Kenmare Resources plc

Good morning and welcome to the Kenmare Resources plc h1 2026 results and presentation. Such recorded presentation and rest 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. 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 morning.

Good morning and thank you thank you all for taking the time to join us today to run through our half year 2026 results and while you're reading the disclaimer I'll just highlight that in the room with me I have James McCullough our CFO, Ben Baxter our COO, Cillian Murphy our Head of Marketing is also on the call and Catherine Sutton our Head of Investment Relations so we'll be running you through the the presentation today and hopefully answering any questions that you have. Just a few quick reminders about Climber's business we operate the MoMA titanium minerals mine in most Plc Plc Plc Plc And of course, if you're going to be in a country for a long time, you've got to behave well. And we believe we do. We're a good corporate citizen. We work hard to improve the lives and outcomes of the community around us, to contribute to the country, and to the economy as a whole. And I think that's recognised by us being included, once again, in the FTSE for Good index. And I'll talk a little later about our negotiations around a critical agreement with the Mozambican government, where I think you may have seen we've seen good progress in recent weeks. Our production, we produce Titanium Minerals principally, Aluminum Lime and Rutile. You use them every day, you see them every day. They're part of every day life. We're a decent part of the world market, about 6%. And Titanium Minerals are part of the critical minerals for Europe, UK and the US. So there is a lot of focus on them, but I think we're, you know, as we hear when we come to talk about the market, the market has been through a couple of ups and downs in recent years. To go back to my comment about investing for the long term, we have made material investments in recent years to upgrade our biggest mining plant, WCPA, to move to our biggest ore body, Nataka. Nataka is 70% of our reserves. It's the future of the company. All our mining plants will end up there and we've been working on WCPA to prepare it to work effectively at Nataka. It's taken a little bit longer than we would have liked and it's still a work in progress but Ben Baxter will run you through the good progress we've made there recently and what we expect over the remainder of the year. Our strategy overall, as I said, we want to operate responsibly. We have a 97% Mozambican workforce. We've spent nearly $25 million or over $25 million in working with community over the last 20 years plus. And for our own employees, we're really focused on safety. We had a really good safety performance in the first half. We're over 4 million hours without a lost time incident. Our lowest ever all injuries frequency rate achieved in the first half. So we're very proud of that. It's something that we work on every day. We're very focused on our industry position and operating effectively. We've done a good job so far in 26 in managing and reducing our operating costs and enabling us to run through this point of the price cycle. We do want to invest carefully and manage the cash flows that the asset gives us over the long term effectively. We paused our dividend early this year. It's been an important part of our investment case in previous years and hopefully will be again. But it's a sensible thing to do at this point in the cycle when debt is elevated. And we have made over 300 million in shareholder distributions since 2019. So it is something that we do think about. So just to maybe recap on the first half of the year. I've already talked about our sales performance and we're proud of that. But it has been a difficult market and we are just after a big capex program. we spoke to you all at the start of 2026 we spoke about our priorities for the year and in reality our priorities were to control the things we can to ship as much product as we can to generate as much cash as we can to manage our costs well to maintain financial flexibility and to continue to improve the performance of our assets and to continue our agreements with the government around the implementation I think we've made really good progress on all of those in the first half but there's still things we can hope to achieve in the second half So from shipments, we're on track to achieve our 2036 shipments guidance. We've had some really good successes in the first half with our new Xertai product. You may have seen that we're reporting that in sales now as opposed to accredited cost of sales. And that's because it's an important part of our production this year, but it will be an important part of our revenue mix for many years to come. This is something we trialed in 2024 with customers. There was strong take on it and we sold over 80,000 tons in the first half of the year. We've done a good job on reducing our operating costs, James will run you through that, maybe a little bit more to go there. The one area where I think we would like to see improvements in the second half is our Illuminate production. It's a little bit softer than we would have expected, and we kind of modestly adjusted our guidance to approximately 800,000 pounds, and we are on track to achieve all our guidance at the moment, with a close line needed on second half performance. On the financial side, you know our balance sheet has been an area of focus for us you know our net debt fences around a bit you've seen it increase slightly in the first half but you know cost discipline gave us a 12% reduction in cash operating costs our lenders as ever have been constructive they've assisted us with waivers where required and they've increased our revolving credit simply by 30 million dollars yeah we hope we won't have to use that additional flexibility but it's nice to have it there because you know who knows what happens in the future but look With the strong performance we had in the first half, we were cash flow positive before development topics in the first half. And development topics will be much lower in the second half. So we're managing what we can. We're maximizing our cash flow. We're paying attention to things on a day-to-day basis. And we're positioning ourselves hopefully to recover well when the market recovers. And on the market, we've seen some progress on Zircon in the first half. Strong price increases. And I think we saw a comment this morning in a manner very similar to us. We do expect to see those pricing cases maintained. Hillmines is taking a little bit longer. We don't currently see any near-term recovery, although we would be hoping for next year. But we're having some frequent price increases in recent months and Hillmines generally follows them, albeit with a lag. Just a moment on WCPA. We're making steady progress on the commissioning. Even in July and August, things have improved. and we're working to a consistent to to get us up to to maintain capacity um no fatal flaws in the project but it is taking longer than we'd like and we know it's a focus of investment and finally in this area just to talk a little bit about the implementation agreement um this is an area that you know we've focused a lot of time on um we work very closely with the government to move them we've had we've had really good engagements in the first half there was a little bit of volatility in the first quarter related to the tax authority but that's now concluded we've got no more issues we've had written assurances we continue to operate under the old terms and the negotiations have continued constructively I met the Minister for Mineral Resources in late July to really help the discussion help understand what was important to their key stakeholders which we already understood well but to kind of forge a path towards an agreement and I think what the technical team in Mozambique are doing is just trying to foresee any questions or queries that they might receive during development to approval or consideration of this by the Council of Ministers. We're in that usual part of the process now, the back and forth of comments, so while there's no express timeline, we're very hopeful this will be, the progress that we've achieved will be maintained. As you can probably tell, our language here is warmer than it has been in the past. We certainly feel that So with that, I'll hand over to James McCulloch who will run you through our financial results for the first half of the year. James McCulloch Thank you.

James McCulloch Thanks Tom and good morning everyone. Thanks for joining. In summary, as Tom outlined, we have faced challenges in H1, notably the market and what prices are for our products at the same time as we're wrapping up WCPA and that's taking a little longer anticipated. Those factors are certainly affected in our financial performance. If we start at the top line, average prices perceived were down significantly in the half versus both H1 last year, we were down 26%, and H2 last year, then 31%. So our average price came out at 242 dollars per tonne. That's a reflection both of the as well as changes in our own product mix, and I'll go through that in a little bit more detail shortly. Shipments were strong, as we disclosed back in July, 565,000 tonnes, that's up 13%, but that wasn't sufficient to offset the climate prices, so revenue outcome was 16% versus H1 last year. We did, as Tom mentioned, have a very strong focus on costs in the half and managed to reduce cash operating costs by around $15 million or 12%. I'll focus on that shortly. But notwithstanding that, we still saw the price impact fall through to the EBITDA line and came out at $4 million for EBITDA in the half. Net death went up to $176 million from around 1959 at the end of the year. That, as we've kind of seen over the, well, historically, that's a very lumpy metric. It depends very much on the timing of receipts coming in and cash going out. and we shared in our Q2 update that we had very strong receipts coming in at the beginning of July which sort of largely offset the increase and so the lumpiness is sort of part of the business but not something that's an increase of around $16 million. If you go to the next slide please. So just looking at a summary income statement You can see the revenue line there reflecting the markets in the mix. If we think about pricing for the different products that we sell, film and light pricing for the app went from $286 per ton down to $203 per ton. Zircon from around $1300 per ton down to $1100 per ton. The average price from $326 down to $242. Looking at that product mix, our actual percentage of zircon tons sold stayed flat, or went up a little bit from 3% to 4%, and zircon is our most valuable product, so that's positive. But it's really offset by the increase in concentrates that we have in the year, so that's particularly zirti, which kind of brought us from a concentrate 20% or as a share of actual revenue generated from 6% to 17% and those concentrates sell at a lower price and therefore impact the revenue generation through deterioration of product mix. Zeratai has been a tremendous benefit for us this year. Those sales came out of tailings that we previously hadn't valued so it is very much a positive story but we do see that Notwithstanding the lower cash costs that we had, the cost of sales is up significantly from $150 million to $175 million. That's really reflecting the inventory drawdown that we had in the first half. So we've said all along that shipments are our primary focus and we intend to monetize the inventory that we have accumulated. over the course of last year. That's provided very valuable liquidity for us. It doesn't provide as much EBITDA because we took an NRB adjustment to it at the end of last year. So EBITDA from those sales is largely passed, but it does contribute significantly to up from last year reflecting the increased debt that we have so we're we're up at around 200 million dollars of debt drawn and and all of that sort of well not the finance itself but the rest falls through to lower EBITDA four million and uh all that falls through to the lower profit numbers so a loss after taxes for big four million dollars Just looking at the cost side of things, so the bridge from cost to sales to cash costs. First of all, admin expenses were down by around $3.5 million. That reflects the recognition of Illmanite stock, or the recovery of Illmanite stocks from a sale that we had made to a customer last year, which that customer went into administration. We recovered those stocks last year. and through the admin expenses line. There's also a reduction in head office costs there contributing to that reduction. We'll also see the contribution of inventory in the product stock movements of 20.5 million, so that's really reflecting that inventory drawdown that we had in the first half. And then when we get down to cash costs, you can see that reduction from 124 million to just over 110 million, so taking around $15 million out of the cost base. That's across all categories. So the major contributors there were labor, where our costs reduced by around $5 million, which is over $5 million versus H1 last year. Production overheads also came down by around $5 million. Major contributors to that was equipment samples. reduction in the amount of heavy mobile equipment that we're renting. And power, fuel and chemicals, so we had significant reduction in our diesel consumption and electricity consumption. So notwithstanding the increases in unit prices for those things, particularly diesel, reflecting the US Iran conflict, our overall power, fuel and chemical costs came down to around a half million And unit costs, notwithstanding the reduction in total costs, unit costs were up to $255 per tonne. And that's really the reduction in production overall. So a reduction in tons to absorb those total costs. And that applies both at the total cost line as well as the net demand cost line. and just to note Tom mentioned the DIA and the discussions ongoing there as we've discussed before we're accruing at a rate of two and a half percent on the on the other royalties that we pay under the DIA but we're only actually paying at one percent which are one percent being our So our total cash payments on that 1% royalty was 1.5 million and a half and over and above that we accrued further 2.2 million and that total accrued amount now is 7.9 million. Just looking at cash movements, you can see really that the standard feature here is the contribution of liquidity or of cash from the inventory drawdown. And as I said, given the net reliable value adjustments that we took predominantly to Illmanis at $14 million at the end of 2005, those funds don't generate significant EBITDA, but they do generate significant cash. That cash has been adored through both the higher interest costs but also sustaining capital. So sustaining capital we incurred $12 million of the cash outflow was 7 million dollars and a half leaving us with a cash flow before development capex of 6.1 million and the development capex outflow was 23 million dollars a large chunk of that 12 million dollars related to two spend from 2025 so there was 11 million of new in current effectively within 2026 H1 but a 23 million dollar outflow led to a $17 million change in debt. Looking at the balance sheets, just a few things to note. First of all, a large inventory reduction. So we had a 128,000 ton drawdown of finished products all in. That's a mix. We had more than that, around 140,000, 150,000 tons of humanite drawdown, but we also had The inventory value does include a further NRV adjustment at the end of page 1 of around $5.9 million. That's reflective of the current elevated unit costs that we have, predominantly relating to the WCPA ramp-up, in that the cost reduction is actually above the net realisable value of those products, and so we took a $5.9 million adjustment at the end of the half. The net current assets at 135 million, so a very comfortable position, a strong position on the net current assets side. We test for impairments at the end of each period at the moment and we had headroom of $67 million on that. And the RCF upsides that we did, so as well as the $30 million of upsides that we agreed with the Times, we also agreed a number of waivers and new covenants in the debt package. So new covenants are predominantly balance sheet related, reflecting kind of where we are in the cycle. and all of those problems have been met at the end of that. With that I will pass over to Ben.