TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
15 October 2020
Q3 2020 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 ending 30 September
2020 ("Q3 2020").
Statement from Michael Carvill, Managing Director:
"Following the safe relocation of Wet Concentrator Plant B to the
Pilivili ore zone in late September, project execution continues to
progress well. We now expect to begin production at Pilivili in the
coming days, ahead of our target of the middle of the quarter. Downtime
for the move is estimated at less than eight weeks, which is a
significant achievement by our team. Consequently, Q4 2020 is
anticipated to be our strongest quarter of the year for production, with
WCP B mining high grade ore and taking us an important step closer to
our goal of producing 1.2 million tonnes per annum of ilmenite on a
sustainable basis.
It is encouraging to see pigment markets improving more quickly than
expected from COVID-19-related restrictions and consequently we believe
the outlook for the ilmenite market is robust in Q4 and continuing into
2021."
Q3 2020 overview
-- Relocation of Wet Concentrator Plant ("WCP") B completed safely in
September 2020 -- mining is expected to commence in the Pilivili ore zone
in the coming days
-- As previously announced, sadly there was a fatality at the Moma Mine on
31 August 2020
-- Lost time injury frequency rate ("LTIFR") of 0.29 per 200,000 hours
worked to 30 September 2020 (30 September 2019: 0.20), excluding the
fatality
-- Heavy Mineral Concentrate ("HMC") production of 258,000 tonnes in Q3
2020, a 15% decrease compared to Q3 2019 (304,100 tonnes), in line with
expectations and due primarily to WCP B temporarily ceasing production
from late August onwards, partially offset by WCP C
-- Ilmenite production of 167,900 tonnes in Q3 2020, a 27% decrease compared
to Q3 2019 (230,800 tonnes), primarily as a result of reduced HMC
consumption and a short-term reduction in ilmenite content in the HMC
-- Primary zircon production of 10,900 tonnes, representing a 16% decrease
compared to Q3 2019 (12,900 tonnes) due to reduced HMC consumption
-- Total shipments of finished products of 118,000 tonnes, a 39% decrease
compared to Q3 2019 (192,000 tonnes) due to improvement works on a
transhipment vessel and continuing poor sea conditions -- Q4 is expected
to be the strongest quarter of the year for shipments and has begun well
-- Kenmare has the majority of its ilmenite sales contracted for the
remainder of 2020 and the outlook for 2021 is robust, supported by strong
Chinese demand and a recovering pigment market
-- Oversupply in the zircon market continued in Q3 2020, however supply
discipline from the major producers is slowing price declines and the
medium-term fundamentals for all of Kenmare's products remain strong
-- Further strengthening of Kenmare's COVID-19 response, with the opening of
a testing facility on site
Operations update
Operational results for the Moma Mine in Q3 2020 were as follows:
Q3 2020 Q3 2019 Q2 2020
----------------- ------------ --------- ---------- ---------- ----------
tonnes tonnes % variance tonnes % variance
----------------- ------------ --------- ---------- ---------- ----------
Excavated ore(1) 8,333,000 9,219,500 -10% 10,317,000 -19%
----------------- ------------ --------- ---------- ---------- ----------
Grade(1) 3.58% 3.63% -1% 3.29% 9%
----------------- ------------ --------- ---------- ---------- ----------
Production
----------------- ------------ --------- ---------- ---------- ----------
HMC production 258,000 304,100 -15% 310,300 -17%
----------------- ------------ --------- ---------- ---------- ----------
HMC consumption 260,400 318,800 -18% 311,900 -17%
----------------- ------------ --------- ---------- ---------- ----------
Ilmenite 167,900 230,800 -27% 209,900 -20%
----------------- ------------ --------- ---------- ---------- ----------
Primary zircon 10,900 12,900 -16% 11,600 -6%
----------------- ------------ --------- ---------- ---------- ----------
Rutile 1,600 2,100 -24% 1,500 7%
----------------- ------------ --------- ---------- ---------- ----------
Concentrates(2) 9,000 10,700 -16% 9,000 0%
----------------- ------------ --------- ---------- ---------- ----------
Shipments 118,000 192,900 -39% 219,100 -46%
----------------- ------------ --------- ---------- ---------- ----------
1. Excavated ore and grade prior to any floor losses.
2. Concentrates include secondary zircon and mineral sands concentrate.
Regrettably, and as previously announced, there was a fatality at the
Moma Mine on 31 August 2020. The employee, a front-end loader operator,
suffered a fatal crush injury during the night shift at WCP A's dry
mining operations. Kenmare's rolling 12 month LTIFR for the 12 months to
30 September 2020 was 0.29 per 200,000 man-hours worked (30 September
2019: 0.20), with two lost time injuries recorded during the period.
These figures exclude the fatality as the primary cause of the incident
has been found to be not work-related.
HMC production was 258,000 tonnes in Q3 2020, a 15% decrease compared to
Q3 2019 (304,100 tonnes) due primarily to a reduction in excavated ore
volumes to 8.3 million tonnes (Q3 2019: 9.2 million tonnes). This was in
line with expectations, as a result of no production from WCP B in
September as it relocated to Pilivili, partially offset by production
from WCP C. WCP B represents approximately 40% of mining capacity and
WCP C represents 8%.
Ore grades in Q3 2020 were 3.58%, broadly in line with Q3 2019 (3.63%).
They increased by 9% compared to Q2 2020 as WCP A began mining higher
grades whilst WCP B ceased mining lower grades at the end of its mine
path. WCP C mined grades averaging 5.99% during the quarter, making a
robust contribution to production. With the start of production from WCP
B in the high grade Pilivili ore zone in Q4, average ore grades are
expected to continue to strengthen.
As expected, production of all finished products decreased in Q3 2020
compared to Q3 2019. This was due to an 18% reduction in HMC consumption
offset by HMC being produced at a lower heavy mineral grade resulting in
higher mine recoveries during a period of lower HMC production. Ilmenite
production was 167,900 tonnes, representing a 27% decrease compared to
Q3 2019 (230,800 tonnes). Ilmenite production was further impacted by
lower Mineral Separation Plant recoveries due to limited HMC
availability, and the reduced ilmenite content in HMC, as WCP B
completed mining in Namalope. It is expected that ilmenite content in
HMC will increase upon WCP B commencing mining in Pilivili.
Primary zircon production was 10,900 tonnes, representing a 16% decrease
compared to Q3 2019 (12,900 tonnes), in line with reduced HMC
consumption. Rutile production was 1,600 tonnes, a 24% decrease (Q3
2019: 2,100 tonnes), due to similar reasons as for primary zircon.
Concentrates production was 9,000 tonnes, a 16% decrease compared to Q3
2019 (10,700 tonnes) and also in line with reduced HMC availability.
Kenmare shipped 118,000 tonnes of finished products during the quarter,
which represents a 39% decrease compared to Q3 2019 (192,900 tonnes).
This comprised 112,800 tonnes of ilmenite and 5,200 tonnes of
concentrates. No primary zircon or rutile was shipped during the
quarter. Q3 2020 shipments were impacted by reduced availability of the
Peg transhipment vessel, which was undergoing planned five-yearly
maintenance procedures and improvement works in dry dock during
September, and continuing adverse weather conditions.
Kenmare expects Q4 to be the strongest quarter of the year for shipments
and it has begun well.
Closing stock of HMC at the end of Q3 2020 was 4,400 tonnes, compared
with 6,800 tonnes at the end of Q2 2020. Closing stock of finished
products at the end of Q3 2020 was 227,300 tonnes, compared to 157,000
tonnes at the end of Q2 2020.
COVID-19 update
On 7 September 2020, Mozambique transitioned from a State of Emergency
to a State of National Public Calamity. This change in status was as a
result of new legislation being passed and restrictions have largely
been maintained, such as limitations on public gatherings. However some
travel restrictions have been eased, allowing for members of the
management team to travel to site and for employees to leave site and
return, while still undertaking a mandatory quarantine period.
As previously announced, a limited number of positive test results have
been received for employees and contractors. All individuals with
confirmed positive tests are required to self-isolate in the Moma camp
and are given appropriate care.
Management continues to be focused on minimising the potential for
COVID-19 to spread to the operations, with stringent mitigation measures
having been in place since March 2020. These include heightened health
protocols, social distancing measures and testing procedures. During Q3
2020 Kenmare established an on-site testing facility, which began
operation in early October 2020.
Capital projects update
Kenmare has been progressing three development projects that together
have the objective of increasing ilmenite production to 1.2 million
tonnes (plus co-products) per annum on a sustainable basis.
The third of these projects is the relocation of WCP B and its dredge.
WCP B and its dredge were relocated 23 kilometres from their former
mining area at Namalope to a new high grade ore zone called Pilivili.
Following the move, WCP B and its dredge were positioned onto plinths.
Establishment of associated infrastructure is underway and the plant is
being prepared to float in to the starter pond. Following this, the
dredge and plant will be connected to walkways and feedlines, and
commissioning of critical equipment at the infrastructure terrace will
commence. Kenmare expects to produce first HMC from Pilivili and to
begin commissioning of WCP B in the coming days.
As previously announced, installation of the positive displacement pumps
and the overhead powerline experienced delays due to COVID-19-related
fabrication and transport restrictions. As a result, initially Kenmare
will truck HMC from Pilivili to the Mineral Separation Plant and power
will be provided at the Pilivili site by temporary diesel generators.
Although this will increase operating costs on a temporary basis, it
ensures that mining can begin at Pilivili as soon as possible, allowing
Kenmare to access higher grade ore. The Company expects to commission
the overhead powerline before year-end and the ramp-up of the positive
displacement pumps is anticipated to begin during Q1 2021.
While the original project scope remains on budget (US$106 million), the
additional initiatives required to mitigate the impacts of
COVID-19-related delays are anticipated to increase overall project
costs. Capital costs are expected to increase by approximately 17%,
which are expected to be fully funded by Kenmare's existing financial
resources. This has increased from previous estimates of a 10% increase
due to an extension of the project schedule, primarily caused by the
delayed delivery of the HMC pipeline. Additional operating costs are
also expected to be incurred for the costs of hauling HMC by road until
the pipeline is completed and the provision of power by temporary diesel
generators, but are included in Kenmare's 2020 operating cost guidance.
Market update
Ilmenite prices were marginally softer in Q3 2020, as limited supply was
offset by lower demand from certain geographic regions as a result of
the pandemic. Kenmare has the majority of its ilmenite sales contracted
for the remainder of 2020 and is seeing strong demand for remaining spot
sales in Q4.
Global pigment demand was negatively impacted by COVID-19-related
restrictions in Q2 2020, which continued into Q3. Pigment production was
reduced in response to this lower demand, which resulted in lower demand
for ilmenite in Q3. However, downstream markets are recovering more
quickly than expected, as the return of construction activity adds to
the improving demand for architectural coatings and plastics experienced
in Q3.
In China, pigment production remained very strong in Q3 as both the
domestic and export markets improved throughout the quarter. This higher
production supported strong demand for ilmenite. Domestic ilmenite
production remains at lower levels compared to 2019, stimulating
increased demand for imported ilmenite. Increased imports of low-quality
ilmenite products and ilmenite concentrates are somewhat bridging this
gap. Kenmare is seeing strong demand from China for its remaining spot
sales in Q4 as a result of low inventories of high-quality ilmenite. As
a result, Kenmare has a more robust outlook for the ilmenite market in
Q4 and continuing into 2021.
The oversupply in the zircon market continued in Q3 2020. Demand for
zircon was subdued prior to COVID-19 and it has been exacerbated further
by global lockdowns. Prices for Kenmare's zircon were also impacted by a
reduction in zircon product quality during Q3 due to the operational
impacts of lower HMC availability and COVID-19-related staff shortages,
both affecting product recoveries. Travel restrictions have now begun to
ease, allowing employees to travel to and from site, and product quality
is expected to return to normal levels during Q4 once WCP B re-commences
production and HMC availability improves.
Additionally, the return of construction and real estate activity
globally is increasing demand. Inventories in the supply chain sit
mostly with the major zircon producers and supply discipline from these
producers is slowing price declines.
Kenmare expects the zircon market to remain challenging in the short
term, but to strengthen in the medium term as the major zircon mines
deplete, leading to constrained supply.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton
Investor Relations
https://www.globenewswire.com/Tracker?data=nnr3IxPpJfr3bLYNE88qYaAnxExkmxLT8nXCIP0bHDOhrokafB9XP5plq9zrRhMYv6m6XinaX7SG5p3lZFXIJPhVT0FCpwUBbYInk7rjfI4=
ir@kenmareresources.com
Tel: +353 1 671 0411
Mob: + 353 87 943 0367 / + 353 87 663 0875
Murray (PR advisor)
Joe Heron
Tel: +353 1 498 0300
Mob: +353 87 690 9735
About Kenmare Resources
Kenmare Resources plc is one of the world's largest producers of mineral
sands products. Listed on the London Stock Exchange and the Euronext
Dublin, Kenmare operates the Moma Titanium Minerals Mine in Mozambique.
Moma's production accounts for approximately 7% of global titanium
feedstocks and the Company supplies to customers operating in more than
15 countries. Kenmare produces raw materials that are ultimately
consumed in everyday "quality-of life" items such as paints, plastics
and ceramic tiles.
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.
(END) Dow Jones Newswires
October 15, 2020 02:00 ET (06:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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