TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company" or "the Group")
13 January 2021
Q4 2020 Production Report and FY 2021 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 full year ("FY") and fourth
quarter ending 31 December 2020 ("Q4 2020") and production guidance for
FY 2021.
Statement from Michael Carvill, Managing Director:
"Q4 2020 was a pivotal quarter for Kenmare, as we began mining the
Pilivili ore zone, following the successful move of Wet Concentrator
Plant B in Q3. WCP B began operating in late October and made a
significant contribution to our best production quarter of 2020,
benefitting from exceptionally high grades mined. It was also pleasing
to see a strong quarter for shipments, with over 300,000 tonnes shipped
during the period.
We achieved or exceeded the midpoint of our August 2020 guidance ranges
for all finished products and we are targeting an uplift of ilmenite
production in 2021 of between approximately 45% and 60%. In addition to
higher revenues, increased production will deliver lower unit costs,
significantly increasing cash flows and bringing us closer to our target
of becoming a first quartile producer on the industry revenue to cost
curve.
Global demand for ilmenite, our primary product, exceeded supply in Q4
2020 and led to significant price increases. Following our second and
third consecutive dividends paid in 2020, these positive operational and
market dynamics are expected to support increased cashflow, and in turn
our objective to increase shareholder returns."
Overview
-- Lost time injury frequency rate ("LTIFR") of 0.25 per 200,000 man-hours
worked for the 12-months to 31 December 2020 (31 December 2019: 0.27)
-- Increased COVID-19 positive test results were received for employees and
contractors in December 2020 as cases in Mozambique, and other parts of
the world, have also seen a recent upward trend - management remains
focused on limiting transmission and mitigating the impact of the virus
-- Production of all finished products at or above the midpoint of the FY
2020 revised guidance ranges
-- Q4 2020 represented the strongest quarter of the year for production and
shipments, as expected, benefitting from the higher ore grades being
mined by Wet Concentrator Plant ("WCP") B at Pilivili and calmer sea
conditions
-- Heavy Mineral Concentrate ("HMC") production of 1,201,100 tonnes in FY
2020, in line with FY 2019 (1,202,100 tonnes), benefitting from the
higher ore grades mined in Q4 2020 but offset by the decrease in
excavated ore volumes resulting from WCP B's relocation
-- Ilmenite production of 756,000 tonnes, a 15% decrease compared to FY 2019
(892,900 tonnes) due to lower HMC consumption, changes in intermediate
stocks and lower ilmenite recoveries in FY 2020
-- Total shipments of finished products of 853,100 tonnes, representing a
17% decrease compared to FY 2019 (1,029,300 tonnes), impacted by poor sea
conditions, and works to upgrade transhipment capacity
-- WCP B began mining in Pilivili in October, with operations connected to
grid power in December 2020 and the HMC pumping system on track to begin
commissioning and ramp-up in Q1 2021
-- At the end of 2020 Kenmare had US$64.0 million of net debt (year-end
2019: US$13.7 million net cash), with cash and cash equivalents of
US$87.2 million (year-end 2019: US$81.1 million)
-- Higher average prices achieved for ilmenite in Q4 2020, compared to the
prior quarter, with strong ilmenite pricing momentum continuing into H1
2021
-- FY 2021 ilmenite production guidance range of 1,100,000 to 1,200,000
tonnes
Production
Production from the Moma Mine in Q4 2020 and FY 2020 was as follows:
Q4 2020 vs Q4 2019 vs Q3 2020 FY 2020 vs FY 2019
----------------- --------- ---------- ---------- ---------- ----------
tonnes % change % change tonnes % change
----------------- --------- ---------- ---------- ---------- ----------
Excavated ore(1) 7,554,000 -9% -9% 34,357,000 -7%
----------------- --------- ---------- ---------- ---------- ----------
Grade(1) 5.64% 57% 58% 3.90% 9%
----------------- --------- ---------- ---------- ---------- ----------
Production
----------------- --------- ---------- ---------- ---------- ----------
HMC production 384,700 45% 49% 1,201,100 0%
----------------- --------- ---------- ---------- ---------- ----------
HMC consumption 338,900 26% 30% 1,157,900 -5%
----------------- --------- ---------- ---------- ---------- ----------
Ilmenite 219,100 7% 30% 756,000 -15%
----------------- --------- ---------- ---------- ---------- ----------
Primary zircon 11,200 3% 3% 43,300 -8%
----------------- --------- ---------- ---------- ---------- ----------
Rutile 1,400 -26% -13% 6,000 -28%
----------------- --------- ---------- ---------- ---------- ----------
Concentrates(2) 8,600 -14% -4% 35,200 -12%
----------------- --------- ---------- ---------- ---------- ----------
Shipments 321,300 -9% 172% 853,100 -17%
----------------- --------- ---------- ---------- ---------- ----------
1. Excavated ore and grade prior to any floor losses.
2. Concentrates include secondary zircon and mineral sands concentrate.
Kenmare recorded a LTIFR of 0.25 per 200,000 man-hours worked for the 12
months to 31 December 2020, which represents a marginal improvement
compared to the 12 months to 31 December 2019 (0.27). Whilst two lost
time injuries were recorded in Q4 2020, the rolling LTIFR improved from
0.29 in the 12 months to the end of Q3 2020, a result of continuing
improvements in safety leadership and risk assessment practices.
HMC production in FY 2020 was 1,201,100 tonnes, in line with FY 2019
(1,202,100 tonnes). FY 2020 ore grades increased by 9% to 3.90%,
compared to FY 2019 (3.58%). Higher grades were offset by reduced
excavated ore volumes due to the two-month interruption to operations at
WCP B during relocation. Although ore volumes were down 7% year-on-year,
WCP C commenced production in late February 2020, and contributed to
both grades mined and tonnes excavated.
As expected, Q4 2020 was the strongest quarter of the year for HMC
production, benefitting from the exceptionally high ore grades mined by
WCP B in Pilivili during November and December. Mining commenced in the
highest-grade area of Pilivili, resulting in a 57% increase in Q4 2020
grades to 5.64%, compared to Q4 2019 (3.60%).
Production of all finished products was at or above the midpoint of the
revised August 2020 guidance ranges. Ilmenite production was 756,000
tonnes, representing a 15% decrease compared to FY 2019 (892,900
tonnes). This was due to a 5% reduction in HMC consumption during the
year and lower MSP recoveries due to the impact of limited HMC
availability and reduced ilmenite content in the HMC during the first
nine months of the year. As expected, the ilmenite content in the HMC
increased as mining commenced in Pilivili.
Production of all finished products in Q4 2020 was impacted by
seasonally poor power reliability at the MSP. Typically, this would have
been mitigated by the use of diesel-powered electric generators, but
these were being utilised to power the Pilivili operations until grid
power was established in mid-December. This was one of the temporary
measures to alleviate COVID-19-related delays. From late December when
the generators were reinstalled at the MSP, production of all finished
products strengthened significantly due to improved recoveries and
operating time.
In Q4 2020, Kenmare produced 219,100 tonnes of ilmenite, a 7% increase
compared to Q4 2019 and a 30% increase compared to Q3 2020. Compared to
Q4 2019, ilmenite production was lower relative to HMC consumption due
to intermediate stockpile movements. Ilmenite recoveries were also lower
in Q4 2020 relative to the prior period as a result of power
interruptions and increased levels of contaminants in a part of WCP C's
mining area, which has now been resolved.
Primary zircon production in FY 2020 was 43,300 tonnes, an 8% decrease
compared to FY 2019 (46,900 tonnes) and rutile production was 6,000
tonnes, a 28% decrease compared to FY 2019 (8,300 tonnes). Production of
both products was impacted by decreased HMC availability year-on-year,
with weaker recoveries due to changes in feed characteristic, which also
continued to affect rutile production. A solution to improve rutile
production is under investigation. Concentrates production was 35,200
tonnes, a 12% decrease compared to FY 2019 (40,200 tonnes) but
benefitting from some of the recovery losses from rutile production,
which were captured in this product stream.
Whilst there was a 26% increase in HMC consumption in Q4 2020,
production of primary zircon only increased by 3% to 11,200 tonnes (Q4
2019: 10,900 tonnes) as a result of a build-up of intermediate stocks
offset by poorer recoveries, due primarily to power instability.
Production of rutile decreased by 26% to 1,400 tonnes (Q4 2019: 1,900
tonnes) and concentrates by 14% to 8,600 tonnes (Q4 2019: 10,000 tonnes)
for the same reasons.
Shipment volumes in FY 2020 were 853,100 tonnes, a 17% decrease compared
to FY 2019 (1,029,300 tonnes), impacted by adverse weather conditions
during a significant portion of the year and reduced availability of the
transhipment vessels, which underwent works to increase capacity.
Shipments were comprised of 766,500 tonnes of ilmenite, 43,100 tonnes of
primary zircon, 6,300 tonnes of rutile and 37,200 tonnes of
concentrates.
However as expected, Q4 2020 was the strongest quarter of the year for
shipments and the third strongest quarter in Kenmare's history, with
321,300 tonnes shipped. Q4 2020 represents a 9% decrease compared to Q4
2019, the quarterly record, impacted by two months of improvement works
relating to one of the transhipment vessels. Shipments in Q4 2020 were
comprised of 283,300 tonnes of ilmenite, 22,900 tonnes of primary zircon,
3,100 tonnes of rutile and 12,000 tonnes of concentrates.
Closing stock of HMC at the end of FY 2020 was 50,200 tonnes, compared
with 7,000 tonnes at the start of the year. Closing stock of finished
products at the end of FY 2020 was 145,500 tonnes (year-end 2019:
160,100 tonnes).
COVID-19 update
The State of National Public Calamity, declared by the Government of
Mozambique on 7 September 2020, remains in place. In addition, as with
other parts of the world, Mozambique has seen a recent increase in
COVID-19 cases.
In relation to cases at Moma, prior to December 2020, a limited number
of employees and contractors had tested positive for the Coronavirus. In
December 2020, the number of positive test results during the month
increased to approximately 25.
Stringent mitigation measures remain in place at site, including
heightened health protocols, social distancing measures and testing
procedures, including an on-site testing laboratory. All individuals
with positive test results are required to self-isolate in the Moma camp
until they receive a negative test result. Management continues to be
focused on limiting transmission and minimising the impact of COVID-19
on its employees, contractors and host communities.
Capital projects update
Kenmare previously announced 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 first
development project, a 20% expansion of WCP B, was commissioned
successfully in late 2018.
The second project, the development of WCP C, commenced production in
late February 2020. Although Kenmare is in discussions with the
contractor for the concentrator plant in relation to a number of
outstanding matters, such as acceptance and performance testing and
defect remediation, the project has been operating at expected
throughput levels and remains on track to be completed within the
original budget of US$45 million.
The third project, the relocation of WCP B to Pilivili, was successfully
undertaken in Q3 2020. The ramp-up began in Q4 2020 and continues to
progress well, with production in line with expectations and ore grades
significantly higher than previously being mined in Namalope.
Operations at Pilivili were connected to grid power in mid-December
2020, as expected, whilst the temporary trucking of HMC from Pilivili to
the MSP continues to run smoothly. The final parts of the HMC pumping
pipeline are expected to arrive on site in early February, with
commissioning and ramp-up expected to start during Q1 2021. The total
capital cost of the WCP B move is estimated at US$124 million, as
outlined in the Q3 2020 Production Report.
Several community development initiatives in Pilivili and the
surrounding area are under construction, including a new community
health centre and water supply systems. The Kenmare Moma Development
Association (KMAD) has also approved financial support for six
income-generating projects in the area, including grocery stores and a
small-scale flour mill.
Finance update
On 23 October 2020 Kenmare paid its third consecutive dividend, an
interim dividend of USc2.31 per share, in line with the policy to pay a
minimum of 20% of profit after tax. As previously stated, following
completion of the development projects, the Company expects to make
higher capital returns from 2021.
At 31 December 2020, Kenmare had net debt of US$64.0 million, compared
to net cash at the end of 2019 of US$13.7 million. Kenmare continues to
maintain an invoice discounting facility of up to US$30 million, which
was partially used in 2020. Cash and cash equivalents were US$87.2
million (2019: US$81.1 million) and gross bank loans, including accrued
interest, were US$151.2 million, in line with the debt position at the
end of H1 2020 (2019: US$67.4 million).
Market update
FY 2020 was a strong year for the titanium feedstocks market, with
Kenmare achieving higher average prices for its ilmenite and rutile
products compared with FY 2019. However, in FY 2020 zircon prices
decreased for the second consecutive year, due to continued oversupply
in the market.
Despite the disruption caused by the global COVID-19 pandemic, demand
for ilmenite remained strong in H1 2020. There was a marginal softening
in Q3 2020, but market conditions tightened strongly in Q4 2020,
delivering a 5% increase in average received prices over the prior
quarter. This momentum has continued into 2021.
Low supply chain inventories, in combination with global stimulus
efforts, supported a downstream pigment recovery during H2 2020. This
recovery was most pronounced in China, which saw pigment production
increase by more than 10% in FY 2020 compared to FY 2019, a record high.
This was supported by high utilisation rates at existing plants and the
ramp-up of new chloride pigment plants, building strong demand for
imported ilmenite.
Global ilmenite supply constraints remained in place due to depleting
ore bodies in Africa and mine closures in Australia, as well as
continued government restrictions in Vietnam and India. However,
ilmenite production in China increased, as well as global production of
low-quality ilmenite and ilmenite concentrates, which offset the reduced
supply from other mines. There is little new ilmenite supply forecast to
enter the market in the near term, with existing demand levels expected
to comfortably absorb Kenmare's increased 2021 production.
The zircon market continued to weaken in FY 2020 due to the impact of
the pandemic on global demand, particularly in Europe and China. Coupled
with a market already in oversupply, this resulted in sequentially
softer pricing through the first nine months of the year. However,
demand for zircon showed signs of recovery in Q4 2020 and Kenmare has
seen prices beginning to stabilise in early 2021.
FY 2021 guidance
The FY 2021 guidance for production and operating costs is as follows:
Unit FY 2021 Guidance FY 2020 Actual
--------------------------- ------- --------------------- --------------
Production
--------------------------- ------- --------------------- --------------
Ilmenite tonnes 1,100,000 - 1,200,000 756,000
--------------------------- ------- --------------------- --------------
Primary zircon tonnes 53,100 - 57,900 43,300
--------------------------- ------- --------------------- --------------
Rutile Tonnes 9,500 - 10,300 6,000
--------------------------- ------- --------------------- --------------
Concentrates(1) tonnes 37,900 - 41,400 35,200
--------------------------- ------- --------------------- --------------
Costs
------------------------------------ --------------------- --------------
Total cash operating costs US$m 166 - 184 N/R(2)
--------------------------- ------- --------------------- --------------
Cash costs per tonne of US$/t 132 - 146 N/R(2)
finished product
--------------------------- ------- --------------------- --------------
1. Concentrates include secondary zircon and mineral sands concentrate.
2. To be reported in full year financial statements
Production of all finished products in FY 2021 is expected to be higher
than in FY 2020, due primarily to WCP B mining higher grade ore in
Pilivili. Ilmenite production in FY 2021 is expected to be 1.1 million
to 1.2 million tonnes, building towards 1.2 million tonnes per annum on
a consistent basis. More than 50% of Moma's production is attributable
to WCP B following its relocation, as Pilivili is the highest grade ore
zone in Moma's portfolio. This guidance does not make any significant
allowance for further potential business interruption, such as through
the restriction on movement of goods or people, relating to the
continuing global pandemic.
Expenditure on development projects and studies is expected to be
approximately US$39 million in FY 2021. These costs primarily relate to
the remaining costs associated with the relocation of WCP B (US$19
million), some of which have been carried over from FY 2020 due to
timing of invoices, and improvement projects to enhance the resilience
of existing operations (US$9 million). The balance is attributable to
studies and community resettlement costs in preparation for the
relocation of WCP A to Nataka in 2025.
Sustaining capital costs in FY 2021 are expected to be approximately
US$25 million, in line with previously guided sustaining capital costs
of US$20-25 million per annum from 2020 to 2025.
Total cash operating costs are anticipated to increase in FY 2021 due to
increased production and the need to transport WCP B's HMC production
from Pilivili, which is a greater distance than the previous mining area
of Namalope, to the MSP. However, cash operating costs per tonne are
expected to decrease in FY 2021 due to higher anticipated production
volumes, and further decrease in 2022 as the Company targets a first
quartile position on the industry revenue to cost curve.
Kenmare will release its 2020 Preliminary Results on Wednesday 24 March
2021.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton
Investor Relations
https://www.globenewswire.com/Tracker?data=bSWAjX-9ib1R7ecAJVojR_JkzlM9Q112ZcpRd4wrL6tsMCSwdFkAeXb1MuD0xIMp64V3FTD6nUkKN3rL0-gxXUyL1efeduEAi9xfMRIbU40=
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
January 13, 2021 02:00 ET (07:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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