TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
13 October 2016
Q3 2016 Production Report
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 third quarter ending 30
September 2016.
Overview
-- Spot prices for domestically produced ilmenite in China have risen 70%
year to date and bode well for an increase in Kenmare's average received
ilmenite price for 2017.
-- Production of total finished products was a quarterly record for Q3 2016
and Moma is on track to achieve record finished product output for the
full year.
-- Cash operating costs per tonne of finished product have trended downwards
in Q3 2016 and are expected to be at the lower end of guidance for the
full year.
-- Ore mined in Q3 2016 decreased 21% to 7,160,800 tonnes compared to the
equivalent period in the prior year (Q3 2015: 9,057,500 tonnes). Ore
mined has been lower in 2016 as a result of harder mining conditions,
augmented by the higher grades achieved in these areas.
-- Production of Heavy Mineral Concentrate ("HMC") in Q3 2016 decreased 4%
to 325,100 tonnes (Q3 2015: 339,600 tonnes).
-- Ilmenite production in Q3 2016 was 243,500 tonnes, close to the record
quarterly production of 244,800 tonnes in Q3 2015 and up 12% when
compared with the prior quarter (Q2 2016: 217,900 tonnes).
-- Zircon production in Q3 2016 increased 48% to 19,700 tonnes (Q3 2015:
13,300 tonnes) as a result of increased recoveries.
-- Total shipments of finished products in Q3 2016 increased 48% to 280,800
tonnes (Q3 2015: 190,000 tonnes).
Statement from Michael Carvill, Managing Director:
"Q3 2016 represented a record quarter for finished product output,
demonstrating the benefits of stable power supply, increased
supplemental mining and higher grades. 2016 is also expected to be a
record year for production of all final products, and for unit costs to
be even lower in the second half of the year. Not only is production
increasing and costs falling, Chinese spot prices for ilmenite have
increased by over 70% as a result of the decline in domestic production
and falling port inventories. Kenmare is well positioned to benefit from
increasingly favourable operational and market dynamics in 2017."
Production
Production and shipments from the Moma Mine for Q3 2016 was as follows:
Q3-2016 Q3-2015 Variance Q2-2016 Variance
tonnes tonnes % tonnes %
Excavated Ore * 7,160,800 9,057,500 -21% 7,386,200 -3%
Grade* 4.81% 4.54% 6% 4.91% -2%
Production
HMC 325,100 339,600 -4% 331,300 -2%
Ilmenite 243,500 244,800 -1% 217,900 12%
Zircon 19,700 13,300 48% 16,900 17%
of which primary 12,300 9,400 31% 10,900 13%
of which secondary 7,400 3,900 90% 6,000 23%
Rutile 2,500 1,500 67% 1,900 32%
Shipments 280,800 190,000 48% 309,000 -9%
* Excavated Ore and grade are prior to any floor losses.
During Q3 2016, Kenmare mined 7,160,800 tonnes of ore at an average
grade of 4.81% and produced 325,100 tonnes of HMC. Finished product
volumes for the period included 243,500 tonnes of ilmenite and 19,700
tonnes of zircon (including 7,400 tonnes of lower grade secondary
zircon).
The production of total finished products in Q3 2016 was a quarterly
record. Ilmenite production for the quarter was the second highest
achieved, 1% lower than record production in Q3 2015. Total zircon
production was up 17% on the previous record achieved in Q2 2016 and
rutile production was 32% higher than the previous record achieved in Q2
2016.
Ore mined in Q3 2016 was broadly in line with the prior quarter, as
expected, declining slightly by 3% versus Q2 2016 to 7,160,800 tonnes
(Q2 2016: 7,386,200 tonnes). The volume of ore mined has been generally
lower in 2016 as a result of a decision to mine in more difficult
conditions, augmented by the higher grades available in these areas.
This decline was amplified by the particularly favourable mining
conditions encountered in Q3 2015 (Q3 2015: 9,057,500 tonnes).
HMC production declined 4% to 325,100 tonnes in Q3 2016 compared with
339,600 tonnes in Q3 2015, principally as a result of volumes of ore
mined, offset by higher grades. The expected harder mining prevented the
plant from running at maximum capacity and supplemental (dry) mining was
unable to completely close this gap. It is expected that more favourable
mining conditions will be encountered in Q4 2016, while the higher
grades will be maintained, hence HMC production is expected to be higher
in the fourth quarter. At WCP B, the commissioning of a supplementary
(dry) mining unit is ensuring the plant operates at capacity.
Production of ilmenite was 243,500 tonnes in Q3 2016, the second highest
quarterly production after the 244,800 tonnes achieved in Q3 2015.
Production continued the trend of increasing through 2016, rising 12% in
Q3 2016 when compared with the prior quarter (Q2 2016: 217,900 tonnes).
In turn, production in Q2 2016 showed a 18% increase on production in
the first quarter (Q1 2016: 185,000 tonnes). These gains have been
achieved through improved Mineral Separation Plant operating times and a
higher average HMC production through 2016.
Zircon production increased 48% to 19,700 tonnes in Q3 2016, compared
with 13,300 tonnes in Q3 2015. Of this, primary zircon production rose
31% due to improved recoveries. Higher volumes of secondary zircon
production, up 90%, were the result of a successful project to recover
zircon from previously rejected streams. Kenmare is now assessing the
most efficient way to upgrade more secondary zircon into primary zircon,
a higher value product.
Kenmare has reached agreement with the local community for the mining of
Monte Filipe in the coming months. Monte Filipe is an area of special
significance to the local community in the dredge path and the community
expects to hold a traditional ceremony shortly to ratify the signed
agreement.
The Moma Mine has benefitted from the increased stability and
reliability of grid power supplied by Electricidade de Moçambique
("EdM") throughout 2016. While supplementary diesel-powered generators
would typically be used towards the end of the fourth quarter, these
generators will not be turned on as a matter of course but will remain
on standby should the need arise.
Sales of total finished products were up 48% to 280,800 tonnes in Q3
2016 compared to 190,000 tonnes in Q3 2015. Sales demand remains strong,
however, sales were 9% lower than the prior quarter (Q2 2016: 309,000
tonnes) due to an ilmenite shipment being loaded over the period end
which was therefore not reflected in the shipment figures for the
quarter. Sales in Q3 2016 comprised 259,400 tonnes of ilmenite, 19,800
tonnes of zircon and 1,600 of rutile. Closing stock of finished products
at 30 September 2016 was 214,900 tonnes (30 June 2016: 230,100 tonnes),
of which 60,000 tonnes were being held for a customer and which has been
subject to an advanced payment.
Guidance Update
Production of each final product is expected to be within the range of
guidance provided at the beginning of the year. Primary zircon
production has shown a strong increase in the second half of this year
but the rate of improvement is tracking slightly behind expectations. As
such, there is a potential for primary zircon to be lower than
previously thought, however, total zircon production is expected to be
well within the guided range due to higher secondary zircon volumes.
Cost control remains a key focus for the Company and it is expected that
unit costs per tonne of final product produced will reduce considerably
in the second half of the year due to plant efficiencies, increased
production and further cost reductions, resulting in full year average
costs towards the lower end of guidance.
An update of the 2016 guidance on production and operating costs is as
follows:
2016 Guidance Original Updated
Production
Ilmenite kt 855-1,045 890-920
Zircon kt 63-77 65-70
of which primary kt 45-55 43-46
of which secondary kt 18-22 22-24
Rutile kt 7-9 7-8
Costs
Cash operating costs per tonne of finished product US$/t 127-155 131-141
Market
Sulphate ilmenite demand continued to see good improvement in Q3 2016
with increased activity in China as a result of strong pigment
production and the ongoing curtailment of Chinese domestic ilmenite
production. A combination of increased demand, declining supply and
reduced inventories has seen ilmenite prices recover from the very low
levels seen at the start of 2016, and this tightening supply outlook is
forecast to continue.
Sulphate ilmenite prices globally have also increased and Kenmare has
agreed higher prices for the second half of 2016 with contracted
customers (where pricing is set on a six monthly basis) and expects that
the sustained improvement in market conditions should continue into
2017.
Zircon prices were stable through the quarter following some weakness in
Q2 2016. Some positive trends were evidenced at recent ceramics trade
shows in Italy that augur well for zircon demand.
Finance
As previously announced on 28 July 2016, the Group completed a capital
restructuring to reduce debt to US$100 million (from US$392.4 million
using agreed exchange rates) and to provide an additional US$75 million
of cash for working capital and to meet fees and expenses of the capital
restructuring.
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
Joe Heron / Aimee Beale
Tel: +353 1 498 0300
Mob: +353 87 690 9735
Buchanan
Bobby Morse / Chris Judd
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 Corporate Solutions on behalf
of Nasdaq 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
http://www.kenmareresources.com/
(END) Dow Jones Newswires
October 13, 2016 02:00 ET (06:00 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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