TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
29 April 2016
Q1 2016 Trading Update & 2016 Guidance
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 update for the first quarter ending 31
March 2016.
Overview
-- Ore mined in Q1 2016 increased 120% to 7,061,000 tonnes (Q1 2015:
3,211,000 tonnes), mainly due to improved power supply quality and
consistency in 2016
-- Heavy Mineral Concentrate ("HMC") production in Q1 2016 increased 90% in
to 274,800 tonnes (Q1 2015: 144,500 tonnes)
-- Ilmenite production increased 39% to 185,000 tonnes (Q1 2015: 132,900
tonnes)
-- Zircon production increased 12% to 11,600 tonnes (Q1 2015: 10,400 tonnes)
-- Total shipments of finished products were down 37% at 132,700 tonnes (Q1
2015: 209,600 tonnes) as the delayed arrival of a vessel and inclement
weather at the end of March delayed the departure of two large ilmenite
shipments
-- Production guidance of 950,000 tonnes of ilmenite production in 2016
(+/- 10%), up 24% on achieved 2015 production
-- Vastly improved power quality and consistency since the December 2015
installation of additional power transmission infrastructure by
Electricidade de Moçambique ("EdM")
-- Update on proposed deleveraging announced separately this morning
Statement from Michael Carvill, Managing Director:
"A proposed capital restructuring was announced separately this morning.
A successful implementation of this plan will reduce outstanding debt to
not more than US$100m, provide a significant working capital buffer and
a stable and sustainable platform for the Group pending a recovery in
mineral sands prices. In addition, costs have been substantially reduced
and the electricity supply, which has materially impeded production for
the last several years, has been dramatically improved.
Our analysis shows that the market for merchant sulphate ilmenite (our
largest product) is in global supply deficit and inventories appear to
be declining. This view is evidenced by the price increases we have been
seeing in the Chinese ilmenite spot market over recent months and, we
believe, augurs well for the outlook."
Results conference call
A conference call for analysts will be held at 9:30am GMT on 29 April
2016. Participant dial-in numbers are as follows:
UK: 08082 370 030 or 020 31 394 830
Ireland: 01 696 8154 or 1800 936 842
Rest of the world: +44 (0) 203 139 4830
Participant ID# 49796939#
Production
Production from the Moma Mine in Q1 2016 was as follows:
Q1-2016 Q4-2015 Variance Q1-2015 Variance
tonnes tonnes % tonnes %
Excavated Ore * 7,061,000 7,053,000 0% 3,211,000 120%
Grade* 4.32% 4.93% -12% 5.85% -26%
Production
HMC 274,800 306,700 -10% 144,500 90%
Ilmenite 185,000 190,700 -3% 132,900 39%
Zircon 11,600 14,500 -20% 10,400 12%
of which primary 8,300 10,100 -18% 9,200 -10%
of which secondary 3,300 4,500 -27% 1,300 154%
Rutile 1,100 1,700 -35% 1,400 -21%
Shipments 132,700 198,300 -33% 209,600 -37%
* Excavated Ore and grade prior to any floor losses.
During Q1 2016, Kenmare mined 7,061,000 tonnes of ore at an average
grade of 4.32% and produced 274,800 tonnes of HMC. Finished product
volumes for the period included 185,000 tonnes of ilmenite and 11,600
tonnes of zircon (including 3,300 tonnes of a lower grade secondary
zircon product).
As a result of the upgrades to the power lines by EdM, operating time
benefitted from increased power stability and consistency through Q1
2016, particularly in comparison to the same period in prior years. The
tonnage of ore excavated remained flat in comparison to the prior
quarter, though HMC production declined 10% as a result of grade
fluctuations. Grade is forecast to increase from the end of Q2 until the
end of the year.
Lower HMC production limited production of final products in the first
quarter. Mining conditions vary through the year, however, shallow
dredging and the harder mining conditions experienced in Q4 2015
continued into Q1 2016, as expected. Dry mining was restarted towards
the end of the quarter and is helping to augment the more difficult
mining conditions. A focused programme of organisational and management
improvements has also been put in place with the aim of reducing
downtime and ensuring more consistent production levels.
Ilmenite production for the period was 185,000 tonnes, up 39% compared
to 132,900 tonnes in Q1 2015. Total zircon production for the period
increased 12% over the previous year to 11,600 tonnes, though primary
zircon fell 10%. This was primarily a result of lower non-magnetic
recoveries experienced in March, which have since improved.
Shipments of total finished products in Q4 2016 amounted to 132,700
tonnes, comprised of 123,200 tonnes of ilmenite, 8,600 tonnes of zircon
(including 2,400 tonnes of secondary grade zircon) and 900 tonnes of
rutile. The late arrival of a vessel and inclement weather at the end of
March delayed the shipment of two large ilmenite parcels into April.
This, is combination with an improving demand outlook, is expected to
contribute to a much stronger Q2 for shipments.
Closing stock of HMC at the end of Q1 2016 was 14,800 tonnes, compared
with 11,800 tonnes at the start of the year. Closing stock of
intermediate magnetic concentrate at the end of the period was 64,400
tonnes. Closing stock of finished products at the end of Q1 2016 was
302,600 tonnes, of which 40,000 tonnes are being held for a customer
under a bill and hold arrangement.
Power
We have already seen considerable improvement in power quality and
reliability in the first few months of 2016 and we believe power should
no longer be a fundamental constraint on Moma's ability to produce.
During December 2015, EdM commissioned new equipment that provides
additional transmission capacity on the power network that serves the
Moma Mine, increasing capacity by 50MW (42%) in December 2015. A further
increase in transmission capacity of 10MW is expected to be commissioned
in mid-2016.
Electricity generation capacity in northern Mozambique is also being
increased by EdM, with a ship-based 100MW mobile power generation plant
positioned nearby at Nacala since April 2016. The plant is currently
being commissioned and will both provide significant additional capacity
and stabilisation of the network voltage.
These improvements to the network gave the management team confidence in
placing the diesel generators on standby earlier than expected, through
the high thunderstorm risk summer months, with no significant effect to
power supply or operations. However, the generators remain available on
standby should the need arise.
Market
There was a stabilisation of ilmenite prices in Q1 2016 as reductions in
ilmenite production globally met with strong demand from pigment
customers, who saw sales volumes increase between 6-12% in Q1 2016 in
comparison to the same prior year quarter. Offtake conditions have
continued to improve following the end of the quarter, resulting in the
first tentative price increases for both domestically produced and
imported ilmenite in the Chinese spot market. As the largest offtake
market for sulphate ilmenite, Chinese market conditions strongly
influence global market price movements. We expect stronger global
pigment demand conditions to continue through 2016, driving increased
feedstock consumption.
Zircon prices declined over the course of 2015, by approximately 10%.
Although some of the larger producers sought to align production with
market demand, increased supply from new producers, coupled with
positioning by various producers for year-end sales contributed to the
softness. Further price weakness has been seen in recent weeks due to
ongoing competitive tensions between major producers.
2016 Guidance
Mining output through 2016 is expected to benefit from a significantly
more stable power supply, with HMC also benefitting from an increase in
grade from the latter part of Q2 2016 onwards. Future plant availability
is anticipated to improve as a result of mechanical reliability
improvements completed. In addition, further recovery improvement
projects are being implemented though 2016 in the non-magnetic section
of the plant (processing rutile and zircon).
We are continuing to push down our costs to the extent possible and
expect that as volume increases through 2016, with the benefit of
improved power and product recoveries, our unit cost per tonne of final
product produced will continue to reduce.
The 2016 guidance on production and operating costs is as follows:
Production 2016 Guidance 2015 Actual Variance
Ilmenite kt 950 764 24%
Zircon kt 70 52 35%
of which primary kt 50 39 27%
of which secondary kt 20 12 61%
Rutile kt 8 6 33%
Costs
Total cash operating costs US$m 145 136 6%
Cash operating costs per tonne
(MORE TO FOLLOW) Dow Jones Newswires
April 29, 2016 02:02 ET (06:02 GMT)
of finished product US$/t 141 166 -15%
Production and cost guidance is subject to a +/- 10% variance and
foreign exchange movements.
Sustaining capital in 2015 was US$5.6m as a result of stringent cost
management, though expected to average US$20m per annum in the medium
term.
For the five year period from 2011-2015, head grade at the mine was
5.2%. It is expected that over the following five years from 2016-2020
that the average grade will decline to 4.5%. This decline in grade will
require an increased mining fleet to maintain levels of HMC. The capital
expenditure required to enhance the mining fleet over this period is yet
to be approved by the board and will be subject, inter alia, to market
conditions. However preliminary studies estimate the additional capital
to be US$100m, over the five year period. No material capital
expenditure is expected prior to Q4 2017.
As previously announced, the Namalope deposit will be mined until 2024
by WCPA and until 2020 by WCP B. The capital costs associated with the
movement of the dredges from the Namalope deposit to the Nataka deposits
are in addition to the capital outlined to increase the capabilities of
the mining fleet.
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
Tel: +44 207 466 5000
Forward Looking Statements
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.
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#2008223
http://www.kenmareresources.com/
(END) Dow Jones Newswires
April 29, 2016 02:02 ET (06:02 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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