Kenmare Resources (LON:KMR) reported a “good solid quarter” for shipments in its Q1 2026 production update, with Managing Director Tom Hickey emphasizing that shipping volumes are the company’s main operational priority for 2026 as it works to manage cash flow and reduce elevated inventories.
Hickey said the company remains “well on track” for its 1.1 million tonne shipment target for the year, even as Q1 production was “a little bit softer,” partly due to time spent completing and debottlenecking the Wet Concentrator Plant A (WCPA) upgrade project. He added that Kenmare is still on track for annual guidance.
Operations: Lower output, focus on debottlenecking and inventory drawdown
On production, Baxter said heavy mineral concentrate (HMC) output was down 30% year-on-year, citing lower volumes during WCPA debottlenecking work. He also noted grades have started to fall as WCPA finishes mining at Namalope and prepares for the transition to Nataka, and that dry mining was reduced versus the prior-year quarter. Baxter said the company expects grades and throughputs to improve through the rest of the current quarter as WCPA debottlenecking continues.
Finished product output (ilmenite, zircon and rutile) also declined, which Baxter attributed to inefficiencies in the mineral separation plant (MSP), including lower recoveries linked to variable feed as WCPA work progressed. He also said the company decided to reprocess a former tailings stockpile containing historical heavy minerals, but fluctuating feed grades made it difficult to optimize plant settings, increasing spillage. Baxter said the spillage was retained rather than sent to tailings and will be retreated during Q2 to “catch up on some of those losses.”
On shipments, Baxter said volumes were 10% lower year-on-year, reflecting a balancing of demand and slower loading of ZrTi early in the year. However, he said Kenmare succeeded in drawing down finished product stocks by about 99,000 tonnes, consistent with a “value over volume” approach.
WCPA upgrade transitions from project to operations
Baxter said the WCPA upgrade is now “essentially complete” and has transitioned to operations, with major works finished and the bulk of capital spend behind the company. While rectifications have been required, he said there are “no fatal flaws” and that the focus is now on achieving consistent performance at nameplate capacity.
He outlined several improvements made during Q1, including:
- Software changes and cooling benches implemented to address dredge winch brake issues, improving equipment utilization.
- Tailings pump gearbox upgrades to improve tailings throughput and remove a bottleneck.
- Stability improvements around slimes densification and the tailings storage facility, following issues in Q4.
- Rectification of a walkway turnover caused by instability under additional material loads.
Baxter added that further debottlenecking work is progressing into Q2, including improved dredge feed delivery (with one dredge improved and the second under rectification) and low-cost additional equipment to increase flow from dredge to feed preparation and desliming. He said Kenmare expects debottlenecking to be completed “over the coming weeks,” enabling nameplate capacity.
Markets: Ilmenite remains weak; zircon prices begin to rise
Head of Sales and Marketing Cillian Murphy said Q1 was “a bit softer” for titanium feedstocks as inventory overhang continued to weigh on ilmenite pricing. Murphy said Kenmare was additionally impacted by cancellations and postponements from customers affected by conflict in the Middle East, forcing the company into spot sales at short notice, which “probably harmed prices further.”
Murphy said the Middle East conflict has not yet reduced underlying demand, but higher sulfur and sulfuric acid prices are supporting chloride pigment production. He cited “record chloride pigment production” and “record titanium metal production” in China in Q1 as signs of recovering demand. Combined with supply curtailments in the second half of last year and unplanned disruptions into the first half of this year, Murphy said the industry is starting to work through inventories and move toward a tighter market, which is being reflected in Kenmare’s Q2 order book.
For zircon, Murphy described a “brighter” outlook. He said supply curtailments have been heavier on the zircon side while demand has remained relatively steady, supporting the market. Hickey added that Kenmare began to book higher zircon prices in Q2 2026, after stabilization in Q4 2025, and said commentators were more optimistic about prices through 2026 and beyond.
Murphy also highlighted the ramp-up of Kenmare’s newer ZrTi product, calling Q1 sales growth “really encouraging” and saying demand appears robust through Q2 and the rest of the year.
Customer recovery and Mozambique Implementation Agreement talks
Hickey provided an update on a customer in financial distress first discussed in Q3 2025. He said one of the customer’s plants has been sold and Kenmare has recovered $4.6 million of $9.3 million outstanding. The second plant is “very well advanced” in a sale process, and Kenmare is engaged with potential acquirers, with Hickey saying the company is hopeful of “strong recovery” and expects to recover a “significant proportion” of the remaining balance.
Hickey also addressed the ongoing renegotiation of the Implementation Agreement in Mozambique, which covers processing and export activities but “doesn’t impact on our mining at all.” He said a late-February meeting with government officials and presidential advisers “re-energized the process,” and while a target to conclude by the end of March was ambitious, both sides have remained constructively engaged. He stressed there is “no mandated timeline” and Kenmare continues to operate under legacy terms while negotiations proceed.
Fuel exposure and cost considerations
In the Q&A, management discussed diesel supply and cost exposure. Baxter said Kenmare has a long-term agreement with Mozambique’s state fuel provider, Petromoc, and that all fuel imports come through Petromoc. He said the site has about three months of diesel supply in its fuel farm and a further three months reserved in Nacala Port.
Chief Financial Officer James McCullough said Kenmare consumed around 18 million liters of diesel last year at “just short of $1 per liter,” and expects consumption to be lower this year—around 15 million liters—due to less dry mining. He said diesel represented roughly 7% to 8% of the operating cash cost base last year, adding that prices are expected to rise but the extent remains unclear.
On potential electrification, Baxter said feasibility studies have been completed on using electricity to pre-heat air for diesel-driven dryers, which could reduce diesel consumption and emissions. However, he said the project has been non-economic and is not being pursued currently given a focus on conserving liquidity.
Kenmare said its next formal update is expected at its AGM in early May.
