Ladies and gentlemen, thank you for standing by. My name is Bhavesh, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Kenmare Resources Interim Results Conference 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'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the one once again. Thank you. I will now hand the call over to Michael Carvill, Managing Director. You may begin your conference.
Good morning, everyone. It's Michael Carvill speaking, welcome to Kenmare's 2023 H1 results presentation. I just flip to page 3. I'm going to make a short introduction. The main body of this presentation is a financial review by Tom Hickey. Ben Baxter, our COO, will give an operations review, and Cillian Murphy, our Marketing Manager, will give a market update. Finally, I'll make a few concluding remarks, and then we will be open to questions. Turning to Slide 4. I expect that most of the people who are on this call are pretty aware of Kenmare, but just to recap on just a few of the high points or the key points.
Kenmare is now the world's largest supplier of ilmenite, the key component for the manufacture of titanium metal and titanium pigment. Titanium pigment being the larger of those markets. We have been in production for 15 years, despite that, we still over have over 100 years of mineral resources left if we continue to produce at the existing rate. The project is powered with electricity, which starts from a hydroelectric dam, we have a very low environmental impact and very low carbon dioxide output per ton of product produced. Ilmenite is, as I mentioned, the key raw material used in manufacture of titanium pigment, which is in turn used in paints, paper, plastics, fabrics, inks, dyes, cosmetics, foodstuffs, et cetera.
Pretty well any industrially manufactured product, which is color or opacity, and it's also used in the manufacture of titanium metal, which is a light, strong metal, which is very valued in aerospace and other applications where lightness and durability are important. Kenmare now represents about 7% of the global supply of titanium feedstocks. The capital investment so far in the project is over $1.4 billion. Turning to Slide 5. We operate the project with a management focus on 3 main areas: operating the project responsibly, delivering low-cost production, and allocating the capital that's produced from, from our operations efficiently. In terms of operating responsibly, we believe a safe and highly engaged workforce is very important.
The engagement levels of our workforce, you know, which we have surveyed, are, are very high, and our Lost Time Injury Frequency Rate is 0.18 incidents per 200,000 man-hours worked. We believe that's not good enough, and it's an area of very high focus for management of the company to improve that Lost Time Injury Frequency Rate. We believe that it's important that the communities around the mine gain benefit in their own lives from the presence in the mine of the mine in the, in their community, that will allow them cooperate with us as we continue to move forward and create joint prosperity.
Again, we believe that, that, that has been successfully, successfully done during the previous 15 years, and we look forward to working closely with communities in the future. A healthy natural environment is very important. We, we, we rehabilitate as we go, and we work with communities to encourage further biodiversity. Finally, in this area of focus, we believe it's very important that we're a trusted business. Trusted by government, trusted by our employees, trusted by our customers, trusted, trusted by our suppliers, and very importantly, trusted by the investment community, and we work hard to ensure that that's the case throughout our activity. In terms of low-cost production, we're a first quartile industry producer. However, during H1, we did have some production issues. We, we have...
We have spoke to the market about these before, but principally, we suffered from a very severe lightning strike, which hit the transmission grid to the mine in Q1. There are hundreds of lightning strikes that hit the transmission grid every year, but this is a particularly severe strike. It was proximate to the mine, and that the combination of the proximity and the severity and the fact that the protection systems within the transmission grid field caused widespread damage to our electrical infrastructure within the project. Further to that then, global supply chain constraints meant that it took much longer to fully reinstate the capacity of the project than we had originally envisaged. I'm very happy to say that, that now we're back fully at normal operating levels. All of the equipment has been, has been reinstated.
We're operating fully, automatically, where we're supposed to operate automatically. H2 has started in a very positive fashion. In addition to that, we have a project underway to create additional protection systems within the project so that a similar strike to the one that, that knocked us out in Q1 would cause no damage. Despite that, we were able to sell down an inventory that finished goods inventory that we built up in 2022, because one of our shipping vessels was in dry dock for a period, that allowed a build-up of finished goods inventory, and we drew down on that finished goods inventory during H1, and that's allowed us to produce an EBITDA of $110 million, which is a record for us for H1.
All of which has allowed us, announced this morning, a $30 million share buyback and an interim dividend, which is a 59% increase in dividend. Turning to market, like, like every supplier of primary, primary products in the world, there is a short-term global, short-term high level of global unpredictability. To dampen demand , central bankers throughout the world have increased interest rates with the specific objective of reducing the economic activity, slowing demand, and, and stamping out inflation. That has, that has affected, affected our customers. Interestingly, the, the price for mineral sands, the price for, for titanium dioxide has remained quite resilient, and our order book for H2, we have good visibility of, of where our materials will, will go in H2.
That's not to say that there might not be some price, price reductions or value reductions, but we do, we do have good visibility of our orders during that period. That being said, the fundamentals of for the market remain strong and remain very positive. As we do our analysis, we continue to predict or forecast a tightness of supply as we look forward. That's based on continued economic growth, even if slower growth, the depletion of the existing supply, and while there are some new projects underway, the number of those flow projects is limited, and we still see a tight supply going forward. We think that the long-term market is still very supportive. Turning to Slide 7.
This is, I suppose, the summary of many of the aspects of H1. You can see our shipments are higher than they were in H1 2022, and that was, that was facilitated by the drawdown of that finished goods inventory. As we look at the sales price over in the next graph on the right-hand side of the page, you can see that the average sales price was reduced from $486 to $413 per ton. That's principally because of the change in sales mix, because we were shipping obviously more ilmenite, because we were drawing down on that inventory, and ilmenite has... is less valuable in dollars per ton than rutile. That changed the average price per ton.
All of that, all of that allowed us to get a net profit of $68 million. Allowed us to declare a dividend of $0.175 per share. We have finished, we finished the year with net cash of $42 million. We have this morning announced a share buyback for 30 million shares at 422p per share. We're very pleased to make that announcement. There are some capital projects that are essential to ensure the ongoing success of the company and the project. One of those is the movement of Wet Concentrator Plant A from the mine site to a new mine site at Nataka.
The Definitive Feasibility Study for that for that project is on track and moving forward, with the transition itself expected to begin in 2025. Additionally, at our Capital Markets Day, we explained to the investment market that we intend to expand the capacity of Wet Concentrator Plant B by about 40%. The Definitive Feasibility Study for that is also well underway and on track. With that, I would like to hand it over to Tom Hickey, our Finance Director.
Thanks very much, Michael. Well, as, as Michael outlined, we had a, from a financial perspective, a very strong H1 with record revenue and profits. He touched on the circumstances in 22 versus 23, which effectively meant that we had a significantly higher level of shipments in 2023. The Bronagh J trans shipment vessel was in dry dock in 2022. Those shipments were lower, we built the, the finished product inventory that Michael referred to. Those two circumstances together, along with stable pricing, albeit in a slightly different mix, enabled us to drive mineral product revenue up by 26%.
In reality, that flowed all the way down the P&L account, albeit with slightly higher operating costs, to a profit before tax, which was just under $78 million, up 13%, and a profit after tax of just under $68 million. I'll touch a little later on some of the trends in costs and, and, and, and in particular in relation to fuel, which have impacted in the period. And maybe one other thing to highlight here is you can see that the net finance and foreign exchange cost has pretty much halved over H1 2023 over 2022. Combination of a couple of things there.
1, again, as Michael mentioned, better cash balances, higher interest rates in, in terms of our cash deposits, and low - and, and while interest rates themselves are higher, a, a lower debt burden, and thus, lower interest costs. Look, our, our plans for our debt facility in the future are well-publicized. We do plan to, to refinance and, and I'll talk a little bit more about that later on as well. I think, I think in summary, we had strong customer demand in H1. We were able to satisfy that demand via our production and drawing down on, on our, finished products, stockpiles. We had pretty much, m- moving on to Slide 10, stable market conditions. Ilmenite prices, ±% on H1 2022, a little bit lower than H2 2022.
As Michael said, H2 2022, we saw record pricing, while we're a little bit down on that, prices still remain strong in historical terms. There's a mineral products revenue, mostly relating to volume and the volume of shipments over 2021, 2022 versus, excuse me, 2023 versus 2022. Prices a very, very modest difference, the mix between co-products and ilmenite, as you saw, ilmenite, 78% of H1 revenue versus 73% last year, meaning that the mix effect was a slight negative, resulting in minimal products revenue of $28 million in the first half. Freight rates were a little more favorable this year as well, although freight is an in and out in the P&L accounts, freight costs were lower. Moving on to Slide 11. We touched on the impact of the lightning strike.
Michael touched on it, how it impacted our production volumes, and, and clearly, that also impacts on our unit costs. We did see higher cash operating costs in the first half, labor costs due to just underlying wage inflation. Fuel costs, which, as I highlighted earlier, was a little unusual. Historically, there's been quite a strong correlation, albeit with a slight lag, between global oil prices and, and, and diesel prices in Mozambique. And that, that correlation has, has, has, has disappeared in the first half of this year. Although we used slightly more diesel because obviously the Bronagh J was back on, despite the oil prices down more than 10% on the same period last year, the diesel cost was up 40%. You know, we have factored that into our expectations for H2.
We would hope that, that, you know, that correlation will return, and/or that the, that the inflation will moderate, but it is something we're keeping an eye on. Aside from that, we were seeing some extra production overheads due to HME rentals, but this was offset by other savings in areas such as repairs and maintenance, and by rand-based costs, with the rand depreciating during the period. The other thing, 2 things I'm supposed to draw out here. You can see H1 versus H1 2023 versus 2022, significant change in the product stock movements. Again, we had a stock build in H1 2022, a stock draw in H1 2023, and again, we touched on the reasons for that.
Finally, you know, well, well, all of those factors, plus the lower production, resulted in cash operating costs per ton, which is up 24%. We also slightly lower relative to co-product shipments in the first half of 2023 versus 2022. means that the net cash cost per ton of ilmenite is up 28%. As we said, we hope, we would hope to improve those figures as we move into H2. Finally, Michael mentioned the lightning strike. We do have $1.5 million of costs in operating costs related to those extra unusual costs incurred relating to the strike in the first half. We have an outstanding and progressing insurance claim, which, if successful, will result in a credit in H2.
That claim is, I think we've said in the past, mid to high single digit million, so it's between $7 million and $8 million, and potentially at the rate of 8% of that claim. That's, that's going through the process at the moment. We await the final determination. Moving on to the next Slide. We saw in 2022, and we've continued to see in 2023, very strong cash generation in the business, enabling us to increase our net cash position from $26 million to $42 million over the first half of the year. As Michael said, providing the capacity for us to announce the $30 million stock buyback today. Just, just moving into one or two of the components of that. Our CapEx, probably a little lighter in the first half than we expected.
I think one or two analysts have commented on that. Our CapEx probably moved a little bit more towards the second half, Ben will update on, on the trends and, and updates on the major, major programs to, to, to explain that. Working capital, we had our inventory movement, we had more, more sales in the second quarter than in the first on, on the base deal sit in debtors. Probably a little bit less going to wind in debtors in the first half than we would have expected. Maybe one other factor to touch on here is historically, when we were in a net debt position, we would on occasion have factored some of our debts, and we didn't do that this year.
I mean, effectively, what you see is just our debts rolling off in the normal, in the normal timescale. Slightly lower accruals, slightly lower trade, trade creditors and accruals at the end of the first half, just timing on trades and royalty payments, principally, in 2023 versus 2022. We paid out just over $40 million in dividends in the first half, and our net finance costs, as I said, were $2 million, enabling us to increase our net cash to $42 million. I think, as we said, if we saw a net cash build on the balance sheet, we would consider doing a share buyback. Since we've come, we've updated on that intention today. Just moving on to Slide 13, balance sheet review.
To be honest, not, not a whole lot of unusual movement in the balance sheet. PP&E additions and depreciation pretty much in, in line, although, as I said, the CapEx second half weighted. Inventory reduction related to the inventory draw, mostly finished products and some consumable spares to address the damage caused by the lightning strike. Receivables up, timing of shipments, as I said, some prepayments related to CIG compensation increased, and that receivable increased, and our credit is down. The debt refinance process, you know, we currently have $150 million of debt facilities. We have since last year been in the repayment phase of those, which will extend to the end of 2025.
As we move into a CapEx program over the next couple of years, it makes sense to match our debt facilities against that, the timing of that program. We expect to launch that refinance process over the coming weeks with our key relationship banks, and certainly, the response to it to date in preliminary discussions has been encouraging. Overall, look, we've maintained in the first half balance sheet strength. That has enabled us, moving on to Slide 14, that plus the strong profitability has enabled us to increase our interim dividend by 59%.
I mean, this is driven by the updated payout ratio that we announced at our Capital Markets Day earlier this year of 20%-40% of profit after tax, and by the fact that, again, we said at the Capital Markets Day, we're, we're, we're comfortable, you know, based on what we see at the moment, with dividends in or around the $50 million level that they were for full year 2022. We just effectively trying to address that with our traditional 1/3 at H1 and 2/3 at H2 dividend date, $16.6 million or $0.175 a share. There's a bit of interaction with the share buyback here in that such shares, which are bought back pursuant to the tender offer, won't qualify for dividends.
The actual absolute amount of that dividend will be, will be determined by the level of take-up of the coming share buyback. Finally, look, the, the share buyback, and, and Michael mentioned it. It's the second time that we've proposed a tender offer, and we did one back in 2021. I think we took the view with our strong cash balances before we head into a CapEx Phase, it might be a little bit of time before we were able to do that, and we were comfortable to supplement our shareholder returns by, by launching a tender offer today for $30 million. We've launched at 422p, which is yesterday's closing price. Obviously, shareholders have the choice whether they want to take part at all, take their pro rata, or indeed apply for more.
We will, we will obviously see that post the EGM and understand the take of those that point at an EGM on the in early September 2023, and all funds will be admitted 10 days after that. Should we not get full take-up over under the tender offer, any unutilized capacity we use, we will apply in the market to purchase back stock between now and the end of March next year. Look, you know, combining the two tender offers will give us to bring us to just under 19% cumulative reduction in shares and issues since late 2021. You know, a significant investment by the company in its own shares over, over the last two-year period, obviously reflecting how we feel about the business. Huge. That's it for me.
I just hand over to Ben Baxter, who will run through the nuts and bolts of operation.
Thanks, Tom. Morning, everybody. So as usual, I'll start by discussing health and safety. Following an increase in the number of injuries that we took on site in late 2022 and in January 2023, we've been intensifying our focus on health and safety, and we're looking to improve our safety performance. As Michael said, we don't believe the 0.18 LTIFR is adequate, it should be lower. We're working to change that by getting an improved performance and injury-free status. We've been focusing particularly on risk management and the idea there being to really take it to another level, make sure that our employees fully understand what's expected of them in hazard identification, making sure they understand the risks, putting mitigations.
We've been practicing that with them through role plays, through extra visible self-leadership of leadership team with the teams to try and ensure that the right processes are happening, but also the right behaviors are happening as well. We've updated to support that, the permitting to work process that we operate with and upgraded it. The idea there is to assist leaders to retain the accountability for safety across the whole site, ensuring that safe work can take place and that they have a system now to audit that and manage it. Then thirdly, focusing on standards. We operate a system called COBRA Hunting.
This is a method by which the workforce goes into the workplace and does specific safety inspections and standards reviews, and we, between leaders and the workers themselves, rate, coach, and raise the standards to a higher common level. Moving on to the next Slide, I'll talk through the production for H1. We produced below our expectations in the first half of the year, and we've been working very hard since then to try and redress that. But I will just talk through the principal issues of the half. Our performance was driven by reduced Heavy Mineral Concentrate performance at the mine. It was down 14%, and it was impacted by three particular issues.
First, Michael described, which was that we had this severe lightning strike in Q1. This damaged electrical equipment across the whole mine, particularly impacting the mining areas as opposed to the Mineral Separation Plant, as the Mineral Separation Plant had been protected by the rods. This was brought back into operation again, on a phased basis after a couple of weeks, but there were significant shortages of spare equipment, and long lead times, as well as supply chain difficulties, caused us to delay some of that production coming back to full stream. In addition to that, we had some additional maintenance requirements on the electrical lines through Q2, which we had not expected. This meant that the production in Q2 didn't meet our expectations following that lightning strike.
In addition, we had lower grades experienced at WCP B. This was related to the mining of a wetland area, and we had not only the lower grades, but lower recoveries, since the buried roots that we found within this wetland were blinding the screens on our Wet Concentrator Plant and causing losses of ore. We couldn't get all of the ore into the plant. That, I'm happy to say, is now behind us. The third issue was that WCP B was planned in 2023, H1, to transition from one part of the ore body across to another, and that this meant mining across an area of tailings. This barren area took longer to get through than we had anticipated.
The three of those things combined meant that we were not confident with our original guidance by the end of the 2Q, and in July, we have revised our ilmenite guidance for 2023. The knock-on effects of that were that there was insufficient HMC to treat in the MSP, and so all the final products were down, at similar levels to the HMC production, other than concentrates, which were better than... They were on plan and similar to 2022 H1, with and that, again, that's from increased quantities of monazite in the ore bodies and higher recoveries in the concentrate circuits. Onto shipments, a bright spell there for the shipping fleet.
We had improved sales volumes, up 31%, based on 2021, 2022 H1. This came with the return of the Bronagh J, the excellent cycle times and high availability of the fleet. That allowed us to draw down the finished product revenues, the finished product inventories that we had in stock. Those strong revenues and EBITDA came from that drawdown of those product stockpiles. On to Slide 19. Let me focus now on sort of our response to that poor half and the outlook ahead. We've had a strong start to the half, the second half of the year. We expect that to continue through to the end of the year. The mining operations are working at higher levels.
At all three of the mining operations, we're delivering higher levels of HMC than we did in the first half of the year. We've seen that when you break that down, the throughput rates are up, the utilizations are up, and recoveries are also up. Broadly speaking, mining conditions have improved. Focusing on a couple of the particular improvements, at WCP A, we have our slimes levels, which, historically, in recent years at least, been hampering the operation. We've gone into a period of eased, slimes levels based on some good protocols around our three paddock system and also some lower slimes grades coming from the dry mining areas. This, this in combination with the addition of clean water onto the spiral circuit.
which we implemented in Q2, has meant that we're not-- we're seeing higher throughputs at WCP A, but also higher recovery, metallurgical recoveries as well. We, we expect those to be even above our original plans for the year in the second half of the year. At WCP B, we moved out of the wetlands, and we, we don't have wetlands in our mine plan for the second half of the year. Nevertheless, we were, by the end of Q2, able to realize improvement in the management of roots, bringing higher utilizations and higher mineral recoveries again.
Going forward, when we do expect to see wetlands in the future, we've taken to have some more confidence on our, on our ore body grades for those periods, we've taken a more conservative grade forecasting position for those future years. On to WCP B, as I said, we were out of the transitions area by the end of Q2, and since July, we've been operating at normal throughputs and making planned grades HMC. This is actually set up well for the rest of the year. In fact, we've managed to alter our, adapt our dredge path slightly, to get some higher grades in the second half of this year, over and above the plan.
If we look back at the lightning strike, we do regard that as a once-off event. It was the first... We, we, we have experienced lightning strikes in the past, but never with this level of severity. When we looked at the investigation that we'd concluded or completed, we found that the network that we have within our own site was adequate and built to design, and met, met the standards of design. However, as Michael said earlier, we had that, that, that design did rely on the transmission provider's breakers working, should a lightning strike occur. In this case, that didn't happen.
In the future, we will have a project delivery, which will stop us from relying on, on their, their breakers, and we will have our own breakers in, in tandem, to help ensure that that doesn't happen again. Then internally, we found that through normal improvements in technology over the years, some breakers are now able to cope with lightning better than others, and we will upgrade to some breakers, which where, where we had some protection within our business during the last lightning, and we'll standardize that across the rest of the business. Just one further point on, on electricity. The RUPS was reported in Q2 to have been, to have gone out of service, and that was the case for Q2 and into the early half of Q3.
We have made design adjustments to the RUPS. It's now fully operational. This brings consistency to the operations for the second half. MSP is performing well, especially with the additional HMC that's coming through now. In conclusion, I would say that we're on track to achieve the revised guidance levels for and have a good second half of the year. Onto the next Slide, 20. This Slide focuses on our development projects and growth projects. Broadly speaking, they're progressing well and on track. As you know, WCP A is planning to mine in a new ore zone called Nataka from the end of 2025.
In order to do this, we need to initiate some fundamental upgrades to the WCP A plant, so that it can mine and deliver in the forecasted mining conditions of the future. This means the purchase of two new, new dredges, an upfront de-sliming plant, incorporated into a wholly new surge bin, the preparation plant, and then also the initiation of a tailings storage facility. All of those items are planned to be delivered prior to entering the relocation channel into Nataka at the end of 2025. The aim here is to make sure that we maintain our status as a first quartile revenue to cost producer.
In order to do that, one of the key aspects of that is to increase capacity of the WCP A operation. I'll remind you of the Slide on the right, the graph on the right, should I say, where existing throughputs when in high slimes conditions, can't meet the capacity of the plant, of the Wet Concentrator Plant . In the future, our new two dredges will be able to always deliver the required feed to fill the concentrated plant. Current status on those projects is that the dredges. We've nearly finalized the contract, so we're imminently placing our order. The, that, that's on track, and we expect those dredges to be available in Q2 2025. The Definitive Feasibility Study for the upfront de-sliming plant is progressing well.
As you see on the picture on the right, we have people. We are replacing the existing surge bin at WCP A with a new module. It will have a surge bin screening and de-sliming facility on board. Then the tailings storage facility is also coming towards the completion of its Definitive Feasibility Study design. That's being done to GISTM standards, which is the Global Industry Standard on Tailings Management, which is the world-leading standard for managing tailings facilities. On to the other of our growth projects, or sorry, not growth projects, the other of our sustaining production projects, which is the WCP B upgrade.
Our, our plan is to move WCP B from 2,400 tons per hour to 3,400 tons an hour, that will support the consistent delivery of ilmenite at 1.2 million tons going forwards. The DFS has commenced, it's actually advancing quite well, we're expecting that to be completed around the end of 2023, maybe slightly into the first half of 2024. The PFS costing is $41 million for that project, we expect that to commission in the first half of 2025. On to our growth project. At the Capital Markets Day, you'll recall we provided an option for growth, in order to pursue that option, we've decided to take the Congolone project through a pre-feasibility study.
That study is now underway. We're expecting it to last most of this year before it's complete, and it's, it's, it's progressing well. We'll obviously give further details on that PFS once it's completed. Moving on to Slide 21, it would be remiss not to talk about some of the items we've been pursuing around sustainability, and we've been making some significant advances this, in the first half of this year. The pillars that Michael referred to at the beginning of the presentation, safe and engaged workforce, thriving communities, healthy natural environments, and trusted business, are the four pillars around which work takes place. I'll just pick a couple of the items to, for, for, for sharing. Gender diversity is increasing.
It's progressing well. I was happy that in 2022 and into 2023, our leadership development programs are really moving forward with good pace. We're now focusing on a program called Full Role Delivery, where we are really moving to raise leaders' accountability and capabilities to a higher level, and that's been very well received. Around water and sanitation, we've implemented a trial on drinking water throughout a village. It's worked very well. We're now rolling that out across other villages around the mine. We've reached an agreement with government to fund the construction of the district hospital, which will help deliver healthcare for the whole region. Focusing for a moment on agroforestry and our, and our improvements around rehabilitation.
Agroforestry is really the bringing together of subsistence farming with an ability to develop biodiversity into our rehabilitation and be able to satisfy both, both requirements. What we see in the photograph on the left is the growth of indigenous trees in lines with growth, with crops, crop growing in between. What we find is that the agroforestry, the, the trees are bringing protection, they're bringing organic fertilizer to the soils, and that, in turn, is turning into higher crop yields for, for farmers, and, and also facilitating not just subsistence farming, but cash cropping as well. That's really something that we're very proud of, that's developing well, and we hope that that continues well into the future.
Then just maybe one last point to mention around our trusted business. The GISTM compliance for our new PFS is one component, but we're also transforming the whole business, and all of our paddock settling systems are our water bodies around the mine to GISTM standards, and that progress will take place through the rest of this year and into 2024. So with that, I'll pass over to Michael to continue. In fact, I think Cillian. To Cillian. Sorry, Cillian, could you take over, please?
Yep. Thanks, Ben. I'm gonna talk through the market results in the first half of 2023. Starting with Slide 23, shows a graph we consider quite strong results, and I think Michael and Tom spoke at high level about it. Looking at the ilmenite market in a bit more detail, I wanna talk through really what we have seen. Through 2022, we saw increased prices for ilmenite until really the very end of the year, we saw the spot market decrease. This is on the back of slower pigment market in the second half of last year, the widely acknowledged trough in Q4 in the pigment market last year, decreasing prices. This led into the first half of 2023, slightly lower prices.
Importantly, and I think an important one to note, is that, you know, our prices remained flat through the first half of 2023. As we exit, the first half, you know, prices are at the same level as, as we entered. On zircon, I think it's a strong results in the first half. We saw prices increase slightly on the back of robust demand. Although in the last few weeks of the half, we did see the market soften a bit, particularly in the spot market and in China.
Overall, as Tom mentioned, that we did see a drop in the average price received for all products, but this is mostly as a result of increased sales volumes as the return of the Bronagh J allowed us to decrease our inventories and place those customers, put those volumes with, with our customers. Turning to Slide 4, I think we're gonna focus on the major ilmenite consuming region, look at China for a minute. You can see the graph on the left-hand side, why it's important to our industry with 2 million tons or almost 2 million tons of pigment produced in the first half of 2023. This is a record for pigment production.
Importantly for us, the chloride pigment production rebounded as well in the first half of 2023, after a drop in the second half of 2022. Again, first half was a record for chloride pigment in production in China, which needs and requires imported ilmenite, the high quality ilmenite to produce chloride pigments. This we saw the benefit for us, and we really felt that benefit in the first half. Coupled with that, we've shown graphs in recent halves of metal production in China as well, and we haven't shown it this time. Again, the first half of 2023 was a record for titanium metal production in China, again, boosting demand. This is a result of increased utilizations on the pigment and the metal side, but also increased capacity being built in China.
We look at the right-hand side, it's really showing net exports from China. There's a couple of things to note here. One is the lower imports. We believe lower pigments being imported into China as a result of the improved quality of pigment being produced in China. They're able to take some of those higher quality markets. Two is the big increase in exports, which is having an impact in the global market, the global pigment market. It is something that we think is, is needed over the longer term, with little new capacity being built outside China. The pigment capacity in China will need to meet global growth. Turning to Slide 25, it's a bit of an outlook.
Michael said at the start, you know, our market's not immune to the global economic conditions that we're seeing at the moment, we are seeing the impact of the higher interest rates, weaker Chinese real estate impacting our, all our markets really. Looking at titanium feedstocks, in particular, ilmenite and rutile, we are seeing more subdued markets in the third quarter as lower utilizations at the major pigment producers are impacting the overall demand for titanium feedstocks. That has mostly been at the high-grade chloride feedstocks at the moment, but we're also seeing it in the ilmenite. Thankfully, strong pigment production in China is supporting ilmenite and partially offsetting that.
We do see depletion coming from several mines and disruptions, and therefore, we are confident, as demand recovers, that there are lot- strong long-term fundamentals for titanium feedstocks going forward. On zircon, it's a similar story. Demand is being impacted by the global economy at the moment, and while we did see a strong first half, towards the end, the market weakened, and this has continued into Q3, 2023. In particular, we've seen softer demand and prices in the spot market for zircon. Despite that, there are significant mine depletions coming in the coming years. As a result, despite the new projects coming online in the next couple of years, we do think there's strong underlying fundamentals for the zircon market going forward also. With that, I'll pass back to Michael for closing remarks.
Yeah, thanks, Cillian. Thank you very much. I think we might have been overrunning here a little bit, if I just turn quickly to Slide 27. Maintaining our 1st quarter position in the industry, the 1st half of 2023 wasn't our best ever production year, production half. The electrical problems are behind us. Recoveries, as Ben has mentioned, have improved, our grades are higher, we expect to have a much better H2. Looking forward, we believe that all of the studies and the investment in a very detailed feasibility study for the mining, the optimal mining solution for Nataka has paid off very well.
The dredge and hydro mining combination that we have ended up with, it really is an optimal mining solution and will give us the opportunity for a long life, low-cost operation at Nataka. Allow us to maintain our first quartile industry position. We see the projects that are underway as being quite transformative. The new high-capacity dredges at Wet Concentrator Plant A will allow us to not require high cost supplemental mining. Again, that will lead towards our low-cost position. The de-sliming circuit will mean that we no longer have this continual difficulty of slime causing reductions in throughput and recovery. That will be a great relief to our operational people and make our output much more predictable....
In addition to that, 40% increase in at the of wet cluster at B, which will be facilitated by moving 1 of the dredges that are currently in operation at A, to B whenever the new dredges come in for A. All of that together will remove mining, mining, which has been the bottleneck of this project, which has been the main constraint on production ever since this project was first developed. That will, will be, we believe, removed with the, with these new approaches that are underway. Cillian mentioned that we believe that the overall situation in the market is supportive, as, as we look forward, we, we look at the, the demand and expected demand and expected new projects, then we still see a tight market.
Even further to that, we believe that Kenmare is well positioned in the growth areas of that market, being chloride ilmenite...sorry, chloride pigment in China and titanium metal, where we have a strong position in both those markets. All of those feeding towards being able to provide good returns to our investors. We target about $50 million annual dividend. As we said, we've mentioned already this morning that we are launching tender offer for a $30 million share buyback. Finally, we are working hard to develop the pre-feasibility study for Congolone as a growth option for the company. It's looking very exciting. It's a very good project, good mineralization, great flowing sand, interesting suite of products, which will complement our existing product range very well.
So that's, that's how we see, the situation as we, as we look forward. With that, I'd like to hand back to, the operator, and take any questions that you guys have. Thank you very much.
Thank you. Thank you. If any participant would like to ask a question, please press the star followed by the 1 on your telephone keypad. Our first question comes from the line of Colin Grant from Davy. Please go ahead with your question.
Yeah, good morning, everybody, and thanks very much for doing the call. I have a couple of questions. Just start with the first one. In terms of maybe visibility on pricing in H2, could you maybe give some color on what proportion of your revenues or, or production, where you may be contracted on pricing for H2? Just give us a flavor there, please. Start with that.
Maybe, Cillian, you could answer that?
Yeah, I can. can't give too much visibility on pricing. I think normally we have around, you know, 60 to even above 60% of our volumes on contract. The price of them are normally fairly steady. Then the spot market, you know, I think we've already agreed prices on that in Q3 already. They have not been materially different at all from what we've seen already this year. It's probably the best visibility I can give at this stage.
Thanks. Great. Thanks very much. That's helpful. Then, just in terms of the second point, you, you had a, I think, a pretty good performance in terms of drawing down finished goods inventory in H1 of the year. I'm just trying to look, through H2, and what to expect in terms of any further movements in inventory, maybe there's a certain level or, or a minimum level of inventory you want to keep or. I'm trying to get a sense of whether or not we should be expecting shipments to exceed production in H2 or, or what movements we should be modeling in there. Thanks.
Look, I, I don't. Sorry. Sorry, Cillian. Go ahead.
No, you go ahead, Michael.
I, I, I don't believe that we need to, model, shipments being greater than production in H2, since our production will be, we anticipate our production back up to, to normal production levels one. So I, I think it should be roughly equivalent.
Okay. Thanks, Michael.
Thank you. As a reminder, if you'd like to ask a question, please press star followed by the one on your telephone. Our next question comes on the line of Richard Hatch from Berenberg. Please go ahead with your question.
Yeah, thanks, Michael and team, good morning. A few, few questions. First one, for Tom, just on the debt refi. Tom, correct me if I'm wrong, the term loan at the moment is LIBOR plus 5.4%. What kind of sort of cost of debt are you, you thinking that you might be able to sort of average in for the debt refi? Because at the moment, I guess that's probably what shade out, about 11% cost of debt for you at the moment on term loan.
Yeah, I suppose there's a couple of considerations there, Richard. Firstly, clearly, when we're sitting in net cash, we prefer not to be paying 11% for debt we don't particularly need or need all the time. We hope to be, you know, utilizing any revised facility or a new facility slightly more selectively, and occasionally. The constant debt burden wouldn't be there. Secondly, there is, you know, we have 2 elements to our facility. We have a term loan, which is +5.4%, and a revolver, which is 4.25%. There's another year of availability indeed on the revolver if our proposed revise is delayed.
I think we're, we're orienting more towards, you know, again, in line with what I said earlier...
structure with a bit more flexibility in it. Probably, you know, while we haven't had definitive guidance, and no banks have been formally fully through credit on it yet, because we're only launching next week, I think thinking about a margin that's more in that kind of 4.255-4.5% range on, on the bulk of it, which will likely be an RCF, is probably a better way to think about it. Some advantages there, but I would say more related to the flexibility to, to draw down and repay and redraw rather than having a full-term facility.
Yeah, understood. All right, fine. Thanks. Just on the ops, have you now got all of the stocks you need in terms of spares, in case you do have, you know, another kind of significant lightning event, or operational sort of challenge in terms of the, in terms of the, the, the weather?
That, that's correct, Richard. Yeah, we did a review of the stock holdings, after this event, and we had placed some additional orders as well as the orders to recover from the event itself. Yes.
Okay, cool.
I would, I would emphasize that, that the severity of that lightning strike is, was so great that we would never hold such a comprehensive stock to replace every single variable speed drive in, in the mine, or. Likewise, you can't do that with pumps. You know, it's, it's impossible to hold the level of stock that will completely insulate you from, you know, a, you know, an extremely severe event, Richard. That would, that would, that would require a very significant further investment in working capital.
While our, our stock levels are back up to well above the levels they previously were at, I, I don't think you can say, "Okay, if we got hit by another major event tomorrow, that it would, you know, we'd just click in the units, and it'll be all right." That was a extremely severe, unusual event. What we are, what we are doing is we are, we are going to install new protection after the, within this system, to ensure that if a similar event happens, that it would not affect. It'll take a little while before that is in place.
Okay, understood. Thanks, Michael. Then just on the, on the operations, just, can you perhaps just give us a little bit more help with how Q3 and Q4 look? If I kind of look at it, you know, the mining rates have dropped sort of down to 9, 9.3, Q1, 9 million tons, or 9.1 million ton, tons, Q2. You know, Q4 2022 was 10.1 million tons. And then grade-wise, you know, we, we previously, second half of last year, were averaging about 4.8%, 4.9%. That's dropped down to sort of 4.1%, 4%, and I appreciate there's been some, some sort of factors with the ore body that's been sort of been more of a challenge.
What kind of mining rates do we need to think about in Q3, Q4? What kind of grade should we be thinking about Q3, Q4? You sort of mentioned that the mine plan's been adjusted slightly so that you can access some higher grade portions of the ore body. You know, what are the moving parts there that help you get to that, that kind of, I guess, would be what? Like a 280-290 thousand ton per quarter run rate of ilmenite to hit, hit the bottom end of guidance?
Yeah. So you're in the right ballpark there, Richard, in terms of quarterly, quarterly performance for the rest of the year. It comes really from three areas. Our mining rates are up, so you can expect mining rates, we're aiming at, at about, certainly above 10 million tons. You know, that, that's the quarter, I mean, those rates are coming through nicely already. That's through puts and utilizations being up and above, above, above plan, the... Sorry, above H1 levels, also above plan actually as well. You know, I think we're performing quite well at the moment. On the grades, you're right, that there have been some adjustments.
We have dry mining fleets that gave us some flexibility for WCP A and the mentioned improvements in grade at WCP B as well. We're coming in around, I, I think about 4.4, 4.5. I can't quite recall exactly the number, but it's in that sort of area. The third area of improvement has been around recoveries, and we saw meaningful recoveries improvements when we introduced this clean water onto the spirals at WCP A. Recoveries for that plant, metallurgical recovery is moving from high seventies, 78, 79, up to mid-high eighties, so 85, 86, 87, so about there. That, that's a significant improvement level for recoveries at that particular plant.
Okay, I guess not at a huge significant cost to pump freshwater there then, right?
No. I mean, that was a project that we'd implement. We, we brought through from the. We, I come up with that view back in 2022, so that money was spent through the latter half of last year and into the beginning of this year, literally pump and piping, so not, not an expensive-
... Yeah. Okay, cool. Then my last-- thank you. Then my last question is just on the market, Cillian, it's a bit of a, sort of a, a wide-ranging one, but the first one is, are you seeing-- wha-what's the view on inventory levels, and the pigment producers in the West and in China? Are you, sort of concerned that, and, and, you know, if are inventory levels high enough that China can take their foot off the gas, second half in terms of production? I just sort of note that, that kind of increase in exports and just wonder, you know, if the export market isn't necessarily there, do they, do they take the foot off the gas in terms of pigment production, or, or do you not see that?
Then you kind of talked a bit about your Q3 pricing, but, you know, what about Q4? Are you seeing any early sort of discussions on Q4 contract pricing? Yeah, and then also, sorry, last one is just, are you seeing a shift of any of your volumes away from the West and into China? If you were to say, like, take a pie chart of how your, your sales mix sort of spread, and you sort of spread that over the last sort of 4 or 5 quarters or cut, you know, 4 halves, are you seeing an increase of volumes going to China, or is it fairly consistent? Thanks.
Hey, Cillian, I think that's about seven or eight questions.
You might have to remind me of a couple, but I'll do my best. Start off with inventories. Looking at the pigment market in general, I think when we look at what happened, both in China and particularly in the West, when the market weakened and demand softened in the second half of last year, pigment producers kind of took off production, and that's continued really through to, and you can still see that in the results. The pigment producers speak about how Q4 was the trough, and you can see their volumes, their sales volumes in particular, are growing quarter on quarter in Q1 and in Q2. We don't think they're sitting on huge amount of inventories because they've adjusted their production.
In China, I think they've been opportunistic, and they have gained market share through the first half of this year, really with lower pigment prices compared to their competitors outside China. Anecdotally, you know, when we talk to our customers in China, the majority of them we don't think are sitting on significant inventories or really significantly above normal at all. We don't see that as a huge risk right now. Q4 pricing, look, I think we're too early to talk about it really. We don't have contract pricing that sets quarterly, really for our products. We have half yearly, we have yearly, and we have some spot. The spot agreements for Q4, then those discussions aren't happening at this stage.
I think it's a bit early, but look, I think go back to the comments you made in the outlook that we are seeing more subdued demand, and we'd love to see how that plays out. Market share is a more difficult question for us at the moment, just because of what happened with the Bronagh J being in dry dock last year. You know, we have our contracted volumes, and we have to deliver to our customers based on those. When we had reduced shipping capacity in Q2, Q3 last year, we had to make sure we were meeting our contracts and our obligations. That meant less to the spot market, and the spot market largely is in China, so you would have seen reduced sales to China last year.
As we've been able to increase our sales volumes this year, you know, a large part of that uptake has been to China, so that's been more back to normal levels. When we look at our customers, for the most part, every is still taking volume to the plants that they normally do. I don't think we've been affected by any plant suspensions or shutdowns really, immaterially on volume there. I think I answered them all.
Appreciate you. Appreciated. Yeah, you did. Yeah, that was, that was much appreciated. Thank you very much.
Thank you. There are no further questions at this time. Michael Carvill, I'll turn the call back over to you.
Thank you very much. Folks, thank you all for listening and being present for Kenmare's H1 2023 results presentation. I hope we've managed to answer your questions, and with that, I will close down the call. Thanks, everyone, and bye.
Thank you. This does conclude today's conference call. Thank you for participating. You may-