TIDMKMR
Kenmare Resources plc
("Kenmare" or "the Company" or "the Group")
18 August 2021
Half-Yearly Financial Report for the six months to 30 June 2021
and interim dividend
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, today publishes its Half-Yearly Financial Report for
the six month period ended 30 June 2021 ("H1 2021") and announces
its interim dividend for 2021.
Statement from Michael Carvill, Managing Director:
"I am delighted to see the capital investment and the hard work
of our teams over the last three years generating significant
increases in production and sales volumes. This is also translating
into higher profitability. H1 2021 EBITDA is up 121% on last year
and profits after tax are up 278%. As a result, we have increased
our interim dividend to USc7.29 per share, more than triple last
year's interim dividend.
We remain concerned by the rise in delta variant COVID-19 cases
in Southern Africa. Therefore, I'm particularly pleased that we
completed the first round of COVID-19 vaccinations for our Mine
employees and contractors. Local community vaccinations have also
commenced.
We remain confident in the outlook for annual production and
re-iterate our guidance of 1.1-1.2 million tonnes of ilmenite in
2021. I am pleased our RUPS decarbonisation project, targeting a
material reduction in CO(2) emissions, is underway. Market
conditions for titanium feedstocks remained strong in H1 2021, with
pricing strengthening quarter on quarter. The outlook for zircon
has also continued to improve, with price increases during the half
and continuing into H2 2021 to date."
H1 2021 overview
Operations
-- Lost time injury frequency rate ("LTIFR") of 0.14 per 200,000 work-hours
for the 12 months to 30 June 2021 (30 June 2020: 0.32) -- a result of
embedding improved risk management practices and strengthening safety
leadership
-- First round of COVID-19 vaccinations of the Mine workforce completed,
second round commenced and due for completion by mid-September. Local
community vaccination programme to distribute 12,000 inoculations started
in July 2021
-- Excavated ore volumes of 19.9 million tonnes, including
quarter-on-quarter record of 10.9 million tonnes in Q2 2021
-- Heavy Mineral Concentrate ("HMC") production of 798,500 tonnes, a 43%
increase compared to H1 2020 (558,400 tonnes), due to higher ore grades
and tonnes mined
-- Total finished product production of 612,100 tonnes, a 49% increase
compared to H1 2020 (410,600 tonnes) due primarily to increased HMC
availability
-- Total shipments of 594,100 tonnes, a 44% increase (H1 2020: 413,700
tonnes), due to higher production volumes
-- Kenmare expects production of all products to be within 2021 guidance
Financials and markets
-- Interim dividend of USc7.29 (H1 2020: USc2.31) per share, up 217%, in
line with Kenmare's dividend target to return 25% of profit after tax in
2021
-- Revenues (FOB) of US$167.8 million in H1 2021, up 51% compared to H1 2020
(US$111.2 million), benefitting from higher volumes shipped and higher
prices
-- EBITDA of US$82.3 million, a 121% increase compared to H1 2020 (US$37.2
million), due to higher pricing and shipments combined with lower unit
costs. Profit after tax of US$48.0 million, up 278% (H1 2020: US$12.7
million) setting a new half-yearly record
-- Average received free on board ("FOB") price for all finished products of
US$282 per tonne in H1 2021, a 5% increase compared to H1 2020 (US$269
per tonne), benefitting from strong market conditions but impacted by a
lower proportion of zircon and rutile sales, which is expected to reverse
in H2
-- Cash operating cost per tonne of finished product fell by 22% to US$143
per tonne (H1 2020: US$183 per tonne), as higher cash operating costs
were more than offset by increased production volumes
-- At the end of H1 2021, cash and cash equivalents were US$56.5 million and
gross debt was US$132.7 million, resulting in net debt of US$76.2 million
(31 December 2020: US$64.0 million), which is mainly due to the timing of
capital expenditure payments and a reduction in the use of invoice
factoring
-- Strong ilmenite market conditions continued in H1 2021 and this is
expected to continue in Q3 2021, with higher prices agreed and a strong
order book in place
-- The outlook for zircon market has improved, with received prices rising
in Q2 2021
Analyst & investor webcast
Kenmare will host a conference call and webcast for analysts,
institutional investors, and media today at 9:00am GMT. To access
the webcast, please register in advance by clicking here
https://www.globenewswire.com/Tracker?data=Lgqd4Pf-4NMCKQy6XClFLxY37S4F02z335QdRzOLbXyghRNjnMmLyh7tp7isdCRThU8yaRNy68UA_9cdhII0RbxbwTFq2xxtw-DZ3TwrdUh1rxTGDGBv2PAFj-t5L0qI
.
Private investor webinar
There will also be a separate webinar for private investors
tomorrow, Thursday, 19 August 2021, at 17:30 BST. To access the
webinar, please register in advance by clicking here
https://www.globenewswire.com/Tracker?data=Lgqd4Pf-4NMCKQy6XClFL0YHzdlz8yHky_1yAGj0xM1Sv_44Fd7yTNyzn6kvd_S2E9LtNidTJSHMmyf_x2Hugy8GUDK2w_P7fjRd7BMjAvGZxcQJTuwaoXSjGCLEeZcKzVp5L-22NhAf1VY9QP--Vg==
.
To view this announcement as a PDF, please click here
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.
The Half-Yearly Financial Report for the period ended 30 June
2021 is also available at
www.kenmareresources.com/investors/reports-and-presentations.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb
Investor Relations
Tel: +353 1 671 0411
Mob: + 353 87 943 0367
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 5% of
traded 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.
INTERIM MANAGEMENT REPORT
Group Results
Operational and financial results for H1 2021 were as
follows:
H1 H1
2021 2020 % Change
-------------------------------------------------- ------- ------- --------
Production (tonnes)
-------------------------------------------------- ------- ------- --------
Heavy mineral concentrate production 798,500 558,400 43%
-------------------------------------------------- ------- ------- --------
Heavy mineral concentrate treatment 814,400 558,600 46%
-------------------------------------------------- ------- ------- --------
Finished products production
-------------------------------------------------- ------- ------- --------
Ilmenite 559,000 368,900 52%
-------------------------------------------------- ------- ------- --------
Primary zircon 28,200 21,200 33%
-------------------------------------------------- ------- ------- --------
Rutile 4,200 2,900 45%
-------------------------------------------------- ------- ------- --------
Concentrates(2) 20,700 17,600 18%
-------------------------------------------------- ------- ------- --------
Total finished products 612,100 410,600 49%
-------------------------------------------------- ------- ------- --------
Financials
-------------------------------------------------- ------- ------- --------
Revenue (US$ million) 178.2 116.8 53%
-------------------------------------------------- ------- ------- --------
Freight (US$ million) 10.4 5.6 86%
-------------------------------------------------- ------- ------- --------
Revenue FOB (US$ million)(1) 167.8 111.2 51%
-------------------------------------------------- ------- ------- --------
Finished products shipped (tonnes)(1) 594,100 413,700 44%
-------------------------------------------------- ------- ------- --------
Average price (FOB) per tonne (US$/t) 282 269 5%
-------------------------------------------------- ------- ------- --------
Total operating costs (US$ million)(3) 119.5 96.9 23%
-------------------------------------------------- ------- ------- --------
Total cash operating costs (US$ million)(4) 87.3 75.2 16%
-------------------------------------------------- ------- ------- --------
Cash operating cost per tonne of finished product
(US$/t)(1) 143 183 -22%
-------------------------------------------------- ------- ------- --------
Cash operating cost per tonne of ilmenite (net of
co-products) (US$/t)(1) 113 119 -5%
-------------------------------------------------- ------- ------- --------
EBITDA (US$ million)(1) 82.3 37.2 121%
-------------------------------------------------- ------- ------- --------
Profit before tax (US$ million) 50.6 16.0 216%
-------------------------------------------------- ------- ------- --------
Profit after tax (US$ million) 48.0 12.7 278%
-------------------------------------------------- ------- ------- --------
Notes
1. Additional information in relation to Alternative Performance Measures
("APMs") is disclosed in the Glossary.
2. Concentrates includes secondary zircon and mineral sands concentrate.
3. Total operating costs consists of cost of sales and other
operating costs as reported in the income statement. Included in
operating costs are depreciation and amortisation.
4. Total cash costs consists of total operating costs less
freight and non-cash costs, including inventory movements.
Operations
Kenmare's rolling 12-month LTIFR was 0.14 per 200,000 work-hours
at 30 June 2021 (30 June 2020: 0.32) with one lost time injury
recorded during the first half of the year.
During H1 2021, Kenmare mined a record 19.9 million tonnes of
ore at an average grade of 4.67%. Excavated ore tonnes increased 8%
compared to H1 2020 (18.5 million tonnes), whilst grades increased
40% to 4.67% (H1 2020: 3.33%) benefitting from the WCP B mining in
Pilivili.
High mining rates are expected to continue as we see the benefit
of improvements in throughputs and utilisations, and as previously
announced, grades are expected to be maintained between 4.5-5.0%
Total Heavy Mineral until Q4 2021 (when grades are anticipated to
drop to 3.8%), before normalising at around 4.1% in 2022.
Production of all finished products increased in H1 2021
compared to H1 2020 due to a 43% increase in HMC production.
Ilmenite production was 559,000 tonnes in H1 2021, representing a
52% increase compared to H1 2020 (368,900 tonnes). Despite ilmenite
recoveries being slightly lower than expected in H1 2021,
production set a new quarterly record in Q2 2021 and recoveries
have now returned to expected levels.
Primary zircon production was 28,200 tonnes, representing a 33%
increase compared to H1 2021 (21,200 tonnes). Production benefitted
from increased HMC supply but was hampered by some lower recoveries
experienced at the height of the COVID-19 pandemic due to a
shortage of personnel. Rutile production was 4,200 tonnes, a 45%
increase (H1 2020: 2,900 tonnes), also benefitting from higher HMC
treatment, and a successful recovery programme. Concentrates
production was 20,700 tonnes, representing an 18% increase compared
to H1 2020 (17,600 tonnes), due to a build-up of intermediate
stock.
Kenmare shipped 594,100 tonnes of finished products during the
period, a 44% increase compared to H1 2020 (413,700 tonnes). This
comprised 562,100 tonnes of ilmenite, 18,500 tonnes of primary
zircon, and 13,500 tonnes of concentrates. International shipping
availability impacted the normal mix of zircon and rutile products
shipped in H1 2021, which is expected to reverse in H2 2021.
Closing stock of HMC at the end of H1 2021 was 34,300 tonnes,
compared with 50,200 tonnes at the end of 2020. Closing stock of
finished products at the end of H1 2021 was 164,100 tonnes,
compared to 145,500 tonnes at the end of 2020.
COVID-19 health update
COVID-19 cases at Moma steadily decreased through Q2 2021,
following the higher cases reported in Q1 2021. This reduced to
zero in May. However, Moma has experienced an increase associated
with the Southern Africa third wave of cases, which has led to a
small increase at site, with 21 people currently in isolation.
Protecting our people and the communities in which Kenmare
operates has always been our highest priority. In addition to the
various physical distancing and hygiene protocols, and testing
procedures, Kenmare has been working with industry partners and the
Government of Mozambique to acquire, distribute and administer
vaccines. The first vaccinations have been offered to all
employees, on-site contractors and employees' partners, and the
second vaccine process has commenced. 12,000 vaccines have been
purchased for a local community inoculation programme.
Capital projects
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 first development project, a 20% expansion of WCP B, was
commissioned successfully in late 2018. The second development
project, the construction of WCP C, has delivered targeted
throughput of 500 tph on a consistent basis since Q1 2020. The
previously highlighted outstanding items for completion of the WCP
C project have now been satisfactorily resolved and the project is
due to be closed out shortly, with a final cost of US$43.5 million
versus the forecast cost of US$45 million.
The final capital project to move WCP B to Pilivili, including
associated infrastructure, is now substantially complete. The
pipeline for pumping HMC from Pilivili has been installed and is
undergoing ramp-up. Heavy mineral product is being transported via
the pipeline, and design throughput rates have been achieved.
However, reliability of some pump parts has been an issue, leading
to lower-than-expected utilisation and subsequently a slower ramp
up. HMC will continue to be trucked, at lower levels, until
targeted utilisations are achieved. The total capital cost of the
WCP B move is estimated at US$127 million, in line with estimates
provided with the 2020 Preliminary Results in March 2021.
Studies in preparation for mining the Nataka ore zone have
progressed. WCP A and WCP C are both expected to mine in Nataka,
with WCP A commencing in 2025. Orebody characterisation works are
well underway, and will be combined with mining, processing and
tails management studies. Environmental and social assessments will
commence in H2 2021. A prefeasibility study is due to be completed
in 2022.
The development of a RUPS (Rotary Uninterruptible Power Supply)
for the Mineral Separation Plant is intended to reduce reliance on
diesel generators and to provide power stability, thereby reducing
mine CO(2) emissions materially. The project is a net present
value-positive project on conservative assumptions, which also
provides business continuity risk mitigation benefits. The
execution phase of the project is underway with fabrication and
civil engineering advanced. The project is scheduled to be
delivered at the end of January 2022 at an estimated cost of US$18
million (previous estimate reported at US$16 million).
Market update
Demand for titanium feedstocks accelerated throughout H1 2021,
which allowed Kenmare to achieve consecutive prices increases in Q1
and Q2 2021. Following several weak quarters, the zircon market
rebounded in the latter half of Q1 2021. This allowed stronger
prices to be agreed for zircon in Q2 2021.
Global demand for ilmenite continued to improve in H1 2021
following a strong rebound in H2 2020. Accommodating monetary and
fiscal policy globally has boosted demand for TiO(2) pigment, which
has led pigment producers throughout the globe to run their plants
at high operating rates and has resulted in a firm demand
environment for ilmenite. Titanium metal and welding electrode
markets also showed robust demand growth in H1 2021, which has
further tightened titanium feedstock demand.
Global ilmenite supply increased in H1 2021 to meet greater
demand. Outside of Kenmare, this increase in supply primarily came
from China, Vietnam and from concentrates containing ilmenite in
Africa. We have observed a decline in supply from Vietnam in recent
months; however, we expect to see supply from China and Africa
remain elevated. Despite this greater supply, we believe the market
remains undersupplied and this is being exacerbated by global
supply constraints.
The outlook for ilmenite remains positive. Kenmare continues to
receive strong demand for its ilmenite products and pricing
momentum has continued into Q3 2021. We have a strong order book
for the remainder of the year and the market is absorbing increased
production.
The zircon market strengthened significantly in Q2 2021
following several weak quarters. Ceramic tile producers are
operating at high utilisation rates as a result of the global
economic recovery. This has led to a large pull-through to zircon
demand as supply chain inventories were low, while supply
constraints worsened the tight market in the latter stage of H1
2021. Price increases were agreed in Q2 2021 and further price
gains are expected in H2 2021 as the market remains undersupplied
and inventories remain low.
Financial review
In H1 2021, Kenmare generated revenue (FOB) of US$167.8 million
(H1 2020: US$111.2 million) and EBITDA of US$82.3 million (H1 2020:
US$37.2 million). The Company expects to pay a full year dividend
of 25% of profit after tax for 2021, subject to prevailing product,
market and other conditions.
Revenue
Revenue (FOB) increased by 51% in H1 2021 to US$167.8 million
compared to H1 2020 (US$111.2 million), driven by a 44% increase in
tonnes of finished products sold and a 5% increase in the average
received price per tonne (FOB). Freight costs in H1 2021 increased
to US$10.4 million (H1 2020: US$5.6 million), reflecting a more
expensive freight market due to strong global demand for
commodities. Shipments comprised 562,100 tonnes of ilmenite, 18,500
tonnes of primary zircon, and 13,500 tonnes of concentrates.
Ilmenite revenue (FOB) increased to US$143.9 million in H1 2021
(H1 2020: US$80.3 million), as a result of a 52% increase in
shipment volumes and an 18% price increase to US$256 per tonne (H1
2020: US$217 per tonne). Primary zircon revenue (FOB) decreased by
5% to US$19.2 million (H1 2020: US$20.2 million) due to an 8%
decrease in shipment volumes, partly offset by a 4% price increase.
It is this product mix movement arising on the lower zircon volumes
shipped compared with the previous period that moderated the total
finished products increase in the average received price per tonne
(FOB) to 5%, as noted above.
Operating costs
Total operating costs increased in H1 2021 to US$119.5 million
(H1 2020: US$96.9 million). The increase in costs is due to
increased freight charges for shipping, increased COVID-19 costs to
deal with the Mozambican second wave experienced in Q1 2021,
increased plant maintenance costs, additional HMC haulage costs
from Pilivili and increased mining royalties and processing taxes
due to increased sales and pricing. A number of these increases are
expected to be short term issues, with strong management focus on
maintaining cost discipline. Depreciation has increased as a result
of higher production levels and the significant capital investments
in property, plant and equipment in the prior year. Total cash
operating costs increased to US$87.3 million
(H1 2020: US$75.2 million). A 49% increase in production of finished products has resulted in a 22% decrease in cash operating costs per tonne to US$143 per tonne in H1 2021 (H1 2020: US$183 per tonne).
Finance income and costs
The Group recognised finance income of US$0.04 million in H1
2021 (H1 2020: US$0.5 million), consisting of interest on bank
deposits. Finance costs were US$6.1 million in H1 2021 (H1 2020:
US$5.1 million), including loan interest of US$4.9 million (H1
2020: US$4.0 million). The increase in loan interest year-on-year
reflects the higher gross debt, offset by lower US LIBOR interest
rates. Factoring and other fees were US$0.8 million (H1 2021:
US$0.3 million) in the period. The unwinding of the mine closure
provision amounted to US$0.4 million (H1 2020: US$0.3 million) in
the period.
Commitment fees under the debt facilities were US$0.02 million
(US$0.3 million) and lease interest was US$0.1 million (H1 2020:
US$0.2 million) in the period.
Exchange movements
An exchange loss of US$2.0 million (H1 2020: gain US$0.7
million) arose during H1 2021. This primarily relates to operating
and capital costs denominated in Mozambique Metical, which
strengthened sharply against the US Dollar during April 2021.
Tax
The tax charge for H1 2021 amounted to US$2.6 million (H1 2020:
US$3.3 million). Kenmare's subsidiary, Kenmare Moma Mining
(Mauritius) Limited, incurred a Mozambican tax charge of US$2.3
million (H1 2020: US$3.0 million), which is down on the prior year
mainly as a result of additional capital allowances due to higher
depreciation following significant capital investments in 2020,
including completion of the WCP C and move of WCP B to Pilivili.
Kenmare Resources plc incurred a tax charge of US$0.3 million (H1
2020: US$0.3 million).
Cash flows
Net cash from operations in H1 2021 was US$33.9 million (H1
2020: US$0.1 million) after spend on working capital of US$42.3
million (H1 2020: US$29.3 million) reflecting increased production
and stock levels, investment in plant spares and consumables,
increases in shipment volumes and sales to customers and the
payment of development project suppliers for the move of WCP B to
the Pilivili orebody and additional infrastructure required.
Investing activities of US$31.8 million (H1 2020: US$59.4
million) during the period represented additions to property, plant
and equipment. US$20.0 million of debt was repaid in the period (H1
2020: debt drawn US$82.7 million) and a final dividend for 2020 of
US$8.5 million (H1 2020: US$6.0 million), representing USc7.69 (H1
2020: USc5.52) per share, was paid in May 2021. Lease repayments of
US$0.5 million (H1 2020: US$0.5 million) and factoring fees of
US$0.8 million (H1 2020: US$0.3 million) were also paid in the
period.
Consequently, Kenmare finished the period with US$56.5 million
of cash and cash equivalents, representing a decrease of US$30.7
million compared to year-end 2020 (US$87.2 million).
Balance sheet
In H1 2021 there were additions to property, plant and equipment
of US$23.6 million (H1 2020: US$59.2 million). Additions consisted
of US$9.7 million for project execution costs for the relocation of
WCP B to the high grade Pilivili ore zone, US$4.2 million on a
Rotary Uninterruptable Power Supply (RUPS) project and US$9.7
million on sustaining capital and other capital projects.
Depreciation increased to US$23.5 million in H1 2021 (H1 2020:
US$17.3 million), primarily as a result of increased production and
the WCP B costs capitalised in H2 2020. The mine closure provision
was reduced by US$5.2 million in H1 2021 (H1 2020: increased by
US$10.8 million). This was due to an increase in the discount rate
used to estimate the closure cost provision from 2.0% to 2.3%.
There were no asset disposals during the period (H1 2020: US$7.7
million).
The Group conducted an impairment review of property, plant and
equipment at the period-end and the key assumptions of this review
are set out in Note 10 of the financial statements. No impairment
provision is required as a result of this review.
Inventory at period-end amounted to US$69.6 million (H1 2020:
US$58.3 million), consisting of intermediate and finished mineral
products of US$35.2 million (H1 2020: US$28.7 million) and
consumables and spares of US$34.4 million (H1 2020: US$29.6
million). Closing stock of HMC at the end of June 2021 was 34,300
tonnes compared with 6,800 tonnes at the end of June 2020. Closing
stock of finished products at the end of June 2021 was 164,100
tonnes (H1 2020: 157,000 tonnes).
Trade and other receivables amounted to US$51.3 million (H1
2020: US$60.5 million), of which US$39.3 million (H1 2020: US$45.6
million) were trade receivables from the sale of mineral products
and US$12.0 million (H1 2020: US$14.9 million) was comprised of
supplier prepayments and other miscellaneous debtors. Trade
receivables are a function of shipments made before period-end and
credit terms specific to the relevant customer. The Group did not
discount the invoices of its customers using the Absa Bank facility
in the period in order to save discounting costs and as the funds
were not required. There have been no credit impairments during the
period. An expected credit loss of US$0.1 million (H1 2020: US$0.08
million) was recognised during the period.
Cash and cash equivalents decreased by US$30.7 million in the
period (H1 2020: increase of US$17.4 million) and at 30 June 2021
amounted to US$56.5 million (H1 2020: US$98.6 million).
Lease liabilities amounted to US$2.8 million (H1 2020: US$3.9
million) at period-end.
Tax liabilities and trade and other payables amounted to US$0.6
million (H1 2020: US$1.8 million) and US$25.8 million (H1 2020:
US$32.1 million) respectively at period-end. The decrease in trade
and other payables of US$24.3 million is principally due to the
close-out and payment of capital projects contractors in the period
relating to the move of WCP B to Pilivili in Q4 2021 and timing of
creditor payments around the year-end.
Debt facilities
The debt facilities comprise a US$110 million Term Loan Facility
and a US$40 million Revolving Credit Facility, all of which were
drawn in 2020. US$20 million of the Revolving Credit Facility was
repaid in June 2021. The repaid amount is available to be redrawn
by the Group if needed. The first principal repayment (US$15.7
million) under the term facility is in March 2022.
At the period-end, reported debt amounted to US$128.0 million
(H1 2020: US$145.2 million). This consists of debt drawn of
US$130.0 million and loan interest and amortisation of US$2.7
million, net of transaction costs of US$4.7 million. The weighted
average interest rate on Group debt at period-end was 5.5% (H1
2020: 6.1%). The Group is in compliance with all debt covenants as
at 30 June 2021.
Financial outlook
We will continue to identify and manage risks to the business,
such as COVID-19, in a safe, sustainable manner and to support our
strategic objectives.
Solid operational cashflow generated during H1 2021 supported
the unwinding of working capital investment at 31 December 2020 to
more normalised levels and we expect that cashflow generation in H2
will enable us to continue the ongoing funding of planned capital
projects. In addition to sustaining and improvement projects,
capital projects include the RUPS, which will enhance environmental
performance and the resilience of the MSP by improving power supply
reliability, and Nataka orebody mining studies.
The strong cashflow generated also enabled us to repay US$20
million of the Revolving Credit Facility in H1 2021 and we plan to
continue to reduce debt levels as part of our objective to maintain
a robust Balance Sheet.
Increased production, reduced unit costs and strong markets
for
Kenmare's products in H1 2021 resulted in strong earnings growth. We plan to build on these positive trends for the remainder of this year and we look forward to continued delivery on our objective of increasing shareholder returns in H2 2021.
Interim dividend
Kenmare generated profit after tax of US$48.0 million in H1 2021
(H1 2020: US$12.7 million). The Board has therefore approved an
interim 2021 dividend of USc7.29 (H1 2020: USc2.31) per share, for
a total distribution of US$8.0 million (H1 2020: US$2.6 million).
The 2021 interim dividend has been calculated as 66.6% of 25% of H1
2021 profit after tax (US$48.0 million), in line with the intention
to target a one-third/two-thirds interim/final dividend split. The
financial statements do not reflect this interim dividend.
The Company will pay the interim dividend on 22 October 2021 to
shareholders of record at the close of business on 24 September
2021. Irish Dividend Withholding Tax (25%) must be deducted from
dividends paid by the Company, unless a shareholder is entitled to
an exemption and has submitted a properly completed exemption form
to the Company's Registrar.
The dividend timetable is as follows:
Announcement of interim dividend 18 August 2021
Ex-Dividend Date 23 September 2021
Record Date 24 September 2021
Currency election cut-off 28 September 2021
date
Payment Date 22 October 2021
Principal risks and uncertainties
There are a number of potential risks and uncertainties, that
could have a material impact on Kenmare's performance over the
remaining six months of the 2021 financial year and which could
cause actual results to differ materially from expected and
historic results.
These principal risks and uncertainties are disclosed in
Kenmare's Annual Report for the year ended 31 December 2020. A
detailed explanation of these principal risks and uncertainties and
how Kenmare seeks to mitigate these risks, can be found on pages 60
to 65 of the Annual Report under the following headings: grant and
maintenance of licenses, country risk, geotechnical risk, severe
weather events, uncertainty over physical characteristics of the
orebody, power supply and transmission risk, asset damage or loss,
COVID-19, health, safety and environment, mineral resource
statement risk, IT security risk, development project risk,
industry cyclicality, customer concentration, foreign currency risk
and loan default risk.
In relation to these previously disclosed risks, the following
commentary may be noted:
-- Country risk: The ongoing insurgency in the Cabo Delgado province of
Mozambique remains a concern for Kenmare. To date it has had no direct
impact on the Moma operation but is being monitored closely.
-- COVID-19: The COVID-19 pandemic remains prevalent globally. Kenmare is
managing this risk by implementing a COVID-19 management plan, which has
seen success during 2021. However, the rise of the Delta variant and a
third wave of cases across Southern Africa, has seen a rise in cases in
Mozambique and a small rise in cases at the Moma operation. To further
manage this risk, Kenmare has been working closely with industry partners
and the Government of Mozambique to acquire, distribute and administer
vaccines to the Kenmare workforce, on site contractors and surrounding
communities.
Related party transactions
There have been no material changes in the related party
transactions affecting the financial position or the performance of
the Group in the period since publication of the 2020 Annual Report
other than those disclosed in Note 20 to the condensed consolidated
financial statements.
Going Concern
As stated in Note 1 to the condensed consolidated financial
statements, based on the Group's forecasts and projections the
Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not
less than twelve months from the date of this report. Accordingly,
they continue to adopt the going concern basis in preparing the
condensed consolidated financial statements.
Events after the Statement of Financial Position Date
Interim dividend
An interim dividend for the year ended 31 December 2021 of
USc7.29 per share was approved by the Board on 17 August 2021. The
dividend payable of US$8.0 million has not been included as a
liability in these financial statements. The interim dividend is
payable to all shareholders on the Register of Members on 24
September 2021.
There have been no other significant events since 30 June 2021
that would have a significant impact on the financial statements of
the Group.
Forward-looking statements
This report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the
information available to them up to the time of their approval of
this report, and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
On behalf of the Board,
Managing Director Financial Director
Michael Carvill Tony McCluskey
17 August 2021 17 August 2021
INDEPENT REVIEW REPORT TO KENMARE RESOURCES PLC
Introduction
We have been engaged by Kenmare Resources plc ("the Company" or
"the Entity") to review the condensed set of consolidated financial
statements in the half-yearly financial report for the six months
ended 30 June 2021 which comprises the condensed consolidated
interim income statement, the condensed consolidated interim
statement of other comprehensive income, the condensed consolidated
interim statement of financial position, the condensed consolidated
interim statement of cash flows, the condensed consolidated interim
statement of changes in equity and the related explanatory notes.
Our review was conducted having regard to the Financial Reporting
Council's International Standard on Review Engagements (UK and
Ireland) 2410, 'Review of Interim Financial Information Performed
by the Independent Auditor of the Entity'.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2021 is not prepared, in all material
respects in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the EU, the Transparency (Directive 2004/109/EC)
Regulations 2007 ("Transparency Directive"), and the Transparency
Rules of the Central Bank of Ireland.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Transparency Directive and the Transparency Rules of the
Central Bank of Ireland. As disclosed in note 1, the annual
financial statements of the Group are prepared in accordance with
International Financial Reporting Standards as adopted by the EU.
The directors are responsible for ensuring that the condensed set
of consolidated financial statements included in this half-yearly
financial report has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Entity a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review having regard to the Financial Reporting
Council's International Standard on Review Engagements (UK and
Ireland) 2410 Review of Interim Financial Information Performed by
the Independent Auditor of the Entity. A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (Ireland) and consequently
does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies, we consider the implications for our report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Entity in meeting the
requirements of the Transparency Directive and the Transparency
Rules of the Central Bank of Ireland. Our review has been
undertaken so that we might state to the Entity those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Entity for our
review work, for this report, or for the conclusions we have
reached.
Keith Watt
For and on behalf of KPMG
Chartered Accountants
1 Stokes Place
St. Stephen's Green
Dublin 2
17 August 2021
Group condensed consolidated statement of comprehensive
income
For the financial period ended 30 June 2021
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
30 June 2021 30 June 2020 31 Dec 2020
Notes US$'000 US$'000 US$'000
Revenue 2 178,249 116,803 243,746
Cost of sales 4 (100,330) (82,722) (179,103)
Gross profit 77,919 34,081 64,643
Other operating costs 5 (19,159) (14,190) (30,250)
Operating profit 58,760 19,891 34,393
Finance income 40 493 642
Finance costs 7 (6,143) (5,133) (11,301)
Foreign exchange (loss)/gain (2,014) 728 (980)
Profit before tax 50,643 15,979 22,754
Income tax expense 8 (2,619) (3,324) (6,015)
Profit for the financial period and total comprehensive
income for the financial period 48,024 12,655 16,739
-------------------------------------------------------- ----- ------------- ------------- ------------
Attributable to equity holders 48,024 12,655 16,739
-------------------------------------------------------- ----- ------------- ------------- ------------
US$ per
US$ per share US$ per share share
Profit per share: Basic 9 0.44 0.12 0.15
-------------------------------------------------------- ----- ------------- ------------- ------------
Profit per share: Diluted 9 0.43 0.11 0.15
-------------------------------------------------------- ----- ------------- ------------- ------------
The accompanying notes form part of these financial
statements.
Group condensed consolidated statement of financial position
As at 30 June 2021
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
Notes US$'000 US$'000 US$'000
Assets
Non-current assets
Property, plant and
equipment 10 956,554 904,617 961,728
Deferred tax asset -- 198 202
956,554 904,815 961,930
--------------------------- ----- ------------- ------------- ------------
Current assets
Inventories 11 69,576 58,288 63,670
Trade and other receivables 12 51,288 60,470 29,915
Cash and cash equivalents 56,543 98,591 87,244
177,407 217,349 180,829
--------------------------- ----- ------------- ------------- ------------
Total assets 1,133,961 1,122,164 1,142,759
--------------------------- ----- ------------- ------------- ------------
Equity
Capital and reserves
attributable to the
Company's equity holders
Called-up share capital 13 120 120 120
Share premium 545,950 545,950 545,950
Other reserves 229,328 230,867 231,350
Retained earnings 164,605 121,567 123,083
Total equity 940,003 898,504 900,503
--------------------------- ----- ------------- ------------- ------------
Liabilities
Non-current liabilities
Bank loans 14 109,595 143,886 144,554
Lease liabilities 14 1,756 2,569 2,028
Provisions 16 35,798 39,915 40,430
147,149 186,370 187,012
--------------------------- ----- ------------- ------------- ------------
Current liabilities
Bank loans 14 18,429 1,294 1,217
Lease liabilities 14 1,093 1,361 1,360
Trade and other payables 15 25,809 32,069 50,122
Tax liabilities 564 1,823 1,631
Provisions 16 914 743 914
46,809 37,290 55,244
--------------------------- ----- ------------- ------------- ------------
Total liabilities 193,958 223,660 242,256
--------------------------- ----- ------------- ------------- ------------
Total equity and
liabilities 1,133,961 1,122,164 1,142,759
--------------------------- ----- ------------- ------------- ------------
The accompanying notes form part of these financial
statements.
On behalf of the Board:
M. CARVILL
Director
17 August 2021
T. MCCLUSKEY
Director
17 August 2021
Group condensed consolidated statement of changes in equity
Called-Up Share-Based
Share Retained Undenominated Payment
Capital Share Premium Earnings Capital Reserve Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2020 215,046 545,729 93,851 11,336 25,866 891,828
Profit for the financial
period -- -- 12,655 -- -- 12,655
Transactions with owners
of the Company
Share-based payments -- -- -- -- 47 47
Unvested and expired share-based
payments -- -- 21,087 -- (21,087) --
Shares issued (Note 13) -- 221 -- -- (221) --
Deferred shares (Note 13) (214,926) -- -- 214,926 -- --
Dividends -- -- (6,026) -- -- (6,026)
Balance at 30 June 2020 120 545,950 121,567 226,262 4,605 898,504
--------------------------------- --------- ------------- --------- ------------- ----------- --------
Profit for the financial
period -- -- 4,084 -- -- 4,084
Transactions with owners
of the Company
Share-based payments -- -- -- -- 483 483
Shares issued -- -- -- -- -- --
Dividends -- -- (2,568) -- -- (2,568)
Balance at 31 December
2020 120 545,950 123,083 226,262 5,088 900,503
--------------------------------- --------- ------------- --------- ------------- ----------- --------
Profit for the financial
period -- -- 48,024 -- -- 48,024
Transactions with owners
of the Company
Share-based payments (Note
18) -- -- -- -- (58) (58)
Unvested and expired share-based
payments (Note 18) -- -- 1,964 -- (1,964) --
Dividends (Note 13) -- -- (8,466) -- -- (8,466)
Balance at 30 June 2021 120 545,950 164,605 226,262 3,066 940,003
--------------------------------- --------- ------------- --------- ------------- ----------- --------
For the financial period ended 30 June 2021
Group condensed consolidated statement of cash flows
For the financial period ended 30 June 2021
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
30 June 2021 30 June 2020 31 Dec 2020
Notes US$'000 US$'000 US$'000
Operating activities
Profit for the financial period/year after tax 48,024 12,655 16,739
Adjustment for:
Foreign exchange movement 2,014 (728) 980
Share-based payments 18 2,122 1,014 1,759
Finance income (40) (493) (642)
Finance costs 7 6,143 5,133 11,301
Income tax expense 8 2,619 3,324 6,015
Depreciation 10 23,535 17,269 42,294
84,417 38,174 78,446
Change in:
Provisions 16 212 408 614
Inventories 11 (5,906) (6,442) (11,824)
Trade and other receivables 12 (21,373) (19,293) 11,256
Trade and other payables 15 (15,054) (3,542) 9,955
Cost of equity settled share-based payments 18 (2,180) (967) (1,229)
Cash generated from operating activities 40,116 8,338 87,218
Income tax paid (3,484) (5,611) (8,498)
Interest received 40 493 642
Interest paid (2,730) (2,653) (7,474)
Net cash from operating activities 33,942 567 71,888
------------------------------------------------------ ----- ------------- ------------- ------------
Investing activities
Additions to property, plant and equipment 10 (31,819) (59,424) (139,347)
Net cash used in investing activities (31,819) (59,424) (139,347)
------------------------------------------------------ ----- ------------- ------------- ------------
Financing activities
Debt commitment and other fees paid -- (343) (317)
Factoring fees paid (767) (253) (720)
Dividends paid (8,466) (6,026) (8,594)
Repayment of debt 14 (20,000) -- --
Drawdown of debt 14 -- 82,742 82,742
Payment of lease liabilities 14 (539) (523) (1,065)
Net cash (used in)/from financing activities (29,772) 75,597 72,046
------------------------------------------------------ ----- ------------- ------------- ------------
Net (decrease)/increase in cash and cash equivalents (27,649) 16,740 4,587
Cash and cash equivalents at the beginning of the
financial period/year 87,244 81,177 81,177
Effect of exchange rate changes on cash and cash
equivalents (3,052) 674 1,480
Cash and cash equivalents at the end of the financial
period/year 56,543 98,591 87,244
------------------------------------------------------ ----- ------------- ------------- ------------
Notes to the group condensed consolidated financial
statements
For the financial period ended 30 June 2021
1. Basis of preparation and going concern
Basis of preparation
The annual financial statements of Kenmare Resources plc ('the
Group') are prepared in accordance with IFRS as adopted by the
European Union. The Group Condensed Consolidated Financial
Statements for the six months ended 30 June 2021 have been prepared
in accordance with the Transparency (Directive 2004/109/EC)
Regulations 2007, as amended, the Transparency Rules of the Central
Bank of Ireland, Disclosure and Transparency Rule 4.2 of the UK
Financial Conduct Authority's Disclosure and Transparency Rules and
IAS 34 'Interim Financial Reporting', as adopted by the European
Union.
The financial information presented in this document does not
constitute statutory financial statements. The amounts presented in
the half-yearly financial statements for the six months ended 30
June 2021 and the corresponding amounts for the six months ended 30
June 2020 have been reviewed but not audited. The independent
review report is on pages 10 and 11. The preparation of the
half-yearly financial statements requires the Directors to make
judgements, estimates and assumptions that affect the application
of policies and reported amounts of certain assets, liabilities,
revenues and expenses together with disclosure of assets and
liabilities. Estimates and underlying assumptions relevant to these
financial statements are the same as those described in the last
annual financial statements.
The financial information for the year ended 31 December 2020,
presented herein, is an abbreviated version of the annual financial
statements for the Group in respect of the year ended 31 December
2020. The Group's annual financial statements in respect of the
year ended 31 December 2020 have been filed in the Companies
Registration Office and the independent auditor issued an
unqualified audit report thereon. The annual report is available on
the Company's website at www.kenmareresources.com.
Going Concern
The Directors have a reasonable expectation based on the Group's
cash flow forecast (the "Group Forecast") that the Group has
adequate resources for the foreseeable future and continue to adopt
the going concern basis of accounting in preparing these financial
statements.
The Group Forecast has been prepared by management with best
estimates of production, pricing and cost assumptions over the
period. The Group recognises the uncertainty surrounding the
potential global impacts from the COVID-19 virus.
Key assumptions upon which the Group Forecast is based include a
mine plan covering production using the Namalope, Nataka, Pilivili
and Mualadi reserves and resources. Specific resource material is
included only where there is a high degree of confidence in its
economic extraction. Production levels for the purpose of the
forecast are approximately 1.2 million tonnes per annum of ilmenite
plus co-products, zircon, concentrates and rutile over the next
year. Assumptions for product sales prices are based on contract
prices as stipulated in marketing agreements with customers or,
where contract prices are based on market prices or production is
not presently contracted, prices are forecast taking into account
independent titanium mineral sands expertise and management
expectations. Operating costs are based on approved budget costs
for 2021, taking into account the current running costs of the Mine
and escalated by 2% per annum thereafter. Capital costs are based
on the capital plans and include escalation at 2% per annum.
Sensitivity analysis is applied to the assumptions to test the
robustness of the cash flow forecasts for changes in market prices,
shipments and operating and capital cost assumptions. Changes in
these assumptions affect the level of sales and profitability of
the Group and the amount of capital required to deliver the
projected production levels. Debt covenants are complied with and
Group liquidity is maintained although at lower levels in each of
these forecasts. As a result of this assessment, the Board has a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due for the
foreseeable future, a period of not less than twelve months from
the date of this report.
Changes in accounting policies
The accounting policies applied in the half-yearly financial
statements are those set out in the annual financial statements for
the year ended 31 December 2020, except as noted in relation to the
financing facilities below.
The Group has a trade finance facility with Absa Bank for four
of the Group's customers. In accordance with this facility the bank
purchases 80% of the receivable without recourse and so the bank
takes on the credit risk. Derecognition of the trade receivables
and the receipt of cash occurs when the customer's invoices are
discounted by Absa Bank. The facility is US$30 million with limits
on the maximum amount that can be factored for each of the
customers named in the facility. During the period no trade
receivables were factored. At the period-end, trade receivables
amounting to US$28.1 million (H1 2020: US$16.9 million) may be
factored under this facility and are therefore included in trade
receivables as at 30 June 2021. The cost of this facility for the
period, which amounted to US$0.2 million (H1 2020: US$0.04
million), is included in finance costs in the condensed statement
of comprehensive income and in financing activities in the
condensed statement of consolidated cash flows. This cost was
included in the movement in trade receivables in prior periods.
The Group has a trade facility with Barclays Bank for customers
which it sells to under letter of credit terms. Under this
facility, Barclays Bank confirms the letter of credit from the
issuing bank and therefore takes the credit risk that the issuing
bank will not pay. Barclays Bank can also discount these letters of
credit thereby providing early payment of receivables to the Group.
Derecognition of the trade receivables and the receipt of cash
occurs when the customer's invoices are discounted by Barclays
Bank. There is no limit under the Barclays Bank facility. During
the period trade receivables of US$69.4 million (H1 2020: US$42.8
million) were discounted under this facility. At the period-end
there were no trade receivables which may be discounted under this
facility. The cost of this facility for the period, which amounted
to US$0.5 million (H1 2020: US$0.2 million), is included in finance
costs in the condensed statement of comprehensive income and in
financing activities in the condensed statement of consolidated
cash flows. This cost was included in the movement in trade
receivables in prior periods.
The following new and revised standards, all of which are
effective for accounting periods beginning on or after 1 January
2021, have been adopted in the current financial period.
-- COVID-19 Related Rent Concessions- Amendments to IFRS16
Interest Rate Benchmark Reform Phase 2 -- Amendments to IFRS9,
IAS39, IFRS7, IFRS4 and IFRS 16. Further details are included in
Note 17.
None of the new and revised standards have a material effect on
the Group's financial statements.
2. Revenue
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Sale of mineral products 178,249 116,803 243,746
During the financial period, the Group sold 594,100 tonnes (H1
2020: 413,700 tonnes) of finished products ilmenite, rutile, zircon
and concentrates to customers at a sales value of US$178.2 million
(H1 2020: US$116.8 million). The principal categories for
disaggregating revenue are by product type and by country of the
customer's location. The product types are ilmenite, zircon, rutile
and concentrates. Concentrates includes secondary zircon and
mineral sands concentrates.
Revenue from major products
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Ilmenite 151,427 82,875 175,587
Zircon 20,842 22,026 45,708
Concentrates 5,975 8,837 16,320
Rutile 5 3,065 6,131
Total 178,249 116,803 243,746
------------- ------------- ------------- ------------
Geographical information
Audited
Unaudited Unaudited 31 Dec
30 June 2021 30 June 2020 2020
US$'000 US$'000 US$'000
Revenue from external customers
China 75,005 48,127 107,824
Spain 19,205 7,663 9,318
Italy 15,146 8,522 19,645
USA 10,856 12,266 19,955
Rest of the world 58,037 40,225 87,004
Total 178,249 116,803 243,746
-------------------------------- ------------- ------------- --------
All revenues are generated by the Moma Titanium Minerals
Mine.
3. Segment reporting
Information on the operations of the Moma Titanium Minerals Mine
in Mozambique is reported to the Group's Board for the purposes of
resource allocation and assessment of segment performance.
Information regarding the Group's operating segment is reported
below.
Segment revenues and results
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Moma Titanium Minerals Mine
Revenue 178,249 116,803 243,746
Cost of sales (100,330) (82,722) (179,103)
Gross profit 77,919 34,081 64,643
Other operating costs (15,230) (11,335) (24,441)
Segment operating profit 62,689 22,746 40,202
Other corporate operating costs (3,929) (2,855) (5,809)
Group operating profit 58,760 19,891 34,393
Finance income 40 493 642
Finance expenses (6,143) (5,133) (11,301)
Foreign exchange (loss)/gain (2,014) 728 (980)
Profit before tax 50,643 15,979 22,754
Income tax expense (2,619) (3,324) (6,015)
Profit for the financial
period/year 48,024 12,655 16,739
---------------------------------- ------------- ------------- ------------
Segment assets
Moma Titanium Minerals Mine assets 1,110,765 1,060,730 1,101,808
Corporate assets 23,196 61,434 40,951
Total assets 1,133,961 1,122,164 1,142,759
---------------------------------- ------------- ------------- ------------
Segment liabilities
Moma Titanium Minerals Mine
liabilities 189,739 219,148 236,695
Corporate liabilities 4,219 4,512 5,561
Total liabilities 193,958 223,660 242,256
---------------------------------- ------------- ------------- ------------
Corporate assets consist of the Company's and other subsidiary
undertakings' property, plant and equipment including right-of-use
assets, cash and cash equivalents and prepayments at the reporting
date.
4. Cost of sales
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Opening stock of mineral products 31,373 26,493 26,493
Production costs 82,925 69,918 146,431
Depreciation 21,248 15,009 37,552
Closing stock of mineral products (35,216) (28,698) (31,373)
Total 100,330 82,722 179,103
---------------------------------- ------------- ------------- ------------
Mineral products consist of finished products and heavy mineral
concentrate.
5. Other operating costs
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Distribution costs 4,635 4,795 9,820
Freight and demurrage costs 10,317 6,463 14,185
Administration costs 4,207 2,932 6,245
Total 19,159 14,190 30,250
---------------------------- ------------- ------------- ------------
Distribution costs of US$4.6 million (H1 2020: US$4.8 million)
represent the cost of running the Mine's finished product storage,
jetty and marine fleet. Included in distribution costs is
depreciation of US$2.2 million (H1 2020: US$2.1 million). Freight
costs of US$10.4 million (H1 2020: US$5.7 million) arise from sales
to customers on a CIF or CFR basis. Despatch of US$0.1 million was
earned (H1 2020: demurrage US$0.8 million) during the financial
period. Administration costs of US$4.2 million (H1 2020: US$2.9
million) are the Group administration costs and include
depreciation of US$0.1 million (H1 2020: US$0.2 million) and a
share-based payment expense of US$2.1 million (H1 2020: US$1.0
million).
6. Seasonality of sale of mineral products
Sales of the Group's mineral products are not seasonal in
nature.
7. Finance costs
Audited
Unaudited 30 June 2021 Unaudited 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Interest on bank
borrowings 4,864 4,042 9,288
Interest on
lease
liabilities 119 156 312
Factoring fees 767 253 720
Commitment and
other fees 20 343 317
Unwinding of
discount on
mine closure
provision 373 339 664
Total 6,143 5,133 11,301
---------------- ---------------------- ---------------------- ------------
All interest has been expensed in the financial year.
8. Income tax expense
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Corporation tax 2,619 3,053 5,748
Deferred tax -- 271 267
Total 2,619 3,324 6,015
---------------- ------------- ------------- ------------
During the period the KMML Mozambique Branch had taxable profits
of US$6.6 million (H1 2020: US$8.7 million) resulting in an income
tax expense of US$2.3 million (H1 2020: US$3.1 million) being
recognised. This has decreased from the prior year mainly as a
result of additional capital allowances due to higher depreciation
following significant capital investments in 2020, including
completion of the WCP C and move of WCP B to Pilivili. The income
tax rate applicable to taxable profits of KMML Mozambique Branch is
35% (H1 2020: 35%).
KMML Mozambique Branch has elected, and the fiscal regime
applicable to mining allows for, the option to deduct, as an
allowable deduction, depreciation of exploration and development
expense and capital expenditure over the life of mine. Tax losses
may be carried forward for three years.
During the period Kenmare Resources plc had taxable profits of
US$2.4 million (H1 2020: US$2.2 million) resulting in an income tax
expense of US$0.3 million (H1 2020: US$0.3 million) being
recognised. The deferred tax asset of US$0.2 million (2020:
recognised US$0.3 million) was released in the period.
9. Earnings per share
The calculation of the basic and diluted earnings per share
attributable to the ordinary equity holders of the Company is based
on the following data:
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Profit for the financial period/year attributable
to equity holders of the Company 48,024 12,655 16,739
2021 2020 2020
Number of shares Number of shares Number of shares
Number of issued ordinary shares at beginning of
period 109,736,382 109,657,480 109,657,480
Weighted number of shares issued during the financial
period/year -- 14,916 51,523
Weighted average number of issued ordinary shares
for
the purpose of basic earnings per share 109,736,382 109,672,396 109,709,003
Effect of dilutive potential ordinary shares:
Share awards 2,090,069 1,855,011 1,993,422
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 111,826,451 111,527,407 111,702,425
US$ per share US$ per share US$ per share
Earnings per share: basic 0.44 0.12 0.15
Earnings per share: diluted 0.43 0.11 0.15
------------------------------------------------------ ----------------- ----------------- -----------------
10. Property, plant and equipment
Plant & Development Construction Other
Equipment Expenditure In Progress Assets Total
US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 31 December 2019 817,579 250,326 88,170 69,357 1,225,432
------------------------------- ---------- ------------ ------------ -------- ---------
Transfer from construction in
progress 41,002 -- (41,020) 18 --
Additions during the financial
year -- -- 59,224 -- 59,224
Disposals (36) -- -- (7,620) (7,656)
Adjustment to mine closure cost 10,817 -- -- -- 10,817
At 30 June 2020 869,362 250,326 106,374 61,755 1,287,817
------------------------------- ---------- ------------ ------------ -------- ---------
Transfer from construction in
progress 130,002 (355) (134,369) 4,722 --
Additions during the financial
year 1,831 -- 80,411 -- 82,242
Disposals (2,173) -- -- (1,255) (3,428)
Adjustment to mine closure cost 155 -- -- -- 155
At 31 December 2020 999,177 249,971 52,416 65,222 1,366,786
------------------------------- ---------- ------------ ------------ -------- ---------
Transfer from construction in
progress 7,731 -- (7,731) -- --
Additions during the financial
year (757) -- 24,337 -- 23,580
Adjustment to mine closure cost (5,219) -- -- -- (5,219)
At 30 June 2021 1,000,932 249,971 69,022 65,222 1,385,147
------------------------------- ---------- ------------ ------------ -------- ---------
Accumulated Depreciation
At 31 December 2019 209,336 130,626 -- 33,435 373,397
------------------------------- ---------- ------------ ------------ -------- ---------
Charge for the financial period 11,145 1,895 -- 4,229 17,269
Disposals (36) -- -- (7,430) (7,466)
At 30 June 2020 220,445 132,521 -- 30,234 383,200
------------------------------- ---------- ------------ ------------ -------- ---------
Charge for the financial period 15,678 2,632 -- 6,715 25,025
Disposals (2,021) -- -- (1,146) (3,167)
At 31 December 2020 234,102 135,153 -- 35,803 405,058
------------------------------- ---------- ------------ ------------ -------- ---------
Charge for the financial period 16,668 3,024 -- 3,843 23,535
------------------------------- ---------- ------------ ------------ -------- ---------
At 30 June 2021 250,770 138,177 -- 39,646 428,593
------------------------------- ---------- ------------ ------------ -------- ---------
Carrying Amount
At 30 June 2021 750,162 111,794 69,022 25,576 956,554
At 30 June 2020 648,917 117,805 106,374 31,521 904,617
At 31 December 2020 765,075 114,818 52,416 29,419 961,728
------------------------------- ---------- ------------ ------------ -------- ---------
Included in property, plant and equipment are right-of-use
assets totalling US$2.7 million (H1 2020: US$3.8 million). There
were no additions to right-of-use assets in the period and
depreciation of US$1.1 million (H1 2020: US$ 1.1 million) was
incurred.
At each reporting date, the Group assesses whether there is any
indication that property, plant and equipment may be impaired. The
Group considers the relationship between its market capitalisation
and its book value, among other factors, when reviewing for
indicators for impairment. As at 30 June 2021, the market
capitalisation of the Group was below the book value of net assets
which is considered an indicator of impairment of assets. The Group
carried out an impairment review of property, plant and equipment
as at 30 June 2021. As a result of the review and given the
performance and outlook of the Group no impairment provision was
recognised in the current financial period. No impairment was
recognised in the prior financial year. Given the sensitivities of
the forecast to the discount rate, pricing and to a lesser extent
operating cost, the impairment loss of US$64.8 million which was
recognised in the Consolidated Statement of Comprehensive Income in
2014 is not reversed.
The cash-generating unit for the purpose of impairment testing
is the Moma Titanium Minerals Mine. The basis on which the Mine is
assessed is its value-in-use. The cash flow forecast employed for
the value-in-use computation is from a life of mine financial
model. The recoverable amount obtained from the financial model
represents the present value of the future discounted pre-tax,
pre-finance cash flows discounted at 10.5% (31 December 2020:
10.0%).
Key assumptions include the following:
-- The discount rate is based on the Group's weighted average cost of
capital. This rate is a best estimate of the current market assessment of
the time value of money and the risks specific to the Mine, taking into
consideration country risk, currency risk and price risk. The factors
making up the cost of equity, cost of debt and capital structure have
changed from the year-end review resulting in a discount rate of 10.5%
(31 December 2020: 10.0%). As noted in principal risks and uncertainties,
the Group's assessment of the country risk has increased due to the risk
of insurgency in the north of Mozambique. To date, this risk has not
directly impacted the Mine. The Group's estimation of the country risk
premium included in the discount rate has remained unchanged from the
prior year. The Group does not consider it appropriate to apply the full
current country risk premium for Mozambique to the calculation of the
Group's weighted average cost of capital as it believes the specific
circumstances which have resulted in the risk premium increase over the
past number of years are not relevant to the specific circumstances of
the Moma Mine. Hence, country risk premium applicable to the calculation
of the cost of equity has been adjusted accordingly. Using a discount
rate of 10.5%, the recoverable amount is greater than the carrying amount
by US$285.4 million (31 December 2020: US$260.2 million). The discount
rate is a significant factor in determining the recoverable amount. A
4.0% increase in the discount rate to 14.5% reduces the recoverable
amount by US$285.4 million. The increase in the recoverable amount from
the year-end review is a result of increased cash flows over the life of
mine due to the factors detailed below and net of the increase in the
discount rate from 10.0% to 10.5%.
-- A mine plan based on the Namalope, Nataka, Pilivili and Mualadi proved
and probable reserves and resources. Specific resource material is
included only where there is a high degree of confidence in its economic
extraction. The Mine life assumption of 40 years has not changed from the
prior year review. Average annual production is approximately 1.2 million
tonnes (31 December 2020: 1.2 million tonnes) of ilmenite and co-products
zircon, rutile and concentrates over the life of the Mine. This mine plan
does not include investment in additional mining capacity. Shipment
volumes are forecast to be in line with production subject to certain
minimum stocks of final and intermediate products which are assumed to be
maintained at period-ends. The average annual production of final
products has increased from the prior year due to additional production
from the WCP A plant with the introduction of hydro mining and update of
the production forecast from the other mining plants.
-- Product sales prices are based on contract prices as stipulated in
marketing agreements with customers, or where contracts are based on
market prices or production is not currently contracted, prices are
forecast by the Group taking into account independent titanium mineral
sands expertise provided by TiPMC Solutions and management expectations
including general inflation of 2% per annum. Forecast prices provided by
TiPMC Solutions have been reviewed and found to be consistent with other
external sources of information. Average forecast product sales prices
have increased slightly over the life of mine from the year-end review
particularly in the near term as a result of revised forecast pricing.
Receipts are forecast to be in line with revenue subject to customer
credit terms at period-ends. A 9% reduction in average sales prices over
the life of mine reduces the recoverable amount by US$285.4 million.
-- Operating costs are based on approved budget costs for 2021 taking into
account the current running costs of the Mine and escalated by 2% per
annum thereafter. Average forecast operating costs have increased from
the prior year end review as a result of 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. A
17% increase in operating costs over the life of mine reduces the
recoverable amount by US$285.4 million.
-- Capital costs are based on a life of mine capital plan including
inflation at 2% per annum from 2021. Average forecast capital costs have
increased from the year-end review based on updated sustaining and
development capital plans required to maintain the existing plant over
the life of mine. The forecast takes into account reasonable cost
increases and therefore a sensitivity to this assumption which would give
rise to a reduction in the recoverable amount has not been applied.
An adjustment to the mine closure cost of US$5.2 million (H1
2020 2020: US$10.8 million) was made during the period as a result
of an increase in the related discount rate.
11. Inventories
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Mineral products 35,216 28,698 31,373
Consumable spares 34,360 29,590 32,297
69,576 58,288 63,670
------------------ ------------- ------------- ------------
At 30 June 2021, total final product stocks were 164,100 tonnes
(31 December 2020: 145,500 tonnes). Closing stock of heavy mineral
concentrate was 34,300 tonnes (31 December 2020: 50,200
tonnes).
Net realisable value is determined with reference to forecast
prices of finished products expected to be achieved. There is no
guarantee that these prices will be achieved in the future,
particularly in weak product markets. During the financial period
there was a write-down of US$0.1 million (H1 2020: US$0.2 million)
to mineral products to value them at net realisable value.
12. Trade and other receivables
Audited
Unaudited 30 June 2021 Unaudited 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Trade
receivables 39,265 45,558 23,112
Prepayments 12,023 14,912 6,803
51,288 60,470 29,915
---------------- ---------------------- ---------------------- ------------
The movement in the condensed statement of financial position of
US$21.4 million (H1 2020: US$19.3 million) results in the amount
disclosed in the condensed statement of cash flows.
13. Share capital and dividends
Share capital as at 30 June 2021 amounted to US$0.12 million (31
December 2020: US$0.12 million). In 2020, 78,902 ordinary shares in
the Company were issued as a result of the exercise of shares under
the 2016 KIP award.
On 10 March 2020, the Company acquired and cancelled all of the
2,781,905,503 deferred shares of EUR0.059995 each in the capital of
the Company in issue by transfer otherwise than for valuable
consideration in accordance with Section 102(1)(a) and Section
106(1) of the Companies Act 2014 and Article 3(b)of the Articles of
Association of the Company. At the Annual General Meeting of the
Company held on 13 May 2020, all of the unissued deferred shares of
EUR0.059995 each in the capital of the Company were cancelled.
In May 2021, the Company paid a final 2020 dividend of US$8.5
million (H1 2020: US$6.0 million) representing USc7.69 (H1 2020:
USc5.52) per share.
14. Bank loans
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Borrowings 128,024 145,180 145,771
The borrowings are repayable as
follows:
Less than one year 18,429 1,294 1,217
Between two and five years 114,285 150,000 150,000
132,714 151,294 151,217
Transaction costs (4,690) (6,114) (5,446)
Amount due for settlement 128,024 145,180 145,771
---------------------------------- ------------- ------------- ------------
Borrowings
On 11 December 2019, the Group entered into secured debt
facilities ("Senior Facility Agreement") with Absa Bank Limited
(acting through its Corporate and Investment Banking Division)
("Absa"), The Emerging Africa Infrastructure Fund (part of the
Private Infrastructure Development Group) ("EAIF"), Nedbank Limited
(acting through its Nedbank Corporate and Investment Banking
division) ("Nedbank"), Rand Merchant Bank and Standard Bank Group
("Standard Bank").
The debt facilities comprise a US$110 million Term Loan Facility
and a US$40 million Revolving Credit Facility that share common
terms and a common security package. The finance documentation also
provides for a Mine Closure Guarantee Facility (provided by either
the existing lenders or other finance providers) of up to US$40
million, with the provider(s) of such a facility sharing in the
common security package. The potential total aggregate principal
amount of indebtedness secured under the finance documentation is
therefore US$190 million. The transaction costs for arrangement of
the new debt facilities amounted to US$6.5 million.
The Term Loan Facility has a final maturity date of 11 March
2025. Interest is at LIBOR plus 5.40% per annum. Repayment is in
seven equal semi-annual instalments, beginning 11 March 2022.
The Revolving Credit Facility has a final maturity date of 11
December 2022 extendable by up to 24 months at the lenders'
discretion. Interest is at LIBOR plus 5.00% per annum.
During the period the Group entered into a mine closure
guarantee facility with Absa Bank Moçambique SA for US$11.4
million. This guarantee shares the security package with the Term
Loan Facility and Revolving Credit Facility on a pro rata and pari
passu basis.
The security package consists of (a) security over the Group's
bank accounts (subject to certain exceptions), (b) pledges of the
shares of Kenmare Moma Processing (Mauritius) Limited and Kenmare
Moma Mining (Mauritius) Limited (the "Project Companies"), (c)
security over intercompany loans and (d) Mozambican law security
interests over certain rights and agreements with Mozambican
authorities, including over the Implementation Agreement, the
Mineral Licensing Contract and the Mining Licence.
The carrying amount of the secured bank accounts of the Group
was US$54.7 million as at 30 June 2021 (H1 2020:US$97.3 million).
The shares of the Project Companies and intercompany loans are not
included in the consolidated statement of financial position as
they are eliminated on consolidation. They therefore do not have a
carrying amount but, upon enforcement of the pledges on behalf of
the lender group, the shares in the Project Companies would cease
to be owned or controlled by the Group. The secured rights and
agreements do not have a carrying amount. They are, however,
necessary for the Project Companies to operate the Mine in
Mozambique.
The finance documents contain a number of representations,
covenants and events of default on customary terms, the breach of
which could lead to the secured parties under the finance
documentation accelerating the outstanding loans and taking other
enforcement steps, such as the enforcement of some or all of the
security interests, which could lead, in extremis, with the Group
losing its interest in the Mine. The most salient of the relevant
terms that could lead to acceleration of the loans and/or
enforcement of security are the financial covenants described on
page 25.
During the period US$20.0 million (31 December 2020: drawn
US$40.0 million) of the Revolving Credit Facility was repaid. At 30
June 2021 total debt of US$128.0 million (31 December 2020:
US$145.8 million) was recognised by the Group, being the principal
of US$130.0 million (US$150.0 million) before transaction costs of
US$4.7 million (31 December 2020: US$5.4 million) plus interest
amortised of US$2.7 million (31 December 2020: US$1.2 million).
Unaudited Unaudited Audited
Reconciliation of movements of debt to cashflows arising 30 June 2021 30 June 2020 31 Dec 2020
from financing activities US$'000 US$'000 US$'000
Bank Loans
Balance at 1 January 145,771 60,903 60,903
Cash movements
Loan interest paid (2,611) (2,497) (7,162)
Principal paid (20,000) -- --
Loan drawn down -- 82,742 82,742
Non-cash movements
Loan interest accrued 4,864 4,032 9,288
Balance at 30 June/31 December 128,024 145,180 145,771
--------------------------------------------------------- ------------- ------------- ------------
Unaudited Unaudited Audited
Reconciliation of movements of debt to cashflows arising 30 June 2021 30 June 2020 31 Dec 2020
from financing activities US$'000 US$'000 US$'000
Lease liabilities
Balance at 1 January 3,388 4,454 4,454
Cash movements
Lease interest paid (119) (157) (312)
Principal paid (539) (523) (1,065)
Non-cash movements
Lease interest accrued 119 156 311
Balance at 30 June/31 December 2,849 3,930 3,388
--------------------------------------------------------- ------------- ------------- ------------
Financial Covenants
As at
30 June
2021 Covenant
Interest Coverage Ratio 14.18:1 Not less than 4.00:1
Net Debt to EBITDA 0.63:1 Not greater than 2.00:1
Debt Service Coverage Ratio 4.08:1 Not less than 1.20:1
Liquidity (million) US$76.5 Not less than US$15.0
Reserve Tail Ratio 77% Not less than 30%
All covenants have been complied with during the period. The key
financial covenants as at 30 June 2021 are detailed below. In
accordance with the senior facilities agreement, covenant
compliance is assessed over the 12-month period ending 30 June 2021
or, where applicable, as at such date.
The definition of the covenants under the debt facilities are
set out below:
-- Interest Coverage Ratio is defined as the ratio of EBITDA to Net Interest
Cost.
-- Net Debt is defined as total financial indebtedness excluding leases less
consolidated cash and cash equivalents.
-- The Debt Service Coverage Ratio is the ratio of cash and cash equivalents
at the beginning of a reporting period plus available facilities plus
cash generated in the period to debt repayments in the period.
-- Liquidity is defined as consolidated cash and cash equivalents plus
undrawn amounts of the Revolving Credit Facility.
-- Reserve Tail Ratio means the reserve tail ratio, expressed as a
percentage of the termination date reserves (estimated remaining reserves
in March 2025) divided by the initial reserves (estimated reserves in
December 2019).
15. Trade and other payables
Audited
Unaudited 30 June 2021 Unaudited 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Trade payables 12,918 14,064 24,352
Accruals 12,891 18,005 25,770
25,809 32,069 50,122
--------------- ---------------------- ---------------------- ------------
During the period there were foreign exchange movements of
US$1.1 million (H1 2020: US$0.05 million) in relation to non-US
Dollar payables and US$8.2 million in relation to capital suppliers
(H1 2020: US$0.3 million). Excluding the above from the movement in
the statement of financial position of US$24.3 million (H1 2020:
US$3.9 million) results in the US$15.0 million (H1 2020: US$3.6
million) disclosed in the statement of cash flows.
16. Provisions
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Mine closure provision 32,607 36,973 37,451
Mine rehabilitation provision 4,105 3,685 3,893
36,712 40,658 41,344
------------------------------ ------------- ------------- ------------
Current 914 743 914
Non-current 35,798 39,915 40,430
36,712 40,658 41,344
------------------------------ ------------- ------------- ------------
The Mine closure provision represents the Directors' best
estimate of the Project Companies' liability for close-down,
dismantling and restoration of the mining and processing site. A
corresponding amount equal to the provision is recognised as part
of property, plant and equipment. The costs are estimated on the
basis of a formal closure plan, are subject to regular review and
are estimated based on the net present value of estimated future
cost. Mine closure costs are a normal consequence of mining, and
the majority of close-down and restoration expenditure is incurred
at the end of the life of the Mine. The unwinding of the discount
is recognised as a finance cost and US$0.4 million (H1 2020: US$0.3
million) has been recognised in the statement of comprehensive
income for the financial period.
The main assumptions used in the calculation of the estimated
future costs include:
-- a discount rate of 2.4% (31 December 2020: 2.8%);
-- an inflation rate of 2% (31 December 2020: 2%);
-- an estimated life of mine of 40 years (31 December 2020: 40
years). It is assumed that the land licences will be extended on
expiry in 2058; and
-- an estimated closure cost of US$34.1 million (31 December
2020: US$34.1 million) and an estimated post-closure monitoring
provision of US$3.9 million (31 December 2020: US$3.9 million).
The life of mine plan is based on the Namalope, Nataka, Pilivili
and Mualadi reserves and resources. Specific resource material is
included only where there is a high degree of confidence in its
economic extraction. The Mine closure provision has been reduced by
US$5.2 million from 30 June 2021 to reflect a change in the
discount rate from 2.0% at 31 December 2020 to 2.4% at 30 June
2021.
The discount rate is a significant factor in determining the
Mine closure provision. The Group uses US Treasury rates.
Thirty-year US Treasury yields are the longest period for which
yields are quoted. A forty-year rate to align with the estimated
life of mine has been calculated by taking the average of the
increase in yield from ten to twenty years and the increase in
yield from twenty to thirty years and adding this average to the
thirty-year treasury rate to arrive at an estimated extrapolated
rate for forty years. This discount rate is deemed to provide the
best estimate of the current market assessment of risk-free time
value of money. Risks specific to the liability are included in the
cost estimate.
The Mine rehabilitation provision represents the Directors' best
estimate of the Company's liability for rehabilitating areas
disturbed by mining activities. Rehabilitation costs are recognised
based on the area disturbed and estimated cost of rehabilitation
per hectare which is reviewed regularly against actual
rehabilitation cost per hectare. Actual rehabilitation expenditure
is incurred approximately twelve months after the area has been
disturbed. During the financial period there was a release of
US$0.3 million (H1 2020: US$0.3 million) to reflect the actual mine
rehabilitation costs incurred, and an addition to the provision of
US$0.5 million (H1 2020: US$0.7 million) for areas newly
disturbed.
17. Financial Instruments
Unaudited 30 June 2021 Unaudited 30 June 2020 Audited 31 Dec 2020
Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Financial
assets
measured at
fair value
Trade
receivables 11,153 11,153 Level 2 32,294 32,294 Level 2 15,073 15,073 Level 2
Financial
assets not
measured at
fair value
Trade
receivables 28,112 28,112 Level 2 13,264 13,264 Level 2 8,039 8,039 Level 2
Cash and
cash
equivalents 56,543 56,543 Level 1 98,591 98,591 Level 1 87,244 87,244 Level 1
95,808 95,808 144,149 144,149 110,356 110,356
------------ --------------- ---------- ------- --------------- ---------- ------- --------------- ---------- -------
Financial
liabilities
not measured
at fair
value
Bank loans 128,024 128,034 Level 2 145,180 145,180 Level 2 145,771 146,247 Level 2
128,024 128,034 145,180 145,180 145,771 146,247
------------ --------------- ---------- ------- --------------- ---------- ------- --------------- ---------- -------
The carrying amounts and fair values of financial assets and
financial liabilities including their levels in fair value
hierarchy are detailed above. The table does not include fair value
information for prepayments, trade payables and accruals as these
are not measured at fair value as the carrying amount is a
reasonable approximation of their fair value. Trade receivables
measured at fair value are receivables which the Group may elect to
receive early payment through its trade finance facilities with
Absa Bank and Barclays Bank. Trade receivables not measured at fair
value are receivables whose payment is received under the sale
contract credit terms.
The valuation technique used in measuring Level 2 fair values is
discounted cash flows which considers the expected receipts or
payments discounted using adjusted market discount rates or where
these rates are not available estimated discount rates.
Credit risk
The movement in the allowance for impairment in respect of trade
receivables during the reporting period was as follows:
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 Dec 2020
US$'000 US$'000 US$'000
Opening balance 199 229 229
Net remeasurement of loss
allowance 108 78 (30)
Closing 307 307 199
---------------------------------- ------------- ------------- ------------
The increase in the loss allowances is mainly attributable to
the total increase in the gross carrying amounts of trade
receivables. The methodology for the calculation of expected credit
losses is the same as described in the last annual statements.
Interest rate benchmark reform
A fundamental reform of major interest rate benchmarks is being
undertaken globally, including the replacement of some interbank
offered rates (IBORs) with alternative nearly risk-free rates
(referred to as "IBOR reform"). The group has exposure to IBORs on
its financial instruments that will be reformed as part of these
market-wide initiatives. The Group's main IBOR exposure at the
reporting date is US LIBOR, which is administered by ICE Benchmark
Administration (IBA). The alternative reference rate for US LIBOR
is the US Secured Overnight Financing Rate (SOFR).
On 5 March 2021, IBA stated that it will cease the publication
of (i) the overnight and 1, 3, 6 and 12 months USD LIBOR settings
immediately following the LIBOR publication on Friday, June 30,
2023 and (ii) all other LIBOR settings, including the 1 week and 2
months USD LIBOR settings, immediately following the LIBOR
publication on Friday, December 31, 2021. IBA stated that it will
not have access to input data necessary to calculate LIBOR settings
on a representative basis after those dates. The UK Financial
Conduct Authority (FCA) issued a separate announcement confirming
that IBA had notified the FCA of its intent to cease providing all
LIBOR settings. The FCA confirmed that all 35 LIBOR settings will
either cease to be provided by any administrator or will no longer
be representative as of the dates set out by IBA.
The Group anticipates that IBOR reform will impact its
operational and risk management processes. The main risk to which
the Group is exposed as a result of IBOR reform is in the amendment
to the Senior Facility Agreement with negotiation with the lender
group to reflect the migration from USD LIBOR to SOFR, updating
contractual terms and revising operational controls related to the
migration. Financial risk is predominantly limited to interest rate
risk.
The Audit & Risk Committee monitors while the executive and
senior management manages the migration to alternative rates. Such
management includes evaluation of the extent to which contracts
reference IBOR, whether such contracts will need to be amended as a
result of IBOR reform and how to manage communication about IBOR
reform to counterparties.
The Group plans to amend contractual terms for purposes of
migrating from USD LIBOR to SOFR prior to the discontinuance of the
administration and publication of the relevant LIBOR rates by
IBA.
The carrying amount of financial liabilities with unreformed
contracts at 30 June 2021 was US$128.0 million (31 December 2020:
US$145.8 million).
18. Share-based payments
Kenmare Restricted Share Plan (KRSP)
In the financial period, 689,412 (H1 2020: 853,074) shares were
granted to employees under the 2020 KRSP award. The estimated fair
value of the shares awarded is US$3.9 million (H1 2020: US$2.2
million). These share awards vest, subject to continued employment
on the third anniversary or, in the case of Executive Directors and
certain other staff, subject to continued employment and to the
Remuneration Committee's assessment against a discretionary
underpin, on the third anniversary of grant.
During the financial period, the Group recognised a share-based
payment expense of US$2.1 million (H1 2020: US$1.0 million) as a
result of the KRSP awards.
During the period, 386,677 shares awards were exercised under
the 2017 and 2018 KRSP awards at a cost of US$2.2 million.
The movement in the condensed statement of changes in equity of
US$0.06 million (H1 2020: US$0.05 million) is made up of the
share-based payment expense of US$2.1 million (H1 2020: US$1.0
million) net of the cost of settlement of the equity-based shares
of US$2.2 million (H1 2020: US$1.0 million).
During the period, options with a fair value of US$1.9 million
that expired in prior years were transferred to retained
earnings.
19. Contingent liabilities
The Group, like other businesses operating in Mozambique, is
subject to tax audits by the Mozambican Tax Authorities. These
audits may review a range of matters including corporate income
tax, indirect taxes and transaction related issues, and can take a
number of years to complete. The Mozambican Tax Authority conducted
an audit of the tax obligations of KMML Mozambique Branch in
relation to the years 2015 to 2017. The Group is liaising with the
Tax Authority to address matters raised during the audit. It is not
possible to estimate with certainty the timing of any future
resolution or possible outcomes. No provision has been made in
these financial statements as the Group does not consider that
there is any material future probable loss.
20. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Apart from existing remuneration arrangements there were no
material transactions or balances between the Group and its key
management personnel or members of their close families during the
period under review.
21. Events after the statement of financial position date
Interim dividend
An interim dividend for the year ended 31 December 2021 of
USc7.29 (H1 2020: USc2.31) per share was approved by the Board on
17 August 2021. The dividend payable of US$8.0 million (H1 2020:
US$2.6 million) has not been included as a liability in these
financial statements. The interim dividend is payable to all
shareholders on the Register of Members on 24 September 2021.
There have been no other significant events since 30 June 2021
which would have a significant impact on the financial statements
of the Group.
22. Information
The half-yearly financial report was approved by the Board on 17
August 2021.
Copies are available from the Company's registered office at 4th
Floor, Styne House, Hatch Street Upper, Dublin 2, D02 DY27,
Ireland.
The report is also available on the Company's website at
https://www.globenewswire.com/Tracker?data=yAt9xS9K8EPfRNlkqddQ5KJaXQnh4pufvpHuKhIxXst4pn6-hMxT0-lvOvTxzxUg4vOVAoR3y_41992OzwT4VZ3WlsINV4H0CLiE-GUymJMDPc8uMEUgulGIwwl3BAqT
www.kenmareresources.com.
STATEMENT OF DIRECTORS RESPONSIBILITIES
For the half year ended 30 June 2021
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007 ("Transparency Directive"), the
Transparency Rules of the Central Bank of Ireland and Disclosure
and Transparency Rule 4.2 of the UK Financial Conduct Authority's
Disclosure and Transparency Rules. The names and functions of the
Directors are as listed in the Group's 2020 Annual Report and
Accounts. A list of the current Directors is maintained on the
Kenmare Resources plc website: www.kenmareresources.com.
In preparing the condensed set of financial statements included
within the half-yearly financial report, the Directors are required
to:
-- prepare and present the condensed set of financial statements in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU,
the Transparency Directive and the Transparency Rules of the Central Bank
of Ireland;
-- ensure the condensed set of financial statements has adequate
disclosures;
-- select and apply appropriate accounting policies; and
-- make accounting estimates that are reasonable in the circumstances.
The Directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the condensed set of financial
statements that is free from material misstatement whether due to
fraud or error.
We confirm that to the best of our knowledge:
(1) the condensed set of consolidated financial statements included within the half-yearly financial report of Kenmare Resources plc for the six months ended 30 June 2021 ("the interim financial information") which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of cash flows, the condensed consolidated statement of changes in equity and the related explanatory notes, have been presented and prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, the Transparency Directive and Transparency Rules of the Central Bank of Ireland.
(2) The interim financial information presented, as required by the Transparency Directive, includes:
1. an indication of important events that have occurred during the first 6
months of the financial year, and their impact on the condensed set of
consolidated financial statements;
2. a description of the principal risks and uncertainties for the remaining
6 months of the financial year
3. related parties' transactions that have taken place in the first 6 months
of the current financial year and that have materially affected the
financial position or the performance of the enterprise during that
period; and
4. any changes in the related parties' transactions described in the last
annual report that could have a material effect on the financial position
or performance of the enterprise in the first 6 months of the current
financial year.
On behalf of the Board:
M. CARVILL
Director
17 August 2021
T. MCCLUSKEY
Director
17 August 2021
Glossary - Alternative Performance Measures
Certain financial measures set out in the half-yearly financial
report to 30 June 2021 are not defined under International
Financial Reporting Standards (IFRSs), but represent additional
measures used by the Board to assess performance and for reporting
both internally and to shareholders and other external users.
Presentation of these Alternative Performance Measures (APMs)
provides useful supplemental information which, when viewed in
conjunction with the Group's IFRS financial information, allows for
a more meaningful understanding of the underlying financial and
operating performance of the Group.
These non-IFRS measures should not be considered as an
alternative to financial measures as defined under IFRSs.
Descriptions of the APMs included in this report, as well as
their relevance for the Group, are disclosed below.
APM Description Relevance
Revenue (FOB) Revenue excluding freight Eliminates the effects of freight to provide the product
price
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
EBITDA Operating profit/loss before depreciation and amortisation Eliminates the effects of financing, tax and depreciation
to allow assessment of the earnings and performance
of the Group
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
EBITDA margin Percentage of EBITDA to Revenue (FOB) Provides a group margin for the earnings and performance
of the Group
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Capital costs Additions to property, plant and equipment in the Provides the amount spent by the Company on additions
period to property, plant and equipment in the period
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Cash operating cost per tonne of finished product Total costs less freight and other non-cash costs, Eliminates the non-cash impact on costs to identify
produced including inventory movements, excluding movements the actual cash outlay for production and, as production
in provisions, divided by final product production levels increase or decrease, highlights operational
(tonnes) performance by providing a comparable cash cost per
tonne of product produced over time
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Cash operating cost per tonne of ilmenite net of Cash operating costs less FOB revenue of zircon, rutile Eliminates the non-cash impact on costs to identify
co-products and mineral sands concentrates, divided by ilmenite the actual cash outlay for production and, as production
production (tonnes) levels increase or decrease, highlights operational
performance by providing a comparable cash cost per
tonne of ilmenite produced over time
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Net cash/debt Bank loans before transaction costs, loan amendment Measures the amount the Group would have to raise
fees and expenses net of cash and cash equivalents through refinancing, asset sale or equity issue if
its debt were to fall due immediately, and aids in
developing an understanding of the leveraging of the
Group
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Mining -- HMC produced Heavy mineral concentrate extracted from mineral sands Provides a measure of heavy mineral concentrate extracted
deposits and which include ilmenite, zircon, rutile, from the Mine
concentrates and other heavy minerals and silica
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Processing -- HMC treatment Heavy mineral concentrate feed into the mineral separation Provides a measure of heavy mineral concentrate feed
plant into the processing plants
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Processing -- finished products produced Finished products produced by the mineral separation Provides a measure of finished products produced from
process the processing plants
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Marketing -- finished products shipped Finished products shipped to customers during the Provides a measure of finished products shipped to
period customers
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
LTIFR Lost time injury frequency rate Measures the number of injuries causing lost time
per 200,000 man hours worked on site
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
AI All injuries Provides the number of injuries at the Mine in the
year
------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------
Revenue (FOB)
H1 2021 H1 2020 H1 2019 H1 2018
US$m US$m US$m US$m
-------------- ------- ------- ------- -------
Revenue 178.2 116.8 122.7 140.1
Freight (10.4) (5.6) (7.3) (8.8)
Revenue (FOB) 167.8 111.2 115.4 131.3
-------------- ------- ------- ------- -------
EBITDA
H1 2021 H1 2020 H1 2019 H1 2018
US$m US$m US$m US$m
------------------------------ ------- ------- ------- -------
Operating profit 58.8 19.9 26.1 32.2
Depreciation and amortisation 23.5 17.3 16.7 16.0
EBITDA 82.3 37.2 42.8 48.2
------------------------------ ------- ------- ------- -------
EBITDA margin
H1 2021 H1 2020 H 1 2019 H1 2018
US$m US$m US$m US$m
------------------ ------- ------- -------- -------
EBITDA 82.3 37.2 42.8 48.2
Revenue (FOB) 167.8 111.2 115.4 131.3
EBITDA margin (%) 49 33 37 37
------------------ ------- ------- -------- -------
Cash operating cost per tonne of finished product
H1 2021 H1 2020 H1 2019 H1 2018
US$m US$m US$m US$m
------------------------------------------ ------- ------- ------- -------
Cost of sales 100.3 82.7 79.6 92.5
Other operating costs 19.2 14.2 17.0 15.4
Total operating costs 119.5 96.9 96.6 107.9
Freight charges (10.4) (5.6) (7.3) (8.8)
Total operating costs less freight 109.1 91.3 89.3 99.1
Non-cash costs
Depreciation and amortisation (23.5) (17.3) (16.7) (16.0)
Share-based payments (2.1) (1.0) (0.9) (0.6)
Mineral product inventory movements 3.8 2.2 5.2 (8.9)
Total cash operating costs 87.3 75.2 76.9 73.6
Final product production tonnes 612,100 410,600 505,200 487,300
Cash operating cost per tonne of finished US$143 US$183 US$152 US$151
product
------------------------------------------ ------- ------- ------- -------
Cash operating cost per tonne of ilmenite
H1 2021 H1 2020 H1 2019 H1 2018
US$m US$m US$m US$m
------------------------------------------ ------- ------- ------- -------
Total cash operating costs 87.3 75.2 76.9 73.6
Less FOB revenue from co-products zircon,
rutile and mineral sands concentrate (24.0) (31.3) (41.2) (34.2)
Total cash costs less co-product revenue 63.3 43.9 35.7 39.4
Ilmenite product production tonnes 559,000 368,900 458,200 449,500
Cash operating cost per tonne of ilmenite US$113 US$119 US$78 US$88
------------------------------------------ ------- ------- ------- -------
Net debt/cash
H1 2021 H1 2020 H1 2019 H 1 2018
US$m US$m US$m US$m
-------------------------- ------- ------- ------- --------
Bank debt (128.0) (145.2) (73.5) (93.3)
Transaction costs (4.7) (6.1) -- --
Gross debt (132.7) (151.3) (73.5) (93.3)
Cash and cash equivalents 56.5 98.6 77.0 84.0
Net (debt)/cash (76.2) (52.7) 3.5 (9.3)
-------------------------- ------- ------- ------- --------
Glossary -- Terms
Term Description
CIF The seller delivers the goods on board the vessel
in the port of shipment. Seller must pay the cost
and freight necessary to bring goods to named port
of destination. Risk of loss and damage are the same
as CFR. Seller also has to procure marine insurance
against buyer's risk of loss/damage during the carriage.
Seller must clear the goods for export. This term
can only be used for sea transport.
CFR This term means the seller delivers the goods on board
the vessel in port of shipment. Seller must pay the
costs and freight necessary to bring the goods to
the named port of destination, but the risks of loss
or damage, as well as any additional costs due to
events occurring after the time of delivery, are transferred
from seller to buyer. Seller must clear goods for
export. This term can only be used for sea transport.
------------- ---------------------------------------------------------------
the Company Kenmare Resources plc
------------- ---------------------------------------------------------------
FOB This term means that the seller delivers the goods
on board the vessel at the named port of shipment.
This means the buyer has to bear all costs and risks
to the goods from that point. The seller must clear
the goods for export. This term can only be used for
sea transport.
------------- ---------------------------------------------------------------
Group or Kenmare Resources plc and its subsidiary undertakings
Kenmare
------------- ---------------------------------------------------------------
HMC Heavy mineral concentrate extracted from mineral sands
deposits and which include ilmenite, zircon, rutile
and other heavy minerals and silica.
------------- ---------------------------------------------------------------
KMML Mozambique branch of Kenmare Moma Mining (Mauritius)
Mozambique Limited (KMML)
Branch
------------- ---------------------------------------------------------------
KMPL Mozambique branch of Kenmare Moma Processing (Mauritius)
Mozambique Limited (KMPL)
Branch
------------- ---------------------------------------------------------------
Lenders Absa Bank Limited (acting through its Corporate and
Investment Banking Division) ("Absa"), The Emerging
Africa Infrastructure Fund (part of the Private Infrastructure
Development Group ("PIDG")) ("EAIF"), Nedbank Limited
(acting through its Nedbank Corporate and Investment
Banking division) ("Nedbank"), Rand Merchant Bank
and Standard Bank Group ("Standard Bank").
------------- ---------------------------------------------------------------
Moma, Moma The Moma Titanium Minerals Mine consisting of a heavy
Mine or the mineral sands, processing facilities and associated
Mine infrastructure, which mine is located in the north
east coast of Mozambique under licence to the Project
Companies.
------------- ---------------------------------------------------------------
MSP Mineral Separation Plant
------------- ---------------------------------------------------------------
Mtpa Million tonnes per annum
------------- ---------------------------------------------------------------
Project Kenmare Moma Mining (Mauritius) Limited and Kenmare
Companies Moma Processing (Mauritius) Limited, wholly owned
subsidiary undertakings of Kenmare Resources plc,
who are incorporated in Mauritius.
------------- ---------------------------------------------------------------
Revolving US$40 million debt facility pursuant to the Senior
Credit Facilities Agreement dated 11 December 2019 between,
Facility amongst others, the Lenders and KMML Mozambique Branch
and KMPL Mozambique Branch as borrowers.
------------- ---------------------------------------------------------------
Term Loan US$110 million debt facility pursuant to the Senior
Facility Facilities Agreement dated 11 December 2019 between,
amongst others, the Lenders and KMML Mozambique Branch
and KMPL Mozambique Branch.
------------- ---------------------------------------------------------------
THM Total heavy minerals in the ore of which ilmenite
(typically 82%), rutile (typically 2.0%) and zircon
(typically 5.5%) total approximately 90%.
------------- ---------------------------------------------------------------
tph Tonnes per hour
------------- ---------------------------------------------------------------
WCP Wet Concentrator Plant
------------- ---------------------------------------------------------------
WCP A The original WCP, which started production in 2007
------------- ---------------------------------------------------------------
WCP B The second WCP, which started production in 2013
------------- ---------------------------------------------------------------
WCP C The third WCP, which started production in 2020
------------- ---------------------------------------------------------------
WHIMS Wet High Intensity Magnetic Separation Plant
------------- ---------------------------------------------------------------
Attachment
-- 2021-08-18 KMR H1 2021 Results announcement
https://ml-eu.globenewswire.com/Resource/Download/51de9ece-3ab8-4058-b692-c3230075cfc6
(END) Dow Jones Newswires
August 18, 2021 02:00 ET (06:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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