Good afternoon, and welcome to the Kenmare Resources PLC Q1 2026 Production Update. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll, and I would now like to hand you over to Managing Director, Tom Hickey. Good afternoon to you.
Thanks very much, and thanks, everybody, for joining us today for our Q1 2026 production update. I'm joined by my colleagues, Cillian Murphy, who's Head of Marketing, Ben Baxter, COO, who's coming to us from Moma, Katharine Sutton, who's Head of Investor Relations. I know off-camera, I've got James McCullough, CFO, as well. While we may have spoken to you all comparatively recently following our full year results at the end of March, I think we do have some interesting and useful updates today, and we felt that it'd be useful to just skim over them and take any questions people might have. We finished Q1 2026 a number of weeks ago. We've had a good solid quarter in terms of shipments, and I think shipments is our big objective for 2026. It's a priority in terms of how we want to run the business.
It's a priority in terms of managing our cash flow through what is, as we hear later on, you may have heard already quite a difficult period in the market. It reflects the fact that we do have or had at the end of 2026 quite high inventory levels. 2026 from an operational perspective, very strong on shipments, well on track for our 1.1 million target. A little bit softer from a production perspective. As we'll hear from Ben, the completion and debottlenecking of our WCPA upgrade project, which was a huge focus last year, took up quite a bit of time in Q1. I think we're nearly there now, and Ben will update you on where we are with our dredges, where we are with our feed prep unit, and the punch list of tasks and issues that we were addressing during Q1.
How that leaves us set for the remainder of the year. I think on balance, we're very comfortable where we are. While Q1 was a little slower from a production perspective, and by consequence, a little slower from an ilmenite production perspective, and we're still on track for our annual guidance. Moving on to markets, which I think have been an important focus for us over the last while. Following highs in pricing in 2021, 2022, 2023, we have seen weaker markets. We did comment over the course of last year on oversupply in the market for most of the feedstocks that we produce. Certainly, we've seen maybe a few interesting evolutions in that area. The ilmenite market did continue to be weak, and ilmenite, you may recall, is about 70% of our revenue.
Pricing was softer as we expected, but we're certainly seeing the responses that people put in place to the current weaker market and oversupply, limiting production, managing production, and indeed, some unplanned production disruptions start to take effect, start to tighten the market. Not quite seeing it in price yet, but there are some interesting emerging themes, which Cillian will touch on. The market is not just about price, it's also about transportation and logistics, and as you can imagine, we are seeing an impact on freight rates, in particular from the war in Ukraine. But limited so far. We are seeing some impact on shipping schedules, challenges in logistics, people without access to their normal ports.
Nothing, as you can see, that impacted our trajectory in Q1 in terms of shipping, but certainly something that we do need to keep an eye on and we need to support specific customers on. I mentioned that the feedstock market had seen some interesting developments in Q1. I think towards the back of 2025, we commented that zircon, which is our second biggest revenue contributor at about 20%-25%. Zircon prices began to stabilize in Q4 2025. Following on from that, we've actually started to book higher prices for zircon products in the second quarter 2026. The industry commentators are certainly somewhat more optimistic about the trajectory for zircon prices over the remainder of 2026 and into 2027 and beyond.
Finally, on the marketing side, you may recall us speaking about a customer who was in financial distress in Q3 2025, couldn't take some volumes and hadn't paid us. Those were shipments to two plants. One of those plants has now been sold, and we've recovered $4.6 million of the $9.3 million that was outstanding. The second plant is very well advanced in a sale process. We're engaged with the potential new acquirers, and we'd be very hopeful for strong recovery there. While there has been a delay on receipt, we're comfortable that we'll recover a significant proportion of those outstandings. Finally, I think the biggest focus, certainly from shareholders over recent months, has been on the progress of our Implementation Agreement renegotiations in Mozambique. The Implementation Agreement, you may recall, is the agreement that covers our processing and export activities.
Doesn't impact on our mining at all. We had a really useful meeting in late February, with the Minister for Mineral Resources and Energy, the Minister for Economy, the head of the tax department, and some presidential advisors. I think that really re-energized the process, following a period of less activity over year-end on the holiday period in Mozambique. At that meeting, we vowed to each other to do everything we could to get the agreement, the renewal agreed by towards the end of March. I think, while we all recognized that would be a challenge, the objective was really to inject momentum into proceedings, and I think we succeeded in doing that. Both sides have been engaged. The engagements are constructive and we are making progress, and we'd be hopeful that we'll see that progress realized in a near-term outcome before too long.
Now, I should stress, there's no mandated timeline here. We're still operating under our legacy terms while we negotiate. Certainly, there seems to be energy for this and hopefully we can capitalize on that to conclude the negotiations before too long. That's, I suppose, the highlights. Maybe I'll just hand over to my colleagues now to dive a little bit deeper on some of the themes that I've touched on, and I'll hand over to Ben Baxter to talk through operations.
Hi, good afternoon, everybody. Maybe I'll just first of all start with safety and record that we had a really good quarter. We had no lost time injuries during the quarter, and that was a good response to the end of 2025, when we'd had two injuries. We've set the year off on the right note on that front. On mining, we were behind on the production of Heavy Mineral Concentrate, down by 30%. This was on the back of the lower volumes from the debottlenecking processes that took place through the quarter at WCPA. I'll talk more about the WCPA project on the next slide. We also saw grades starting to fall, and those grades are expected to fall as we finish the life in Namalope for WCPA, and also we'll be preparing ourselves into the transition to Nataka.
The other element of that was that we had reduced dry mining in Q1 this year compared to Q1 last year. We are expecting to see throughputs, sorry, grades improving and also throughputs through the rest of this quarter, and that's coming as we continue to do the debottlenecking of WCPA. The effect of that into finished products was clear that all of the finished products of ilmenite, zircon, and rutile were down relative to the HMC production as well, though. Those additional reductions came as a result of some inefficiencies in the mineral separation plant. We incurred lower recoveries, and that was on the back of the fact that we had up and down feed into the plant as a result of the WCPA debottlenecking, but also we took the decision during the quarter to reprocess a former tailing stockpile.
That tailings stockpile contains historical amounts of valuable heavy minerals, but we don't have a clear and full knowledge of the grades that enter the plant at any time. Hence, the plant setup was quite difficult when grades on the feed were fluctuating from day to day. The impact of all of that was more spillage. Thankfully, we were able to retain that spillage. It hasn't gone to tailings, and we will be retreating some of that spillage through the second quarter and catching up on some of those losses. On the concentrate side, you see a significant improvement in concentrates production up 400%, and that's because of the introduction of our new product called ZrTi. This is a product that's been introduced in the latter half of last year, and we were able to make appreciable amounts during the quarter.
The idea of that is that we also can improve our shipping through the rest of this year. In addition to the reprocessing of those previous stockpiles, we were also able to dry some of the ZrTi, and that increases the shipping rates as well, so that the material flows easily onto the conveyor and onto the ship load and through the ship loader and onto the customer vessels. That was very useful to help with shipping rates, and that's supporting our main KPI of the year, which is to ship more than 1.1 million tons. That drying process helped with one of the last shipments during the year. It's important to note that the ZrTi production that we did make was more than in the whole of last year.
This has become a meaningful part of the operating routine, and will do for the rest of this year. On the shipments themselves, we were 10% down year-on-year. This is due to the balancing effect of demand and also for all of our finished product or for particularly the ilmenite finished products, but also that the loading of ZrTi, certainly at the beginning of the year, was slower relative to our other products. Nevertheless, we were successful to debottleneck, to draw down the stocks of our finished products by about 99,000 tons, and that's in line with the value over volume approach, where we are looking at making the right products. We're looking at converting intermediate stocks and making sure that we operate with maximum efficiency.
After all of that, we finished the end of the quarter on track to achieve the production guidance and the sales guidance or shipments guidance, should I call it, for the year. On the next slide, I'm just gonna talk through the progress that we've been making on WCPA, and it's an encouraging quarter. We have all the major works complete, and the project is now essentially complete. It has transitioned to becoming an operation. We don't have large project teams on the plant anymore. We are now fully running it with our operating crews. The bulk of the spend is done, and we're on track to reach the nameplate capacity. We have, though, had some rectifications required along the way.
However, thankfully and usefully, there are no fatal flaws in any of the process that we've been through, so we're comfortable that we're on the right journey to get to the nameplate capacity. It's just been taking a bit longer to get consistency. Those consistencies, though, are improving, and we've made some good progress through the quarter, firstly improving utilizations through the solutions around dredge winch brakes. We altered the software, and we implemented cooling benches to those brakes, and that's been successful, and the winch brakes are no longer impacting on the utilization of the equipment. We also had an improved capacity brought to the plant by improving the tailings pump gearboxes that we now get greater throughputs out of the tailings, out of the back of the plant, and that means that that's no longer a bottleneck.
Some of you may recall that during Q4, we struggled with the outside densification of the slimes that gets produced by the plant, and we've had a stable quarter on that front. We're comfortable around the densification paddock and the tailings storage facility, and so that has had a good successful time. Lastly, during the quarter, we had a walkway turnover due to instability from the additional mass of material traveling over that walkway. The effects of that were rectified, and those walkways now have a long-term stability rectification in place. All of that's good progress, but we've been achieving more through into Q2 as well, and the dredge feed delivery has been improved on one of the dredges, and that is now in the process of being rectified on the second dredge as well. That shall be completed during this month.
We also have been looking at how to debottleneck the amount of flow that passes from the dredge to the feed preparation part and desliming part of the new plant. This involves us building some additional equipment on the plant. It's low cost, and as we've said before, is covered in the contingency of the project, and that is currently near complete at the moment. Over the coming weeks, we expect that the debottlenecking of the plant will have been completed, and we'll be able to achieve our nameplate capacity. I'm going to pass over now to Cillian to talk through the market.
Thanks, Ben. Going to start with Q1, and Q1 was a bit softer for the titanium feedstock market again, really as the inventory overhang in the market continued to weigh on ilmenite pricing. As Tom mentioned earlier, this was exacerbated a bit for Kenmare as some customers were affected by conflict in the Middle East. We saw some cancellations and postponements, and that resulted in us being forced into the spot market at late notice which probably harmed prices further. Outside of that plus, I suppose, the higher freight, we haven't seen an impact from the conflict in the Middle East on underlying demand yet. On the other hand, what we have seen is that higher sulfur and sulfuric acid prices as a result of the war in the Middle East is supporting chloride pigment.
We've seen record chloride pigment production in China in Q1, and that alongside record titanium metal production in China, in Q1, showing a recovery of demand for our products. That, coupled with the supply curtailments that we saw in the second half of last year and unplanned ones into the first half of this year, really means that we're starting to work through the inventory overhang in the industry and seeing a tighter market. That's flowing through to our order book for Q2. We're seeing a strong order book for our ilmenite sales, kind of supported by both demand in the West and in China. We're seeing that continue into Q3 at the moment with the sales that we can see. Zircon, similar story, but a bit brighter. I think the supply curtailments have been a bit heavier on the zircon side.
While demand has been relatively steady, the reduction of supply is supporting the market. We saw it stabilize in the second half of last year towards quarter four, and now we're seeing prices start to increase in the second quarter. We have achieved price increases on some products, so we expect when we go to the market for all our zircon products that we'll see good traction there. Finally, I think our new product, ZrTi, was mentioned. We saw a big increase in sales in ZrTi in the first quarter, which was really encouraging to see for a new product. That's continuing through really Q2 and through the rest of the year, where we see that there is a new and a really robust demand for that product. With that, I'll probably pass back to you, Tom.
Thanks, Cillian. Look, I think this is a bit of a quick canter through what was a very interesting and active quarter for us and continues on many of the themes you've heard us speak about over recent months. I suppose as we draw back from that, it's important to think about why we're doing what we're doing and the particular characteristics of Moma. Moma is a world-class asset. It's going to be around for decades and decades to come through a number of cycles, and our job is to make sure that we're positioned to navigate through those cycles, with a favorable cost profile, with good operational practices, and we can adapt to the ups and downs that come over that sort of period of time.
Certainly the investment in WCPA and how it positions us for moving to Nataka is something that we're very excited about and very comfortable with. As Ben said, the CapEx is behind us. The plant is operational. The punch list of items that we need to work through to get it up to consistently nameplate capacity is pretty much done. That will see the plant well set for years and years to come. That will enable us to continue to generate operating cash flow. I suppose on those themes, some of the initiatives we spoke about in terms of reducing CapEx and managing our OpEx, we're very much on track with those initiatives in Q1 2026. We have, I see it coming through on some of the questions. Again, while addressing short-term issues, we've a decent position in terms of diesel stocks.
We have about 90 days, albeit we are exposed to higher pricing, but we certainly have access. We're constantly reviewing what needs to change, what could change, and how we can serve our customers better through this period of geopolitical uncertainty. Our customers are loyal. Our customers are continuing to work with us. Many of the customers we had 15 years ago are still the same customers. Even when plants change hands, as they did with the customer who went into administration in Q3, we continue to work with the new owners, and we expect we would continue to work with the new owners of both those plants that have recently changed hands.
Look, I think that's a very important characteristic of Kenmare, the stability that our contractual relationships give us and the stability that our customer relationships give us because of our long life, because of our quality. Look, I suppose, while we have a very good partnership with our customers, we also have had for the last 20 years a good partnership with the Mozambican government and with the population in and around the mine at Moma. While the Implementation Agreement has taken quite some time to get concluded, we've been reassured throughout that process that the partnership that we have is valued by the Mozambicans as well. They regard Kenmare, and the president said this to me directly, Kenmare as a case study in how international investors and governments can work together in a beneficial manner.
We'd be hopeful that that sentiment, which is easy to say, but that sentiment will be followed through on with the continued progress on the Implementation Agreement. I think we recognize that the future has to be different to the past for Mozambique. We've made what we regard as a very fair and favorable offer, and along with that comes significant investment in the asset and in the community, which we really are anxious to embark on. Hopefully we can get to a point where that's behind us before too long. Happy to take any questions that people might have. Thanks for taking the time to listen to us today.
Fantastic. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company take a few moments to view those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via Investor Dashboard. Katharine, at this point, if I may now hand over to you to chair the Q&A, and I'll pick up from Tom at the end. Thank you.
Thanks.
First question. The ongoing war is putting pressure on sulfate pigment producers' margins. How is this impacting Kenmare's pricing and volumes? There's actually a second part to the same question, which is, chloride pigment producers seem to be relatively less affected. How is Kenmare adjusting the sales strategy in response?
Cillian, do you want to take that?
Yeah, I can take that. Maybe I brushed over that in the presentation, but it's correct in the question. The high sulfur, sulfuric acid prices are really harming sulfate pigment producers, particularly in China, but all over. We are seeing a reaction to that at the moment. That reaction is increasing pigment prices in China and for export. Rather than they can still get the volumes of sulfur, sulfuric acid, but they are increasing price. How does that affect Kenmare? Kenmare for years has been targeting the chloride pigment market more so. Our Kenmare ilmenite is very good for beneficiation, so chloride slag and synthetic rutile, which is key feedstock into the chloride pigment market. That is a positive for us. I think that's one of the reasons we saw record chloride pigment production in China in quarter one. We expect that to continue.
It is boosting the demand for our products. I think while there still is an inventory overhang, we haven't seen it come through in pricing yet.
Next question, how are you managing diesel reserves in the current environment? There's three sub-questions to that. One, do you have any long-term fuel supply agreements in place? Would it be feasible to directly import diesel in collaboration with the Omani government? Is there room for a further increase in electricity usage in the MSP?
Ben, do you want to take that? You're on mute, Ben.
Yeah. Thanks. On the supply agreements, we do have a long-term agreement with the state fuel provider, Petromoc, and it's the situation that in Mozambique, all fuel imports come through Petromoc. On site, we operate with two large vessels in our fuel farm, and they have about three months of supply currently at this time. We also operate with another three months of supply reserved for us in Nacala Port. That's the main way in which we are managing the fuel and how that will go forward. I'm not really aware that we have the opportunity to collaborate with the Omani government to take fuel or do an agreement with them. I think that's something that we would take away and have a think about, unless my colleagues have got a view on that.
Maybe to answer the third part around the electricity usage in the Mineral Separation Plant. We have done feasibility studies for the pre-heating of air into our dryers, which are diesel driven. The pre-heating of air to be done using electricity. That is a project that has a decarbonization benefit for the business and would reduce diesel consumption. However, at this point in time, it has been non-economic to deliver that project at this point. Hasn't been being pursued and is not likely to be pursued in the current quarter based on conservation of liquidity. If the price of diesel was to increase, that business case would obviously change. It's certainly something that is on our radar and something that we are closely watching.
Next question. Chinese artisanal miners appear to be more exposed under the current conditions. Is there any evidence of accelerated supply rationalization so far?
Maybe I'll start that, and Cillian, you can jump in. Look, I suppose the challenge with the artisanal miners that are around us in Mozambique and other territories is they're not under single ownership. They're independent entities with their own licenses and their own operating plans. I think it is fair to say, though, as the question implies, that they typically don't use mains electricity in the way that we do, which is renewable. They typically use diesel as their principal energy source, and by consequence, will be exposed to all the movements in the diesel price over the next short while. I suppose the other point to emphasize is that while we export finished materials to world markets, they typically export a heavy mineral concentrate that has lower levels of valuable materials plus waste matter. Effectively, per ton of material transported, they have less value.
Certainly, there are challenges here. We haven't immediately seen any impacts, but equally, these challenges from a geopolitical perspective and diesel perspective in particular are very recent vintage. I think it would take a while to work through. I think in a wider sense, it's our view that at current prices, 20%-25% of the industry cost curve is underwater, that there are a number of producers of all types not making money, and that is what's provoking some of the supply responses that Cillian spoke about. I think it pains us to say it, and it's a little bit of a cliché, but the best cure for low prices is low prices. Cillian, anything I missed there in relation to the artisanal miners?
No, I think that mostly covers it. I think it is an advantage that we use less diesel per ton of product at the moment, and we do see that anecdotally in China. We've heard of rutile truck prices, which mostly comes from Sierra Leone or concentrates containing rutile, trying to push prices up. We believe that's on the back of the higher diesel costs they're incurring. We are hearing anecdotally of that coming through, but nothing meaningful yet on the pricing.
What's roughly the anticipated impact of higher oil prices on the cash cost of production?
I can talk to that one. Hi, everyone. Look, last year, we consumed around 18 million liters of diesel at a price of probably just short of $1 per liter. This year, with less dry mining, as Ben mentioned, we'll probably consume a bit less, so maybe around 15 million liters, thereabout. Look, last year, that would have made up somewhere between 7%-8% of our operating cost base in cash terms.
We would expect that diesel prices will rise. It's unclear yet to what extent that will be, but hopefully those numbers give you something to work with in terms of what the impact might be on our overall cost base.
Next question. A few fuel distributors in Mozambique have reportedly been unable to secure inventory due to U.S. dollar liquidity constraints. Does Kenmare have alternative procurement channels to secure fuel without going through the domestic Mozambican market?
Look, I think we broadly covered that. I suppose just to say that the U.S. dollar constraints don't impact on us in this particular regard in the same way as they do on others, and that our relationship is directly with the state distributor. I think we're comfortable for now with our positioning. The question of engaging with our shareholders or others in Oman, look, I think we don't buy directly from refineries. We don't have the relevant licensing or permissions to do that, and I suspect it would take quite some time to put ourselves in a position to do that. We'll continue to work through the channels that we're currently working through and have been for many years. As James said, try and economize wherever we can on our usage of diesel, in any event, from a cost perspective.
Next question. Where can I follow live or daily prices of ilmenite and rutile? What's the best source and price link to your products?
Do you want to touch on this one, Cillian? It's a difficult question to answer.
Yeah. I think, okay, an issue with the market that it is very opaque. No one source is really that accurate in looking at Kenmare or any others. They're trying to find averages or picking a particular product at any time. There are sources like Asian Metal, which look at products into China, FerroAlloyNet, again, into China, less frequently, but more of a global look, people like TZMI. We would, I suppose, be forced to use a combination of all, because no one is really focusing on any singular product that's trying to take averages or trying to take one product going into a certain region. It needs to be with an overall look at those three being the best.
That was the final question. Back to you, Tom.
Okay. Thank you everybody for taking the time to listen to us today. Hopefully we've managed to answer your questions. If not, please feel free to get in touch. You can see the contact details there on the back slide of the presentation. Our next formal update will likely be our AGM in early May, which is normally just an update presentation plus obviously the resolutions. Thank you for taking the time, and have a good afternoon.
That's great. Thank you, Tom, and the rest of the team for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.