Kenmare Resources Kenmare Resources : Q3 Trading Update
October 27 2015 - 2:01AM
UK Regulatory
TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
27 October 2015
Q3 Trading Update
Kenmare Resources plc, which operates the Moma Titanium Minerals Mine
(the "Mine" or "Moma") in Mozambique, today issues, in accordance with
the reporting requirements of the EU Transparency Directive, the
following Q3 Trading Update with respect to the period from 1 July 2015
to 25 October 2015 and covering production and shipments from 1 July
2015 to 30 September 2015 ("Q3" or "Q3 2015").
Overview
-- Record production of Heavy Mineral Concentrate ("HMC") and finished
product, including record ilmenite production in Q3 2015
-- Ore mined in Q3 increased 1% to 9,057,500 tonnes (Q3 2014: 9,000,000
tonnes), despite dry mining being placed on care and maintenance in Q2
2015
-- Production of HMC increased 7% to 339,600 tonnes (Q3 2014: 316,500
tonnes)
-- Ilmenite production in Q3 increased 11% to 244,800 tonnes (Q3 2014:
220,200 tonnes)
-- Zircon production in Q3 decreased 9% to 13,300 tonnes (Q3 2014: 14,600
tonnes), offset by a significant increase in the proportion of the higher
grade of the two primary zircon products following completion of a cost
benefit analysis
-- Total shipments of finished products in Q3 increased 4% to 190,000
tonnes (Q3 2014: 183,200 tonnes)
Statement from Michael Carvill, Managing Director:
"I am pleased to announce record quarterly production of HMC and
ilmenite in Q3 2015. Increased production, in combination with the
progress we have been making to reduce absolute cash operating costs, is
predicted to result in a significant commensurate reduction in our unit
operating costs for H2 2015. I would like to thank all Kenmare employees
for their contributions to improving our production and cost
effectiveness."
Production
Production from the Moma Mine for Q3 2015 was as follows:
Q3-2015 Q3-2014 Variance Q2-2015 Variance
tonnes tonnes % tonnes %
Excavated Ore * 9,057,500 9,000,000 +1% 8,210,400 +10%
Grade* 4.54% 4.29% +6% 4.64% -2%
Production
HMC 339,600 316,500 +7% 310,000 +10%
Ilmenite 244,800 220,200 +11% 195,100 +25%
Zircon 13,300 14,600 -9% 13,400 -1%
of which primary 9,400 12,900 -27% 10,600 -11%
of which secondary 3,900 1,800 +117% 2,800 +39%
Rutile 1,500 1,600 -6% 1,400 +7%
Shipments 190,000 183,200 +4% 202,400 -6%
* Excavated Ore and grade are prior to any floor losses.
Production in Q3 2015 continued to increase as the mine resumed steady
operations following the flood damage to the power lines and industrial
action in H1 2015. Kenmare mined 9,057,500 tonnes of ore at a grade of
4.54% compared with 9,000,000 tonnes of ore at a grade of 4.29% in Q3
2014. Despite dry mining operations having been suspended in Q2 2015 as
a cost reduction measure, tonnes mined remained flat as a result of
improved dredge utilisation. HMC production increased 7% to 339,600
tonnes in Q3 2015 compared with 316,500 tonnes in Q3 2014, principally
as a result of increased grade and dredger throughputs.
Production of ilmenite increased 11% to 244,800 tonnes in Q3 2015,
compared with 220,200 tonnes in Q3 2014. Previously stockpiled magnetic
concentrate was used to supplement production of final ilmenite product.
Zircon production decreased 9% to 13,300 tonnes in Q3 2015, compared
with 14,600 tonnes in Q3 2014. This was partially due to some
non-magnetic stockpiles that had been processed in Q3 2014. A series of
three zircon improvement programmes are currently underway and are
expected to show benefits as they are commissioned between now and Q1
2016. A recently completed project is expected to result in increased
production of secondary zircon as a consequence of zircon recovery from
previous reject streams. Separately, following cost and benefit analysis,
another project has resulted in a reduction of total primary zircon
volume in favour of a large increase in the proportion of the higher
grade of the two primary zircon products.
Sales of total finished products were up 4% to 190,000 tonnes in Q3 2015
compared to 183,200 tonnes in Q3 2014. Sales in Q3 2015 comprised
178,900 tonnes of ilmenite, 10,000 tonnes of zircon and 1,100 of rutile.
Closing stock of finished products at 30 September 2015 was 228,700
tonnes (30 June 2015: 158,400 tonnes).
Power
Power reliability and stability continued to improve in Q3 2015, helping
to increase the utilisation levels at the mine, which contributed to
higher production volumes in the quarter. All permanent repairs to the
previously damaged transmission lines are expected to be completed by
Electricidade de Moçambique ("EdM") before the start of the rainy
season later this year.
Separately, EdM has been investing in the power line infrastructure to
increase capacity on the line. These projects continued to make progress
during the quarter, with all three phases planned for delivery between
now and early 2016. These projects equate to a 50% increase in the power
line capacity and will help to provide a more stable power supply to the
mine with additional capacity to allow for increased power needs in
northern Mozambique.
Market
Market conditions for titanium feedstocks have remained challenging in
Q3 2015. Overcapacity in global pigment markets has driven further
competition for market share and consequently reduced pricing. All
evidence suggests that Chinese domestic ilmenite production continues to
decline with reduced iron ore mining economics as a consequence of the
falling iron ore price. This has led to a drawdown of ilmenite
inventories in China, further evidenced by a reduction in port
inventories. However, while the volume of Chinese titanium feedstock
imports has been increasing in recent months, this market dynamic has
yet to result in an improvement for imported ilmenite prices.
There was some moderate softening of zircon prices through the quarter
due to positioning for sales volumes by some producers. Offtake support
from our customers remains strong and we continue to sell all of our
zircon.
Finance
As previously announced, on 24 July 2015 the conditions precedent to the
April 2015 Amendment were satisfied and the Group drew down US$10.0
million from the US$30.0 million working capital element of the Super
Senior Facility on 11 August 2015. The Company remains in discussions
with Lenders in relation to required waivers to the April 2015 Amendment
in the context of planned further disbursements.
During H1 2015, total cash operating costs reduced by 17% compared with
H1 2014 and the ongoing active cost reduction programme has continued
through H2 2015. In addition to the significant progress on capital and
operating cost control achieved to date by the Moma management team, an
external consultant has also now been appointed to support and extend
this ongoing cost control and efficiency programme.
For further information, please contact:
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 / Anna Michniewicz
Tel: +44 207 466 5000
This Q3 Trading Update constitutes an Interim Management Statement for
the purposes of regulations applicable to companies listed in Ireland
and contains certain forward looking statements which involve risk and
uncertainty because they relate to events and depend on circumstances
that occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from those
expressed or implied by these forward looking statements.
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
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