Half-Yearly Financial Report for the six months to 30 June 2024 and
interim dividend
Kenmare Resources plc
(“Kenmare” or “the Company” or “the Group”)
14 August 2024
Half-Yearly Financial Report for the six
months to 30 June 2024 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 2024 (“H1 2024”) and
announces its interim dividend for 2024.
Statement from Andrew Webb, Chairman:
“As previously announced, Michael Carvill,
Kenmare’s founder, today steps down as Managing Director after
almost four decades. I would like to again express the Board’s
appreciation and thanks to Michael, who leaves the Company with a
robust balance sheet, strong and capable team, a tier one asset, a
market-leading position and a robust balance sheet. Tom Hickey,
Kenmare’s Finance Director, has been appointed to succeed Michael.
Tom has 24 years’ experience as a public company director and a
strong background in finance, natural resources and African
operations.
Kenmare is on track to achieve 2024 guidance
and in H1 we delivered an EBITDA margin of over 40%. However,
reduced shipments impacted our financial performance. Shipments
have strengthened in early H2, supported by strong visibility of
customer orders, high finished product inventories and seasonally
better weather conditions. Consequently, revenue is expected to be
second-half weighted.
With net current assets of almost $200
million at the half year, including record net cash of $58.9
million, we are well positioned to fund our capital commitments and
shareholder returns.”
H1 2024 overview
Financials and markets
- Revenue from mineral products of
$154.5 million in H1 2024, down 33% year-on-year (“YoY”) due to
lower shipments, pricing and product mix
- In H2 2024, shipments are expected
to increase and the product mix is anticipated to reverse, with two
zircon shipments delayed from Q2 dispatched in early Q3
- Despite the lower shipments, at the
end of H1 2024 net cash increased to a record $58.9 million, having
paid $34.7 million in dividends and invested $49.1 million in
capital expenditure
- EBITDA of $63.2 million, down 43%
YoY due to lower revenues but maintaining a 41% margin, and profit
after tax of $20.9 million, down 69% YoY
- Interim dividend of USc15 per share
– full year dividend is expected to be towards the upper end of the
20-40% of profit after tax payout range
- Cash operating cost of $218 per
tonne of finished product, down 5% YoY, benefitting from increased
production volumes
- Cash operating cost per tonne of
ilmenite (net of co-products) of $201, up 47% YoY due to a
temporary reduction in co-product revenues, partially offset by a
4% increase in ilmenite production
- Demand for Kenmare’s ilmenite
remains robust, with prices in H1 above the Company’s expectations
– good demand and sales visibility for shipments in H2
- The zircon market remains
relatively stable with improving demand in India and Europe
Corporate and operations
- As previously announced, Michael
Carvill is stepping down as Managing Director and from the Board
and he will be succeeded by Tom Hickey, Finance Director
- Kenmare will now undertake a
limited process to identify Tom’s successor as Chief Financial
Officer - further updates will be provided in due course
- Encouraging progress with a
reduction in Lost Time Injury Frequency Rate (“LTIFR”) to 0.09 per
200,000 hours worked for the 12 months to 30 June 2024
- Continued improvement across
various key sustainability metrics in H1 2024, including malaria
prevention, reduction in GHG emissions, land rehabilitation,
biodiversity and socio-economic impact
- Kenmare is on track to achieve 2024
guidance across all stated metrics, including 950,000-1,050,000
tonnes of ilmenite production, with higher forecast grades
supporting production expectations in H2
- 4% increase in Heavy Mineral
Concentrate (“HMC”) production to 659,000 tonnes due to higher
excavated ore volumes and heavy mineral recoveries
- 4% increase in total finished
product production to 490,800 tonnes due primarily to increased HMC
processed
- Total shipments of 477,600 tonnes,
down 14% YoY due primarily to poor weather conditions and
additional operational maintenance, limiting shipping time
- Execution underway for upgrade of
Wet Concentrator Plant (“WCP”) A and transition to Nataka – 54% of
capital committed at end of H1 and ~75% expected by year-end
- Constructive discussions with the
Government of Mozambique continued in H1 2024 relating to the
renewal of Kenmare’s Implementation Agreement (“IA”), governing the
Industrial Free Zone forming part of the Moma Mine
Additional information in relation to
Alternative Performance Measures (“APMs”) is disclosed in the
Glossary.
Analyst and investor conference call and
webcast
Kenmare will host a conference call and webcast
for analysts, institutional investors, and media today at 9:00am UK
time. Participant dial-in numbers for the conference call are as
follows:
|
UK |
+44 20 3481 4247 |
|
Ireland |
+353 1 582 2023 |
|
USA |
+1 (646) 307 1963 |
|
Conference ID |
191 59 50 |
The webcast will be available at
www.kenmareresources.com and playback of the webcast will be
available at:
www.kenmareresources.com/investors/reports-and-presentations.
Private investor webinar
There will also be a separate webinar for
private investors on Thursday, 15 August 2024, at 12:30pm UK time.
To access the webinar, please register in advance by clicking
here.
The Half-Yearly Financial Report for the period
ended 30 June 2024 is also available at
www.kenmareresources.com/investors/reports-and-presentations.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton / Michael Starke
Investor Relations
ir@kenmareresources.com
Tel: +353 1 671 0411
Mob: + 353 87 943 0367 / + 353 87 663 0875
Murray (PR advisor)
Paul O’Kane
pokane@murraygroup.ie
Tel: +353 1 498 0300
Mob: +353 86 609 0221
Richie Oakley
roakley@murraygroup.ie
Tel: +353 1 498 0300
Mob: +353 87 245 1824
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.
INTERIM MANAGEMENT REPORT
Group results
Operational and financial results for H1 2024
were as follows:
|
|
H1
2024 |
H1
2023 |
% Change |
|
Production (tonnes) |
|
|
|
|
HMC produced |
659,000 |
633,900 |
4% |
|
HMC processed |
651,100 |
637,600 |
2% |
|
Finished products production |
|
|
|
|
Ilmenite |
444,100 |
425,500 |
4% |
|
Primary zircon |
21,300 |
23,000 |
-7% |
|
Rutile |
4,000 |
3,600 |
11% |
|
Concentrates2 |
21,400 |
20,500 |
4% |
|
Total finished products |
490,800 |
472,600 |
4% |
|
|
H1
2024 |
H1
2023 |
% Change |
|
Financials |
|
|
|
|
Revenue ($ million) |
165.1 |
242.9 |
-32% |
|
Freight ($ million) |
10.6 |
13.2 |
-20% |
|
Mineral Product Revenue ($ million) |
154.5 |
229.7 |
-33% |
|
Finished products shipped (tonnes) |
477,600 |
556,800 |
-14% |
|
Average price received per tonne ($/t) |
323 |
413 |
-22% |
|
|
|
|
|
|
Total operating costs ($ million) 3 |
132.3 |
162.6 |
-19% |
|
Total cash operating costs ($ million)4 |
107.2 |
108.8 |
-1% |
|
Cash operating cost per tonne of finished product ($/t) |
218 |
230 |
-5% |
|
Cash operating cost per tonne of ilmenite (net of co-products)
($/t) |
201 |
137 |
47% |
|
EBITDA ($ million)1 |
63.2 |
110.4 |
-43% |
|
Profit before tax ($ million) |
27.7 |
77.5 |
-64% |
|
Profit after tax ($ million) |
20.9 |
67.8 |
-69% |
|
|
|
|
|
|
Net cash at period-end |
58.95 |
42.3 |
39% |
Notes
- Additional information in relation to APMs is disclosed in the
Glossary.
- Concentrates include secondary
zircon and mineral sands concentrate.
- Total operating costs consist of
cost of sales and administration costs as reported in the income
statement. Depreciation and amortisation are included in the
operating costs.
- Total cash costs consist of total
operating costs less freight and non-cash costs, including
inventory movements.
- Kenmare’s net cash position at
period-end was $58.9 million. This comprises $60.3 million of cash,
including $1.7 million of cash held in the Employee Benefit Trust,
minus $1.4 million of leases.
Sustainability
As reported on 3 June 2024, Kenmare was deeply
saddened by a fatality at the Moma Mine on 1 June 2024. An
excavator operator employed by one of Kenmare’s contractors was
involved in a fatal incident during the night shift. Police
investigations have found that his death was related to activities
outside of the ordinary course of operations and Kenmare has
co-operated fully with the authorities.
Kenmare’s rolling 12-month LTIFR to 30 June 2024
improved to 0.09 per 200,000 hours worked (30 June 2023: 0.18). One
Lost Time Injury (“LTI”) was recorded during Q2 2024, not including
the fatality as it was non-work related. Prior to this, the Moma
team had achieved almost five million hours worked without an LTI,
which is equivalent to eight months’ work. Sustained leadership
focus on safety and standards of work is contributing to a safer
workplace.
The Company continued to deliver improvement
across various key sustainability metrics during the period,
including the advancement of projects to reduce the prevalence of
malaria, improve the future productivity of rehabilitated land for
agriculture and reduce carbon emissions. Construction of a new
district hospital, funded by the Kenmare Moma Development
Association (KMAD), also commenced in Q1 2024.
Operations
At the end of H1, Kenmare is on track to achieve
its 2024 guidance on all stated metrics. The Company continues to
expect production to increase in H2, supported by higher forecast
ore grades, averaging 4.5% Total Heavy Minerals (“THM”).
Production in early H2 has been solid,
particularly for rutile, which delivered a new monthly production
record in July following the improvement works undertaken in the
Mineral Separation Plant (“MSP) in H1. Shipment volumes have
strengthened and the two zircon shipments delayed from Q2 were
shipped in early Q3 2024. The product transfer conveyor system is
operating reliably, following the additional maintenance work
carried out in Q2, and the system is not a constraint to increased
H2 loadouts.
Looking back at H1, HMC production in Q1 2024
was impacted significantly by seasonal power interruptions due to
the southern hemisphere rainy season, limiting mining operations.
As expected, operating conditions improved in Q2 with the onset of
the dry season, leading to reduced power interruptions and
consequently, excavated ore tonnes increased by 13%
quarter-on-quarter. Operating conditions in Q3 continue to be
favourable.
As a result, HMC production in H1 2024 was
659,000 tonnes, a 4% increase YoY (H1 2023: 633,900 tonnes). This
was the product of a 7% increase in excavated ore volumes to
19,601,000 tonnes (H1 2023: 18,380,000 tonnes) and higher heavy
minerals recovery, offsetting the 5% decrease in ore grades to
3.97% THM (H1 2023: 4.19% THM), in line with expectations. Stronger
heavy mineral recoveries are due to improvements at all three
mining plants during the past year, including the addition of clean
water to spiral separation at WCP A, the return to better mining
conditions at WCP C, and improved sweeping control as part of the
dredging operations at all three plants. Recoveries are expected to
remain strong in H2.
HMC production exceeded HMC processed in H1 2024
due to increased maintenance work taking place in the MSP during Q1
to improve circuit performance, with HMC held back from processing
until the work was completed. Despite this, HMC processed was up 2%
in H1 2024 YoY, contributing to a 4% increase in production of
finished products.
Production of Kenmare’s primary product,
ilmenite, was 444,100 tonnes, up 4% YoY, due to increased HMC
processed and benefitting from greater ilmenite content in the
HMC.
Primary zircon production was 21,300 tonnes in
H1 2024, down 7% YoY, due to challenges in the zircon circuit
during Q1 and downtime due to improvement works. This resulted in
lower recoveries and higher than usual quantities of material being
sent to the intermediate stockpiles. Performance improved
significantly in Q2, supported by the drawdown of some intermediate
stocks, however it did not fully offset the weak performance in Q1.
Intermediate stockpiles will be further drawn down in H2, which is
expected to benefit zircon and rutile production for the remainder
of the year.
Rutile production was 4,000 tonnes, up 11% YoY,
supported by increased HMC processed; drawdown of intermediate
stocks; and higher recoveries as a result of improvement works
completed.
Concentrates production was 21,400 tonnes, up 4%
YoY, in line with increased HMC processed.
Total shipments in H1 2024 were 477,600 tonnes,
down 14% YoY, due primarily to poor weather conditions and
operational issues at Kenmare’s shipping facilities, limiting
shipping time. Shipments comprised 458,400 tonnes of ilmenite,
8,800 tonnes of primary zircon and 10,400 tonnes of concentrates.
No rutile was shipped during the period.
Closing stock of HMC at the end of H1 2024 was
24,600 tonnes, compared to 16,700 tonnes at the end of 2023. This
was due to HMC production exceeding HMC processed during the
period. Closing stock of finished products at the end of H1 2024
was 273,000 tonnes, compared to 259,100 tonnes at the end of 2023,
reflecting production exceeding shipments. Finished product stock
is expected to be drawn down in H2, as shipments are anticipated to
be greater than expanded production. However Kenmare still expects
stock levels to remain higher than usual during H2, before
normalising during H1 2025.
Capital projects
WCP A upgrade and transition to
Nataka
As announced on 4 July 2024, Kenmare’s Board has
approved the final part of the Definitive Feasibility Study
(“DFS”), relating to infrastructure, for the WCP A upgrade and
transition to Nataka. Nataka is the largest ore zone in Kenmare’s
portfolio and WCP A’s transition to this area secures production
from Moma for decades to come.
The total capital costs for the project remain
in line with previous estimates, totalling $341 million. Kenmare
plans to fund the WCP A upgrade and transition from cash flow and
existing debt facilities. Further detailed engineering and
scheduling work has deferred $38 million of expected capital
expenditure from 2024 into subsequent years, in line with the
evolving mine plan.
Works for the upgrade are advancing well and at
the end of H1, 54% of the overall project budget has been
committed. By year-end, Kenmare expects almost 75% to be committed,
with the project being progressively derisked.
The fabrication of the two new dredges is
progressing, with work on the first dredge pontoons now taking
place by the project contractor in the Netherlands. The new surge
bin, which forms part of the upfront desliming circuit, has been
successfully trial-assembled in South Africa, and will now be
transported to Moma. The first batch of pontoons and the screens
for the surge bin are due to be shipped to Nacala, the nearest
large port to Moma, before the end of August, in advance of being
transported by road to site. The detailed design of the Tailings
Storage Facility (“TSF”) is on track for completion in mid-Q3 2024
with construction expected to begin in Q4 2024. Early works for the
infrastructure in Nataka are also commencing, following Board
approval in Q2.
WCP B upgrade
Work continued on the DFS for the WCP B upgrade
during H1, which is expected to increase WCP B’s capacity by over
40%. Kenmare has identified workstreams that have the potential to
optimise the DFS and studies are underway.
Although the Company believes this project is
highly accretive, the Final Investment Decision remains deferred
while the upgrade and transition of WCP A is prioritised. Kenmare
will provide a further update on the WCP B upgrade in the Q4
Production Report in January 2025.
Congolone ore zone
Kenmare also progressed the Pre-Feasibility
Study for the Congolone ore zone during H1. Congolone is situated
90 kilometres to the north of the Moma operations and has Mineral
Resources to support 20 years of production, including
approximately 300,000 tonnes of ilmenite production for the first
12 years.
The PFS work has improved Kenmare’s
understanding of the project’s Mineral Resources and its mineral
transport and processing requirements. Various mining methods have
also been reviewed.
Kenmare’s project team is focused on executing
the upgrade and transition of WCP A; however, work will continue on
the Congolone PFS in tandem, maintaining it as a future potential
growth opportunity.
Renewal of Implementation Agreement
Discussions with the Government of Mozambique
continued during the period, relating to the renewal of Moma’s IA.
The IA governs fiscal and other terms of the Industrial Free Zone,
under which Kenmare conducts its processing and export activities.
A number of meetings took place in Maputo and discussions have been
constructive. Government representatives share Kenmare’s objective
of concluding the renewal process before the December 2024 renewal
date.
Market update
Demand for Kenmare’s products remained robust in
H1 2024, particularly for ilmenite. Spot prices for ilmenite
remained relatively stable throughout H1 and were above the
Company’s expectations. However, Kenmare’s average received price
for all products decreased by 22% compared to H1 2023, due
primarily to a 56% decrease in high value zircon shipments
year-on-year. The two zircon shipments delayed from Q2 due to poor
weather were shipped in early Q3 2024, with consequent positive
impact on H2 revenues.
Demand from the titanium pigment industry
rebounded more strongly than expected in Q1 2024 and remained solid
throughout the first half. Chinese producers continued to produce
at record levels and demand for Kenmare’s ilmenite was bolstered by
increased operating rates among pigment producers in Europe and the
United States. This was driven by stronger underlying demand and
restocking of titanium feedstocks, with producers having held
lower-than-normal inventories in 2023. Concerns surrounding
potential duties on Chinese pigment entering the European Union
further supported demand and prices for European pigment. Demand
for titanium feedstocks from the titanium metal sector also remains
very strong.
Global supply of titanium feedstocks remains
sufficient to meet demand, with the main source of new supply
continuing to be Chinese producers in African countries shipping
concentrates to China for processing. However, this was partially
offset by the suspension of operations in Sierra Leone and
continued Mineral Resource depletion in Kenya.
After a weak 2023, the zircon market began to
show signs of recovery in early Q1 2024, benefitting from growing
demand in India, while demand in Europe also improved in Q2,
particularly from the ceramics industry. Although the market in
China softened in Q2, Kenmare’s product quality means that it
continues to experience healthy demand for its concentrates from
Chinese customers. On a global basis, supply of high-quality zircon
products is constrained, supporting prices in the spot market.
Kenmare’s order book for H2 2024 is largely
committed. In the medium term, Kenmare believes that supply
constraints will support the fundamentals for all of the Company’s
products.
Financial review
Kenmare generated mineral product revenue of
$154.5 million in H1 2024 and EBITDA of $63.2 million, resulting in
a strong EBITDA margin of 41%. While the Company remains highly
profitable, Kenmare’s H1 financial performance was impacted by a
lower average price received, due to a lower proportion of high
value zircon shipments than normal, and reduced shipment volumes.
The Company expects its average price received to increase in H2,
as the primary zircon shipments delayed from Q2 were shipped in
early Q3. Shipment volumes are also expected to be higher due to
seasonally better weather between July and December. Consequently,
revenue is anticipated to be to be materially stronger in the
second half of the year.
Kenmare’s balance sheet remained robust during
H1, with net cash increasing by $38.2 million to $58.9 million (31
December 2023: $20.7 million), after capital investments ($49.1
million) and $34.7 million of dividend payments. The Company is
pleased to announce a 2024 interim dividend of USc15 per share (H1
2023: USc17.5 per share) and the full year dividend is expected to
be towards the upper end of the Company’s target payout range of
20–40% of profit after tax.
Revenue
Mineral product revenue was $154.5 million in H1
2024, down 33% YoY (H1 2023: $229.7 million), driven by a 22%
decrease in the average received price to $323 per tonne (H1 2023:
$413 per tonne) and a 14% decrease in shipment volumes. The
decrease in average price received was due to product mix, with a
substantially lower proportion of zircon shipments in H1 2024 than
normal, as detailed below.
Freight revenue in H1 2024 was $10.6 million,
down 20% YoY (H1 2023: $13.2 million), reflecting lower shipments,
offset by higher freight costs in the period.
Ilmenite revenue was $136.5 million in H1 2024,
down 24% YoY (H1 2023: $179.2 million), due to a 14% decrease in
the average ilmenite price to $298 per tonne (H1 2023: $347 per
tonne) and an 11% decrease in ilmenite shipments.
Primary zircon revenue was $11.9 million, down
64% YoY (H1 2023: $33.1 million), due to a 56% decrease in primary
zircon shipments and a 19% decrease in average zircon price to
$1,355 per tonne (H1 2023: $1,670 per tonne). The primary zircon
shipments deferred from Q2 2024 due to poor weather were shipped in
early Q3, which will have a positive impact on H2 2024 revenue.
Operating costs
Total operating costs in H1 2024 were $132.3
million, a 19% decrease compared to H1 2023 ($162.6 million) due to
lower shipment volumes and therefore lower cost of sales in the
period. Total operating costs also benefitted from $3.3 million in
insurance proceeds relating to business interruption resulting from
the lightning strike on the power transmission line at the Mine in
February 2023.
Total cash operating costs were $107.2 million,
down 1% YoY (H1 2023: $108.8 million). Combined with a 4% increase
in production of finished products, this resulted in a 5% decrease
in cash operating costs per tonne to $218 (H1 2023: $230). Cash
operating cost per tonne of ilmenite was $201, up 47% YoY (H1 2023:
$137), as a result of a 64% reduction in co-product revenues,
partially offset by a 4% increase in ilmenite production.
Finance income and
costs
Kenmare recognised finance income of $2.4
million in H1 2024 (H1 2023: $3.6 million), consisting of interest
on bank deposits. Finance costs were $7.5 million (H1 2023: $6.3
million), including loan interest of $2.2 million (H1 2023: $4.2
million), amortisation of transaction fees of the 2019 debt
facility of $0.9 million and transaction costs of $2.6 million on
the $200 million Revolving Credit Facility (“RCF”) entered into on
4 March 2024. Factoring and other trade facility fees were $0.5
million in the period (H1 2023: $0.8 million) and unwinding of the
mine closure provision amounted to $0.4 million (H1 2023: $0.3
million). Commitment fees under the debt facilities were $0.8
million (H1 2023: $0.3 million) and lease interest was $0.06
million (H1 2023: $0.05 million).
Tax
The tax charge for H1 2024 amounted to $6.8
million (H1 2023: $9.7 million). Kenmare’s subsidiary, Kenmare
Moma Mining (Mauritius) Limited, had taxable profits of $10.1
million (H1 2023: $16.3 million), resulting in an income tax charge
of $3.5 million (H1 2023: $5.6 million). During the period Kenmare
Resources plc had taxable profits of $42.4 million (H1 2023: $58.6
million), resulting in an income tax expense of $3.6 million (H1
2023: $4.1 million) being recognised. $40 million of the taxable
income relates to dividend income received from the subsidiary
undertaking, Kenmare Moma Mining (Mauritius) Limited (H1 2023: $60
million), with the balance relating to trading profits and deposit
income of $4.1 million (H1 2023: $1.4 million).
Cash flows
Net cash from operations in H1 2024 was $125.4
million (H1 2023: $82.2 million), as a result of strong operating
cashflow of $63.8 million (H1 2023: $112.2 million) and a working
capital inflow of $71.9 million (H1 2023 outflow: $14.6 million).
The working capital inflow of $71.9 million reflects the unwinding
of year-end trade receivables of $87.3 million (H1 2023 increase:
$16.2 million).
Investing activities of $49.1 million in H1 2024
(H1 2023: $20.2 million) represented additions to property, plant
and equipment. $48.8 million of debt repayments (H1 2023:
$15.7 million) and $2.6 million of transaction fees on the new
RCF were paid during the period (H1 2023: Nil), as well as payment
of the final 2023 dividend of $34.7 million (2023: $41.1 million).
Lease repayments of $0.05 million (H1 2023: $0.09 million) were
also made and treasury shares of $0.9 million (H1 2023: $3.6
million) were purchased in the period.
Consequently, Kenmare finished H1 2024 with
$60.3 million of cash and cash equivalents, including $1.7 million
of cash held in the Employee Benefit Trust, representing a decrease
of $10.7 million compared to year-end 2023 ($71.0 million).
Balance sheet
In H1 2024 there were additions to property,
plant and equipment of $49.1 million (H1 2023: $20.2 million).
Additions consisted of $31.1 million of development expenditure,
mainly in relation to the upgrade of WCP A and $18.0 million of
sustaining capital.
Depreciation of $30.5 million was in line with
the prior period (H1 2023: $30.2 million). The mine closure
provision asset decreased by $1.8 million in H1 2024 (H1 2023:
increase $0.8 million). This was due to an increase in the
discount rate used to estimate the closure cost provision from 4.0%
to 4.5%.
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 8 of the financial
statements. No impairment provision is required as a result of this
review.
Inventory at period-end amounted to $113.6
million (31 December 2023: $99.3 million), consisting of
intermediate and finished products of $77.2 million (31 December
2023: $58.4 million), which increased as a result of lower shipment
volumes in the period, and consumables and spares of $36.4 million
(31 December 2023: $40.9 million).
Trade and other receivables amounted to $67.6
million (31 December 2023: $153.7 million). This was
comprised of $36.7 million of trade receivables from the sale of
finished products (31 December 2023: $127.4 million),
$24.5 million of supplier prepayments and other miscellaneous
debtors (31 December 2023: $19.8 million), and $6.3 million of VAT
receivable (31 December 2023: $6.4 million). Trade receivables are
a function of shipments made before period-end and credit terms
specific to the relevant customer. There have been no credit
impairments or bad debts during the period. The expected credit
loss was reduced by $1.2 million (H1 2023: decreased $0.6
million).
Cash and cash equivalents decreased by
$10.7 million in H1 2024 and at 30 June 2024 amounted to $60.3
million (31 December 2023: $71.0 million).
Lease liabilities amounted to $1.4 million (31
December 2023: $1.5 million) at period-end.
Tax liabilities amounted to $4.6 million (31
December 2023: $6.9 million) and trade and other payables amounted
to $36.9 million (31 December 2023: $38.6 million).
Debt facilities
On 4 March 2024, the Group entered into a new
$200 million RCF with its existing lenders Absa Bank, Nedbank, Rand
Merchant Bank and Standard Bank. The facility will support
Kenmare’s planned capital programme in the coming years and removes
the amortising payments of the previous term loan, whilst
increasing available funding and extending the maturity profile
from 2025 to 2029.
At period-end, there was no outstanding debt due
(31 December 2023: $47.9 million).
Financial
outlook
Kenmare’s strategic priorities are to operate
responsibly, deliver long-life, low-cost production, and to
allocate capital efficiently, including developing accretive growth
opportunities. The Group is focused on maintaining a strong and
flexible balance sheet to enable it to deliver all these goals,
particularly to fund its capital investment requirements and
shareholder returns.
Kenmare will continue to manage its operating
cost base in a disciplined and sustainable manner, cognisant of
inflationary pressures and other risks that face its business, in
order to minimise unit costs.
Market demand remains encouraging and while
product prices were lower in H1 YoY, financial performance is
expected to be stronger in H2, driven by increased shipment volumes
and a higher value product mix. The business continues to be highly
cash generative, with cash flows and debt continuing to support all
expected expenditures.
At the end of H1, Kenmare is well capitalised to
fund the upgrade and transition of WCP A to Nataka and to continue
delivering shareholder returns.
Interim dividend
Kenmare generated profit after tax of $20.9
million in H1 2024 (H1 2023: $67.8 million). The Board has approved
an interim 2024 dividend of USc15 per share (H1 2023: USc17.5). The
Company is targeting a full year dividend towards the upper end of
the 20-40% profit after tax payout range. The financial statements
do not reflect this interim dividend.
The Company will pay the interim dividend on 11
October 2024 to shareholders of record at the close of business on
20 September 2024. Irish Dividend Withholding Tax (“DWT”) of 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. For
assistance claiming an exemption from DWT or a refund for DWT,
please contact Kenmare’s Investor Relations team.
The dividend timetable is as follows:
|
Announcement of interim dividend |
14 August 2024 |
|
Ex-Dividend Date |
19 September 2024 |
|
Record Date |
20 September 2024 |
|
Currency election cut-off date |
24 September 2024 at 12:00 noon (IST) |
|
Payment Date |
11 October 2024 |
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 2024 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
2023. A detailed explanation of these principal risks and
uncertainties and how Kenmare seeks to mitigate these risks, can be
found on pages 76 to 85 of the 2023 Annual Report under the
following headings: permitting; licensing and Government agreement
risk; country risk; geotechnical risk; severe weather events;
uncertainty over physical characteristics of orebody; loss of
production due to power supply and transmission interruption; asset
damage or loss; health, safety and environment; material
misstatement in the Ore Reserves & Mineral Resource Table; IT
security risk; development project risk; industry cyclicality;
customer and/or market concentration; foreign currency risk; and
aggressive cost inflation.
The Group’s climate risks disclosure is set out
on pages 66 to 70 of the 2023 Annual Report. These have not changed
in the first half of the year and outline the Group’s objectives in
relation to climate risk. Kenmare has continued with these
objectives in H1 2024 and will provide an update in the 2024 Annual
Report.
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
2023 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 12 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 period ended 30 June
2024 of USc15 per share was approved by the Board on 13 August
2024. The dividend payable 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 20 September 2024.
There have been no other significant events
since 30 June 2024 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
Tom Hickey
13 August 2024
13 August 2024
Independent Review Report to Kenmare Resources plc (“the
Entity”)
Conclusion
We have been engaged by the Entity to review the
Entity’s condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2024
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 a summary of significant accounting policies
and other explanatory notes.
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 2024 is not prepared, in
all material respects in accordance with International Accounting
Standard 34 Interim Financial Reporting (“IAS 34”) as
adopted by the EU and the Transparency (Directive 2004/109/EC)
Regulations 2007 (“Transparency Directive”), and the Central Bank
(Investment Market Conduct) Rules 2019 (“Transparency Rules of the
Central Bank of Ireland).
Basis for conclusion
We conducted our review in accordance with
International Standard on Review Engagements (Ireland) 2410
Review of Interim Financial Information Performed by the
Independent Auditor of the Entity (“ISRE (Ireland) 2410”)
issued for use in Ireland. 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.
Conclusions relating to going
concern
Based on our review procedures, which are less
extensive than those performed in an audit as described in the
Basis for conclusion section of this report, nothing has come to
our attention that causes us to believe that the directors have
inappropriately adopted the going concern basis of accounting, or
that the directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review
procedures performed in accordance with ISRE (Ireland) 2410.
However, future events or conditions may cause the Entity to cease
to continue as a going concern, and the above conclusions are not a
guarantee that the Entity will continue in operation.
Independent Review Report to Kenmare
Resources plc (“the
Entity”)(continued)
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.
The directors are responsible for preparing the
condensed set of consolidated financial statements included in the
half-yearly financial report in accordance with IAS 34 as adopted
by the EU.
As disclosed in note 1, the annual financial
statements of the Entity for the year ended 31 December 2023 are
prepared in accordance with International Financial Reporting
Standards as adopted by the EU.
In preparing the condensed set of consolidated
financial statements, the directors are responsible for assessing
the Entity’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the Entity or to cease operations, or have no realistic
alternative but to do so.
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.
Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for
conclusion section of this report.
The purpose of our review work and to whom we
owe our responsibilities
This report is made solely to the Entity 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.
13 August 2024
KPMG
Chartered Accountants
1 Stokes Place
St. Stephen’s Green
Dublin 2
Group condensed consolidated statement of comprehensive
income
For the financial period ended 30 June 2024
|
|
Notes |
Unaudited
6 Months
30 June 2024
$’000 |
Unaudited
6 Months
30 June 2023
$’000 |
| Revenue |
2 |
165,081 |
242,879 |
|
Cost of sales |
4 |
(133,598) |
(157,200) |
|
Gross profit |
|
31,483 |
85,679 |
|
Administration Expenses |
4 |
1,267 |
(5,440) |
|
Operating profit |
|
32,750 |
80,239 |
| Finance
income |
5 |
2,409 |
3,589 |
| Finance
costs |
5 |
(7,461) |
(6,324) |
|
Profit before tax |
|
27,698 |
77,504 |
|
Income tax expense |
6 |
(6,823) |
(9,727) |
|
Profit for the financial period and total comprehensive income for
the financial period |
|
20,875 |
67,777 |
|
Attributable to equity holders |
|
20,875 |
67,777 |
|
|
|
|
|
|
|
|
$ per share |
$ per share |
|
Profit per share: Basic |
7 |
0.23 |
0.71 |
|
Profit per share: Diluted |
7 |
0.23 |
0.70 |
The accompanying notes form part of these financial
statements.
Group condensed consolidated statement of financial
position
As at 30 June 2024
|
|
Notes |
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
| Property, plant
and equipment |
8 |
952,808 |
935,848 |
| Right-of-use
assets |
9 |
1,231 |
1,368 |
|
|
|
954,039 |
937,216 |
|
Current assets |
|
|
|
| Inventories |
10 |
113,611 |
99,257 |
| Trade and other
receivables |
11 |
67,553 |
153,650 |
|
Cash and cash equivalents |
12 |
60,290 |
71,048 |
|
|
|
241,454 |
323,955 |
|
Total assets |
|
1,195,493 |
1,261,171 |
|
Equity |
|
|
|
| Capital
and reserves attributable to the |
|
|
|
|
Company’s equity holders |
|
|
|
| Called-up share
capital |
13 |
97 |
97 |
| Share
premium |
|
545,950 |
545,950 |
| Other
reserves |
|
230,053 |
229,740 |
|
Retained earnings |
|
354,139 |
367,504 |
|
Total equity |
|
1,130,239 |
1,143,291 |
|
Liabilities |
|
|
|
|
Non-current liabilities |
|
|
|
| Bank loans |
14 |
- |
15,502 |
| Lease
liabilities |
9 |
1,114 |
1,256 |
|
Provisions |
16 |
21,258 |
20,877 |
|
|
|
22,372 |
37,635 |
|
Current liabilities |
|
|
|
| Bank loans |
14 |
- |
32,371 |
| Lease
liabilities |
9 |
274 |
264 |
| Trade and other
payables |
15 |
36,931 |
38,564 |
| Current tax
liabilities |
17 |
4,629 |
6,921 |
|
Provisions |
16 |
1,048 |
2,125 |
|
|
|
42,882 |
80,245 |
|
Total liabilities |
|
65,254 |
117,880 |
|
Total equity and liabilities |
|
1,195,493 |
1,261,171 |
The accompanying notes form part of these financial
statements.
On behalf of the Board:
M. CARVILL
Director
13 August 2024
T. HICKEY
Director
13 August 2024
Group condensed consolidated statement of changes in
equity
|
|
Called-Up Share
Capital
$’000 |
Share Premium
$’000 |
Retained
Earnings
$’000 |
Other
Reserves
$’000 |
Total
$’000 |
Unaudited
Balance at 1 January 2024 |
97 |
545,950 |
367,504 |
229,740 |
1,143,291 |
| Profit for the
financial period |
- |
- |
20,875 |
- |
20,875 |
|
Transactions with owners of the Company |
|
|
|
|
|
| Recognition of
share-based payment expense |
- |
- |
- |
1,716 |
1,716 |
| Exercise of
share-based payments |
- |
- |
451 |
(2,697) |
(2,246) |
| Shares
acquired by the Kenmare Employee Benefit Trust |
- |
- |
- |
(908) |
(908) |
| Shares
distributed by the Kenmare Employee Benefit Trust |
- |
- |
- |
2,202 |
2,202 |
|
Dividends paid |
- |
- |
(34,691) |
- |
(34,691) |
|
Balance at 30 June 2024 |
97 |
545,950 |
354,139 |
230,053 |
1,130,239 |
Unaudited
Balance at 1 January 2023 |
104 |
545,950 |
324,721 |
232,759 |
1,103,534 |
| Profit for the
financial period |
- |
- |
67,777 |
- |
67,777 |
|
Transactions with owners of the Company |
|
|
|
|
|
| Recognition of
share-based payment expense |
- |
- |
- |
1,354 |
1,354 |
| Exercise of
share-based payments |
- |
- |
(2,511) |
(3,274) |
(5,785) |
| Shares
acquired by the Kenmare Employee Benefit Trust |
- |
- |
- |
(3,625) |
(3,625) |
| Shares
distributed by the Kenmare Employee Benefit Trust |
- |
- |
- |
3,386 |
3,386 |
|
Dividends |
- |
- |
(41,053) |
- |
(41,053) |
|
Balance at 30 June 2023 |
104 |
545,950 |
348,934 |
230,600 |
1,125,588 |
For the financial period ended 30 June 2024
Group condensed consolidated statement of cash
flows
For the financial period ended 30 June 2024
|
|
Notes |
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
| |
|
|
|
| Cash
flows from operating activities |
|
|
|
| Profit for the
period after tax |
|
20,875 |
67,777 |
| Adjustment
for: |
|
|
|
| Foreign exchange
movement |
|
- |
1,018 |
| Share-based
payments |
19 |
1,716 |
1,354 |
| Finance
income |
5 |
(2,409) |
(3,589) |
| Movement in
expected credit losses |
18 |
(1,154) |
(601) |
| Finance
costs |
5 |
7,461 |
6,324 |
| Income tax
expense |
6 |
6,823 |
9,727 |
|
Depreciation |
8/9 |
30,516 |
30,150 |
|
|
|
63,828 |
112,160 |
|
Change in: |
|
|
|
| Provisions |
16 |
710 |
819 |
| Inventories |
10 |
(14,354) |
10,822 |
| Trade and other
receivables |
11 |
87,251 |
(16,151) |
| Trade and other
payables |
15 |
(1,813) |
(7,968) |
|
Exercise of share-based payment awards |
|
- |
(2,160) |
|
Cash generated from operating activities |
|
135,622 |
97,522 |
| Income tax
paid |
|
(9,115) |
(13,137) |
| Interest
received |
|
2,409 |
2,562 |
| Interest
paid |
14 |
(2,210) |
(3,646) |
| Factoring and
other fees |
5 |
(497) |
(807) |
|
Debt commitments fees paid |
5 |
(849) |
(294) |
|
Net cash from operating activities |
|
125,360 |
82,200 |
|
Investing activities |
|
|
|
|
Additions to property, plant and equipment |
8 |
(49,101) |
(20,212) |
|
Net cash used in investing activities |
|
(49,101) |
(20,212) |
|
Financing activities |
|
|
|
| Dividends
paid |
13 |
(34,691) |
(41,053) |
| Market purchase
of equity under Kenmare Restricted Share Plan |
|
(908) |
(3,625) |
| Drawdown of
debt |
14 |
51,370 |
- |
| Repayment of
debt |
14 |
(100,156) |
(15,715) |
| Transaction costs
of debt |
14 |
(2,581) |
- |
|
Payment of lease liabilities |
9 |
(51) |
(85) |
|
Net cash used in financing activities |
|
(87,017) |
(60,478) |
|
Net increase/(decrease) in cash and cash
equivalents |
|
(10,758) |
1,510 |
| Cash and cash
equivalents at the beginning of the financial year |
|
71,048 |
108,271 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
- |
(962) |
|
Cash and cash equivalents at the end of the
period |
|
60,290 |
108,819 |
|
|
|
|
|
Notes to the group condensed consolidated financial
statements
For the financial period ended 30 June 2024
- 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 2024 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 Guidance 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 2024 and the corresponding amounts for the
six months ended 30 June 2023 have been reviewed but not audited.
The independent review report is on pages 13 and 14.
The financial information for the year ended 31
December 2023, presented herein, is an abbreviated version of the
annual financial statements for the Group in respect of the year
ended 31 December 2023. The Group’s annual financial statements in
respect of the year ended 31 December 2023 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.
Use of Judgements and
Estimates
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. At each reporting date, the Group reviews the carrying
amounts of property, plant and equipment to determine whether there
is any indication that those asset have suffered an impairment
loss. A key element to this review is assessing the value in use
and the estimated future cash flows. The assumptions used in the
estimating future cashflows have been updated since the year end
and are included in the Note 8.
Going Concern
The Directors have, at the time of approving the
financial statements, a reasonable expectation that the Group will
have adequate resources to continue in operational existence for
the foreseeable future. Based on the Group’s cash flow forecast,
liquidity, solvency position and available finance facilities, the
Directors have a reasonable expectation that the Group has adequate
resources for the foreseeable future and, therefore, they continue
to adopt the going concern basis of accounting in preparing the
financial statements.
Management plans assume that all agreements,
licences, concessions and approvals relating to the Group’s mining
and processing activities, including the Implementation Agreement,
are in place or will be renewed over the 12 month period, from the
date of authorisation of these financial statements. The Group
forecast has been prepared by management with best estimates of
production, pricing and cost assumptions over the period. 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 1.1 million tonnes per annum of ilmenite
plus co-products, zircon, concentrates and rutile, over the next
twelve months. 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 2024, 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. The 2024 operating costs and forecast capital costs take
into account the current inflationary environment. The 2% inflation
rate used from 2025 to escalate these costs over the life of mine
is an estimated long-term inflation rate based on the Mine’s
overall primary exposure to US Dollar denominated inflation rather
than Mozambican inflation .
Sensitivity analysis is applied to the
assumptions above 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. 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 over the twelve month period from the
date of authorisation of these financial statements.
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 2023.
The following new and revised standards, all of which are effective
for accounting periods beginning on or after 1 January 2024, have
been adopted in the current financial period;
- Classification of Liabilities as
Current or Non-current - Amendment to IAS 1 effective 1 January
2024
- Lease Liability in a Sale and
Leaseback - (Amendments to IFRS 16) effective 1 January 2024
- Supplier Finance Arrangements
(Amendments to IAS 7 and IFRS 7) effective 1 January 2024
None of the new and revised standards have a
material effect on the Group’s condensed consolidated financial
statements.
2. Revenue
| |
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
| |
|
|
| Revenue derived
from the sale of mineral products |
154,467 |
229,668 |
|
Revenue derived from freight services |
10,614 |
13,211 |
|
Total revenue |
165,081 |
242,879 |
Revenue by product
The principal categories for disaggregating mineral products
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.
During the financial period, the Group sold 477,600 tonnes (H1
2023: 556,800 tonnes) of finished products at a sales value of
$154.5 million (H1 2023: $229.7 million). The Group earned revenue
derived from freight services of $10.6 million (H1 2023: $13.2
million).
|
|
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
| Revenue derived
from sales of mineral products by primary product |
|
|
| Ilmenite |
136,452 |
179,228 |
| Zircon |
11,867 |
33,080 |
|
Concentrates |
6,123 |
12,214 |
|
Rutile |
25 |
5,146
|
|
Total revenue from mineral products |
154,467 |
229,668 |
|
Revenue derived from freight services |
10,614 |
13,211 |
|
Total |
165,081 |
242,879 |
Revenue by destination
In the following table, revenue is disaggregated
by primary geographical market. The Group allocates revenue from
external customers to individual countries and discloses revenues
in each country where revenues represent 10% or more of the Group’s
total revenue. Thereafter, where total disclosed revenue
disaggregated by country constitutes less than 75% of total Group
revenue, additional disclosures are made until at least 75% of the
Group’s disaggregated revenue is disclosed.
|
|
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
| Revenue from
external customers |
|
|
| China |
70,855 |
109,166 |
| Europe |
24,905 |
47,035 |
| Asia (excluding
China) |
46,520 |
24,169 |
|
Rest of the world |
12,187 |
49,298 |
|
Total revenue from mineral products |
154,467 |
229,668 |
|
Revenue derived from freight |
10,614 |
13,211 |
|
Total revenue |
165,081 |
242,879 |
All revenues are generated by the Moma Titanium Minerals Mine.
Sales of the Group’s mineral products are not seasonal in
nature.
3. Segment reporting
Information on the operations of the Moma
Titanium Minerals Mine in Mozambique is reported to the Group’s
Executive Committee for the purposes of resource allocation and
assessment of segment performance. Information regarding the
Group’s operating segment is reported below.
|
|
|
|
|
|
| |
Unaudited
30 June 2024 |
Unaudited
30 June 2023 |
|
|
Corporate |
Mozambique |
Total |
Corporate |
Mozambique |
Total |
|
|
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
| Revenue
& Results |
|
|
|
|
|
|
| Revenue* |
- |
165,081 |
165,081 |
- |
242,879 |
242,879 |
|
Cost of sales |
- |
(133,598) |
(133,598) |
- |
(157,200) |
(157,200) |
|
Gross profit |
- |
31,483 |
31,483 |
- |
85,679 |
85,679 |
|
Administrative expenses |
(2,653) |
3,920 |
1,267 |
(3,313) |
(2,127) |
(5,440) |
|
Segment operating profit/(loss) |
(2,653) |
35,403 |
32,750 |
(3,313) |
83,552 |
80,239 |
| Finance
income |
1,118 |
1,291 |
2,409 |
1,814 |
1,775 |
3,589 |
| Finance
expenses |
(22) |
(7,439) |
(7,461) |
(9) |
(6,315) |
(6,324) |
|
Profit/(loss) before tax |
(1,557) |
29,255 |
27,698 |
(1,508) |
79,012 |
77,504 |
|
4Income tax expense |
(3,646) |
(3,177) |
(6,823) |
(4,144) |
(5,583) |
(9,727) |
|
Profit/(loss) for the financial period |
(5,203) |
26,078 |
20,875 |
(5,652) |
73,429 |
67,777 |
|
Segment Assets & Liabilities |
|
|
|
|
|
|
| Segment
Assets |
17,852 |
1,177,641 |
1,195,493 |
66,830 |
1,179,719 |
1,246,549 |
|
Segment Liabilities |
(14,139) |
(51,115) |
(65,254) |
(7,030) |
(113,931) |
(120,961) |
|
Additions to non-current assets |
|
|
|
|
|
|
|
Segment Additions to non-current assets |
- |
49,101 |
49,101 |
- |
20,212 |
20,212 |
*Revenue excludes inter-segment revenue of $10.9
million earned by the corporate segment relating to marketing and
management services fee income. Inter-segment revenue is not
regularly reviewed by the Executive Committee.
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. Corporate liabilities consist of
trade and other payables, lease and current tax liabilities at the
reporting date.
4. Cost and income
analysis
|
|
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
|
Expenses by function |
|
|
| Cost of
sales |
133,598 |
157,200 |
|
Administrative expenses |
(1,267) |
5,440 |
|
Total |
132,331 |
162,640 |
|
|
|
|
4. Cost and income analysis
(continued)
Expenses by nature can be analysed as follows: |
|
|
| |
|
|
|
|
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
|
Expenses by nature |
|
|
| Staff costs |
36,122 |
32,045 |
| Repairs and
maintenance |
17,925 |
20,467 |
| Power and
fuel |
23,807 |
23,985 |
| Freight |
10,614 |
13,211 |
| Other production
and operating costs |
32,187 |
33,224 |
| Movement of
mineral products inventory |
(18,840) |
9,558 |
| Depreciation of
property, plant and equipment and right-of-use assets |
30,516 |
30,150 |
|
Total |
132,331 |
162,640 |
Included in total operating costs is $3.3
million insurance proceeds in relation to business interruption as
a result of the lightning strike on the power transmission line at
the Mine in February 2023.
Mineral products consist of finished products
and heavy mineral concentrate as detailed in Note 10. Mineral stock
movement in the year was an increase of $18.8 million (H1 2023:
$9.6 million decrease). Freight costs of $10.6 million (H1 2023:
$13.2 million) arise from sales to customers on a CIF or CFR basis.
There were no exceptional items within operating profit in H1 2024
(H1 2023: $nil).
5. Net finance costs
|
|
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
|
Finance costs |
|
|
| Interest on bank
borrowings |
(2,210) |
(4,229) |
| Transaction
costs on debt refinancing |
(3,493) |
- |
| Interest on
lease liabilities |
(56) |
(46) |
| Factoring and
other trade facility fees |
(497) |
(807) |
| Commitment and
other fees |
(849) |
(294) |
| Unwinding of
discount on mine closure provision |
(356) |
(334) |
|
Foreign exchange loss |
- |
(614) |
|
Total Finance Costs |
(7,461) |
(6,324) |
|
Finance income |
|
|
| Interest earned
on bank deposits |
2,409 |
2,919 |
5 Net finance costs (continued)
Foreign exchange gain |
- |
670 |
|
Total Finance Income |
2,409 |
3,589 |
|
Net finance costs recognised in profit or loss |
(5,052) |
(2,735) |
All interest has been expensed in the financial period. The
Group has classified factoring and other trade facility fees in net
cashflows from operating activities in the Consolidated Statement
of Cashflows. Transaction costs relating to the 2019 debt of $0.9
million were recognised in the period as the debt was extinguished.
Transaction costs of $2.6 million were incurred in relation to a
new RCF of $200 million which was entered into on 4 March 2024.
6. Income tax expense
|
|
Unaudited
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
|
Corporation tax |
6,823 |
9,727 |
During the period the KMML Mozambique Branch had
taxable profits of $10.1 million (H1 2023: $16.3 million) resulting
in an income tax expense of $3.5 million (H1 2023: $5.6 million)
being recognised. The income tax rate applicable to taxable profits
of KMML Mozambique Branch is 35% (H1 2023: 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. There are no tax
losses carried forward at 30 June 2024.
During the period Kenmare Resources plc had
taxable profits of $42.4 million (H1 2023: $58.6 million) resulting
in an income tax expense of $3.6 million (H1 2023: $4.1 million)
being recognised. $40 million (H1 2023: $60 million) of the taxable
income relates to dividend income received from the subsidiary
undertaking with the balance relating to trading profits and
deposit income of $2.4 million (H1 2023: $1.4 million).
7. 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
30 June 2024
$’000 |
Unaudited
30 June 2023
$’000 |
|
Profit for the financial period attributable to equity holders of
the Company |
20,875 |
67,777 |
|
|
|
|
|
|
2024
Number of shares |
2023
Number of shares |
Weighted average
number of issued ordinary shares for
the purpose of basic earnings per share |
89,228,161 |
94,829,551 |
| Effect of
dilutive potential ordinary shares: |
|
|
|
Share awards |
2,870,528 |
2,479,902 |
|
Weighted average number of ordinary shares for |
|
|
|
the purposes of diluted earnings per share |
92,098,689 |
97,309,453 |
|
|
|
|
|
|
$ per share |
$ per share |
|
Earnings per share: basic |
0.23 |
0.71 |
|
Earnings per share: diluted |
0.23 |
0.70 |
8. Property, plant and equipment
|
|
Plant &
Equipment
$’000 |
Development
Expenditure
$’000 |
Construction
In Progress
$’000 |
Other
Assets
$’000 |
Total
$’000 |
|
Cost |
|
|
|
|
|
| At 1 January
2023 |
1,035,604 |
260,051 |
50,773 |
77,390 |
1,423,818 |
| Additions
during the financial year |
- |
- |
69,703 |
27 |
69,730 |
| Transfer from
construction in progress |
20,144 |
13,095 |
(40,391) |
7,152 |
- |
| Disposals |
(415) |
- |
- |
(9,429) |
(9,844) |
|
Adjustment to mine closure cost |
241 |
- |
- |
- |
241 |
|
At 31 December 2023 |
1,055,574 |
273,146 |
80,085 |
75,140 |
1,483,945 |
| Additions
during the financial period |
1,839 |
282 |
46,980 |
- |
49,101 |
| Transfer from
construction in progress |
779 |
- |
(4,730) |
3,951 |
- |
| Disposals |
- |
- |
- |
(105) |
(105) |
|
Adjustment to mine closure cost |
(1,762) |
- |
- |
- |
(1,762) |
|
At 30 June 2024 |
1,056,430 |
273,428 |
122,335 |
78,986 |
1,531,179 |
|
Accumulated Depreciation |
|
|
|
|
|
| At 1 January
2023 |
304,318 |
147,868 |
- |
40,873 |
493,059 |
| Charge for the
financial year |
44,928 |
8,952 |
- |
11,002 |
64,882 |
|
Disposals |
(415) |
- |
- |
(9,429) |
(9,844) |
|
At 31 December 2023 |
348,831 |
156,820 |
- |
42,446 |
548,097 |
| Charge for the
financial period |
22,162 |
3,386 |
- |
4,831 |
30,379 |
|
Disposals |
- |
- |
- |
(105) |
(105) |
|
At 30 June 2024 |
370,993 |
160,206 |
- |
47,172 |
578,371 |
|
Carrying Amount |
|
|
|
|
|
|
At 30 June 2024 |
685,437 |
113,222 |
122,335 |
31,814 |
952,808 |
|
At 31 December 2023 |
706,743 |
116,326 |
80,085 |
32,694 |
935,848 |
An adjustment to the mine closure cost of $1.7
million (2023: $0.2 million) was made during the period as a result
of an update in the discount rate as detailed in Note 16.
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 2024, the
market capitalisation of the Group was below the book value of net
assets, which is considered an indicator of impairment. The Group
carried out an impairment review of property, plant and equipment
as at 30 June 2024. As a result of the review, and given the
performance and outlook of the Group, no impairment provision was
recognised in the current period. Given the historic volatility in
mineral product pricing and sensitivity of the forecast to mineral
product pricing, the discount rate and to a lesser extent operating
costs, the impairment loss of $64.8 million, which was recognised
in the consolidated statement of comprehensive income in 2014, was
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 12% (31
December 2023: 12%).
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 and cost of debt have changed from the prior
year review, however the discount rate has remained unchanged at
12% (31 December 2023: 12%). 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. Forecast income tax on intercompany
dividends from subsidiary undertakings is assumed to be exempt from
2025, by way of change to tax legislation or alternatively group
restructuring. Using a discount rate of 12%, the recoverable amount
is greater than the carrying amount by $314.0 million (31 December
2023: $374.0 million). The discount rate is a significant factor in
determining the recoverable amount. A 3% increase in the discount
rate to 15% reduces the recoverable amount by $314.0 million to
$nil, assuming all other inputs remain unchanged. The decrease in
the recoverable amount from the year end is a result of decreased
cash flows over the life of mine as a result primarily of increased
forecast operating costs.
• The forecast assumes that all
agreements, licences, concessions and approvals relating to the
Group’s mining and processing activities including the
Implementation Agreement are in place or will be renewed. The mine
plan is 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 year-end review. Average annual production is
approximately 1.2 million tonnes (31 December 2023: 1.3 million
tonnes) of ilmenite and co-products zircon, rutile and concentrates
over the life of the Mine. Medium term production over the next
three years is approximately 1.1 million tonnes. This mine plan
does not include investment in additional mining capacity. Certain
minimum stocks of final and intermediate products are assumed to be
maintained at period ends.
• 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 remained relatively unchanged
over the life of mine from the year-end review. A 8% reduction in
average sales prices over the life of mine reduces the recoverable
amount by $314.0 million to $nil, assuming all other inputs remain
unchanged.
• Operating costs are based on
approved budget costs for 2024 taking into account the current
running costs of the Mine and estimated forecast inflation for
2024. From 2025 onwards, operating costs are escalated by 2% per
annum as management expects inflation to normalise and average 2%
over the life of mine period. Average forecast operating costs has
increased from the year-end review as a result of an increased
labour costs experienced year to date. A 14% increase in operating
costs over the life of mine reduces the recoverable amount by
$314.0 million to $nil, assuming all other inputs remain
unchanged.
Whilst the Group has set ambitions to be net
zero by 2040, the full financial impact of the transition plan is
still being assessed as the Group considers how it will work
towards meeting this target. The mine financial model includes the
cost of using bio-diesel in its forecast operating costs. The cost
of studies on plant electrification and other sustainable methods
of operating are also included in forecast operating and capital
cost. No savings associated with the Company’s ambition to become
net zero have been factored into the forecast.
• Capital costs are based on a life
of mine capital plan including inflation at 2% per annum from 2025.
Average forecast capital costs have remained relatively unchanged
but the scheduling has changed from the year-end review based on
updated sustaining and development capital plans required to
maintain the existing plant over the life of mine. A 44% increase
in capital costs over the life of mine reduces the recoverable
amount by $314.0 million to $nil, assuming all other inputs remain
unchanged.
9. Right-of-use assets
| |
|
|
|
Land and Buildings
$’000 |
Total
$’000 |
|
Cost |
|
|
|
|
|
| At 1 January
2024 |
|
|
|
2,590 |
2,590 |
|
At 30 June 2024 |
|
|
|
2,590 |
2,590 |
|
|
|
|
|
|
|
|
Accumulated Depreciation |
|
|
|
|
|
| At 1 January
2024 |
|
|
|
1,222 |
1,222 |
|
Depreciation expense |
|
|
|
137 |
137 |
|
At 30 June 2024 |
|
|
|
1,359 |
1,359 |
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
|
At 30 June 2024 |
|
|
|
1,231 |
1,231 |
|
At 31 December 2023 |
|
|
|
1,368 |
1,368 |
The Group has recognised a lease liability of
$1.7 million in respect of the rental of its Irish head office. The
lease has a term of 10 years commencing August 2017 and rental
payments are fixed to the end of the lease term. This lease
obligation is denominated in Euros.
The Group has also recognised a lease liability
of $0.9 million in respect of its Mozambican country office in
Maputo. The lease has a term to 1 December 2033. This lease
obligation is denominated in US Dollars.
At each reporting date, the Company assesses
whether there is any indication that right-of-use assets may be
impaired. No impairment indicators were identified as at 30 June
2024 or 31 December 2023.
The Group has recognised a rental expense of
$4.3 million (2023: $10.4 million) in relation to short term leases
of machinery and vehicles which have not been recognised as a
right-of-use asset.
Set out below are the carrying amounts of lease
liabilities at each reporting date:
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
| Current |
274 |
264 |
|
Non-Current |
1,114 |
1,256 |
|
|
1,388 |
1,520 |
10. Inventories
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
| Mineral
products |
77,245 |
58,405 |
|
Consumable spares |
36,366 |
40,852 |
|
|
113,611 |
99,257 |
At 30 June 2024, total final product stocks were
273,000 tonnes (31 December 2023: 259,100 tonnes). Closing stock of
Heavy Mineral Concentrate was 24,600 tonnes (31 December 2023:
16,700 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 $nil (31 December 2023:
$nil) to mineral products to value them at net realisable
value.
11. Trade and other receivables
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
| Trade
receivables |
36,715 |
127,442 |
| VAT
receivable |
6,336 |
6,377 |
|
Prepayments |
24,502 |
19,831 |
|
|
67,553 |
153,650 |
12. Cash and cash equivalents
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
|
Cash and cash equivalents |
60,290 |
71,048 |
Cash and cash equivalents comprise cash balances
held for the purposes of meeting short-term cash commitments and
investments which are readily convertible to a known amount of cash
and are subject to an insignificant risk of change in value. Where
investments are categorised as cash equivalents, the related
balances have a maturity of three months or less from the date of
investment.
13. Share capital and dividends
Share capital as at 30 June 2024 amounted to
$0.1 million (31 December 2023: $0.1 million).
In May 2024, the Company paid a final 2023
dividend of $34.7 million (2022 final dividend: $41.1 million)
representing USc38.54 (2022 final dividend: USc43.33) per
share.
14. Bank loans
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
|
Borrowings |
- |
47,873 |
|
The borrowings are repayable as
follows: |
|
|
| Less than one
year |
- |
33,087 |
|
Between two and five years |
- |
15,712 |
|
|
- |
48,799 |
| Transaction
costs |
- |
(926) |
|
Total carrying amount |
- |
47,873 |
Borrowings
On 4 March 2024, the Group entered into a
secured senior debt facility agreement (“Senior Facility
Agreement”) with Absa Bank Limited (acting through its Corporate
and Investment Banking Division) (“Absa”), Nedbank Limited (acting
through its Nedbank Corporate and Investment Banking division)
(“Nedbank”), Rand Merchant Bank and Standard Bank Group (“Standard
Bank”).
The Senior Facility Agreement provides the Group
with a $200 million Revolving Credit Facility. The finance
documentation also provides for a Mine Closure Guarantee Facility
(provided by either the existing lenders or other finance
providers) of up to $50 million, with the provider(s) of such a
facility sharing in the common security package.
The Revolving Credit Facility has a maturity
date of 4 March 2029. Interest is at SOFR plus 4.85% per annum.
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 $60.3 million as at 30 June 2024 (31 December
2023: $70.9 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.
In March the Group drew down $51.4 million of
the Revolving Credit Facility to repay the Term Loan of $48.8
million plus interest and fees of $2.6 million. The debt was
subsequently repaid in full in the period.
14. Bank loans (continued)
|
Reconciliation of movements of debt to cashflows arising
from financing activities |
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
|
|
|
|
| Bank
Loans |
|
|
| Balance at 1
January |
47,873 |
78,578 |
| Cash
movements |
|
|
| RCF
drawdown |
51,370 |
- |
| Loan interest
paid – Term Loan |
(1,050) |
(7,211) |
| Loan interest
paid - RCF |
(1,160) |
- |
| Principal repaid
– Term loan |
(48,786) |
(31,429) |
| Principal repaid
– RCF |
(51,370) |
- |
| |
|
|
| Non-cash
movements |
|
|
| Loan interest
accrued – Term Loan |
1,050 |
7,935 |
| Loan interest
accrued – RCF |
1,160 |
- |
| Transaction
costs amortised |
913 |
- |
|
Balance at 30 June/31 December |
- |
47,873 |
Financial Covenants
There were no covenants breached during the
period.
15. Trade and other
payables
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
| Trade
payables |
12,708 |
6,510 |
| Deferred
income |
2,280 |
2,752 |
|
Accruals |
21,943 |
29,302 |
|
|
36,931 |
38,564 |
16. Provisions
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
| Mine closure
provision |
16,134 |
17,540 |
| Mine
rehabilitation provision |
6,172 |
5,462 |
|
|
22,306 |
23,002 |
|
Current |
1,048 |
2,125 |
|
Non-current |
21,258 |
20,877 |
|
|
22,306 |
23,002 |
|
|
Mine Closure Provision
$’000 |
Mine Rehabilitation Provision
$’000 |
Total
$’000 |
| At 1 January
2023 |
16,623 |
4,121 |
20,744 |
| Increase in
provision during the financial year |
241 |
1,720 |
1,961 |
| Provision
utilised during the financial period |
- |
(379) |
(379) |
|
Unwinding of the discount |
676 |
- |
676 |
|
At 1 January 2024 |
17,540 |
5,462 |
23,002 |
|
Increase/(decrease) in provision during the financial year |
(1,762) |
2,060 |
298 |
| Provision
utilised during the financial period |
- |
(1,350) |
(1,350) |
|
Unwinding of the discount |
356 |
- |
356 |
|
At 30 June 2024 |
16,134 |
6,172 |
22,306 |
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 costs.
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 $0.4 million (H1 2023: $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 4.5% (31 December 2023: 4.0%);
• an inflation rate of 2% (31 December 2023: 2%);
• an estimated life of mine of 40 years (31 December
2023: 40 years). It is assumed that all licences and permits
required to operate will be renewed or extended during the life of
mine; and
• an estimated closure cost of $36.8 million (31
December 2023: $36.8 million) and an estimated post-closure
monitoring provision of $2.6 million (31 December 2023: $2.6
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 decreased by $1.7 million from 31 December 2023 to reflect a
change in the discount rate from 4% at 31 December 2023 to 4.5% at
30 June 2024.
The discount rate is a significant factor in
determining the Mine closure provision. The Group uses a
thirty-year US Treasury yield as this is the longest period for
which yields are quoted. 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 $1.4 million (2023: $0.4 million) to reflect the actual mine
rehabilitation costs incurred, and an addition to the provision of
$2.1 million (2023: $1.7 million) for areas newly disturbed.
17. Current tax liabilities
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
|
Current tax liabilities |
4,629 |
6,921 |
Further details on the Group’s tax expense are detailed in Note
6.
18. Financial Instruments
| |
Unaudited 30 June 2024 |
Audited 31 Dec 2023 |
|
|
Carrying amount
$’000 |
Fair value
$’000 |
|
Carrying amount
$’000 |
Fair value
$’000 |
|
|
Financial assets at fair value through profit and
loss |
|
|
|
|
|
|
| Trade
receivables1 |
- |
- |
Level 2 |
- |
- |
Level 2 |
|
Financial assets at fair value through OCI |
|
|
|
|
|
|
| Trade
receivables2 |
24,538 |
24,538 |
Level 2 |
110,534 |
110,534 |
Level 2 |
|
Financial assets not measured at fair value |
|
|
|
|
|
|
| Trade
receivables3 |
12,177 |
12,177 |
Level 2 |
16,908 |
16,908 |
Level 2 |
|
Cash and cash equivalents |
60,290 |
60,290 |
Level 2 |
71,048 |
71,048 |
Level 2 |
|
|
97,005 |
97,005 |
|
198,490 |
198,490 |
|
|
Financial liabilities not measured at fair
value |
|
|
|
|
|
|
|
Bank loans |
- |
- |
Level 2 |
47,873 |
48,799 |
Level 2 |
1
Relates to trade receivables which will
be discounted through the Barclay’s bank facility.
2 Relates
to trade receivables which may be factored through the ABSA
facility or discounted through the Barclay’s bank facility.
3 Relates
to trade receivables which will not be discounted or
factored.
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 other receivables, 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 or letters of credit where it is not known at
initial recognition if they will be factored are classified as fair
value through other comprehensive income (FVOCI). Trade receivables
which will not be factored and for which balances will be recovered
under the sale contract credit terms are initially measured at fair
value and subsequently measured at amortised cost.
In the case of factored receivables, the Group derecognises the
discounted receivable to which the arrangement applies when payment
is received from the bank as the terms of the arrangement are
non-recourse. The payment to the bank by the Group’s customers are
considered non-cash transactions for the purposes of the
consolidated statement of cashflows.
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
Credit risk is the risk of financial loss to the
Group if a customer or a counterparty to a financial instrument
fails to meet its contractual obligations and arises principally
from the Group’s trade receivables from customers. The carrying
amount of financial assets represents the maximum credit
exposure.
The Group’s exposure to credit risk is
influenced by the individual circumstances of each customer. The
Group also considers the factors that may influence the credit risk
of its customer base, including the default risk associated with
the industry and country in which customers operate.
Before entering into sales contracts with new
customers, the Group uses an external credit scoring system to
assess the potential customer’s credit quality. The credit quality
of customers is reviewed regularly during the year and where
appropriate credit limits or limits to the number of shipments
which can be outstanding at any point are imposed.
The Group’s customers have been transacting with
the Group for a significant number of years, and no customers’
balances have been written off or are credit impaired at the
financial year end. In monitoring customer credit risk, customers
are reviewed individually and the Group has not identified any
factors that would merit reducing exposure to any particular
customer. The Group does not require collateral in respect of trade
receivables.
The movement in expected credit losses in respect of trade
receivables were measured at amortised cost or fair value through
other comprehensive income during the period was as follows:
|
|
Unaudited
30 June 2024
$’000 |
Audited
31 Dec 2023
$’000 |
| Opening
balance |
1,580 |
1,534 |
| Net
remeasurement of loss allowance |
(1,154) |
46 |
|
Closing |
426 |
1,580 |
The decrease in the loss allowance is mainly
attributable to the decrease in trade receivables at the period
end. The methodology for the calculation of expected credit losses
is the same as described in the last annual statements.
19. Share-based payments
Kenmare Restricted Share Plan
(KRSP)
During the financial period, 885,323 (H1 2023:
864,481) shares were granted to employees under the 2024 KRSP
award. The estimated fair value of the shares awarded is $3.5
million (H1 2023: $5.0 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 $1.7 million (H1 2023:
$1.4 million).
During the period, awards in respect of 414,940
shares were exercised at a cost of $2.2 million.
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.
On 14 March 2024 the Company entered into a
termination agreement with Michael Carvill pursuant to which he
would step down as Managing Director on 14 August 2024. In order to
support an orderly transition process, the Company also entered
into a consultancy agreement with Michael Carvill to at least the
31 December 2024. There is a two month notice period under this
contract.
Apart from the above and the 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 period ended 30 June
2024 of USc15.0 (H1 2023: USc17.5) per share was approved by the
Board on 13 August 2024. The dividend payable 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 20
September 2024.
There have been no other significant events
since 30 June 2024 which would have a significant impact on the
financial statements of the Group.
Mine closure guarantee
The Group entered into a mine closure guarantee
facility on 30 July 2024 with Standard Bank Moçambique SA effective
from 1 July 2024 for an amount of $33 million. The mine closure
guarantee shares the security package with the Revolving Credit
Facility on a pro rata and pari passu basis.
22. Information
The half-yearly financial report was approved by
the Board on 13 August 2024.
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 www.kenmareresources.com.
STATEMENT OF DIRECTORS RESPONSIBILITIES
For the half year ended 30 June 2024
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 Transparency Rule 4.2 of the Disclosure Guidance and
Transparency Rules of the UK Financial Conduct Authority.
In preparing the condensed set of consolidated
financial statements included within the half-yearly financial
report, the Directors are required to:
- prepare and present the condensed
set of consolidated 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
consolidated financial statements has adequate disclosures;
- select and apply appropriate
accounting policies;
- make accounting estimates that are
reasonable in the circumstances; and
- assess the Entity’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the
Entity or to cease operations, or have no realistic alternative but
to do so.
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 consolidated 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 2024 (“the interim financial information”) 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, 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.
(1) The
interim financial information presented, as required by the
Transparency Directive and Transparency Rule 4.2 of the Disclosure
Guidance and Transparency Rules of the UK Financial Conduct
Authority, includes:
- 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;
- a description of the principal
risks and uncertainties for the remaining 6 months of the financial
year;
- 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
- 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.
The Directors are responsible for the
maintenance and integrity of the corporate and financial
information included on the Entity’s website. Legislation in the
Republic of Ireland governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
On behalf of the Board:
M. CARVILL
T. HICKEY
Director
Director
13 August 2024
13 August 2024
Glossary - Alternative Performance
Measures
Certain financial measures set out in the
half-yearly financial report to 30 June 2024 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 |
|
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 Mineral Products Revenue |
Provides a group margin for the earnings and performance of
the Group |
|
Cash operating cost per tonne of finished product produced |
Total costs less freight and other non-cash costs, including
depreciation and inventory movements divided by final product
production (tonnes) |
Eliminates the non-cash impact on costs to identify the actual cash
outlay for production and, as production levels increase or
decrease, highlights operational performance by providing a
comparable cash cost per tonne of product produced over time |
|
Cash operating cost per tonne of ilmenite net of co-products |
Cash operating costs less zircon, rutile and mineral sands
concentrates revenue, divided by ilmenite production (tonnes) |
Eliminates the non-cash impact on costs to identify the actual cash
outlay for production and, as production 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 fees and
expenses, plus lease liabilities net of cash and cash
equivalents |
Measures the amount the Group would have to raise 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 |
|
ROCE |
Return on capital employed |
ROCE measures how efficiently the Group generates profits from
investment in assets |
EBITDA
|
|
H1 2024 |
H1 2023 |
H1 2022 |
H1 2021 |
H1 2020 |
|
|
$m |
$m |
$m |
$m |
$m |
|
Operating profit |
32.7 |
80.2 |
74.0 |
56.8 |
20.6 |
|
Depreciation and amortisation |
30.5 |
30.2 |
30.5 |
23.5 |
17.3 |
|
EBITDA |
63.2 |
110.4 |
104.5 |
80.3 |
37.9 |
EBITDA margin
|
|
H1 2024 |
H1 2023 |
H1 2022 |
H1 2021 |
H1 2020 |
|
|
$m |
$m |
$m |
$m |
$m |
|
EBITDA |
63.2 |
110.4 |
104.5 |
80.3 |
37.9 |
|
Mineral Products Revenue |
154.5 |
229.7 |
182.1 |
167.8 |
111.2 |
|
EBITDA margin (%) |
41% |
48% |
57% |
48% |
34% |
Cash operating cost per tonne of finished
product
|
|
H1 2024 |
H1 2023 |
H1 2022 |
H1 2021 |
H1 2020 |
|
|
$m |
$m |
$m |
$m |
$m |
|
Cost of sales |
133.6 |
157.2 |
117.9 |
100.3 |
82.7 |
|
Administration costs |
(1.3) |
5.4 |
5.4 |
19.2 |
14.2 |
|
Total operating costs |
132.3 |
162.6 |
123.3 |
119.5 |
96.9 |
|
Freight charges |
(10.6) |
(13.2) |
(15.2) |
(10.4) |
(5.6) |
|
Total operating costs less freight |
121.7 |
149.4 |
108.1 |
109.1 |
91.3 |
| Adjustments |
|
|
|
|
|
| Depreciation and
amortisation |
(30.5) |
(30.2) |
(30.5) |
(23.5) |
(17.3) |
| Expected credit
loss |
(1.2) |
0.6 |
(0.2) |
- |
- |
| Share-based
payments |
(1.6) |
(1.4) |
(3.2) |
(2.1) |
(1.0) |
|
Mineral product inventory movements |
18.8 |
(9.6) |
27.8 |
3.8 |
2.2 |
|
Total cash operating costs |
107.2 |
108.8 |
102.0 |
87.3 |
75.2 |
|
Final product production tonnes |
490,800 |
472,600 |
550,700 |
612,100 |
410,600 |
|
Cash operating cost per tonne of finished product |
$218 |
$230 |
$185 |
$143 |
$183 |
Cash operating cost per tonne of ilmenite
| |
|
|
|
|
|
|
|
H1 2024 |
H1 2023 |
H1 2022 |
H1 2021 |
H1 2020 |
|
|
$m |
$m |
$m |
$m |
$m |
|
Total cash operating costs |
107.2 |
108.8 |
102.0 |
87.3 |
75.2 |
Less co-products zircon,
rutile and mineral sands concentrate revenue |
(18.0) |
(50.4) |
(48.6) |
(24.0) |
(31.3) |
|
Total cash costs less co-product revenue |
89.2 |
58.4 |
53.4 |
63.3 |
43.9 |
|
Ilmenite product production tonnes |
444,100 |
425,500 |
499,700 |
559,000 |
368,900 |
|
Cash operating cost per tonne of ilmenite |
$201 |
$137 |
$107 |
$113 |
$119 |
Net debt/cash
| |
H1 2024 |
H1 2023 |
H1 2022 |
H1 2021 |
H1 2020 |
|
|
$m |
$m |
$m |
$m |
$m |
|
Bank debt |
- |
(63.4) |
(93.2) |
(128.0) |
(145.2) |
|
Transaction costs |
- |
(1.5) |
(3.0) |
(4.7) |
(6.1) |
|
Gross debt |
- |
(64.9) |
(96.2) |
(132.7) |
(151.3) |
| Lease
liabilities |
(143) |
(1.6) |
(1.7) |
(2.8) |
(3.9) |
|
Cash and cash equivalents |
60.3 |
108.8 |
30.7 |
56.5 |
98.6 |
|
Net (debt)/cash |
58.9 |
42.3 |
(67.2) |
(79.0) |
(56.6) |
|
|
|
|
|
|
|
ROCE
| |
|
|
|
|
|
|
|
H1 2024 |
H1 2023 |
H1 2022 |
H1 2021 |
H1 2020 |
|
|
$m |
$m |
$m |
$m |
$m |
|
Operating profit |
32.7 |
80.2 |
74.0 |
58.8 |
19.9 |
|
Total Equity and Non-Current Liabilities |
1,153 |
1,180 |
1,058 |
1,087 |
1,085 |
|
ROCE % |
3% |
7% |
7% |
5% |
2% |
Glossary – Terms
|
Term |
Description |
|
AIFR |
All injuries frequency rate. Provides the number of injuries at the
Mine in the year, per 200,000 hours worked. |
|
AGM |
Annual general meeting |
|
CIF |
The seller delivers when the goods pass the ship’s rail 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 when the goods pass the ship’s
rail 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 or Parent Company |
Kenmare Resources plc. |
|
DFS |
Definitive feasibility studies are the most detailed and will
determine definitively whether to proceed with the project. A
definitive feasibility study will be the basis for capital
appropriation, and will provide the budget figures for the project.
Detailed feasibility studies require a significant amount of formal
engineering work and are accurate to within approximately
10–15%. |
|
EdM |
Electricidade de Moçambique. |
|
EGM |
Extraordinary General Meeting |
|
FOB |
Free on Board means that the seller delivers when the goods pass
the ship’s rail 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. |
|
Free Cash Flow |
Free Cash Flow is the cash generated by the Group in a reporting
period before distributions to shareholders. |
|
GHG emissions |
Scope 1 & 2 Greenhouse Gas emissions. The Group acknowledges
the human contribution to climate change and aim to reduce
emissions its already low carbon intensity operations. |
|
GISTM |
Global Industry Standard of Tailings Management |
|
Group or Kenmare |
Kenmare Resources plc and its subsidiary undertakings. |
|
HMC |
Heavy mineral concentrate extracted from mineral sands deposits and
which include ilmenite, zircon, rutile and other heavy minerals and
silica. |
|
Implementation Agreement |
The agreement for the Moma Heavy Mineral Sands Industrial Free Zone
Project between Kenmare Moma Processing Limited (a company
incorporated in Jersey whose rights and interests were transferred
to KMPL in November 2002), a wholly owned subsidiary of Kenmare,
and Mozambique dated 21 January 2002. |
|
KMAD |
Kenmare Moma Development Association |
|
KMML Mozambique Branch |
Mozambique branch of Kenmare Moma Mining (Mauritius) Limited
(KMML). |
|
KMPL Mozambique Branch |
Mozambique branch of Kenmare Moma Processing (Mauritius) Limited
(KMPL). |
|
KRSP |
Kenmare Resources plc Restricted Share Plan |
|
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”). |
|
LTI |
Lost time injury. Measures the number of injuries at the mine that
result in time lost from work. |
|
LTIFR |
Lost time injury frequency rate. Measures the number of injuries
causing lost time per 200,000 man hours worked on site |
|
Marketing – finished products shipped |
Finished products shipped to customers during the period. Provides
a measure of finished products shipped to customers |
|
Mining – HMC produced |
Heavy mineral concentrate extracted from mineral sands deposits and
which includes ilmenite, zircon, rutile, concentrates and other
heavy minerals and silica. Provides a measure of heavy mineral
concentrate extracted from the Mine |
|
Moma, Moma Mine, the Mine or Site |
The Moma Titanium Minerals Mine consisting of a heavy mineral sands
mine, processing facilities and associated infrastructure, which is
located in the north east coast of Mozambique under licence to the
Project Companies. |
|
Mine Closure Guarantee Facility |
$33 million mine closure guarantee facility between the Group and
Standard Bank Moçambique SA effective from 1 July 2024. |
|
MSP |
Mineral Separation Plant. |
|
Mtpa |
Million tonnes per annum. |
|
Ordinary Shares |
Ordinary shares of €0.001 each in the capital of the Company. |
|
PFS |
A feasibility study is an evaluation of a proposed mining project
to determine whether the mineral resource can be mined
economically. Pre-feasibility study is used to determine whether to
proceed with a detailed feasibility study and to determine areas
within the project that require more attention. Pre-feasibility
studies are done by factoring known unit costs and by estimating
gross dimensions or quantities once conceptual or preliminary
engineering and mine design has been completed. |
|
Processing – finished products produced |
Finished products produced by the mineral separation process.
Provides a measure of finished products produced from the
processing plants |
|
Project Companies |
Kenmare Moma Mining (Mauritius) Limited and Kenmare Moma Processing
(Mauritius) Limited, wholly owned subsidiary undertakings of
Kenmare Resources plc, which are incorporated in Mauritius. |
|
Revolving Credit Facility |
$200 million debt facility dated 4 March 2024 between the Lenders
and KMML Mozambique Branch and KMPL Mozambique Branch. |
|
Term Loan Facility |
$110 million debt facility dated 11 December 2019 between 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%. |
|
TSF |
Tailings Storage Facility |
|
UK |
United Kingdom |
|
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. |
Kenmare Resources (LSE:KMR)
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