Member Info for Caposoka

I can understand an opinion that ZR may have peaked if you have assessed global events and simply taken a view but when informed that the industry leader is in fact increasing the reference by 12% from next month, I do not think the response should be that the leader is behind the curve and playing catch up.

ILU have been increasing the reference price every 6 months for the past 2 years at an annualised rate exceeding 25%. They are acting as a balancing supplier to smooth out supply deficits to prevent unsustainable price rises. Other market players are following their lead and refer to this in respective 6 monthly updates.

Due to risk of substitution / thrifting increases will not increase indefinitely but even levelling out a higher level is good news for KMR's profitability and should be a cause of celebration not angst. There are other simpler things to be grumpy about KMR if that is your desired state of mind.

basis for thinking zircon has peaked? …. I have seen commentary that thrifting may occur if prices rise much higher but do you have anything more substantial? ILU have already announced increase of USD 170 / tonne to their ZRP from 1 October to USD 1,580 / tonne

I don't see a cash sweep any time soon and would expect a much slower fall in net debt in H2.

25M reduction was achieved in H1 but H2 sales volumes will fall and capex is H2 weighted - Y18 sustaining capex 22M of which 14M in H2 and Y18 development capex 19M of which 14M in H2.

Also DFS est of WCP C of 45M to be spread over next 18 months.

Notwithstanding, profitability and ultimately cash generation will improve as WCP B upgrade kicks in.

Does anyone have any info on the time/place of the CMD and any arrangements involved.
Only info I can find at present is that it will be in London on 16th Oct.

252 is last automatic trade. All trades this morning have been ordinary trades.

Also, surprised by lack of commentary on size in increase in cost of sales of approx. 19M vs H1/17 - due to payroll, power, fuel, FX...

In AGM presentation (25 May) - Namalope Supplemental DFS est. was 30M and explanation that higher capex WCP C (100m) not needed. Today, renamed as WCP C with DFS est of 45M to be spread over next 18 months, so a chunky increase in capex there.

Sustaining capex for Y18 of 22M of which 14M in H2.

Development capex for Y18 of 19M of which 14M in H2.

Also, sales in H2 will fall as H1 record shipments off back of selling down stocks. Cash improvement will be markedly less in H2 and stocks probably converted to cash in H1, to have cash in bank prior to starting capex programmes.

All in all good numbers but in mid of high capex phase now so still think dividends are far off (notwithstanding other issues such as shareholder resolutions, court approvals etc). My thoughts on why SP still has little momentum despite ever improving financials.

Agree with these thoughts. Also think the projects of Namalope Supplmental and then the WCP re-locations will be enough to keep management occupied for the next few years. Apart from the engineering challenges the disruptive elements need to be well managed. Also looking at the age of the main characters, would be surprised if they wanted major new challenges on the other side of the world at that stage in their careers.

Matt, agree also but don't forget the 2:1 split in primary / secondary and that secondary sells for approx. 30% of primary. Would get you closer to 80M and 5M per 100/ton increase. All good.

Aug '16 was at 235, for a couple of months in the summer '17 pre-results, was at 255, today at 225. Get the point that we can all be disappointed in the lack of SP improvement but quoting one-off spikes in between at 350 for a basis of comparison doesn't do anyone any favours. Also ILU is today at 9.37 not 11.19. Simply makes you look daft.

Equally to expect sub £2 based on the above is equally fanciful. The large amounts of cash being produced is under the radar due to capex on dry mining equipment, WCP B upgrade etc etc. Eventually the truth will out.

I guess if the ore % is 5-6 times more than say KMR they can make it work, even part time. I keep a running interest due to the potential but see many hurdles to overcome, some that will not be foreseen. Will make a speculative punt but after more tangible progress. Agree with Supaman - KMR has its hands full so a non starter - but maybe a reinvestment of future profits from KMR dealings !!?

Supaman, think you can either work out the merits of investing in Kenmare long term and then whichever way you decide, stick to your guns regardless of transient SP movements. Alternatively, speculate. Whatever you prefer. Last August, pre-results the SP was 255. I brought a load and had a nice 35% paper profit 5 weeks later. Now they have a paper loss of 10%. I don't mind. One of many purchases made as my decision is to be long term.

To answer your point, have another look at Hannan's paper from July - posted and discussed here previously. Page 3 sets out their 470p price target, comprising current operations 220p, WCP B upgrade 35p, 2018 End cash 12p, Namalope Supplemental (2019) 42p, WCP B move to Pilivili (2020) 159p. There is also the element of building the future into the present SP but it is not a bad indicator of the milestones to be ticked off to release/generate value. WCP B upgrade and monazite is now just around the corner, so who knows, perhaps pre-results is a good opportunity.

JTD,

TLOU have been clear on what they are going for and their strategy. From reading your posts, it looks like you are unaware of some of the company presentations or podcasts etc. Have a look at the company presentation from June, pages 11 and 12 in particular, http://tlouenergy.com/wp-content/uploads/2018/06/180605-Corporate-Presentation-Final.pdf

Also, all cash generated from operations in H1 was spent either in running costs or capex.

Net debt only fell by 25M in H1 as they sold down their existing stock by 101kt. This cannot be repeated in H2 as they only have 129.6kt remaining and need some form of minimum stock for running the business.

15p dividend costs 16.5M. This is simply not available until the capex programme runs it's course and/or revenue increases and even then, some cash would be retained in the business. When dividends start, this is why a ramp up in payments is more likely.

Large miners typically pay 5-6%, with a strong balance sheet, mixed stream of operations to support a sustainable dividend. KMR is a one trick pony in a remote part of the world with a product profile that can blow hot or cold. A sustainable dividend is more likely to be at a lower level.

Your 'min' 15p equates to approx. 7% at the current SP. Yes, the SP would rise so the yield would fall back to a more reasonable level but it is unrealistic to expect them to reach there in one step. Even a company such as Lloyds took several periods to reinstate their dividend after 2007 and then only did so in gradual increments over further periods. KMR would draw criticism is they had to cut it immediately after introducing a payout.

Hannan's Research Notes from April and July have FCF at ~50M for the year. (They downgraded previous est. from Oct '17 of ~80M due to capex, sales prices etc).

40% of this would get close to 20p which is unlikely at the time of starting payments, still being in a debt repayment / capex phase and viz-a-viz current SP. At this stage, I would be happy with anything more than nil, something symbolic simply to unblock the path.

presume you still hold your shares in them.... if so, congratulations for today.

Possible they will provide an update around time of H1 results in Aug.

No you didn't miss it. I had to do the same. Also happy to have my posts picked over - I'm sure they probably need it!

BF makes a good point that the reduction in stock could be KMR stepping in to fill a RBM created gap and/or it was due to having supply commitments in advance and then having unplanned stoppages to production. Simply put H1 sales exceeded guided half yearly production so must ultimately fall back to a more sustainable level. In H2 cash generation will continue but not quite as strongly unless capex falls back.

Another item to throw in. The WCP B upgrade of 20% is a nice headline (and a good investment) but WCP B is presently 2,000tph, WCP A is 3,500 tph so the upgrade (400tph) corresponds to 'only' a 7.2% increase. I say only as the Y16 grade averaged 5.06% and Y17 averaged 4.46% ie an 11% fall so if grades drop in the future, the upgrade (and other supplementary mining) will simply to offset the drop. I don't expect a similar fall in Y18 (Q1 was 4.51% and Q2 4.68%, a positive that has gone under the radar of most commentary) but think it will trend down so hence the further capex of WCP C to increase production overall by 20% to reach the target of 1.3Mtp.a.

All true, all good but remember 25M was off the back of selling down stock dramatically (100kt+)
Not sure they can repeat that trick in H2 to reach your 35M.