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Kenmare Resources : Trading & Debt Update

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Trading & Debt Update

Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global producers of titanium minerals and zircon, which operates the Moma Titanium Minerals Mine (the "Mine" or "Moma") in northern Mozambique, is pleased to provide a trading and debt update, including for the fourth quarter and year ending 31 December 2014. 

Overview 

  • Ore mined in 2014 increased 42% to 34,120,000 tonnes (2013: 23,950,000 tonnes)
  • Heavy Mineral Concentrate ("HMC") production increased 13% to 1,287,300 tonnes (2013: 1,137,200 tonnes)
  • Ilmenite production increased 19% to 854,600 tonnes (2013: 720,100 tonnes), in addition 60,600 tonnes of magnetic concentrate was produced for later processing into ilmenite, to align production with demand
  • Zircon production increased 62% to 50,800 tonnes (2013: 31,400 tonnes), including primary zircon up 107% to 43,600 tonnes (2013: 21,100 tonnes)
  • Total shipments of finished products increased 18% to 800,000 tonnes (2013: 677,900 tonnes)
  • Project lender budget deadline extended to 28 February 2015 with a financing amendment expected to be completed in the coming weeks 

Statement from Michael Carvill, Managing Director: 

"I'm pleased to see production and shipments growth in 2014, notwithstanding challenging commodity markets. We expect further production growth this year as the mine benefits from upgrade work completed in H2 2014. I am encouraged by the increase in sales volumes in Q4 and look forward to building on this in 2015." 

Production

Production from the Moma Mine in Q4 2014 and FY-2014 was as follows: 

  Q4-2014 Q3-2014 Variance FY-2014 FY-2013 Variance
tonnes tonnes % tonnes tonnes %
Excavated Ore * 8,820,000 9,000,000 -2% 34,120,000 23,950,000 42%
Grade* 5.24% 4.29% 22%  4.55% 5.90% -23%
Production            
 HMC 366,600 316,500 16% 1,287,300 1,137,200 13%
 Ilmenite 188,800 220,200 -14% 854,600 720,100 19%
 Zircon 14,800 14,600 1% 50,800 31,400 62%
  of which primary 12,500 12,900 -3% 43,600 21,100 107%
  of which secondary 2,300 1,800 28% 7,200 10,300 -30%
Rutile 1,700 1,600 6% 6,100 4,000 53%
Shipments 217,800 183,200 19% 800,000 677,900 18%

 * Excavated Ore and grade prior to any floor losses. 

During 2014, Kenmare mined 34,120,000 tonnes of ore at an average grade of 4.55% and produced 1,287,300 tonnes of HMC.  Finished product volumes for the year included 854,600 tonnes of ilmenite and 50,800 tonnes of zircon (including 7,200 tonnes of a lower grade secondary zircon product). During the fourth quarter of 2014, Kenmare mined 8,820,000 tonnes of ore at a grade of 5.24% and produced 366,600 tonnes of HMC, compared with 316,500 tonnes of HMC in the third the quarter of 2014. Increased grades and completed upgrade work to de-bottleneck WCP B (Wet Concentrator Plant B) in Q3 2014 contributed to the additional HMC produced in Q4.               

Ilmenite production for the year was 854,600 tonnes (2013: 720,100 tonnes). In response to market conditions, ilmenite production was curtailed in H2 2014 by temporarily modifying our production strategy by limiting the output of sulphate grade ilmenite while maximising the volume of zircon and rutile produced. As a result, the intermediate magnetic concentrate stockpile was built to 60,600 tonnes. This stockpile is more suitable for outside storage than final product and is available for future processing into ilmenite.   

Total zircon production for the year increased 62% to 50,800 tonnes (2013: 31,400 tonnes). Importantly, there was an increase in average zircon quality and consequently average revenue per tonne across zircon products: primary zircon increased by 107% to 43,600 tonnes (2013: 21,100 tonnes), while secondary zircon decreased by 30% to 7,200 tonnes (2013: 10,300 tonnes). 

Rutile production for the year was 6,100 tonnes (2013: 4,000 tonnes), an increase of 56%. 

During 2014, Kenmare shipped 800,000 tonnes of finished products, up 18% (2013: 677,900 tonnes), comprised of 742,400 tonnes of ilmenite, 50,000 tonnes of zircon (including 7,800 tonnes of secondary grade zircon) and 7,700 tonnes of rutile.  Sales of total finished products were up 19% to 217,500 tonnes in Q4 2014 (Q3 2014: 183,200 tonnes). Sales comprised 194,000 tonnes of ilmenite, 20,400 tonnes of zircon (17,500 primary and 2,900 secondary), and 3,100 of tonnes rutile. 

Closing stock of HMC at end of 2014 was 29,600 tonnes, compared with 72,500 tonnes at the start of the year.  Closing stock of intermediate magnetic concentrate at the end of 2014 was 60,600. Closing stock of finished products at the end of 2014 was 219,500 tonnes (2013: 107,100 tonnes), of which 70,300 tonnes are stored outside under cover, some of the stocks may require reprocessing prior to sale. 

Kenmare has continued to make progress on its cost reduction programme at Moma. The programme will continue throughout 2015 under newly appointed Chief Operations Officer, Ben Baxter. 

Power 

Grid power stability was as expected during Q4 2014. Power supply to the MSP was switched from the grid to diesel generated power on 10 December 2014; both the generators and MSP have operated on a stable and consistent basis since then. 

As has been widely reported, recent flooding in Mozambique has caused a prolonged grid power outage in northern Mozambique. Kenmare expects that grid power will be restored in early February 2015.  In the meantime, the Mine continues to process HMC stocks, magnetic and non-magnetic concentrate stocks, and to export product using power supplied from the generators. Given the continued operation of the MSP and stocks of intermediate and finished product, Kenmare does not expect the grid power outage to have a significant impact on the sales plan for 2015. 

Market 

Titanium feedstock demand was weak in Q4 2014. While some pricing stability returned to the high grade feedstock market, ilmenite prices were led down by soft Chinese market conditions. 

Increasing domestic Chinese and international ilmenite production and delayed offtake from pigment and titanium slag plants contributed to soft Chinese market conditions. Therefore, Kenmare continued to curtail shipments to China during the period. Some market weakness is likely to persist in the run up to Lunar New Year as buying activity remains low and industry activity winds down for the holiday period. 

However, pigment demand continues to grow in China, fuelled by both domestic and export markets. Kenmare expects demand for imported ilmenite into China to increase as the year progresses. New chloride slag plants are being commissioned in China (and the Middle East) and should lead to increased demand for suitable ilmenite to be imported as domestically produced ilmenite in China is unsuitable for chloride slag. In addition, it is expected that domestic Chinese ilmenite production may decrease due to the curtailment of uneconomic iron ore production, the main source of domestic Chinese ilmenite production. 

The US economy continues to recover strongly, with unemployment falling as construction and industrial activity improves. Although growth rates in China are moderating, personal income levels continue to grow, fuelling increased discretionary spending as the Government steers the economy to a more consumer driven model which should help increase demand for late cycle commodities such as TiO2 pigment. Declining oil prices should also provide a boost to discretionary spending globally, which should manifest itself in higher pigment demand. 

Zircon pricing remained stable through the quarter. Offtake support from our customers remains strong and we continue to sell all of our zircon. 

Debt 

Further to the announcements of 10 December and 8 January, the Company is pleased to announce that it has agreed with its project lenders to extend the date for delivery of a budget for 2015 by one month to 28 February 2015. Kenmare, the project lenders and Absa Bank Limited, a member of Barclays, are in constructive discussions with a view to finalising the terms of a financing amendment, which Kenmare expects to be completed in the coming weeks. 

At 31 December 2014, bank loans amounted to US$337.3 million (2013: US$355.2 million) and cash and cash equivalents were US$21.8 million (2013: US$67.6 million). 

Kenmare Resources plc

Michael Carvill, Managing Director    
Tel: +353 1 671 0411
Mob: + 353 87 674 0110                                                       

Tony McCluskey, Financial Director
Tel: +353 1 671 0411 
Mob: + 353 87 674 0346

Jeremy Dibb, Corporate Development and Investor Relations Manager
Tel: +353 1 671 0411
Mob: + 353 87 943 0367 

Murray Consultants
Joe Heron
Tel: +353 1 498 0300
Mob: +353 87 690 9735 

Buchanan
Bobby Morse /Gordon Poole
Tel: +44 207 466 5000

This announcement contains some forward-looking statements that represent Kenmare's expectations for its business, based on current expectations about future events, which by their nature involve risks and uncertainties. Kenmare believes that its expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve risk and uncertainty, which are in some cases beyond Kenmare's control, actual results or performance may differ materially from those expressed or implied by such forward-looking information.

The Directors of Kenmare accept responsibility for the information contained in this announcement. To the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information. 

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise. The distribution of this announcement in jurisdictions outside Ireland or the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction. 

A person interested in 1% or more of any class of relevant securities of Kenmare or Iluka may have disclosure obligations under Rule 8.3 of the Irish Takeover Rules, effective from 26 June 2014, the date of the commencement of the offer period for Kenmare under the Irish Takeover Rules.




This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Kenmare Resources via Globenewswire

HUG#1890511

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