TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company" or "the Group")
9 January 2020
Q4 & FY 2019 Production Report & FY 2020 Guidance
Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global
producers of titanium minerals and zircon, which operates the Moma
Titanium Minerals Mine (the "Mine" or "Moma") in northern Mozambique, is
pleased to provide a trading update for the full year ("FY") and fourth
quarter ending 31 December 2019 ("Q4 2019") and production guidance for
FY 2020.
Statement from Michael Carvill, Managing Director:
"In 2019 Kenmare continued to advance its outlined strategy of
delivering growth, margin expansion and shareholder returns. We achieved
record shipments in Q4 2019 and record excavated ore in FY 2019.
Ilmenite production was within one per cent of the original guidance
range and we achieved guidance for all other products.
We are targeting ilmenite production of 1.2 million tonnes per annum
from 2021, to be achieved through increased mining capacity and higher
average ore grades. The construction of Wet Concentrator Plant C
represents the final step in increasing our mining capacity and the move
of Wet Concentrator Plant B to the high grade Pilivili ore zone later
this year completes our outlined development programme.
These growth projects are expected to enhance our margins, provide
stronger cashflow stability and position us in the first quartile of the
industry revenue to cost curve. Following the completion of the capital
expenditure programme, free cash flow will also benefit significantly.
In combination with these growth and margin expansion initiatives, we
paid our maiden dividend in Q4 2019. We also secured new debt facilities,
increasing our balance sheet strength and extending the maturity profile
of our debt beyond the current short period of increased capital
expenditure."
Overview
-- Lost time injury frequency rate ("LTIFR") of 0.27 per 200,000 man-hours
worked for the 12-months to 31 December 2019 (31 December 2018: 0.12)
-- Ilmenite production within 1% of original FY 2019 guidance range and
original guidance achieved for all other products
-- Record annual excavated ore of 36.8 million tonnes in FY 2019,
representing the fourth consecutive year of increase and benefitting from
a 20% capacity increase of WCP B undertaken in 2018
-- Heavy Mineral Concentrate ("HMC") production of 1,202,100 tonnes in FY
2019, representing a 12% decrease compared to FY 2018 (1,370,800 tonnes)
as a result of anticipated lower ore grades, partially offset by the 8%
increase in excavated ore
-- Ilmenite production of 892,900 tonnes, representing a 7% decrease
compared to FY 2018 (958,500 tonnes)
-- Primary zircon production of 46,900 tonnes (FY 2018: 48,400 tonnes) and
rutile production of 8,300 tonnes (FY 2018: 8,200 tonnes) in FY 2019,
broadly in line with FY 2018
-- Concentrates production of 40,200 tonnes, representing a 43% increase
compared to FY 2018 (28,200 tonnes), benefitting from the introduction of
a mineral sands concentrate product in Q4 2018 and the reprocessing of
tailings stockpiles
-- Total shipments of finished products of 1,029,300 tonnes, representing a
4% decrease compared to FY 2018 (1,074,400 tonnes)
-- Record shipments in Q4 2019 of 352,900 tonnes, representing a 23%
increase compared to Q4 2018 (286,300 tonnes) and an 83% increase
compared to Q3 2019 (192,900 tonnes)
-- Commissioning of the dredge for the WCP C development project commenced
in November 2019, with commissioning of the concentrator starting in
January 2020 -- project on track to be completed within the budget of
US$45 million
-- At the end of 2019 Kenmare had US$13.7 million of net cash (2018: US$13.5
million net cash), including cash and cash equivalents of US$81.1 million
(2018: US$97.0 million) and benefitting from a US$16.1 million reduction
in gross debt during the year
-- Higher average prices achieved for ilmenite and rutile in FY 2019,
compared to FY 2018, but lower average prices received for zircon -- FY
2020 pricing outlook for ilmenite remains strong
-- FY 2020 ilmenite production guidance of 800,000 to 900,000 tonnes, with
1.2 million tonnes per annum of ilmenite production targeted from 2021
Production
Production from the Moma Mine in Q4 2019 and FY 2019 was as follows:
Q4 2019 vs Q4 2018 vs Q3 2019 FY 2019 vs FY 2018
----------------- --------- ---------- ---------- ---------- ----------
tonnes % change % change tonnes % change
----------------- --------- ---------- ---------- ---------- ----------
Excavated ore(1) 8,290,500 -11% -10% 36,803,800 8%
----------------- --------- ---------- ---------- ---------- ----------
Grade(1) 3.60% -21% -1% 3.58% -18%
----------------- --------- ---------- ---------- ---------- ----------
Production
----------------- --------- ---------- ---------- ---------- ----------
HMC production 264,700 -34% -13% 1,202,100 -12%
----------------- --------- ---------- ---------- ---------- ----------
HMC consumption 268,600 -33% -16% 1,214,700 -11%
----------------- --------- ---------- ---------- ---------- ----------
Ilmenite 203,900 -26% -12% 892,900 -7%
----------------- --------- ---------- ---------- ---------- ----------
Primary zircon 10,900 -28% -16% 46,900 -3%
----------------- --------- ---------- ---------- ---------- ----------
Rutile 1,900 -21% -10% 8,300 1%
----------------- --------- ---------- ---------- ---------- ----------
Concentrates(2) 10,000 -13% -7% 40,200 43%
----------------- --------- ---------- ---------- ---------- ----------
Shipments 352,900 23% 83% 1,029,300 -4%
----------------- --------- ---------- ---------- ---------- ----------
1. Excavated ore and grade prior to any floor losses.
2. Concentrates include secondary zircon and mineral sands concentrate.
Kenmare recorded a LTIFR of 0.27 per 200,000 man-hours worked for the 12
months to 31 December 2019, with three lost time injuries in Q4 2019 (12
months to 31 December 2018: 0.12). The Company continues to focus on
empowering employees and developing a culture of personal accountability
for safety. An external audit of the Moma Mine's occupational health,
safety and environment management was undertaken by the National
Occupational Safety Association (NOSA) in Q4 2019 and the Mine retained
its five star certification for the fourth consecutive year.
Kenmare achieved an annual record for excavated ore in FY 2019
(36,803,800 tonnes), which represented an 8% increase compared to FY
2018 (33,961,000 tonnes) and the fourth consecutive year of increase.
Excavated ore tonnes benefitted from a 20% capacity expansion at WCP B
during FY 2018, in addition to a dredge automation project and continued
utilisation improvements. However, in Q4 2019 excavated ore volumes were
impacted by reduced power reliability, due to upgrade work on the
national power grid, and difficulties encountered during the WCP A
dredge automation project, as previously announced. Work on the national
power grid has been completed and power reliability has since improved.
Despite this increase in excavated ore, HMC production decreased by 12%
to 1,202,100 tonnes in FY 2019 compared to FY 2018 (1,370,800 tonnes).
This was due primarily to an 18% decline in ore grades to 3.58% (FY
2018: 4.35%), due to WCP B approaching the end of its current mine path
and lower grades at WCP A, as anticipated in the mine plan.
Ilmenite production was 892,900 tonnes, less than 1% below the lower end
of original FY 2019 production guidance of 900,000 tonnes. This
represents a 7% decrease compared to FY 2018 (958,500 tonnes), as a
result of the reduction in available HMC feed, partially offset by
production from spillage retreatment and reprocessing of scavenger
circuit tailings.
Primary zircon production was 46,900 tonnes in FY 2019, representing a
3% decrease compared to FY 2018 (48,400 tonnes), and rutile production
was 8,300 tonnes, representing a 1% increase compared to FY 2018 (8,200
tonnes). Primary zircon and rutile production benefitted from spillage
retreatment and reprocessing of non-magnetic feed scavenged from
ilmenite circuits during FY 2019, minimising the impact of reduced HMC
consumption.
Concentrates production increased by 43% in FY 2019 to 40,200 tonnes
compared to FY 2018 (28,200 tonnes), due primarily to the introduction
of a mineral sands concentrate product in Q4 2018 and benefitting from
the recovery of intermediate stockpiles.
Shipments increased significantly, as expected, in Q4 2019 to 352,900
tonnes of finished products, due to strong customer demand and improved
weather conditions. This represented a quarterly record and improved on
the previous quarterly record by 10% (322,000 tonnes in Q2 2018).
Shipments in Q4 2019 increased by 23% compared to Q4 2018 (286,300
tonnes) and by 83% compared to Q3 2019 (192,900 tonnes). They were
comprised of 318,200 tonnes of ilmenite, 17,500 tonnes of primary zircon,
1,400 tonnes of rutile and 15,700 tonnes of concentrates.
As a result, Kenmare shipped 1,029,300 tonnes of finished products in FY
2019 (FY 2018: 1,074,400 tonnes), which comprised 930,700 tonnes of
ilmenite, 50,300 tonnes of primary zircon, 9,500 tonnes of rutile and
38,900 tonnes of concentrates. Shipments in FY 2019 represented a 4%
decrease compared to FY 2018 due primarily to poor weather conditions in
the first three quarters of the year impacting loading rates. Kenmare
utilised its finished product inventory during the year to maintain
shipments at broadly the same level as in FY 2018.
Closing stock of HMC at the end of FY 2019 was 7,000 tonnes, compared
with 19,600 tonnes at the start of the year. Closing stock of finished
products at the end of FY 2019 was 160,100 tonnes (2018: 200,000
tonnes).
Capital projects update
Kenmare previously announced three development projects that together
have the objective of increasing ilmenite production to 1.2 million
tonnes (plus co-products) per annum on a sustainable basis from 2021.
The first development project, a 20% expansion of WCP B, was
commissioned successfully in late 2018.
The second project is the development of WCP C, where commissioning of
the dredge commenced, as planned, in November 2019. However,
commissioning of the concentrator is now anticipated to start in January
2020 due to delayed delivery of the plant by the contractor, with first
HMC production expected in February 2020. The project remains on track
to be completed within the budget of US$45 million.
During Q4 2019, project execution for the third development project, the
relocation of WCP B to the high grade Pilivili ore zone, continued to
advance on time and within budget. Kenmare commenced construction of the
purpose-built road from within the existing Namalope permit area in late
Q3 2019. Following receipt of the road Environmental, Social and Health
Impact Assessment approval and forthcoming environmental licence,
construction has now begun along the remainder of the route. The
relocation is expected to take place in Q3 2020, with commissioning in
Q4 2020.
Costs
Total cash operating cost guidance for FY 2019 remains unchanged
(US$151-167 million). However, as previously announced in December 2019,
cash operating cost per tonne guidance for FY 2019 has been revised to
US$160-165 per tonne from US$150-160 per tonne, due to reduced ilmenite
production volumes.
Finance update
On 25 October 2019 Kenmare paid its maiden dividend. It was an interim
dividend and comprised of USc2.66 per share, which is in line with the
Company's dividend policy to pay a minimum of 20% of profit after tax as
shareholder returns. As previously stated, following completion of the
development projects, the Company expects to be in a position to make
higher capital returns from 2021.
On 11 December 2019, Kenmare announced the signing of new debt
facilities, which were comprised of a US$110 million Term Loan Facility
and a US$40 million Revolving Credit Facility. The first disbursement
under the new debt facilities was made on 18 December 2019. It has been
applied to repay the Moma Project Loans, of which US$64 million was
outstanding and which were first disbursed in 2004, and to meet
transaction costs. For more information about the new debt facilities,
including frequently asked questions, visit
https://www.globenewswire.com/Tracker?data=_wUJNFJGdtu25Koam-jePpjMJE7XSYUGgPIfK7pcFhaRqjv9usXUEvhppeKn3TYI270C8gmWJ_W_Or-Yjmw8D-yjY5RyYwSvxqkOwPsMh0X8FExuRT23dr4kva1eGmyFZL9MyonsDY8fEC4URbJ4eiKjUikmqYE6qfYEZ1QxmEmmF2tuZq7mRNP0VRCJidbB
https://www.kenmareresources.com/investors/financing.
At 31 December 2019, Kenmare had net cash of US$13.7 million, which is
in line with net cash at the end of 2018 (US$13.5 million). Cash and
cash equivalents were US$81.1 million (2018: US$97.0 million) and gross
bank loans, including accrued interest, were US$67.4 million (2018:
US$83.5 million), representing a reduction in gross debt of US$16.1
million during the year.
Market update
Kenmare achieved higher average prices for titanium feedstocks (ilmenite
and rutile) during FY 2019 than in FY 2018, but lower average prices for
zircon.
After a subdued first quarter, the ilmenite market improved continuously
for the rest of the year. Despite lower global pigment production in FY
2019, strong ilmenite market conditions were supported by continuing
supply constraints. These include government restrictions in India and
Vietnam and reducing production from major producing countries, such as
Australia and Kenya, due to declining orebodies. Conversely, domestic
Chinese ilmenite production increased by approximately 10% in 2019,
partially offsetting decreasing production elsewhere.
Ilmenite imports to China reduced by approximately 24% (550,000 tonnes)
for the 12 months to the end of November 2019, compared to the same
period in 2018, driven largely by a shortage of available supply.
Kenmare experienced strong demand growth for ilmenite to be upgraded
into high grade chloride feedstocks, for which Chinese domestic ilmenite
is also unsuitable. Kenmare believes the high-grade titanium feedstocks
market is likely to continue to grow in coming years, both in China and
the rest of the world, and the Company is well-positioned to benefit
from this trend.
Kenmare achieved increased ilmenite prices in FY 2019, with H2 received
prices up more than 10% on H1 2019, and prices have continued to
increase in 2020.
The zircon market weakened in FY 2019 due primarily to slower global
growth leading to lower demand, coincident with increased supply. This
resulted in softer pricing, particularly in the Chinese market. Kenmare
believes that FY 2020 is likely to be a challenging year for the zircon
industry as the market remains in oversupply and producer inventories
are high. However, global zircon production is forecast to decline in
the coming years, with mine closures and orebody depletion at a number
of operations, supporting higher long-term prices.
In FY 2019 Kenmare successfully introduced a mineral sands concentrate
product to the market, completing two shipments in 2019.
FY 2020 Guidance
The FY 2020 guidance for production and operating costs is as follows:
Unit FY 2020 Guidance FY 2019 Actual
--------------------------- ------- ---------------- --------------
Production
--------------------------- ------- ---------------- --------------
Ilmenite tonnes 800,000-900,000 892,900
--------------------------- ------- ---------------- --------------
Primary zircon tonnes 44,500-50,100 46,900
--------------------------- ------- ---------------- --------------
Rutile tonnes 7,700-8,700 8,300
--------------------------- ------- ---------------- --------------
Concentrates(1) tonnes 34,700-39,000 40,200
--------------------------- ------- ---------------- --------------
Costs
------------------------------------ ---------------- --------------
Total cash operating costs US$m 153-172 N/R(2)
--------------------------- ------- ---------------- --------------
Cash costs per tonne of US$/t 162-182 N/R(2)
finished product
--------------------------- ------- ---------------- --------------
1. Concentrates include secondary zircon and mineral sands concentrate.
2. To be reported in full year financial statements
Production of all finished products in FY 2020 is expected to be lower
than in FY 2019, due primarily to WCP B mining lower grade ore as it
approaches the end of its current mine path at Namalope and the
predicted lower grades being mined by WCP A. WCP B is expected to cease
production for up to 12 weeks during its relocation from Namalope to
Pilivili, predominantly during Q3 2020, however production will benefit
from the operation of WCP C.
Following WCP B's relocation to Pilivili, WCP B will begin mining higher
grade ore in Q4 2020. WCP B accounts for approximately 40% of Moma's
mining capacity and Pilivili is the highest grade ore zone in Moma's
portfolio. As a result, Q4 2020 production is expected to be strongest
quarter for the year.
Shipment volumes are expected to be higher than production volumes in FY
2020 but lower than in FY 2019.
Approximately US$119.5 million has been approved for expenditure on
development projects and studies in FY 2020. It primarily relates to the
relocation of WCP B and US$14.5 million is attributable to upgrade works
on the Mineral Separation Plant to allow it to process 1.2 million
tonnes per annum of ilmenite on a consistent basis and improvement
works.
Sustaining capital costs in FY 2020 are expected to be approximately
US$22 million, in line with previously guided sustaining capital costs
of US$20-25 million per annum from 2020 to 2025.
Total cash operating costs in FY 2020 are anticipated to increase
marginally, primarily as a result of the addition of WCP C. Cash
operating costs per tonne will also increase due to lower anticipated
production volumes. From 2021, when Kenmare expects to be producing 1.2
million tonnes per annum of ilmenite, the Company expects its cash
operating cost per tonne to decrease to US$125-US$135 per tonne (in 2020
real terms), in line with its objective to become a first quartile
producer on the industry revenue to cost curve.
Kenmare will release its 2019 Preliminary Results on Thursday, 19 March
2020.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton
Investor Relations
https://www.globenewswire.com/Tracker?data=ISeLXzUxOZdgcymhlkoZ2ozJshzGsrL7c1ElMb_HL_LPcl2_5IjqJO-0pwWCowNkUuoD_rU0kQVsxiubR1BUlemf9PZmh7IX9c0Og2YEsuE=
ir@kenmareresources.com
Tel: +353 1 671 0411
Mob: + 353 87 943 0367 / + 353 87 663 0875
Murray (PR advisor)
Joe Heron
Tel: +353 1 498 0300
Mob: +353 87 690 9735
About Kenmare Resources
Kenmare Resources plc is one of the world's largest producers of mineral
sands products. Listed on the London Stock Exchange and the Euronext
Dublin, Kenmare operates the Moma Titanium Minerals Mine in Mozambique.
Moma's production accounts for approximately 7% of global titanium
feedstocks and the Company supplies to customers operating in more than
15 countries. Kenmare produces raw materials that are ultimately
consumed in everyday "quality-of life" items such as paints, plastics
and ceramic tiles.
Forward Looking Statements
This announcement contains some forward-looking statements that
represent Kenmare's expectations for its business, based on current
expectations about future events, which by their nature involve risks
and uncertainties. Kenmare believes that its expectations and
assumptions with respect to these forward-looking statements are
reasonable. However, because they involve risk and uncertainty, which
are in some cases beyond Kenmare's control. Actual results or
performance may differ materially from those expressed or implied by
such forward-looking information.
(END) Dow Jones Newswires
January 09, 2020 02:00 ET (07:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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