this period of relatively elevated net debt and obviously keep them abreast of how things are looking and any expectations we might have around our future financial performances. As we disclosed last year, we made a shipment to a customer in September. That customer subsequently went into administration. They had $9.3 million outstanding unpaid to us. That remains the case. However, there has been some progress.
We understand that there's two plants in question here. We understand that there are sales processes underway for both of those, one at an advanced stage. And we'll continue to stay in close contact both with the existing owners and, once available, with the potential purchasers to ensure that we can recover that. In terms of impairment, so look, we took an impairment at the half year of $100 million. And for the full year, that's going to increase to up to $300 million, so somewhere between $250 and $300 million, we think. That's really driven by a weaker expectation for pricing, mainly in the medium term to a lesser extent in the long term. And for us, this is a mechanical sort of event. We maintain a financial model that we look at at the end of every reporting period, and we compare that to our asset carrying value.
We compare the value that the model suggests for our assets against our asset carrying value. And if the model is suggesting a lower value, we take an impairment charge accordingly. So look, the pricing as it has gone indicates that we'll be looking at up to $300 million of impairment. And that's a non-cash charge. It doesn't impact our continuing operations. Obviously, the market value is quite distinct from the book value. It doesn't influence our ability to pay creditors and our debt covenants or anything around dividends. And one other impact of that weaker pricing outlook is also around the carrying value of some of our ilmenite stocks. So typically, well, always, your inventory is carried at either the lesser of production cost or its net realizable value. We're now in a situation where, in some cases, our ilmenite net realizable value is below its cost of production.
We expect that to lead to an expense of around $15 million in our preliminary results. If you go to the next slide, please. Just looking at the capital spend profile. As indicated, the vast majority now of our capital spend on the WCP A project is behind us in cash terms, around $270 million already spent, with $70 million outstanding. Of that $70 million, about $30 million will be spent in 2026, and then the remaining $40 million over the 2027 to 2032 period. We expect to continue to fund this from our existing cash resources and operating cash flow and obviously the existing debt facilities that we have in place. With that, I think probably handing back to Tom, am I?
Yep, thanks very much, James. And what I will do is just maybe begin to wrap up, firstly, by giving you a quick run through our 2026 guidance. And look, we've, as I said at the outset, probably changed the most important area of emphasis for our guidance this year away from production and just tons for the sake of tons. And we have high inventories of finished products, and it's far better for us, far more financially efficient to sell those down, sell as much as we can, and manage our production to help us achieve those objectives. So rather than production ranges for tons, we're just saying basically that it'll be more than 800,000 and as much more as it needs to be to achieve our shipment objectives.
Those shipment objectives of 1.1 million tons of finished products are pretty much 15% ahead of what we did in 2025, albeit as Ben said, we had a dry dock in 2025 and some maintenance on our transshipment vessels. So a big move, and that should allow us to make a big drawdown of our finished product inventories and effectively turn that historic investment in stock into cash. As part of our adjustment to a period of lower pricing, we looked hard at our operating costs. We've unfortunately had to undertake a retrenchment program at site for up to 15% of personnel. And that's not something we ever do lightly, but many valued colleagues will be leaving the business or have already left the business. But it's necessary to react to and maintain competitiveness through these more difficult periods.
We're seeing the positive effect of that in 2026 with the operating costs significantly lower at between $215-$225 million at that 800,000-ton level of production. As James said, a lot less CapEx. I mean, we really have broken the back of the WCP A upgrade CapEx. 2026 CapEx will be less than 20% of last year's number, which was north of $150 million. We really have effectively finished that project, and now we're on to completion, as Ben said, of the commissioning and infrastructure and other elements necessary as we move to Nataka and when we work there. We're also working hard to make sure that whatever we spend this year, we really need to spend this year. If anything could be postponed, if anything could be deferred, we'll certainly do so, but not at the cost of safety, not at the cost of purchasing.
If we move on to the next slide, please. So just in summary, Moma is a world-class asset. We've 20 years almost experience of producing there. We've learned a lot. We're moving to the biggest ore body. We'll be there for a long time, and we've invested to make sure that we operate well there. The business has, over the last number of years, and despite the challenges in 2025, has consistently generated operating cash flow, and that has enabled us to make the investments we've made. And the upgrade of WCPA has been designed and executed to ensure that remains the case. And I think, as James said, between our operating cash flows, our lenders who understand cycles and are supportive and the value of our inventories, we have multiple sources for funding our programs. But just recall our capital expenditure this year is a fraction of last year's.
All of these investments, plus the quality of Moma's ore body, means that Kenmare is not just important to Mozambique. It's important to the worldwide titanium feedstocks market. We're nearly 6% of that. We have 25 customers operating in 15 countries. And when people start buying from us, they keep buying from us. They very, very rarely move away. And the customers we had on day one are still our customers today. And we've got a strong order book. And all of those factors enable us to invest not just in our assets, but also in the community, also to satisfy our obligations to the Mozambican government and to commit to perhaps even increasing those obligations to increase royalties under our implementation agreement. And as I said, I met the president twice last year. It was very good meetings on both occasions.
We'd love to see that agreement move towards a conclusion this year. I should stress, there's no formal timeline for that. As James and Ben said, this is effectively a summary of 2025 and 2026 outlook ahead of our results, which will be published at the end of March. Thanks for taking the time to speak with us today. Very happy to take any questions that anybody may have on this, what we spoke about, or indeed any other aspect of our business. Thank you.
Thanks, Tom. We've received a number of questions, so I'll now take you through them. The first question is, it's good to see reduced CapEx in 2026 compared to 2025, but do you have any other big projects on the horizon?
Maybe I'll take that one, and James can correct me if I'm wrong. But Kenmare has had quite a lot of CapEx in the last five years between a move of WCP B in 2020, 2021, and the WCPA upgrade. But this is the last big non-discretionary CapEx investment that Kenmare needs to undertake. The moves of WCP B and WCPC to Nataka will be significantly cheaper because neither of them require material upgrades. And most of the money that we're putting into WCPA is new equipment, new dredges, new capability to mine, which the other plants don't need. So no, from now on, apart from sustaining CapEx on occasional minor projects, we'll have no multi-hundred million dollar obligatory investments, and cash flow generation or free cash flow generation should be stronger as the market recovers.
Next question is, how long will excess inventory in the global system take to work through, i.e., when might pricing start to recover?
God, if I knew that, well, look, what we've seen is that this oversupply and the excess inventory has arisen over the last couple of years and probably in response to strong pricing in 2021 and 2022, and the greatest cure for weaker pricing is probably weaker pricing. We do know people are suffering. We do know people are adjusting their production or indeed, in some cases, ceasing production to save money and adjust to these new realities, and look, we're starting to see that be quite a widespread pattern, and generally, that's a precursor to recovery, but the new sources of supply, and in particular, the concentrates, which are going from a number of countries into China, are probably 10%-15% of world supply, so they didn't arise overnight, and they won't disappear overnight.
But we have seen similar kind of patterns back in 2012, 2013, 2014, and those sources of supply gradually declined. So we're hoping the same will be the case here. So it's important to say that we are expecting, and the independent forecasters are forecasting a recovery, but just the assumptions at the moment are that it might be a little more delayed than we might have expected. I think previously, we would have expected it to be happening around now. James, anything you want to add to that?
No, not a lot, Tom. Look, it's very difficult to know exactly how fast things are coming out of the market. I just would note commentary from Rio Tinto this morning saying that they estimate around 5% of global supply came out of the market, and if you look at TZMI, the industry commentator, their latest cost curve, which looks back to sort of 2024, would indicate that current pricing, probably somewhere in the region of 10% of the global feedstock supply that they monitor, would be really struggling to make money just on a direct cash operating cost basis at these sort of price levels, so I think that's talking to the fact that there is supply coming out and that that can only last for so long.
Next question's on a similar theme. Are current prices low enough to determine more production capacity increases globally?
And maybe I'll start that, and my colleagues can jump in. Look, I think they're certainly low enough to deter existing producers from expanding and to force or cause existing producers to adjust their plans and day-to-day activities in response. And I think aside from those concentrate projects, which are reasonably widespread in a number of countries, albeit individually modest in scale, but aside from those, there's been no real new significant investment in mining capacity over the last number of years. And maybe even some of the projects that we thought would come on stream haven't come on stream. And even the ones that have have been less successful in terms of their operating outputs than might have been anticipated. So I think we are seeing certainly a slowdown in people's investment. We're certainly not at the price that would incentivize significant investments in new mining capacity.
So I think people are being rational in how they're adjusting to it. And it's certainly not suggesting that meaningful sources of new supply are imminent.
Next question. Can you please set out why the parliamentary process is taking so long to progress the renewal of the implementation agreement? Is parliamentary business being taken up with other matters, or does the Prime Minister or Cabinet disagree with the president on the renewal, or is it something else entirely?
Look, the renewal needs to be ratified by the Council of Ministers. We know that it was considered by the Council of Ministers over the course of last year, and their sentiment towards it was very favorable. They felt that the royalties proposed at that time needed to be a little higher. We've made a revised proposal, royalties of 2.5%-3.5% ascending over the next number of years, which against the previous 1%, plus a significant level of investment in our assets and indeed even in the community over the 20-year renewal period. We haven't had a formal decision on that implemented by the Council of Ministers. It may have been discussed, but that's the organ that will need to approve it.
I suppose we've highlighted to the president when we've met him and indeed to his colleagues, the ministers, whenever we've met them, which has been regularly. But firstly, under the agreement, Kenmare is entitled to renewal on the same terms. So it's entirely voluntary on our part to propose an increase, but it's entirely realistic because we got a good deal back in 2004. We recognize that times are different now. We recognize that the state needs a better return on the project, and we're prepared to provide it. So in my meetings with the president, I think it was really good to get the second one. There's a lot to address. Another part of the question, there's a lot going on in Mozambique at the moment. Many of you may have seen some of the coverage of what have been quite severe floods in recent days and weeks.
and while they haven't impinged materially on Moma, they certainly have caused a lot of challenges elsewhere in the country and indeed, unfortunately, quite a number of deaths. so between that and adjustments to the health budget caused by changing priorities of USAID, ongoing negotiations and preparations for the resumption of work on LNG projects in the north, where there's also been, as many of you may be aware, some Islamic insurgency, again, hundreds of kilometers from Kenmare, but still a consideration for the government. The government has had a lot to deal with. and certainly, there are times when Kenmare's agreement is not at the forefront of their minds, but it's certainly not because we aren't reminding them of it. so look, I think we have to be persistent. We have to be commercial, and we have to be available.
And we've been all those things for our negotiations with the government. We've received great support from the diplomatic community, and hopefully, 2026 is when we see it all come together. I should stress, though, and indeed the president did stress this, that we've continued to operate under our old terms. I mean, his words to me were, "If we didn't want to renew this agreement, why do we keep letting you operate under your old terms? We are committed to Kenmare, as committed as Kenmare is to the country." The words are great. We haven't seen the actions yet, but hopefully, in 2026, we will.
Next question on a similar theme. Does the value of Kenmare go to zero if the IA is not renewed by the Mozambique government?
No, not at all. No. No. So a couple of things here. One, the implementation agreement doesn't cover our mining operations. It only covers our processing and export operations. Two, obviously, we've made significant investments in the business, and those investments are behind us now. So even in the event that fiscal terms were worse, and let's remember that we have a right to stable terms. Even if they were, we'd still generate significant cash flow. And three, there are terms that a new entrant would subscribe to if they were to come in now into mineral sands are a 6% royalty plus corporation tax, plus some other regulations. But at the end of the 20-year renewal period, Kenmare's royalty payments won't be far off 5% anyway. So for sure, that would be worse than we currently have, but certainly wouldn't be ruinous.
Next question. You guide for net debt to remain elevated this year. Should we interpret that to mean that the nominal net debt will be flat year on year, or do you hope for it to be lower by year-end compared to the start of the year? Thank you.
Okay. I'll let James cover that one.
I can take that. So look, if I talk in net debt terms rather than the actual whatever the amount of debt that we have drawn on a particular day is, first thing I'd say is that given the lumpy nature of our shipments and the relatively high value of each of those shipments, I mean, you can have shipments that are worth $5-$10 million, sometimes even more. The timing of those receipts, obviously, is a big sort of driver of what your cash position is on a given day and therefore your net debt position is. So it's a little bit of a noisy signal, I would say, just to begin with.
In terms of our expectations over the year, I think potential for it to come down a little bit, but I'd say the sort of level that we closed the year at. I'd expect it to trend relatively kind of flat with some of that noise, with some ups and downs over the course of the year.
Another one for James. What's the rationale for the $300 million asset impairment?
Yeah. So look, the primary driver there really is the pricing outlook. And as I said earlier, particularly sort of the next two to three years, more than the next kind of five years plus, just as a result of that oversupply situation that Tom mentioned. And that's driving sort of downgrades in the pricing that we expect to achieve ourselves through our marketing department and the conversations that we're having and our insights into the market, but also the pricing expectations that independent commentators like TZMI and TiPMC have. And so certainly, that is the driver of the downwards move. That's offset to an extent by what we are doing on the cost side.
So the cost savings, both in terms of operating cost and capital reductions and deferrals, actually sort of pulls back, if you like, or reduces the extent of the impairment where we end up is that value of somewhere up to $300 million.
That's the final question. So handing back to you, Tom.
Thanks very much. Thank you, everybody, for your time and your interest in Kenmare. Thanks for the questions. I think we've covered most of the important elements that we disclosed in the announcement today. Please, we'll have another private investor session following our results at the end of March, which I think have been released on the 26th of March. Is that right? And we look forward to speaking to you again then. Obviously, if you have any questions in the intervening period at any time, please feel free to get in touch with us at ior@kenmareresources.com. We're always happy to hear from investors and always happy to address any questions or concerns you may have. Thank you very much, and have a good afternoon.
Perfect, guys. That's great. If I may just jump back in there, and thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations? This won't take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Kenmare Resources PLC, we would like to thank you for attending today's presentation. That now concludes today's session, so good afternoon to you all.