Q4 2023 Production Report and 2024 Guidance
Kenmare Resources plc (“Kenmare”
or the “Company” or “the Group”)
17 January 2024
Q4 2023 Production Report and 2024
Guidance
Kenmare Resources plc (LSE:KMR, ISE:KMR), one of
the leading global producers of titanium minerals and zircon, which
operates the Moma Titanium Minerals Mine (the "Mine" or "Moma") in
northern Mozambique, is pleased to provide a trading update for the
full year 2023 and the fourth quarter ending 31 December 2023 (“Q4
2023”) and production and operating cost guidance for 2024.
Statement from Michael Carvill, Managing
Director:
“Kenmare achieved two million hours worked
without a Lost Time Injury in December 2023. It is encouraging to
see a return to strong safety performance as the health and
wellbeing of our team at the Moma Mine is our highest priority.
Ilmenite production was 986,300 tonnes in 2023,
within our revised guidance range for the year, and production of
our other products met or exceeded our original guidance.
Markets for our products were challenging in
2023 due to global economic uncertainty, resulting in lower
pricing. However strong pigment production in China and the
thriving titanium metal market drove demand for our high-quality
ilmenite, relative to other titanium feedstocks.
In 2023, we made $31 million of debt repayments,
paid $58 million in dividends, bought back $30 million in shares,
began the capital investment for the transition to Nataka, and
finished the year with $21 million net cash. We expect total 2023
dividends to be approximately $50 million.”
Overview
- Lost Time Injury Frequency Rate
(“LTIFR”) of 0.15 per 200,000 hours worked to 31 December 2023 (31
December 2022: 0.09), with zero Lost Time Injuries (“LTIs”) in Q4
2023
- 2023 revised production guidance
achieved for ilmenite; original production guidance achieved for
primary zircon and rutile and materially exceeded for
concentrates
- Heavy Mineral Concentrate (“HMC”)
production of 1,448,300 tonnes in 2023, a 9% decrease compared to
2022 (1,586,200 tonnes), due to lower ore grades and mining rates
impacted by power interruptions and a severe lightning strike in
Q1
- Ilmenite production of 986,300
tonnes in 2023, a 9% decrease on 2022 (1,088,300 tonnes), and
broadly in line with the reduction in HMC processed
- Shipments of finished products of
1,045,200 tonnes in 2023, a 3% decrease on 2022 (1,075,600 tonnes).
Q4 2023 was the strongest quarter of the year, with 324,900 tonnes
shipped
- Share buy-back of 5.9% of Kenmare’s
issued share capital for £23.6 million ($30.0 million) completed in
September 2023
- Interim 2023 dividend of USc17.5
per share paid in October 2023, an increase of 59% compared to H1
2022 (USc10.98)
- Net cash of $20.7 million at
year-end 2023 (2022: $27.5 million net cash), with cash and cash
equivalents of $71.0 million (year-end 2022: $108.3 million)
-
Weakness in the global economy led to lower average prices for all
of Kenmare’s products in 2023
- Ilmenite production guidance for
2024 is 950,000 to 1,050,000 tonnes
Operations update
Operational results for the Moma Mine in Q4 and
full year 2023 were as follows:
|
Q4 2023 |
vs Q4 2022 |
vs Q3 2023 |
2023 |
vs 2022 |
tonnes |
% change |
% change |
tonnes |
% change |
Excavated ore1 |
9,348,000 |
-8% |
-14% |
38,549,000 |
-4% |
Grade1 |
4.83% |
2% |
12% |
4.38% |
-5% |
Production |
|
|
|
|
|
HMC produced |
399,800 |
-1% |
-4% |
1,448,300 |
-9% |
HMC processed |
399,800 |
0% |
-3% |
1,450,400 |
-8% |
Ilmenite |
269,600 |
-5% |
-7% |
986,300 |
-9% |
Primary zircon |
14,000 |
-4% |
-1% |
51,100 |
-13% |
Rutile |
2,100 |
-5% |
-22% |
8,400 |
-6% |
Concentrates2 |
10,500 |
-10% |
-29% |
45,700 |
1% |
Shipments |
324,900 |
-11% |
99% |
1,045,200 |
-3% |
- Excavated ore and grade prior to
any floor losses.
- Concentrates include secondary
zircon and mineral sands concentrate.
In December 2023, Kenmare achieved two million
hours without an LTI. Five LTIs were recorded in the 12 months to
31 December 2023, resulting in a rolling 12-month LTIFR of 0.15 per
200,000 hours worked (31 December 2022: 0.09).
HMC production in Q4 2023 was 399,800 tonnes, a
1% decrease compared to Q4 2022 (404,000 tonnes).
HMC production in 2023 was 1,448,300 tonnes,
down 9% compared to 2022 (1,586,200 tonnes), although with
significantly improved production in H2 (814,400 tonnes versus
633,900 tonnes in H1 2023). The 9% annual reduction was a product
of a 4% decrease in excavated ore volumes to 38,549,000 tonnes
(2022: 40,029,000 tonnes) and a 5% decrease in ore grades to 4.38%
(2022: 4.61%). Ore volumes were impacted primarily by the effects
of the severe lightning strike in Q1 and power supply
interruptions, which affected operations throughout the year. Ore
grades were down principally due to Wet Concentrator Plant (“WCP”)
B mining in wetlands, where grades were lower than expected, and
WCP A mining lower grade ore as it approaches the end of its mine
path in Namalope.
Production of all finished products decreased in
Q4 2023 compared to Q4 2022, although HMC processed was in line
with the prior period. Ilmenite production was 269,600 tonnes in Q4
2023, down 5% compared to Q4 2022 (283,900 tonnes), due to lower
recoveries, as a result of a shortage of HMC and some unplanned
stoppages. Similarly, primary zircon and rutile production were
down 4% and 5%, while concentrates production was down 10%.
For 2023, ilmenite production was 986,300 tonnes
and within the revised guidance range of 980,000 to 1,040,000
tonnes. Production of primary zircon and rutile was within original
guidance and concentrates production exceeded original
guidance.
Ilmenite production in 2023 was down 9% compared
to 2022 (1,088,300 tonnes), broadly in line with the 8% reduction
in HMC processed.
Primary zircon production was 51,100 tonnes in
2023, a 13% decrease compared to 2022 (58,400 tonnes). This was the
product of reduced HMC processed and lower recoveries.
Rutile production was 8,400 tonnes in 2023, a 6%
decrease compared to 2022 (8,900 tonnes). This reflects the
reduction in HMC processed, partially offset by higher rutile
content in the HMC and the drawdown of intermediate stock.
Concentrates production was 45,700 tonnes in
2023, up 1% compared to 2022 (45,200 tonnes), performing better
relative to other products as a result of lower recoveries in
primary zircon and the processing of intermediate stockpiles.
Q4 2023 was the strongest quarter of the year
for shipments, with 324,900 tonnes shipped, despite poor weather
conditions. Although volumes were down 11% compared to Q4 2022
(365,700 tonnes), which was a near record quarter, they were up 99%
compared to Q3 2023. Shipments in Q4 2023 comprised 278,700 tonnes
of ilmenite, 22,300 tonnes of primary zircon, 4,500 tonnes of
rutile and 19,500 tonnes of concentrates.
Shipment volumes in 2023 were 1,045,200 tonnes,
a 3% decrease compared to 2022 (1,075,600 tonnes). This was
impacted by more cautious buying from customers during this period
of weaker demand, compounded by destocking. Shipments during the
year comprised 939,000 tonnes of ilmenite, 51,300 tonnes of primary
zircon, 7,900 tonnes of rutile and 47,000 tonnes of
concentrates.
Closing stock of HMC at the end of 2023 was
16,700 tonnes, compared with 18,800 tonnes at the start of the
year. Closing stock of finished products at the end of 2023 was
259,100 tonnes, compared with 213,500 tonnes at the end of 2022.
Shipments are expected to exceed production in Q1 2024, partly as a
result of shipments deferred from Q4 2023 due to weather.
Capital projects update
As previously announced, WCP A will complete
mining at Namalope in late 2025 and commence its transition to the
Nataka ore zone. Nataka is the largest of Moma’s ore zones,
representing 75% of Kenmare’s Mineral Resources. WCP A is expected
to mine Nataka for the remainder of its economic life, which
exceeds 20 years.
The development capital expenditure profile for
the transition to Nataka was announced in April 2023 at Kenmare’s
Capital Markets Day (“CMD”) and updated in December 2023 in the
Projects Update.
Although orders for important long lead time
items, such as the two new dredges, were placed in 2023, the
capital incurred was lower than forecast, increasing the capital to
be spent in subsequent years.
The table below compares the two estimated
spending profiles:
Capital cost schedule ($m) |
2023 |
2024 |
2025 |
2026 |
2027 |
Total |
April 2023 (CMD) |
29 |
130 |
88 |
23 |
|
270 |
December 2023 |
11 |
179 |
121 |
20 |
10 |
341 |
As previously outlined in December 2023, the
$341 million capital expenditure represents the upper end of the
$316-331 million range, plus the $10 million of additional
infrastructure in 2027. The range relates to the WCP A
Infrastructure Definitive Feasibility Study (“DFS”), which is still
underway and scheduled to be completed in Q2 2024. The costs of
which are currently estimated to be $91-106 million.
The increase of $71m in the project cost
estimates are principally related to:
- Changes in scope/design
(approximately 60%): The scope amendments reflect opportunities to
mitigate execution risk of the project and enhance long-term
operational capacity.
- Additional indirect costs
(approximately 25%): Engineering, Procurement and Construction
Management (EPCM) and Owners costs were comprehensively updated as
part of the DFS process to include increased project governance for
schedule risk minimisation.
- Contingency additions
(approximately 15%): A quantitative risk assessment of the project
components has been completed for the WCP A upgrade and Tailings
Storage Facility. This process, which included comparison against
multiple international projects with similar characteristics,
recommended the inclusion of additional contingency to manage the
potential for schedule overrun and reflect the remote
location.
Finance update
On 13 October 2023, Kenmare paid its interim
2023 dividend of USc17.5 per share, an increase of 59% compared to
the interim 2022 dividend (USc10.98 per share). This represented a
total interim distribution of $16.6 million.
The Company expects total dividends in respect
of 2023 to be approximately $50 million, subject to prevailing
product market and other conditions. This in line with Kenmare’s
dividend policy payout ratio of 20% to 40% of underlying Profit
After Tax.
In September 2023 Kenmare completed a share
buy-back. The Company repurchased approximately 5.6 million shares,
representing 5.9% of the Company’s issued share capital, for a
total consideration of £23.6 million ($30.0 million).
The Company’s debt refinancing process,
initiated in September 2023 to support the capital programme, is
well-advanced and expected to complete in Q1 2024.
At 31 December 2023, Kenmare had net cash of
$20.7 million (2022: $27.5 million net cash). Cash and cash
equivalents were $71.0 million (2022: $108.3 million) and gross
bank loans, including accrued interest, were $50.3 million (2022:
$80.8 million).
Market update
Demand for Kenmare’s products remained
relatively robust in 2023, although prices decreased through the
year due to weaker global economic activity. Despite this
short-term pressure, the Company believes the fundamentals for its
products are strong, due primarily to medium- and long-term supply
constraints within the titanium feedstocks industry.
In 2023, feedstock supply remained flat. Several
large western feedstock producers have depleting Mineral Resources
and production disruptions were experienced at several major
operations outside China, reducing global supply. However, this was
balanced by increased volumes of ilmenite concentrates entering
China in 2023, the largest source of new supply.
Downstream demand for titanium pigment remained
soft in 2023, although improving as H2 progressed. While western
pigment producers reduced production, this was partially offset by
significantly increased pigment production in China. Consequently,
Kenmare experienced elevated demand from Chinese pigment producers,
who prefer to purchase ilmenite for beneficiation over high-grade
feedstocks.
The challenges faced by the pigment market
prompted producers to sustain lower-than-normal inventories
throughout 2023 and the rebuilding of these inventories through
increased utilisation rates in 2024 will support demand for
ilmenite. Market dynamics continue to favour Kenmare’s ilmenite and
the Company has a strong order book for Q1 2024, whilst also
benefiting from its first quartile cost position. Nonetheless, the
Company is experiencing lower pricing in Q1 2024 than it achieved
in Q4 2023.
Demand for zircon remained sluggish in Q4 2023,
as global economic uncertainty continues to weigh on demand for
products such as ceramic tiles. Prices for zircon in Europe remain
under pressure in early 2024 but Kenmare has seen a stabilisation
in the Chinese spot market in recent months, which should provide
some support to the global market.
2024 guidance
2024 guidance for production and operating costs
is as follows:
|
Unit |
2024 Guidance |
2023 Actual |
Production |
|
|
|
Ilmenite |
tonnes |
950,000-1,050,000 |
986,300 |
Primary zircon |
tonnes |
45,000-50,000 |
51,100 |
Rutile |
tonnes |
8,000-9,000 |
8,400 |
Concentrates1 |
tonnes |
37,000-41,000 |
45,700 |
Costs |
|
|
|
Total cash operating costs |
$m |
219-243 |
N/R2 |
Cash costs per tonne of finished product |
$/t |
198-218 |
N/R2 |
- Concentrates include secondary
zircon and mineral sands concentrate.
- To be reported in full year
financial statements.
Ilmenite production in 2024 is expected to be
between 950,000 and 1,050,000 tonnes. Excavated ore volumes are
expected to increase relative to 2023, although a conservative view
of WCP B ore grades in the wetlands and lower grades from dry
mining result in production of HMC and final products being in line
with 2023. Production is anticipated to be weighted towards H2 due
to the grade profile and planned maintenance on WCP B in Q1.
Following poor electrical reliability in 2023,
Kenmare has intervened and funded the refurbishment of the Nampula
statcom in the Electricidade de Moçambique (“EdM”) network. This
was commissioned in Q4 2023 and is expected to provide increased
stability in the regional power grid. In addition, a new 400kw line
is under construction by EdM and expected to connect to Nampula in
H1 2024, further enhancing network stability.
Closing product inventories at the end of 2023
were above normal levels, providing the opportunity to maintain
sales volumes with lower production in H1 2024.
Total cash operating costs are anticipated to
increase to $219-243 million in 2024, largely due to cost increases
in production overheads and power. Total cash operating costs for
2023 are anticipated to be towards the upper end of guidance
($208-228 million). Full details of 2023 costs will be provided
with the 2023 Preliminary Results.
Expenditure on development projects and studies
is expected to be approximately $189 million in 2024. These costs
primarily relate to the transition of WCP A to Nataka and
feasibility studies for the upgrade works to WCP B.
Improvement projects are expected to cost $6
million in 2024 and relate primarily to upgrades to the Mineral
Separation Plant.
Sustaining capital costs in 2024 are expected to
be approximately $29 million.
Notice of 2023 Preliminary
Results
Kenmare plans to release its 2023 Preliminary
Results on Wednesday, 20 March 2024.
For further information, please contact:
Kenmare Resources plcJeremy
Dibb / Katharine Sutton / Michael StarkeInvestor
Relationsir@kenmareresources.comTel: +353 1 671 0411Mob: +353 87
943 0367 / +353 87 663 0875
Murray (PR advisor)Paul
O’Kanepokane@murraygroup.ieTel: +353 1 498 0300Mob: +353 86 609
0221
About Kenmare Resources
Kenmare Resources plc is one of the world's
largest producers of mineral sands products. Listed on the London
Stock Exchange and the Euronext Dublin, Kenmare operates the Moma
Titanium Minerals Mine in Mozambique. Moma's production accounts
for approximately 7% of global titanium feedstocks and the Company
supplies to customers operating in more than 15 countries. Kenmare
produces raw materials that are ultimately consumed in everyday
quality-of life items such as paints, plastics and ceramic
tiles.
All monetary amounts refer to United States
dollars unless otherwise indicated.
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.
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