Report on Payments to Governments 2021
Kenmare Resources plc
(“Kenmare” or “the Company”)
26 May 2022
Report on payments to governments
2021
Introduction
This report details payments to governments made
by Kenmare Resources plc (the “Company”) and its subsidiary
undertakings (the “Group”) for the financial year ended 31 December
2021.
This report has been prepared in accordance with
the requirements of Part 2A of the Transparency (Directive
2004/109/EC) Regulations, 2007 (as amended) (“Part 2A”), Part 26 of
the Companies Act 2014 (“Part 26”) and rule DTR 4.3A of the UK
Financial Conduct Authority’s Disclosure Guidance and Transparency
Rules (“DTR 4.3A”). Part 2A and Part 26 enact in Ireland domestic
rules in line with Directive 2013/34/EU (the “EU Accounting
Directive (2013)”) and apply to large Irish incorporated companies,
like the Company, that are involved in the exploration, discovery,
development, and extraction of minerals. DTR 4.3A imposes
equivalent requirements on issuers, like the Company, admitted to
trading on the London Stock Exchange that are similarly involved in
the exploration, development and extraction of minerals.
This report is available for download at
https://www.kenmareresources.com/investors/reports-and-presentations
It has also been submitted to Euronext Dublin
and the UK National Storage Mechanism and will shortly be
available for inspection at the following locations:
https://direct.euronext.com/#/oamfiling
and
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
About Kenmare Resources plc
Kenmare Resources plc is an Irish incorporated
company with a premium listing on the London Stock Exchange and a
secondary listing on Euronext Dublin. Kenmare operates the Moma
Titanium Minerals Mine (the “Moma Mine”), which is located on the
northern coast of Mozambique. Moma is one of the world’s largest
producers of minerals sands products, accounting for production of
approximately 8% of global titanium feedstocks and supplying to
customers operating in over 15 countries. The Group’s products are
key raw materials, ultimately consumed in everyday quality-of-life
products such as paints, plastics, and ceramic tiles.
The Group consists of the parent company
(Kenmare Resources plc) and its subsidiary undertakings. The mining
operations at the Moma Mine are carried out by the Mozambique
branch of Kenmare Moma Mining (Mauritius) Limited (“KMML”) and
downstream processing is undertaken by the Mozambique branch of
Kenmare Moma Processing (Mauritius) Limited (“KMPL”), both of which
are wholly-owned subsidiary undertakings of the Company. KMML and
KMPL account for 100% of the Group’s turnover and 99% of the
Group’s total assets. Therefore, all revenues and operating costs
of the Group’s mining and processing operations are recorded by
KMML and KMPL within the same tax jurisdiction, namely
Mozambique.
The parent company, Kenmare Resources plc,
conducts no direct exploration or mining activities. The Group’s
corporate costs are recorded by the parent company.
Scope of report
Disclosure of payments to governments is
required in respect of payments arising from the exploration,
discovery, development and extraction of minerals; the payments
included within this report therefore relate to the Group’s mining
and processing activities at the Moma Mine in Mozambique.
Groups are required to prepare a consolidated
report disclosing payments made by the parent company and its
subsidiary undertakings. Accordingly, this report reflects payments
made by the Group companies conducting mining and processing
activities, namely KMML and KMPL. The Group owns 100% of these
entities and the amounts reflect 100% of the payments made by these
subsidiary undertakings.
For a broader discussion of the Group’s payments
to governments and its contribution to its host communities, please
see the Group’s 2021 Sustainability Report, available on the
Company’s website at
www.kenmareresources.com/investors/reports-and-presentations
Payments
The payments disclosed in this report are on a
cash basis.
The payments made to governments are required to
be analysed into the following categories:
- Production entitlements - this category includes the host
government’s share of production, which is usually outlined in a
production sharing agreement. In 2021, the Group did not make
relevant payments in this category.
- Taxes - this category includes taxes paid to governments on
income, profits or production arising from the Group’s exploration,
discovery, development and extraction of minerals. Taxes levied on
consumption such as value added taxes, personal income taxes and
sales taxes are excluded. KMML is subject to a corporation tax rate
of 35% of the taxable profits of its Mozambique branch. Taxable
profits of the branch are calculated by reference to the cash costs
of producing Heavy Mineral Concentrate (“HMC”) net of allowable tax
deductions and increased by a defined margin.
KMML’s Mozambique
branch produces one product from its mining activities, namely HMC.
HMC is sold to KMPL, which processes it into finished products
(ilmenite, zircon, rutile and mineral sands concentrate), which are
exported worldwide to third party customers. The cash costs of
mining include the costs of mine face preparation, dredging and dry
mining operations, Wet Concentrator Plant operations,
rehabilitation and support services.
The margin applied to
the cash costs of mining is stipulated in the Mineral Licensing
Contract, dated 21 January 2002. The contract is between KMML and
the Ministry of Mineral Resources and Energy (MIREME) of the
Republic of Mozambique, acting for and on behalf of the Government
of the Republic of Mozambique, which details the terms and
conditions for the exploration, development and production of heavy
minerals in the areas of Moma, Congolone and Quinga. The margin is
determined by dividing the prices for sale of finished products to
third party customers earned by KMPL in the year by the prices
earned in the prior year, adjusted for inflation and applying this
factor to the prior year margin. For the fiscal year ending 31
December 2021 the margin was 54.8%.
KMPL has the benefit
of operating within an Industrial Free Zone (“IFZ”) and as an IFZ
company, it is exempted from corporation tax.
- Royalties – this category includes payments to a government for
the rights to extract minerals or other materials. Typically
amounts are levied based on production levels or revenues. KMML is
subject to a mining royalty of 3% based on HMC sold to KMPL. The
royalty is calculated by multiplying the cash costs of producing
HMC, plus the margin as detailed above, by 3%.
KMPL is subject to a
revenue royalty of 1% on revenue recognised.
- Dividends - this category includes dividend payments other than
dividends paid to a government as an ordinary shareholder of the
Company or one of its subsidiary undertakings. In 2021, the Group
did not make relevant payments in this category.
- Bonuses - this category includes bonuses paid to a government
for and in consideration of signature, discovery, production,
awards, grants and transfers of extraction rights and production
bonuses. In 2021, the Group did not make relevant payments in this
category.
- Fees – this category includes licence fees, rental fees, entry
fees and other considerations for mining licences or concessions.
- Infrastructure improvements – this category includes payments
to governments for infrastructure other than in circumstances where
the infrastructure is expected to be primarily dedicated to
operational activities throughout its useful life. Payments that
form part of the Group’s social investment activities (which are
primarily organised and administered by Kenmare Moma Development
Association) are excluded. Such payments would include
contributions in respect of local schools, healthcare or community
facilities, or improvements to the general environment of local
communities.
Government
“Government” means any national, regional or
local authority of a country, and includes a department, agency or
undertaking that is a subsidiary undertaking where the authority is
the parent undertaking.
All payments referred to this report are made to
the Government of Mozambique or its agencies; in particular, they
are made to Autoridade Tributária Unidade dos Grandes
Contribuintes–Nampula, a department of the Mozambican tax
authority.
Analysis by project/entity
An analysis of payments by project is required
where payments are attributable to specific projects. Projects are
defined as operational activities which are governed by a single
contract, licence, lease, concession or similar legal agreement,
and form the basis for payment liabilities with a government. Where
agreements are substantially interconnected in operating and
geographical terms, with substantially similar terms, those
agreements should be treated as a single project. Payments may be
disclosed at an entity level where payments are made in respect of
obligations imposed at that entity level rather than at a project
level. Payments below are disclosed at the entity level for KMML
and KMPL, which between them operate the Moma Mine, which is
treated as one project for purposes of this Report.
Materiality
Under Part 2A and Part 26, a payment need not be
disclosed if it is a single payment of less than the equivalent of
€100,000 or a series of related payments in a single year whose
total is less than the equivalent of €100,000.
Currency and rounding
All monetary amounts in this report refer to
United States dollars unless otherwise indicated. The amounts shown
in this report have been rounded to the nearest $1,000.
Payments to governments –
2021
|
Production entitlements |
Taxes |
Royalties |
Dividends |
Bonuses |
Fees |
Infrastructure improvements |
Total |
|
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
Country summary |
Government of Mozambique |
- |
6,156 |
8,863 |
- |
- |
388 |
- |
15,407 |
Total |
- |
6,156 |
8,863 |
- |
- |
388 |
- |
15,407 |
Entity report |
KMML |
- |
6,156 |
4,200 |
- |
- |
388 |
- |
10,744 |
KMPL |
- |
- |
4,663 |
- |
- |
- |
- |
4,663 |
Total |
- |
6,156 |
8,863 |
- |
- |
388 |
- |
15,407 |
This report for Kenmare Resources plc
(registered number 37550) was approved by the Directors of the
Company on 25 May 2022 and signed on their behalf by
Michael Carvill
Director
Tony McCluskey
Director
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton
Investor Relations
ir@kenmareresources.com
Tel: +353 1 671 0411
Mob: +353 87 943 0367 / +353 87 663 0875
Murray (PR advisor)
Doug Keatinge
dkeatinge@murraygroup.ie
Tel: +353 1 498 0300
Mob: +353 86 037 4163
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 8% of global titanium feedstocks and the Group
supplies to customers 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.
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