Kenmare Resources : Kenmare Resources : Trading Update
Kenmare Resources plc ("Kenmare" or "the Company")
30 January, 2013
o2012 production: 772,300 tonnes HMC; 574,400 tonnes ilmenite and 46,900
o680,800 tonnes of finished products shipped in 2012
o40% increase in revenue to US$234.5 million (unaudited) in 2012 from
US$167.5 million in 2011
oGlobal titanium feedstock inventories are depleting and demand outlook
oExpansion commissioning underway
Kenmare Resources plc provides the following update with respect to
production, market conditions, and commissioning of the expansion at the Moma
Total production of Heavy Mineral Concentrate ("HMC") for 2012 was 772,300
tonnes. Finished product volumes for the year were: 574,500 tonnes of
ilmenite and 46,900 tonnes of zircon (including 20,000 tonnes of a secondary
zircon product). 680,800 tonnes of finished products were shipped in 2012,
compared with 730,400 tonnes in 2011. These shipments generated revenues of
US$234.5 million (unaudited), an increase of 40% from US$167.5 million during
Mining operations produced 157,000 tonnes of HMC during the fourth quarter,
compared with 229,100 tonnes in the third quarter. Kenmare's market update
dated 28 November 2012 highlighted the likelihood of reduced
quarter-over-quarter production due to a combination of electricity supply
disruptions and geotechnical challenges associated with elevating the dredge
pond from the Namalope Flats zone to a dunal plateau. Once on the dunal
plateau, Wet Concentrator Plant A ("WCP A") will operate there for the next 12
years until it moves to the Nataka ore zone. Supplemental dry mining improved
delivery of ore to the WCP A, but electrical supply volatility and
geotechnical challenges were such that production was reduced. In the fourth
quarter, the Mineral Separation Plant ("MSP") produced 123,600 tonnes of
ilmenite and 10,600 tonnes of zircon, which represents a reduction in MSP
output from the previous quarter due to lower tonnes of available HMC.
Shipments of finished products in the fourth quarter were 204,000 tonnes, up
from 155,300 tonnes shipped in the third quarter, representing the second
highest quarter on record since operations commenced.
The transition to the dunal plateau will be substantially completed by the end
of the first quarter 2013. Kenmare has been working with Electricidade de
Moçambique ("EdM") to improve the stability of the electricity supply and is
presently completely refurbishing a Static Var Compensator (a voltage
stabilisation system) on the national electrical grid at EdM's Alto Molocue
substation. Kenmare is also installing capacitor banks at Alto Molocue and at
the provincial capital, Nampula. These measures will better insulate the mine
from power disruptions occurring on different transmission lines within the
national grid system. In addition to these steps, Kenmare is installing
another voltage stabilisation system at the mine site substation, which will
reduce the effect of power surges or dips that get through the other
protection devices on EdM's transmission system.
Half-yearly production and shipments during 2012 are summarised as follows:
Heavy Mineral Concentrate (HMC) 386,100 386,200
Ilmenite 297,700 276,700
Zircon 23,300* 23,600**
Shipments 359,300 321,500
* Includes 8,400 tonnes secondary zircon product
** Includes 11,100 tonnes secondary zircon product
Kenmare is committed to a safe and healthy work environment for all
personnel. The health and safety record for the operation remains positive,
with the current lost time injury frequency rate at 0.33, compared to an
industry average of 0.39. This is indicative of the continuous collective
effort of all employees in the strong promotion of health and safety at all
levels of the Mine organisation.
Kenmare has commenced the commissioning phase of its 50% expansion of the
facilities at Moma. Facilities include a new Wet High Intensity Magnetic
Separation ("WHIMS") Plant, a new Auxiliary Ilmenite Plant, a brownfields
enhancement of the existing non-magnetic circuits in the MSP, a new dredge and
a new Wet Concentrator Plant ("WCP B") located in a second dredge pond. Early
stage commissioning is underway in the Auxiliary Ilmenite Plant, the WHIMS
Plant and the dredge. Final preparations are underway for the floating of the
WCP B and dredge. Installation of remaining piping will continue concurrently
with various commissioning stages culminating in hot commissioning at the end
of the first quarter. The production ramp-up will follow, leading to full
production later this year.
2012 was a year of contrasting halves for the titanium feedstock industry.
During the first half, demand for titanium feedstocks was very strong and
prices grew steadily. However, as the painting season in the second quarter
was weaker than expected, pigment producers felt the impact of holding excess
finished goods inventories. This was addressed with a curtailment of
production by most pigment producers that commenced mid-year, which led to
reduced demand for feedstocks from the pigment producers and some downward
pricing pressure. High grade feedstocks in the second half of 2012 were
impacted more acutely as pigment producers re-configured their feedstock
blends to utilise a higher percentage of lower cost feedstocks such as slag
and ilmenite. Despite overall weaker feedstock demand from pigment producers,
demand for ilmenite was more resilient than feedstocks in general, and Kenmare
was able to sell more than it produced in 2012 at significantly higher prices
than in 2011. Year-end inventories were drawn down to low levels as a result.
The titanium feedstock inventory destocking process is still underway as
pigment producers continue to deplete inventories to more normal levels.
However, underlying demand, which is closely correlated to world GDP growth,
is expected to improve as global economic conditions strengthen during 2013.
Given improvements in the real estate market and automotive manufacturing in
the United States and the stabilisation of economic activity in China, Kenmare
expects stronger market conditions to emerge with an improving pricing outlook
for feedstocks during the course of this year.
Global zircon market conditions were challenging during 2012. Consumption was
weak due to significantly reduced demand primarily from the ceramics sector.
This was driven by the slowdown in construction activity in China and weak
economic conditions in Europe. Additionally, zircon consumers started 2012
with high inventory levels on the expectation of continued supply shortages.
However, faced with slower demand for their products, zircon consumers took a
cautious approach to buying as 2012 progressed. Prices held up well initially
but reduced sharply during the fourth quarter. Whilst this trend has continued
into 2013, there are some tentative indications that prices may be close to
Kenmare, with its relatively small production volume, was able to sell all of
its zircon during 2012 at the prevailing market price. With a stronger
economic outlook expected in China during 2013 and completion of the
de-stocking cycle in Europe, zircon demand growth is expected to resume in
2013. The readjustment of market prices that has taken place should help to
reverse the downward trend in consumption seen over the past 12 to 15 months.
The increase in revenue to US$234.5 million (unaudited) in 2012 from US$167.5
million in 2011 was principally a result of increased ilmenite prices.
Compared with the previous year, average ilmenite prices realised were 98%
higher in 2012 and were up 17% in the second half of 2012 compared with the
first half of the year. Average prices for primary zircon products increased
in 2012 by 9% compared with 2011, but dropped by 32% in the second half of
2012 compared with the first half year. Product volumes shipped in 2012
declined by 7% compared with 2011, resulting from reduced production levels.
There has been some increase in operating costs, particularly in the second
half of 2012 as the mine pond was making the complex transition up to the
dunal plateau, and cost control remains a key priority for management.
As the expansion completes, Kenmare is engaging with the remaining contractors
in order to manage the close-out of the contracts and related costs. Given the
extension of the time required to complete the expansion as previously
advised, and the attendant impact on costs, Kenmare has successfully concluded
an agreement with its lending banks to extend the period during which
operating cashflow generated by the Moma Mine can be used to fund the
expansion costs from 15 December 2012 to 30 June 2013. This agreement also
provides Kenmare the flexibility to raise up to US$40 million of additional
debt. Loan payments will continue to be made in accordance with obligations
under the finance documents. At 31 December 2012, the net debt position was
For further information, please contact:
Kenmare Resources plc.
Michael Carvill, Managing
Tel: +353 1 671
Mob: + 353 87 674
Tony McCluskey, Financial Director
Tel: +353 1 671 0411
Mob: + 353 87 674 0346
Virginia Skroski, Investor Relations Manager
Tel: +353 1 671
Mob: + 353 87 739
Tel: +353 1 498
Mob: +353 87 690
Jos Simson / Mike Bartlett
Tel: +44 207 920 3150
Mob: +44 7753 949 108
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Source: Kenmare Resources via Thomson Reuters ONE
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