Kenmare Resources Q2 & H1 2018 Production Report
July 17 2018 - 1:00AM
UK Regulatory
TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
17 July 2018
Q2 & H1 2018 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 quarter and half year ending
30 June 2018.
Statement from Michael Carvill, Managing Director:
"I am pleased to report that production in Q2 2018 increased from Q1
2018, in line with expectations and guidance for the full year. Final
product shipment also achieved new records, whilst average product
prices received increased, resulting in strong cash flow generation in
H1 2018. Our net debt has consequently been reduced by a further US$25.0
million.
This strong cash flow has been achieved in spite of planned spending on
capital projects to expand mining capacity. I have been encouraged by
the progress of the WCP B upgrade, which is currently commissioning,
ahead of time and below budget.
Kenmare looks forward to providing more clarity on our plans for the
future at a Capital Markets Day scheduled for October this year. The
focus will be on our drive to increase production and reduce unit costs
by 2021, funded by internally generated cashflow. We will also provide
an outline of our dividend policy."
Overview
-- Heavy Mineral Concentrate ("HMC") production increased by 5% to 377,900
tonnes (Q2 2017: 359,200 tonnes).
-- Ilmenite production decreased by 4% to 238,500 tonnes (Q2 2017: 248,300
tonnes) but increased 13% on Q1 2018 figures.
-- Primary zircon production decreased by 9% to 11,700 tonnes (Q2 2017:
12,900 tonnes) but increased 4% relative to Q1 2018.
-- Total shipments increased 15% to 322,000 tonnes (Q2 2017: 279,600 tonnes)
setting a new quarterly record.
-- Wet Concentrator Plant B ("WCP B") upgrade currently being commissioned,
ahead of time and under budget.
-- Average received final product prices increased in Q2 2018, led by
zircon.
-- Net debt reduced to US$9.1 million (31 December 2017: US$34.1 million),
with cash on hand of US$84.2 million.
-- Capital Markets Day scheduled for 16 October 2018.
Production
Production from the Moma Mine in Q2 & H1 2018 was as follows:
Q2-2018 Q2-2017 Q1-2018 H1-2018 H1-2017
Tonnes % Change % Change Tonnes % Change
Excavated Ore * 8,409,000 -6% 8% 16,215,000 -7%
Grade* 4.68% 5% 4% 4.60% -1%
Production
HMC 377,900 5% 22% 688,900 -3%
Ilmenite 238,500 -4% 13% 449,500 -11%
Zircon 16,800 -13% -1% 33,700 -11%
of which primary 11,700 -9% 4% 23,000 -11%
of which secondary 5,100 -19% -9% 10,700 -11%
Rutile 2,000 -13% -5% 4,100 -7%
Shipments 322,000 15% 21% 589,200 10%
* Excavated Ore and grade prior to any floor losses.
During Q2 2018, Kenmare mined 8.4 million tonnes of ore at an average
grade of 4.68%, producing 377,900 tonnes of HMC. Finished product
volumes for the period included 238,500 tonnes of ilmenite, 16,800
tonnes of zircon and 2,000 tonnes of rutile.
The tonnage of ore excavated was up 8% in comparison to Q1 2018, as
dredge and supplementary mining benefitted from higher throughput and
utilisation rates and were less impacted by planned stoppages. Grades
increased slightly in comparison to Q1 2018 to 4.68%, up 4%. Capacity
improvements have been implemented at WCP A supplementary dry mining to
increase throughputs, and a similar programme is currently underway at
WCP B.
Ilmenite production for the quarter was 238,500 tonnes, down 4% on Q2
2017, but up 13% compared to Q1 2018, reflecting higher HMC production
levels and availability. Despite improved plant reliability in Q2 2018,
production utilisations in the Mineral Separation Plant ("MSP") were
impacted by reduced reliability in the power network as unplanned
outages, normally associated with the wet season, continued for longer
than expected this year. We are liaising closely with Electricidade de
Moçambique, our electricity provider, to seek resolution on these
matters.
Zircon production of 16,800 tonnes for the period was broadly in line
with Q1 2018 (16,900 tonnes), yet declined 13% in comparison to Q2 2017
(19,200 tonnes). Zircon production in Q2 2017 was supported by an
additional 26,900 tonnes of zircon rich spillage material that was
reprocessed.
The upgrade of WCP B, from 2,000 tonnes per hour to 2,400 tonnes per
hour, is being commissioned ahead of schedule and the project is
currently under budget of US$16 million. Further details will be
provided as part of the H1 2018 interim results, due to be announced on
20 August 2018.
Grades are forecast to be lower in H2 2018 and mining conditions are
expected to become more challenging, particularly at WCP A. These issues
will be addressed by higher levels of supplemental mining and increased
production at WCP B. Production of final products will also be supported
by HMC stock, which has increased during the quarter.
Kenmare shipped 322,000 tonnes of finished products in Q2 2018,
comprising 298,300 tonnes of ilmenite, 21,300 tonnes of zircon
(including 8,300 tonnes of secondary grade zircon) and 2,400 tonnes of
rutile. This represents a new quarterly record, which benefitted from
good demand and favourable shipment variations at the beginning and end
of the period. As product inventories have substantially reduced, it is
expected that shipping volumes will be lower in H2 2018.
Closing stock of HMC at the end of Q2 2018 was 52,300 tonnes, compared
with 24,200 tonnes at the beginning of the quarter. Closing stock of
finished products at the end of Q2 2018 was 129,600 tonnes (Q2 2017:
202,500 tonnes, Q1 2018: 194,200 tonnes).
Market
Strong demand for Kenmare ilmenite continued into Q2, with record
volumes shipped for the quarter and half year, resulting in a further
drawdown of inventory at Moma. This was driven by steady sales to the
China spot market as well as some accelerated shipments to contracted
customers as western pigment plants maintained high utilisation rates.
As in previous years, we are seeing some seasonal weakness in the
Chinese ilmenite market over the summer months. Coupled with ongoing
disruption to pigment plant operating rates driven by the implementation
of environmental regulations, this is leading to a slowdown in ilmenite
purchasing activity. Domestic ilmenite production in China has increased,
as has the supply of ilmenite concentrates from Africa, which has
rebalanced the market and led to some softening of prices in recent
weeks.
Global pigment demand growth was favourable in the first half of 2018,
driving increased feedstock demand, but there are some signs of demand
growth slowing outside North America.
The zircon market continues to benefit from steady demand and
constrained supply, driving higher prices. Further price increases were
achieved in Q2 2018 and are being implemented in Q3 2018 in line with
the prevailing movement in the market.
Finance Update
Following the first principal debt repayment on 1 February 2018, gross
bank loans, including accrued interest, amounted to US$93.3 million at
30 June 2018 (31 December 2017: US$102.9 million). Cash and cash
equivalents were US$84.2 million (31 December 2017: US$68.8 million).
Consequently, net debt stands at US$9.1 million (31 December 2017:
US$34.1 million).
The Company's half-yearly results in respect of the six months ended 30
June 2018 will be issued on 20 August 2018. Kenmare will also be holding
a Capital Markets Day in London on 16 October 2018, providing further
information on the Company's development projects and dividend policy.
For further information, please contact:
Kenmare Resources plc
Michael Carvill, Managing Director
Tel: +353 1 671 0411
Tony McCluskey, Financial Director
Tel: +353 1 671 0411
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
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
July 17, 2018 02:00 ET (06:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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