Slowing global growth is the biggest risk for Irish mining firm Kenmare, which extracts ilmenite from its large Moma mine in Mozambique.
The mineral is used as a pigment in printing, cosmetics and construction industries. Kenmare also produces zircon, which is used in paints and sands.
Ilmenite production ramped up in the second quarter, with prices surging 36pc, while zircon prices rose 52pc, but that surge is likely to ebb next year.
“The main issue is global GDP growth,” managing director Michael Carvill said at the release of the group’s half-year results yesterday .
“We think there will be something of a reduction in growth in demand – in fact, even a reduction in demand. We see 2023 being more subdued than 2022.”
The International Monetary Fund recently cut its forecast for global growth to 3.2pc this year – and 2.6pc next year – on the back of a slowdown in China. But a Russian-led energy crisis could slash growth to zero in Europe and the US next year, dragging global growth down to 2pc, the IMF said.
But Mr Carvill says there is residual demand for ilmenite as inventories have been run down in the last seven years, despite demand being tied closely to swings in GDP.
“We believe there is no excess inventory in the system and the deficit in supply is becoming apparent to consumers,” he said. “That’s why we’re seeing increased prices.”
Even the sharp slowdown in the Chinese economy, including the real estate sector, has not dented Mr Carvill’s bullishness.
“That is obviously cause for concern. On the other hand, the Chinese government has more levers than pretty well any other government in the world in order to reignite economic activity, and I believe that they are funnelling cash into that real estate industry.”
China was Kenmare’s only major market to see a fall in revenues this year, compared to the first half of 2021, dropping by around $5m to $69.9m. Revenues from the US more than doubled to $23.6m.
Group earnings before interest, tax, depreciation and amortisation (Ebitda) came in at $105.5m (around €104m) for the first six months of 2022, up 28pc on the same time in 2021.
After-tax profit at the Dublin and London-listed company came in at $62.5m, a 30pc increase on 2021.
Half-yearly revenues grew 9pc to $182.1m (around €179m), on a free-on-board basis.
Kenmare announced an interim dividend of 10.98 US cents per share, a 51pc increase on 2021.