Kenmare Resources Q2 & H1 2016 Production Report
August 02 2016 - 1:00AM
UK Regulatory
TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
2 August 2016
Q2 & H1 2016 Production Report
Overview
-- Total shipments of finished products in Q2 2016 up 133% to 309,000 tonnes
(Q2 2015: 132,700 tonnes), a new quarterly product shipment record
-- Ilmenite production increased 18% to 217,900 tonnes (Q2 2015: 185,000
tonnes)
-- Zircon production increased 46% to 16,900 tonnes (Q2 2015: 11,600 tonnes)
-- Ore mined in Q2 2016 increased 5% to 7,386,200 tonnes (Q2 2015: 7,061,000
tonnes)
-- Heavy Mineral Concentrate ("HMC") production in Q2 2016 increased 21% to
331,300 tonnes (Q2 2015: 274,800 tonnes), product of higher tonnes mined
and increased grade, as expected
-- Production guidance of 950,000 tonnes of ilmenite production in 2016
(+/- 10%) maintained
-- Production in H2 2016 expected to increase from H1 as a result of
increases in dry mining, grade and operating time
-- Power stability has remained consistent through Q2 2016
-- Capital restructuring and material deleveraging completed at end of July,
resulting in gross debt reduced 74% to US$100 million and US$75 million
of additional cash for working capital purposes and fees and expenses
Statement from Michael Carvill, Managing Director:
"The strengthening of the balance sheet, allied with falling cash costs
and consistent productivity gains at Moma, positions Kenmare to benefit
from the improvement in the titanium feedstock market we are currently
experiencing as higher ilmenite prices are reflected in revenues for the
second half of 2016."
Production
Production from the Moma Mine for Q2 2016 and H1 2016 was as follows:
Q2-2016 Q2-2015 Variance H1-2016 H1-2015 Variance
tonnes tonnes % tonnes tonnes %
Excavated
Ore * 7,386,200 7,061,000 5% 14,447,600 11,421,400 26%
Grade* 4.91% 4.32% 14% 4.62% 4.98% -7%
Production
HMC 331,300 274,800 21% 606,100 454,500 33%
Ilmenite 217,900 185,000 18% 402,900 324,100 24%
Zircon 16,900 11,600 46% 28,500 23,800 20%
of which
primary 10,900 8,300 31% 19,300 19,800 -3%
of which
secondary 6,000 3,300 82% 9,200 4,000 130%
Rutile 1,850 1,100 68% 3,000 2,800 7%
Shipments 309,000 132,700 133% 441,700 412,000 7%
* Excavated Ore and grade are prior to any floor losses.
During Q2 2016, Kenmare mined 7,386,200 tonnes of ore at an average
grade of 4.91% and produced 331,300 tonnes of HMC. Finished product
volumes for the period included 217,900 tonnes of ilmenite and 16,900
tonnes of zircon (including 6,000 tonnes of a lower grade secondary
zircon product).
The tonnage of ore excavated increased 5% in comparison to Q2 2015 as
mining conditions improved, while grade increased by 14% in Q2 2016
compared with Q2 2015, resulting in an overall 21% increase in HMC
production. As noted in the Q1 2016 operations report, grade was
expected to rise from the end of Q2 2016 and is expected to rise through
the second half of the year. Dry mining restarted towards the end of Q1
2016 for Wet Concentrator Plant ("WCP") A and is currently being
commissioned for WCP B, both of which should contribute to higher
volumes of ore being mined in the second half of 2016.
Increased volumes of ore mined, grade levels, recoveries and operating
time should all contribute to higher production levels in H2 2016, in
order for the Company to achieve production forecasts for 2016. The
expected drawdown of intermediate magnetic concentrate will also
contribute to ilmenite production in H2 2016.
Ilmenite production for the quarter was 217,900 tonnes, up 18% compared
to 185,000 tonnes in Q2 2015. Total zircon production for the period
increased 46% over Q2 2015 to 16,900 tonnes. This was primarily a result
of increased non-magnetic recoveries, which are forecast to continue
increasing through the second half of 2016. Secondary zircon production
in particular saw a pronounced improvement as a result of revenue
maximisation projects being implemented through circuit changes to
deliver additional zircon.
Shipments of total finished products in Q2 2016 amounted to 309,020
tonnes, comprised of 291,628 tonnes of ilmenite, 15,682 tonnes of zircon
(including 5,375 tonnes of secondary grade zircon) and 1,709 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.
These delayed shipments, in combination with strong underlying market
demand for ilmenite, contributed to a record volume of shipments in Q2
2016.
Closing stock of HMC at the end of Q2 2016 was 35,753 tonnes, compared
with 14,809 tonnes at the start of the year. Closing stock of
intermediate magnetic concentrate at the end of the period was 54,289
tonnes. Closing stock of finished products at the end of H1 2016 was
230,052 tonnes, of which 103,883 tonnes were being held for customers
under bill and hold arrangements.
Power
The Moma mine has continued to experience stability in power quality and
reliability as a result of the additional transmission capacity
commissioned by Electricidade de Mocambique ("EdM") in December 2015.
Electricity generation capacity in northern Mozambique has also been
increased by EdM, with a ship-based 100MW mobile power generation plant
positioned nearby at Nacala since April 2016. The plant is currently
operating and provides significant additional capacity in the
stabilisation of the network. Power should no longer be a fundamental
constraint on Moma's ability to produce. However, the diesel-powered
generators remain available on standby should the need arise.
Market
Kenmare saw improvement in the sulphate ilmenite market in Q2 as
supply/demand conditions continued to tighten. Chinese domestic ilmenite
prices have been steadily increasing since the beginning of the year and
Kenmare has implemented price increases on spot sales during Q2 to be
shipped in the early part of Q3.
This is due to a combination of improved offtake from the pigment sector,
as price increases for pigment gather momentum on the back of improving
global demand conditions, and continued decline of ilmenite supply from
a number of regions, most notably Chinese domestic ilmenite production
from Sichuan province. Ilmenite production in Sichuan is a by-product of
iron ore mining, which is now in decline due to oversupply in the iron
ore market as cheaper, better quality imported iron ore continues to
displace higher cost, lower quality production in Sichuan.
Ilmenite supply reductions have also been seen in Russia and Australia,
due to mine closure and depletion, while reductions in other regions are
also evident, principally due to poor mining economics. Meanwhile excess
ilmenite inventories, which ensured the market was adequately supplied
in 2015 despite the reduction in primary production, appear to have
declined significantly and Kenmare's market intelligence points to low
inventory levels at other ilmenite producers. China port inventories by
the end of Q2 2016 were the lowest levels seen in the past three years,
down by circa 50% from peak levels in March 2015. Kenmare sells the
majority of ilmenite production on long-term contracts with annual or
six monthly price renegotiations. Therefore, the increase in ilmenite
pricing that we have seen in the first half of 2016 will be largely
reflected in revenues for the second half of the year.
In the zircon market there was further price weakness in Q2 due to
competitive positioning for sales amongst producers. It is anticipated
that a recent price increase announcement by a major zircon producer
will reverse the downward price trend seen in recent months and help to
provide some stability to the market. Kenmare continues to be well
supported by its customer base.
Finance
At 30 June 2016, cash and cash equivalents were US$12.3 million,
compared with US$14.4 million at 31 December 2015. The Company's
half-yearly results in respect of the six months ended 30 June 2016 will
be issued on 24 August 2016.
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
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#2032413
http://www.kenmareresources.com/
(END) Dow Jones Newswires
August 02, 2016 02:00 ET (06:00 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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