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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kenmare Resources Plc | LSE:KMR | London | Ordinary Share | IE00BDC5DG00 | ORD EUR0.001 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 3.50 | 1.06% | 335.00 | 332.50 | 335.00 | 335.00 | 332.00 | 335.00 | 15,398 | 13:24:28 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
22 March 2017
2016 Preliminary Results
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 announces its preliminary results for the twelve months to 31
December 2016.
Statement from Michael Carvill, Managing Director:
"The ilmenite market has been experiencing a strong recovery over the
past twelve months, as evidenced by the US$26.6 million increase in
EBITDA in the second half of the year, and the market continues to
improve. The period also benefitted from improved shipment volumes and
lower unit costs.
2016 was a record year of production and shipments for all products and
the Company expects further production increases and unit cost
reductions in 2017. Contract prices set for H1 2017 will also benefit
from the rise in spot prices experienced in 2016.
The product market recovery remains at an early stage and we believe
higher prices will be required to meet growing titanium feedstock
demand."
Overview
-- Net debt declined by 88% at the end of 2016 to US$44.8 million following
the recapitalisation
-- Record annual production of ilmenite, rutile and zircon
-- HMC production increased 28% to 1,405,500 tonnes
-- Ilmenite production increased 18% to 903,300 tonnes
-- Zircon production increased 32% to 68,200 tonnes
-- Total shipments of finished products increased 28%, setting a record of
1,024,200 tonnes shipped
-- Cash operating costs declined 18% to US$136 per tonne of final product
-- EBITDA increased to US$5.2 million in 2016 from negative US$11.5 million
in 2015
-- Demand for ilmenite has grown strongly through 2016, resulting in
significant price increases since the market bottomed in Q2 2016
Results conference call
A conference call for analysts will be held today at 9:00am GMT.
Participant dial-in numbers are as follows:
UK: +44 (0) 203 139 4830
Ireland: +353 (0) 1 696 8154
Participant ID# 73748707#
For further information, please contact:
Kenmare Resources plc
Michael Carvill, Managing Director
Tel: +353 1 671 0411
Tony McCluskey, Financial Director
Tel: +353 1 671 0411
Jeremy Dibb, Corporate Development and Investor Relations Manager
Tel: +353 1 671 0411
Mob: + 353 87 943 0367
Murray
Joe Heron / Aimee Beale
Tel: +353 1 498 0300
Mob: +353 87 690 9735
Buchanan
Bobby Morse / Chris Judd
Tel: +44 207 466 5000
CHAIRMAN'S STATEMENT
Dear Shareholders,
I am pleased to report that the capital restructuring and
recapitalisation I outlined in last year's statement were successfully
implemented in July 2016, reducing net debt by 88% from June 2016 to
year end and securing a stronger balance sheet for the Company.
We are extremely grateful for the commitment shown by SGRF and
longstanding, major shareholders in underpinning that recapitalisation,
alongside our supportive bank group.
Progress on the ground at Moma has been excellent in 2016, resulting in
record production and declining costs. The Company has weathered a
severe and lengthy commodity downturn, while materially improving
efficiency, and continues to target further operational and strategic
refinements.
Growth in demand
Global economic growth, increasing wealth and urbanisation are driving
sustained increases in demand growth for the minerals we produce. The
large Moma resource base can supply the world with these essential
minerals for decades to come.
Productivity improvements
After continuous and successful efforts to optimise operations during
the cyclical downturn, Kenmare is now a more robust company, with more
reliable performance at higher levels throughout the Mine. Underpinned
by a strengthening commodity market and a disciplined approach to cost
management, Kenmare was within guidance for the year and set records for
the production and shipments of each product.
Shareholder Return
As the outlook continues to brighten, the Board and management of
Kenmare are committed to providing a return to our shareholders. Kenmare
now has a stronger balance sheet, thanks to the commitment of our
stakeholders. However, the upswing in commodity prices needs to progress
somewhat further to allow Kenmare to generate the high returns
commensurate with that commitment.
We live in uncertain times, so prudent capital management remains
essential. A balance must be struck between further debt retirement,
investment to maintain production, and initiating a dividend. These
matters will be at the forefront of discussion for the Board in 2017 and
I look forward to providing you with an update at the right time.
Corporate Governance & Board
The Board has ensured the Company embraces best practice corporate
governance standards, and has remained cohesive and effective while
implementing a complex balance sheet solution, despite the stresses
resulting from exceptionally poor market conditions early in 2016.
Tony Lowrie also retired as a Non-Executive Director at the 2016 AGM,
having provided excellent stewardship and dedicated service to the Board
and the Company for more than nine years. I would like to thank him for
his considerable contribution and sage advice throughout those years.
Following the successful completion of the recapitalisation of Kenmare,
John Ensall stepped down from his role as Lender Approved Non-Executive
Director. I would like to thank John for his highly valuable and unique
contribution during an extraordinary period.
Later in 2016, we welcomed both Tim Keating, who was nominated by SGRF,
and Graham Martin to the Board as Non-Executive Directors, both of whom
bring a wealth of African and natural resources experience.
As separately announced by the Company this morning, Sofia Bianchi, our
Senior Independent Director, will be stepping down from the Board at the
2017 AGM, when she will have served for nine years. I would like to
also thank her for the support and strategic vision that she has amply
provided, especially during the critical recent period recapitalising
the Company.
Finally, and as also announced this morning, we look forward to
welcoming Peter Bacchus to the Board as a Non-Executive Director
immediately after the 2017 AGM.
Moving forward with greater confidence
I would like to thank all shareholders, large and small, for their
outstanding support, and welcome SGRF as our largest shareholder and
partner for the future. I would also like to acknowledge the immense and
successful efforts made by all employees, management, and Directors
during this challenging but transformative year. These efforts have put
the business back into a position of stability that will enable
shareholders to reap the rewards from our long life resource base in
Mozambique and improved market conditions.
Steven McTiernan
Chairman
MANAGING DIRECTOR'S STATEMENT
2016 was a transformational year for Kenmare. The actions taken by the
Board and delivered by the management team to restructure the Company's
debt profile were challenging, but in the best interests of all
stakeholders. As a result, we can now look to the future with the
benefit of a stable and sustainable financial structure, and capitalise
on improving market conditions.
Production for 2016 was at record levels, whilst unit cash operating
costs were at the favourable end of expectations. These are excellent
operating results and I want to thank all employees for the concerted
efforts that made these improvements possible.
Recapitalisation
The capital restructuring and recapitalisation were deeply challenging,
coming at a time when commodity prices were only beginning to stabilise.
The Brexit vote created further market uncertainty, coming just days
before the funding was secured. Throughout the process we were cognisant
of the impact the restructuring would have on our stakeholders, but it
was ultimately necessary to position the Company to benefit from the
current resurgence in commodity prices. I would like to welcome SGRF as
a significant shareholder and long term partner and thank them and our
other shareholders for their support.
A total of US$275 million of new equity was issued via a placing, open
offer and lender underwriting. US$200 million was applied to repay and
discharge project debt, while US$75 million was used to increase cash
reserves and pay fees. In addition, lenders received US$23.8 million in
shares and wrote down US$68.6 million of debt. As a result, net debt
declined from US$374.7 million at 30 June 2016 to US$44.8 million at the
end of 2016.
Safety and Risk
Improving our safety record is central to our strategic success and we
continue to work towards making Kenmare a zero-accident workplace. Four
lost time injuries occurred in 2016, with the Lost Time Injury Frequency
Rate ("LTIFR") reducing to 0.20 per 200k man hours worked, a significant
improvement on performance from 2015 (0.47).
In 2017, the drive to reduce incidents is continuing, further embedding
and developing our safety strategy to improve hazard awareness and
develop safety behaviours. Focus will be placed on incidents where
injury was avoided but could have had significant negative outcomes.
Operations
I am delighted to report that 2016 was a record year of production for
HMC, ilmenite, rutile and zircon but there is still more work to be done
to lift production further in 2017.
Kenmare first began production at Moma in 2007 and has built a high
level of specialised expertise in dredge mining, a low-cost method of
extracting minerals that is well suited to the deposits in which we
operate. Throughput can be affected by variations in the levels of
slimes, the hardness or softness of the ore and the height of the dunes
being mined. Over time we have developed the experience and skills to
efficiently mine and accurately forecast the impact of these
fluctuations.
Kenmare mined over 30 million tonnes of ore in 2016, up 9% on 2015.
Supplemental dry mining capacity was increased through the year,
providing additional tonnes to the Wet Concentrator Plants ("WCP") when
required. Supplemental mining, though more costly than dredge mining, is
highly flexible and can be altered to suit dredging conditions.
The improved stability of the power supply the Mine enjoyed in 2016 was
primarily the result of the grid infrastructure improvements delivered
by Electricidade de Moçambique ("EdM") in late 2015 and throughout
2016. Supplementary diesel-powered generators remain on site for use
when required.
Mechanical availability was a key focus for 2016 significantly improving
utilisation. Several performance improvement projects were completed in
the year and an enhanced maintenance system was commissioned, resulting
in a steady increase in performance.
We have made significant progress in improving recoveries in the Mineral
Separation Plant ("MSP") non-magnetic circuit that produces our rutile
and zircon products. Secondary zircon production increased as work from
2015 to recover valuable material from waste streams continued in 2016.
Projects are underway to increase the proportion of primary zircon to
further enhance revenues.
In 2017, we are targeting additional operating hours, taking advantage
of the improved mechanical availability achieved in 2016 to further
increase utilisation rates. Our operational strategy remains focussed on
increasing production to the highest levels possible, while keeping
absolute costs under a tight rein to ensure that unit costs continue to
decline.
Mined grades have shown a steady improvement through 2016 but are
expected to average at slightly lower levels for full year 2017. Despite
this, we expect to increase production of ilmenite by 5-16%, zircon by
6-22% and rutile by 15-28% over the levels achieved in 2016. This is
possible due to the operational performance improvements we have
delivered at the Mine.
It is expected that the Mine will average production of approximately
one million tonnes per annum of ilmenite, plus associated by-products,
over the next three years. However, in the coming years the grade of ore
mined at Namalope will decline which will require an increase in mining
capacity to maintain final product production volume. Kenmare is
exploring the most capital efficient ways to address these issues and
work has begun on a series of feasibility studies. All assessments will
be made in the context of market conditions and the maintenance of a
strong balance sheet.
Costs
Cash operating costs per tonne of final product declined by 18% during
the year as both production of final products increased and total cash
operating costs declined.
As well as focusing on reducing total and unit cash operating costs, we
are increasingly exploring the potential to enhance margins through
increasing revenues by increasing the quality of products produced
(particularly zircon) and maximising recoveries of valuable minerals.
In relation to the outstanding arbitration case with Aveng, the Arbitral
Tribunal made an award at the end of 2016 and we welcomed the Tribunal's
endorsement of our position that Aveng caused significant losses to the
Project Companies. We are pleased that the Tribunal awarded Kenmare the
maximum amount allowable under our contracts as a deduction from Aveng's
award. The net amount payable of US$4.9 million is significantly less
than the amount claimed by Aveng and the US$19.4 million previously
accrued on the Group's balance sheet.
Marketing
Prices for our products reached a multi-year low in early 2016 at a
level below our cost of production, before debt servicing. Global
production of ilmenite declined in 2015 as mineral sands prices were
uneconomic and low iron ore prices reduced by-product ilmenite
production in China.
Inventories throughout the value chain were drawn down to fill the
supply gap and by Q2 2016, a supply deficit had emerged. Prices for
ilmenite have shown strong and steady price improvements since this time
and will result in a significantly higher average realised price for H1
2017.
Excess inventories persisted in the zircon market and contributed to
prices declining by 10-15% in the first half of 2016. Producer supply
discipline became evident in the second half of the year and inventories
now look to be more tightly held. These improved market conditions have
led to some major producers recently announcing price increases.
Kenmare has achieved modest zircon price increases in the early months
of 2017.
Outlook
We are very grateful for the support of all shareholders through the
capital restructuring. It is only thanks to this support that Kenmare is
now able to move forward from a position of strength. Keeping Kenmare in
business during this downturn has also taken huge efforts by the staff
and Board and I would like to thank them for their unwavering
commitment. I remain optimistic that the positive industry supply/demand
dynamics combined with the operational improvements and stability
achieved during 2016, places Kenmare in an excellent position to deliver
meaningful long term returns to shareholders.
Michael Carvill
Managing Director
KENMARE RESOURCES PLC
PRELIMINARY RESULTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Notes 2016 2015
US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 7 793,875 834,961
Deferred tax asset 3,237 1,320
Other receivables 278 649
797,390 836,930
Current assets
Inventories 47,747 46,228
Trade and other receivables 23,558 20,268
Cash and cash equivalents 8 57,786 14,352
129,091 80,848
Total assets 926,481 917,778
Equity
Capital and reserves attributable to the
Company's equity holders
Called-up share capital 9 215,046 214,941
Share premium 730,897 431,380
Retained losses (203,424) (175,651)
Other reserves 33,247 32,804
Total equity 775,766 503,474
Liabilities
Non-current liabilities
Bank loans 10 100,000 -
Obligations under finance lease - 264
Provisions 15,855 22,100
115,855 22,364
Current liabilities
Bank loans 10 2,618 341,943
Obligations under finance lease 264 479
Provisions 1,720 1,714
Other financial liabilities 4 22
Trade and other payables 30,254 47,782
34,860 391,940
Total liabilities 150,715 414,304
Total equity and liabilities 926,481 917,778
KENMARE RESOURCES PLC
PRELIMINARY RESULTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEARED 31 DECEMBER 2016
Notes 2016 2015
US$'000 US$'000
Revenue 2 141,491 142,583
Cost of sales 3 (144,014) (168,138)
Gross loss (2,523) (25,555)
Other operating costs 4 (22,835) (21,780)
Operating loss (25,358) (47,335)
Finance income 94 543
Finance costs (27,960) (37,805)
Gain on extinguishment of debt 10 38,255 -
Foreign exchange (loss)/gain (2,175) 22,658
Loss before tax (17,144) (61,939)
Income tax credit 5 1,917 1,320
Loss for the financial year and total
comprehensive
income for the financial year (15,227) (60,619)
Attributable to equity holders (15,227) (60,619)
US$ per share US$ per share
Loss per share: Basic 6 (0.28) (4.36)
Loss per share: Diluted 6 (0.28) (4.36)
KENMARE RESOURCES PLC
PRELIMINARY RESULTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEARED 31 DECEMBER 2016
Capital Conversion
Called -Up Share Share Reserve Capital Redemption Reserve Retained Share Based Payment
Capital Premium Fund Fund Losses Reserve Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January
2015 225,523 431,380 754 - (115,032) 22,142 564,767
Loss for the
financial year - - - - (60,619) - (60,619)
Share-based payments - - - - - (674) (674)
Redemption of
deferred shares (10,582) - - 10,582 - - -
Balance at 1 January
2016 214,941 431,380 754 10,582 (175,651) 21,468 503,474
Loss for the
financial year - - - - (15,227) - (15,227)
Share-based payments - - - - - 443 443
Equitisation of loans
and loan fees 16 44,244 - - - - 44,260
Equity issued 89 255,273 - - (12,546) - 242,816
Balance at 31
December 2016 215,046 730,897 754 10,582 (203,424) 21,911 775,766
Capital Conversion Reserve Fund
The capital conversion reserve fund arose from the re-nominalisation of
the Company's share capital from Irish Punts to Euro.
Capital Redemption Reserve Fund
The Deferred Shares of EUR0.25 were created in 1991 by subdividing each
existing Ordinary Share of IR25p into one Deferred Share of IR20p and
one new Ordinary Share of IR5p. The Deferred Shares were non-voting,
carried no dividend rights, and the Company had the right to purchase
any or all of these shares at a price not exceeding EUR0.01 per share
for all the deferred shares so purchased or could execute a transfer of
such shares without making any payment to the holders.
On 12 October 2015, it was resolved that the Company acquire all of the
48,031,467 Deferred Shares of EUR0.25 each in the capital of the Company
in issue by transfer or surrender to the Company otherwise than for
valuable consideration in accordance with Section 102(1)(a) of the
Companies Act 2014 and Article 3(ii) of the Articles of Association of
the Company and, in accordance with Section 106(1) of the Companies Act
2014, cancel such Deferred Shares.
Retained Losses
Retained losses comprise the cost of the equity issued in July 2016 and
accumulated profit and losses in the current and prior financial years.
Share-Based Payment Reserve
The share-based payment reserve arises on the grant of share options and
shares to certain Directors, employees and consultants under the share
option scheme and the Kenmare Incentive Plan.
KENMARE RESOURCES PLC
PRELIMINARY RESULTS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEARED 31 DECEMBER 2016
Notes 2016 2015
US$'000 US$'000
Operating activities
Loss for the financial year before tax (17,144) (61,939)
Adjustment for:
Foreign exchange movement 2,175 (22,658)
Share-based payments 443 (674)
Finance income (76) (45)
Finance costs 27,960 37,805
Gain on extinguishment of debt 10 (38,255) -
Depreciation 7 30,613 35,820
Disposals of property, plant and equipment 7 224 -
Decrease in other financial liabilities (18) (498)
Increase/(decrease) in provisions 113 (742)
Operating cash flow 6,035 (12,931)
(Increase)/decrease in inventories (1,519) 16,224
(Increase)/decrease in trade and other receivables (2,919) 7,222
Decrease in trade and other payables (4,573) (1,901)
Cash (used in)/from operations (2,976) 8,614
Interest received 76 45
Interest paid (2,775) (5,700)
Net cash (used in)/from operating activities (5,675) 2,959
Investing activities
Additions to property, plant and equipment 7 (6,697) (5,564)
Net cash used in investing activities (6,697) (5,564)
Financing activities
Proceeds from the issue of shares 9 254,762 -
Cost of the issue of shares 9 (12,546) -
Repayment of borrowings 10 (179,555) -
Increase in borrowings 10 - 10,000
Loan fees and expenses 10 (6,699) (17,330)
Payment of obligations under finance leases (560) (560)
Net cash from/(used in) financing activities 55,402 (7,890)
Net increase/(decrease) in cash and cash equivalents 43,030 (10,495)
Cash and cash equivalents at the beginning of the
financial year 14,352 21,795
Effect of exchange rate changes on cash and cash
equivalents 404 3,052
Cash and cash equivalents at the end of the financial
year 8 57,786 14,352
1. BASIS OF ACCOUNTING AND PREPARTION OF FINANCIAL INFORMATION
On 21 March 2017, the Directors approved the preliminary results for
publication. While the unaudited consolidated financial statements for
the year ended 31 December 2016, from which the preliminary results have
been extracted, are prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union, these
preliminary results do not contain sufficient information to comply with
IFRS. The Directors expect to publish the full financial statements that
comply with IFRS as adopted by the European Union in March 2016.
Based on the Group's cash flow forecast, the Directors believe that the
Group has adequate resources for the foreseeable future and continue to
adopt the going concern basis of accounting in preparing the annual
financial statements.
The auditors have not yet issued their audit opinion on the financial
statements in respect of the year ended 31 December 2016, but, as in
previous years, when issued such opinion is likely to draw attention to
the disclosures made in the financial statements concerning the
recoverability of property, plant and equipment which are dependent on
the successful operation of the Mine and the realisation of the cashflow
forecast assumptions as set out in Note 7. They are also likely to note
that the financial statements do not include any adjustments relating to
these uncertainties and that the ultimate outcome cannot at present be
determined.
The financial information included within this unaudited preliminary
results statement for the years ended 31 December 2015 and 31 December
2016 does not constitute the statutory financial statements of the
Company within the meaning of section 293 of the Companies Act 2014. The
Group financial information in this preliminary statement for the year
ended 31 December 2016 is unaudited. A copy of the statutory financial
statements in respect of the year ended 31 December 2016 will be annexed
to the next annual return and filed with the Registrar of Companies.
The Group financial information for the year ended 31 December 2015
included in this preliminary statement represents an abbreviated version
of the Company's group financial statements for that year. The
statutory financial statements for the Group for the year ended 31
December 2015, upon which the auditors have issued an unqualified
opinion, but with an emphasis of matter drawing attention to going
concern and the directors' assessment of the principal risks that would
threaten the solvency or liquidity of the Group and an emphasis of
matter drawing attention to the realisation of assets of the Group, were
annexed to the annual return of the company and filed with the Registrar
of Companies.
The accounting policies applied are consistent with those adopted and
disclosed in the Group's financial statements for the year ended 31
December 2016. There have been a number of amendments to accounting
standards and new interpretations issued by the International Accounting
Standards Board which were applicable from 1 January 2016; however these
have not had a material impact on the accounting policies, methods of
computation or presentation applied by the Group.
2. SEGMENT REPORTING
Information on the operations of the Moma Titanium Minerals Mine in
Mozambique is reported to the Board for the purposes of resources
allocation and assessment of segment performance. Information regarding
the Group's operating segment is reported below.
Segment revenues and results
2016 2015
Moma Titanium Minerals Mine US$'000 US$'000
Revenue 141,491 142,583
Cost of sales (144,014) (168,138)
Gross loss (2,523) (25,555)
Other operating costs (20,051) (20,529)
Segment operating loss (22,574) (46,084)
Other corporate operating costs (2,784) (1,251)
Group operating loss (25,358) (47,335)
Finance income 94 543
Finance expenses (27,960) (37,805)
Gain on extinguishment of debt 38,255 -
Foreign exchange (loss)/gain (2,175) 22,658
Loss before tax (17,144) (61,939)
Income tax credit 1,917 1,320
Loss for the financial year (15,227) (60,619)
Segment assets
Moma Titanium Minerals Mine assets 868,400 905,795
Corporate assets 58,081 11,983
Total assets 926,481 917,778
Segment liabilities
Moma Titanium Minerals Mine liabilities 146,070 409,500
Corporate liabilities 4,645 4,804
Total liabilities 150,715 414,304
Other segment information
Depreciation and amortisation
Moma Titanium Minerals Mine 30,610 35,805
Corporate 3 15
Total 30,613 35,820
Additions to non-current assets
Moma Titanium Minerals Mine 6,697 5,564
Corporate - -
Total 6,697 5,564
Revenue from major products
2016 2015
US$'000 US$'000
Mineral products (ilmenite, zircon and rutile) 141,491 142,583
Geographical information
2016 2015
Revenue from external customers US$'000 US$'000
Europe 36,502 49,653
Asia 69,164 43,691
North America 35,825 40,230
Rest of World - 9,009
Total 141,491 142,583
The Group's revenue from external customers is generated by the Moma
Titanium Minerals Mine, the non-current assets of which are US$797.4
million (2015: US$836.9 million).
Cost of sales for the financial year amounted to US$144.0 million (2015:
US$168.1 million), including depreciation and amortisation of US$25.3
million (2015: US$30.8 million).
Information about major customers
Included in revenues are US$35.8 million (2015: US$39.9 million) from
sales to the Group's largest customer, US$20.5 million (2015: US$23.2
million) from sales to the Group's second largest customer, US$18.3
million (2015: US$20.5 million) from sales to the Group's third largest
customer and US$17.5 million from sales to the Group's fourth largest
customer. All revenues are generated by the Moma Titanium Minerals Mine.
3. COST OF SALES
2016 2015
US$'000 US$'000
Opening stock of mineral products 27,643 42,312
Production costs 121,684 122,651
Depreciation 25,318 30,818
Closing stock of mineral products (30,631) (27,643)
144,014 168,138
Mineral products consist of finished products, intermediate magnetic
concentrate and heavy mineral concentrate. There was a lower
depreciation and amortisation charge as a result of the increased
operating life of mine. Mineral stock value increased by US$3.0 million
(2015: US$1.3 million increase). The net realisable value allowance in
2015 of US$16.0 million resulted from forecast declining product prices.
As prices have increased during the year and to date in 2017 and as a
result of lower unit costs achieved in 2016, no net realisable allowance
is required at end of 2016. Included as an offset to cost of sales in
2015 was a business interruption insurance receivable of US$2.0 million
for production losses due to flood damage to the EdM power transmission
line in the first quarter of 2015.
4. OTHER OPERATING COSTS
2016 2015
US$'000 US$'000
Distribution costs 11,287 12,504
Freight and demurrage costs 5,410 3,856
Administration costs 2,893 1,449
Arbitration costs 3,245 3,971
22,835 21,780
Included in administration costs are:
Share-based payments 473 580
Distribution costs of US$11.3 million (2015: US$12.5 million) represent
the cost of running the Mine's finished product storage, jetty and
marine fleet. Included in distribution costs is depreciation of US$5.3
million (2015: US$5.0 million). Freight costs of US$5.4 million (2015:
US$3.7 million) are reimbursable by customers or factored into the sales
price for product delivered to customers on a CIF or CFR basis.
Demurrage costs were US$0.01 million (2015: US$0.1 million) during the
financial year. Administration costs of US$2.9 million (2015: US$1.4
million) are the group administration costs and include a share-based
payment of US$0.5 million (2015: US$0.5 million). There were arbitration
costs incurred in the financial year of US$3.2 million (2015: US$4.0
million).
Total share-based payments for 2016 amounted to US$0.44 million (2015:
US$0.7 million credit), of which a US$0.03 million credit (2015: US$1.2
million credit) relates to staff at the Mine as a result of share
options lapsing in the financial year and is included as an offset to
production cost of inventories, and an expense of US$0.47 million (2015:
US$0.58 million) is included in administration costs in the statement of
comprehensive income.
5. INCOME TAX EXPENSE
2016 2015
US$'000 US$'000
Corporation tax - -
Deferred tax 1,917 1,320
Total 1,917 1,320
Reconciliation of effective tax rate
Loss before tax (17,144) (61,939)
Loss before tax multiplied by the applicable tax rate
(12.5%) (2,143) (7,742)
Differences in effective tax rates on overseas earnings 2,143 7,742
Applied losses - -
Recognition of deferred tax asset 1,917 1,320
Total 1,917 1,320
No charge to corporation tax arises in the financial years ended 31
December 2016 and 31 December 2015 as there were no taxable profits in
either financial year.
At the statement of financial position date Kenmare Moma Mining
(Mauritius) Limited had unused tax losses of US$18.5 million (2015:
US$7.5 million) available for offset against future profits. A deferred
tax asset of US$1.9 million (2015: US$1.3 million) has been recognised
for losses available for offset against future profits. Based on the
forecast at the year end for Kenmare Moma Mining (Mauritius) Limited
these profits are expected to materialise within the next three years.
The fiscal regime applicable to the mining activities of Kenmare Moma
Mining (Mauritius) Limited allows for a 50% reduction in the corporate
tax in the initial ten year period of production following start-up
(2007) and charges a royalty of 3% based on heavy mineral concentrate
sold to Kenmare Moma Processing (Mauritius) Limited. The royalty charge
payable to the Government of Mozambique for the financial year ended 31
December 2016 was US$2.5 million (2015: US$2.6 million). Under the
fiscal regime applicable to mining activities, Kenmare Moma Mining
(Mauritius) Limited is exempted from import and export taxes and VAT on
imports, and accelerated depreciation is permitted. Whilst withholding
tax is levied on certain payments to non-residents, mining companies are
exempt from withholding tax on dividends for the first ten years or
until their investment is recovered whichever is earlier. The
withholding tax charge payable to the Government of Mozambique for the
financial year ended 31 December 2016 was US$0.7 million (2015: US$0.4
million).
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the statement
of financial position liability method. The fiscal regime applicable to
mining allows for the option to use accumulation of exploration and
development expense and optional depreciation at 25% per annum with tax
losses allowed to be carried forward for three years.
Kenmare Moma Processing (Mauritius) Limited has Industrial Free Zone
("IFZ") status. As an IFZ company, it is exempted from import and export
taxes, VAT and other corporation taxes. A revenue tax of 1% is charged
after six years of operation, which became payable in 2013. The revenue
tax payable to the Government of Mozambique for the financial year ended
31 December 2016 was US$1.4 million (2015: US$1.4 million). There is no
dividend withholding tax under the IFZ regime.
6. LOSS PER SHARE
The calculation of the basic and diluted loss per share attributable to
the ordinary equity holders of the parent is based on the following
data:
2016 2015
US$'000 US$'000
Loss for the financial year attributable to equity
holders of the parent -15,227 -60,619
2016 2015
Number of Number of
shares shares
Weighted average number of issued ordinary shares
for
the purpose of basic loss per share 55,253,893 13,909,528
Effect of dilutive potential ordinary shares:
Shares, share options and warrants - -
Weighted average number of ordinary shares for
the purposes of diluted loss per share 55,253,893 13,909,528
US$ per US$ per
share share
Loss per share: basic -0.28 -4.36
Loss per share: diluted -0.28 -4.36
In 2016, the basic loss per share and the diluted loss per share are the
same as the effect of the outstanding share options, share awards and
warrants are anti-dilutive.
On 26 July 2016, there was a capital reorganisation which resulted in a
1 for 200 consolidation of the existing ordinary shares whereby the
ordinary shares and the new ordinary shares have a nominal value of
EUR0.001 each. 2,781,905,503 deferred shares of EUR0.059995 each were
created by subdividing each existing ordinary share of EUR0.06 into one
deferred share of EUR0.059995 and one new ordinary share of EUR0.001. On
26 July 2016, 81,368,822 new ordinary shares of EUR0.001 were issued by
way of a placing and open offer which raised US$254.8 million. On the 28
July 2016, 14,323,202 new ordinary shares were issued to lenders to
discharge debt and fees.
7. PROPERTY, PLANT AND EQUIPMENT
GROUP
Plant & Development Construction Other Total
Equipment Expenditure In Progress Assets
US$'000 US$'000 US$'000 US$'000 US$'000
Cost
At 1 January 2015 776,953 249,984 9,808 52,917 1,089,662
Transfer from
construction in
progress 9,104 - (9,875) 771 -
Additions during the
financial year - - 5,564 - 5,564
At 1 January 2016 786,057 249,984 5,497 53,688 1,095,226
Transfer from
construction in
progress 5,897 - (6,776) 879 -
Additions during the
financial year - - 6,697 - 6,697
Disposals (263) - - (731) (994)
Adjustments* (16,946) - - - (16,946)
At 31 December 2016 774,745 249,984 5,418 53,836 1,083,983
Accumulated
Depreciation
At 1 January 2015 96,745 105,163 - 22,537 224,445
Charge for the
financial year 25,609 4,912 - 5,299 35,820
At 1 January 2016 122,354 110,075 - 27,836 260,265
Charge for the
financial year 21,372 4,905 - 4,336 30,613
Disposals (91) - - (679) (770)
At 31 December 2016 143,635 114,980 - 31,493 290,108
Carrying Amount
At 31 December 2016 631,110 135,004 5,418 22,343 793,875
At 31 December 2015 663,703 139,909 5,497 25,852 834,961
During the financial year the Group carried out an impairment review of
property, plant and equipment. The cash generating unit for the purpose
of impairment testing is the Moma Titanium Minerals Mine. The basis on
which the recoverable amount of the Moma Titanium Minerals 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 pre-tax, pre-finance cash flows discounted
at 11%.
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 discount
rate has increased to 11% from 10% in the prior year review. The increase
is a result of changes to the assumptions used in the calculation of the
cost of equity and debt. The country risk premium has increased during
2016 as a result of a downgrading of the Mozambique Government's credit
rating. Based on the Group's experience of operating in Mozambique the
Board believe that it would be inappropriate to apply the country risk
premium in its entirety due to specific characteristics of the Mine. As a
result a reduced country risk premium is used in the calculation of the
weighted average cost of capital. Using a discount rate of 11% the
recoverable amount is greater than the carrying amount by US$133.0
million. The discount rate is a significant factor in determining the
recoverable amount. A 1% increase in the discount rate to 12%, which
management believe could be a reasonably possible change in this
assumption, would result in the recoverable amount being greater than the
carrying amount by US$47.5 million. A 1% increase in the discount rate in
the prior year to 11% would have resulted in an impairment charge of
US$19.3 million. The improvement in the recoverable amount is a result of
increased forecast pricing and reduced operating and sustaining capital
costs for the life of mine as noted below.
-- A mine plan based on the Namalope and Nataka proved and probable reserves
which runs to 2056. The life of mine assumption has not changed from the
prior year end review.
-- Average annual production is approximately 0.9 million tonnes (2015: 1.0
million tonnes) of ilmenite plus co-products, zircon and rutile over the
life of the mine. This mine plan does not include investment in
additional mining capacity. Minimum stock quantities are forecast to be
maintained at period ends. The average annual production has decreased
slightly from the prior year but this change does not have a significant
effect on the assets recoverable amount.
-- 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 presently contracted, prices are
forecast by the Company taking into account independent titanium mineral
sands expertise and management expectations including general inflation
of 2% per annum. Average forecast product sales prices have remained
relatively unchanged over the life of mine from the prior year end
review. Management do not believe that reducing forecast sales prices
would be a reasonable change given the upturn in the market and therefore
sensitivity to this assumption has not been applied which would give rise
to a reduction in the recoverable amount.
-- Operating costs are based on approved budget costs for 2017 taking into
account the current running costs of the Mine and escalated by 2% per
annum thereafter. Average forecast operating costs have decreased from
the prior year end review as a result of reduced costs in running the
mine in 2016 forming the basis for 2017 budget and life of mine forecast
thereafter. The forecast takes into account reasonable cost increases and
therefore sensitivity to this assumption has not been applied which would
give rise to a reduction in the recoverable amount.
-- Sustaining capital costs are based on a life of mine capital plan
considering inflation at 2% per annum from 2017. Average forecast
sustaining capital costs have decreased from the prior year end review as
a result of a revision to the sustaining capital required to maintain the
existing plant over the life of mine. The forecast takes into account
reasonable cost increases and therefore sensitivity to this assumption
has not been applied which would give rise to a reduction in the
recoverable amount.
As a result of the review no impairment provision is required.
Depreciation during the year decreased to US$30.6 million (2015: US$35.8
million) as a result of the increase in life of mine in 2015. The mine
plan, based on the Namalope and Nataka proved and probable reserves,
runs to 2056.
* Kenmare Resources plc's operating subsidiaries Kenmare Moma Mining
(Mauritius) Limited and Kenmare Moma Processing (Mauritius) Limited
(together, the "Project Companies") have been engaged in arbitration
proceedings initiated by certain members of the Aveng Group (those
members, together, "Aveng") in relation to the performance and
completion of certain engineering, procurement and construction
management contracts entered into in 2010 in connection with the
expansion of the Mine facilities. Aveng claimed that it was owed certain
amounts in respect of unpaid professional fees, plus interest. The
Project Companies counterclaimed for compensation for losses resulting
from Aveng's contractual breaches substantially in excess of the amounts
claimed by Aveng.
The Arbitral Tribunal notified its award on the 23 December 2016. The
tribunal determined that, due to Aveng's breaches, the final payment
sought by Aveng should be reduced by the maximum amount allowable under
the contract, i.e. ZAR 150 million. The net effect of the Tribunal's
finding resulted in the Project Companies making a payment of US$4.9
million (ZAR56 million plus interest accrued of ZAR11 million) in
January 2017. There was an adjustment of US$10.1 million to property
plant and equipment as a result of the arbitral tribunal award which
resulted in a reduction in the amount payable to Aveng and therefore a
reduction in the amount previously capitalised.
There was also an adjustment to the mine closure cost of US$6.9 million
during the year as result of a change in mine closure provision due to
the estimated life of mine increasing from 24 years to 40 years. The
aggregate of the US$10.1 million adjustment to plant and equipment and
the US$6.9 million adjustment to the mine closure cost is US$16.9
million.
Included in plant and equipment are capital spares of US$2.1 million
(2015: US$2.9 million).
During the year there were disposals of property, plant and equipment of
US$0.2 million (2015: nil).
Substantially all the property, plant and equipment of the Group is or
will be mortgaged, pledged or otherwise secured to provide collateral
for the Group's Senior and Subordinated Loans.
The carrying amount of the Group's plant and equipment includes an
amount of US$0.9 million (2015: US$0.7 million) in respect of assets
held under finance lease.
The recovery of property, plant and equipment is dependent upon the
successful operation of the Moma Titanium Minerals Mine; the realisation
of the cash flow forecast assumptions as set out in this note would
result in the recovery of such amounts. The Directors are satisfied
that at the statement of financial position date the recoverable amount
of property, plant and equipment exceeds its carrying amount and based
on the planned mine production levels that the Moma Titanium Minerals
Mine will achieve positive cash flows.
8. CASH AND CASH EQUIVALENTS
2016 2015
US$'000 US$'000
Immediately available without restriction 53,810 9,658
Contingency Reserve Account 2 2
Project Companies' Accounts 3,974 4,692
57,786 14,352
Cash and cash equivalents comprise cash balances held for the purposes
of meeting short-term cash commitments and investments which are readily
convertible to a known amount of cash and are subject to an
insignificant risk of change in value. Where investments are categorised
as cash equivalents, the related balances have a maturity of three
months or less from the date of investment.
The Contingency Reserve Account is an account established under a cash
collateral and shareholder funding deed to provide for shareholder
funding to the Project Companies and to secure the obligations of the
Company and Congolone Heavy Minerals Limited (a wholly-owned subsidiary
undertaking) under the Completion Agreement.
Interest rate risk
Cash at bank earns interest at variable rates based on daily bank
deposit rates, which may be zero. Short-term deposits are made for
varying periods of between one day and three months, depending on the
cash requirements of the Group, and earn interest at the respective
short-term deposit rates. The interest rate profile of the Group's cash
balances at the financial year end was as follows:
2016 2015
US$'000 US$'000
Cash and cash equivalents at variable interest rate 56,634 13,843
Cash at bank on which no interest is received 1,152 509
57,786 14,352
Currency risk
The currency profile of cash and cash equivalents at the financial year
end is as follows:
2016 2015
US$'000 US$'000
US Dollars 52,187 7,976
Euro 2,699 1,411
Sterling 2,563 4,710
Mozambican Metical 276 214
Renminbi 32 19
Australian Dollars 20 18
South African Rand 9 4
57,786 14,352
Fluctuations in the currencies noted above will impact on the Group's
financial results.
Credit risk
The credit risk on cash and cash equivalents is limited because funds
available to the Group are deposited with banks with high credit ratings
assigned by international credit rating agencies. For deposits in excess
of US$50 million the Group requires that the institution have an A
(S&P)/ A2 (Moody's) long term rating. For deposits in excess of US$20
million or South African Rand denominated deposits the Group requires
that the institution have a BBB+ (S&P)/Baa1 (Moody's) long term rating.
US$56.1 million of the bank deposits are with Barclays Bank which has a
long term credit rating of A- (S&P)/A1 Negative (Moody's).
9. CALLED-UP SHARE CAPITAL
2016
EUR'000
Authorised Share Capital
181,000,000 Ordinary Shares of EUR0.001 each 181
4,000,000,000 Deferred Shares of EUR0.059995 each 239,980
240,161
2016
US$'000
Allotted, Called-Up and Fully Paid
Ordinary Shares
Opening balance
2,781,905,503 Ordinary Shares of EUR0.06 each 214,941
Share consolidation
13,909,527 Ordinary Shares of EUR0.001 each 15
2,781,905,503 Deferred Shares of EUR0.059995 each 214,926
Shares issued
95,692,024 Ordinary Shares of EUR0.001 each 105
Closing balance
109,601,551 Ordinary Shares of EUR0.001 each 120
2,781,905,503 Deferred Shares of EUR0.059995 each 214,926
Closing balance 215,046
Total Called-Up Share Capital 215,046
2015
EUR'000
Authorised Share Capital
4,000,000,000 Ordinary Shares of EUR0.06 each 240,000
100,000,000 Deferred Shares of EUR0.25 each 25,000
265,000
2015
US$'000
Allotted, Called-Up and Fully Paid
Ordinary Shares
Opening & closing balance
2,781,905,503 Ordinary Shares of EUR0.06 each 214,941
Deferred Shares
Opening balance
48,031,467 Deferred Shares of EUR0.25 each 10,582
Redemption of deferred shares (10,582)
Closing balance -
Total Called-Up Share Capital 214,941
On 26 July 2016, 81,368,822 new ordinary shares of EUR0.001 were issued
by way of a placing and open offer which raised US$254.7 million.
US$0.1 million of the issue has been credited to share capital and
US$254.7 million has been credited to share premium. The cost of issue
of US$12.5 million has been recognised in retained losses.
On 28 July 2016, 6,527,771 new ordinary shares of EUR0.001 were issued
to Absa, EAIF, EIB and FMO, discharging US$20.4 million of debt under
their US$40.8 million underwriting commitment. 7,603,860 new ordinary
shares of EUR0.001 each were issued to Absa, EAIF, EIB and FMO
discharging US$23.8 million of senior and subordinated loans under the
debt reduction equitisation. 191,571 new ordinary shares of EUR0.001
each were also issued to Absa discharging a loan amendment fee of US$0.6
million. US$0.01 million of the issue has been credited to share capital
and US$44.8 million has been credited to share premium.
On 26 July 2016, there was a capital reorganisation which resulted in a
1 for 200 consolidation of the existing ordinary shares whereby the
ordinary shares and the new ordinary shares have a nominal value of
EUR0.001 each. 2,781,905,503 deferred shares of EUR0.059995 each were
created as part of the capital restructuring by subdividing each
existing ordinary share of EUR0.06 into one deferred share of
EUR0.059995 and one new ordinary share of EUR0.001. The deferred shares
have no voting rights, dividend rights and, in effect, no rights on a
return of capital. The deferred shares may be acquired by the Company
for no consideration and cancelled.
On 12 October 2015, it was resolved that the Company acquire all of the
48,031,467 Deferred Shares of EUR0.25 each in the capital of the Company
in issue by transfer or surrender to the Company otherwise than for
valuable consideration in accordance with Section 102(1)(a) of the
Companies Act 2014 and Article 3(ii) of the Articles of Association of
the Company and, in accordance with Section 106(1) of the Companies Act
2014, cancel such Deferred Shares.
The Deferred Shares of EUR0.25 per share were created in 1991 by
subdividing each existing Ordinary Share of IR25p into one Deferred
Share of IR20p and one new Ordinary Share of IR5p. The Deferred Shares
were non-voting, carried no dividend rights, and the Company had the
right to purchase any or all of these shares at a price not exceeding
EUR0.01 per share for all the deferred shares so purchased.
10. BANK LOANS
2016 2015
US$'000 US$'000
Project Loans
Super Senior Loans - 10,417
Senior Loans 25,857 79,178
Subordinated Loans 76,761 278,216
Total 102,618 367,811
Project Loan fees and expenses - (25,868)
Total Project Loans 102,618 341,943
The borrowings are repayable as follows:
Within one year 2,618 341,943
In the second year 19,048 -
In the third to fifth years inclusive 58,730 -
After five years 22,222 -
102,618 341,943
Less: amount due for settlement within 12 months (2,618) (341,943)
Amount due for settlement after 12 months 100,000 -
Project Loans
Balance at 1 January 367,811 330,055
Loan interest accrued 23,888 31,264
Loan interest paid (2,775) (4,242)
Loan drawdown - 10,000
Project loans novated to Kenmare Resources plc (292,449) -
Novated corporate loan - 20,000
Foreign exchange movement 6,186 (19,266)
Other finance fees (43) -
Balance at 31 December 102,618 367,811
Project Loan Amendment Fees
Balance at 1 January 25,868 11,780
Loan fees and expenses 6,656 17,303
Loan fees and expenses amortised (2,746) (3,215)
Project loan amendment fess novated to Kenmare Resources
plc (29,778) -
Balance at 31 December - 25,868
Corporate Loan
Balance at 1 January - 19,399
Project loans novated to Kenmare Resources plc 292,449 -
Project loan fees and expenses novated to Kenmare
Resources plc (29,778) -
Cash repayment of loans (179,555) -
Equitisation of loans and loan fees (44,260) -
Write-off of loans (68,634)
Amortisation of loan fees and expenses 29,778
Loan interest accrued - 1,441
Loan interest paid - (1,458)
Loan arrangement fees amortised - 618
Novated corporate loan - (20,000)
Balance at 31 December - -
Project Loans
Project Loans have been made to the Mozambique branches of Kenmare Moma
Mining (Mauritius) Limited ("KMML") and Kenmare Moma Processing
(Mauritius) Limited ("KMPL", and together with KMML, the "Project
Companies"). The Project Loans are secured by substantially all rights
and assets of the Project Companies, and, amongst other things, the
Group's shares in the Project Companies, substantially all of the
Group's cash balances and substantially all of the Group's intercompany
loans.
On 22 June 2016, the Group and the Lenders entered into an Amendment,
Repayment and Equitisation Agreement (the "AREA") for purposes of a
group capital restructuring and debt equitisation. The Group also
entered into Amended Financing Agreements setting out the terms and
conditions applicable to the US$100 million residual debt following the
debt restructuring. Details of these agreements are set out below.
Amendment, Repayment and Equitisation Agreement
The AREA, amongst other things, set out the Group's and Lenders'
respective rights and obligations related to the implementation of the
capital restructuring.
The AREA had the effect that the debt balance of US$392.4 million as at
28 July 2016, using agreed exchange rates and without deducting fees and
expenses, was repaid as follows: US$179.6 million of the proceeds from
the capital raise was used to repay debt; US$20.4 million of shares were
issued to Absa, EAIF, EIB and FMO (the "Subscribing Lenders"),
discharging that amount of debt under their US$40.8 million underwriting
commitment; US$23.8 million of shares were issued to Absa, EAIF, EIB and
FMO discharging that amount of senior and subordinated loans under the
debt reduction equitisation; and US$68.6 million of debt was written
off by the Senior and Subordinated Lenders. In consideration for
providing the underwriting, the Subscribing Lenders were paid a fee of
1.75% of their US$40.8 million underwriting commitment. Following
completion of the capital restructuring on 28 July 2016, residual Group
debt was US$100 million. In addition, US$0.6 million of shares were
issued to Absa in settlement of an outstanding fee in the amount of
US$0.8 million.
The extinguishment of debt resulted in a gain which was recognised in
the statement of comprehensive income of US$38.2 million being the write
of debt of US$68.6 million, the amortisation of fees and expenses of
US$29.8 million and the US$0.6 million of shares issued to Absa in
settlement of an outstanding fee.
The Group applied a portion of the US$75 million in equity proceeds
retained for working capital and expenses of the equity issue towards
payment of all accrued and unpaid restructuring fees and expenses and
commitment fees of the Super Senior Facilities.
Subject to certain exceptions, Lenders are not permitted to dispose of
ordinary shares issued to them for a period of 179 days after 28 July
2016, being 23 January 2017.
Amended Financing Agreements
On 28 July 2016, the debt restructuring was implemented pursuant to
which the terms of the residual debt of US$100 million became effective.
The residual debt is in two tranches: US$25.4 million is senior debt and
US$74.6 million is subordinated debt.
Senior debt ranks in priority to subordinated debt in repayment, subject
to the waterfall provision summarised below, on insolvency of the Group
and on enforcement of security.
Voting thresholds are calculated on the basis of aggregate outstanding
debt, being the aggregate of outstanding senior debt and outstanding
subordinated debt. Decisions are taken by majority Lenders (Lenders
whose principal amount of outstanding debt aggregate more than 50.1% of
all outstanding debt) or supermajority Lenders (Lenders whose principal
amount of outstanding debt aggregate more than 66.7% of all outstanding
debt).
Senior Debt
The final maturity date of the senior debt is 1 February 2022. Interest
on the senior debt is payable in cash on each semi-annual payment date
(1 February and 1 August). The interest rate on each tranche of senior
debt is LIBOR plus a margin of 3.00% from and including 28 July 2016 to
and including 31 January 2020, and 3.75% thereafter.
Scheduled repayment of the senior debt and subordinated debt is based on
the following repayment schedule, the percentage being applied to total
senior and subordinated debt outstanding on 28 July 2016 of US$100
million, in each case subject to the waterfall provisions summarised
below:
Payment Date Principal amount to be repaid (%)
1 Feb 2018 9.52381
1 Aug 2018 9.52381
1 Feb 2019 9.52381
1 Aug 2019 9.52381
1 Feb 2020 9.52381
1 Aug 2020 9.52381
1 Feb 2021 9.52381
1 Aug 2021 11.11111
1 Feb 2022 22.22222
Each principal instalment is allocated 50% to senior debt until senior
debt is fully repaid (provided that once the amount of Absa senior debt
is reduced to US$10 million, Absa ceases to participate in the senior
debt instalment and thereafter participates in the subordinated
instalment) with the balance being applied to subordinated debt. The
effect of the sharing provision is that senior debt, other than Absa's
senior debt, will be repaid by 1 August 2019 under the agreed
amortisation schedule.
In addition to the scheduled instalments of senior debt, prepayments
based on 25% of cash available for restricted payments are required
under a cash sweep mechanism, commencing 1 February 2018. Until the
senior debt has been repaid in full, 50% of the prepayments will be
allocated to senior debt (provided that once the amount of Absa senior
debt is reduced to US$10 million, Absa ceases to participate in the
senior debt prepayments and thereafter participates in the
subordinated debt prepayments) with the balance applied to prepayments
of subordinated debt. Senior debt prepayments are applied in inverse
order of maturity.
Subordinated Debt
The final maturity date of the subordinated debt is 1 February 2022.
Interest on the subordinated debt is payable in cash on 1 February and 1
August. The interest rate on subordinated debt is LIBOR plus a margin of
4.75% from and including 28 July 2016 to and including 31 January 2020
and 5.50% thereafter. Subordinated Lenders will receive additional
interest allocated pro rata to principal amounts outstanding equal to
the difference between (i) interest on the senior loans calculated on
the basis of subordinated loan margins and (ii) actual interest on the
senior loans. Taken together, the margin on the senior and subordinated
loans is thus 4.75% from and including 28 July 2016 to and including 31
January 2020, and 5.50% thereafter.
As mentioned above, scheduled principal instalments on subordinated
loans will equal the total principal instalment due on a Payment Date
less the principal instalment on senior loans. In addition to the
scheduled instalments, prepayments based on 25% cash available for
restricted payments less senior debt prepayments are required under a
cash sweep mechanism, commencing 1 February 2018. Subordinated debt
prepayments are applied in inverse order of maturity.
Group borrowings interest, currency and liquidity risk
Loan facilities arranged at fixed interest rates expose the Group to
fair value interest rate risk. Loan facilities arranged at variable
rates expose the Group to cash flow interest rate risk. Variable rates
are based on six month LIBOR. The average effective borrowing rate at
financial year end was 5.2% (2015: 9.6%). The interest rate profile of
the Group's loan balances at the financial year end was as follows:
2016 2015
US$'000 US$'000
Fixed rate debt - 294,932
Variable rate debt 102,618 47,011
Total debt 102,618 341,943
The fair value of the Group borrowings of US$103.1 million (2015:
US$333.3 million) has been calculated by discounting the expected future
cash flows at a rate of 6%. The 6% market rate was estimated by looking
at what the mining sector is borrowing at and relevant market yield. For
B+ to B- rated debt the borrowing rates are in the range of 5 to 6%.
Given the recent restructuring, the Group would be deemed to be in this
range of credit rating.
Under the assumption that all other variables remain constant, a 1%
change in the 6 month LIBOR rate will result in a US$1.0 million (2015:
US$0.5 million) change in finance costs for the financial year.
The currency profile of loans at the financial year end is as follows:
2016 2015
US$'000 US$'000
Euro - 170,195
US Dollars 102,618 171,748
102,618 341,943
On 28 July 2016, the debt restructuring was implemented pursuant to
which all debt is now denominated in US Dollars.
The above sensitivity analyses are estimates of the impact of market
risks assuming the specified change occurs. Actual results in the future
may differ materially from these results due to developments in the
global financial markets which may cause fluctuations in interest and
exchange rates to vary from the assumptions made above and therefore
should not be considered a projection of likely future events.
11. 2016 Annual Report and Accounts
The Annual Report and Accounts will be posted to shareholders before 30
April 2017.
Glossary - Alternative Performance Measures
Certain financial measures set out in our preliminary results for the
year ended 31 December 2016 are not defined under International
Financial Reporting Standards (IFRS), 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
Company'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 IFRS.
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 Eliminates the effects of financing and accounting
amortisation decisions to allow assessment of the profitability
and performance of the Group.
Cash operating cost per tonne of finished product Total costs less freight and other non-cash costs, Eliminates the non-cash impact on costs to identify
produced including inventory movements, divided by final product the actual cash outlay for production and, as production
production (tonnes) levels increase or decrease, highlights operational
performance by providing a comparable cash cost per
tonne of product produced over time.
Net Debt Bank loans before loan amendment fees and expenses Measures the Group's ability to repay its debts if
net of cash and cash equivalents they were to fall due immediately, and aids in developing
an understanding of the leveraging of the Group. For
comparability purposes the calculation of this APM
has changed from the 2016 Half Yearly Financial Report
to include gross debt before rather than after loan
amendment fees and expenses.
Mining - HMC produced Heavy mineral concentrate extracted from mineral sands Provides measure of heavy mineral concentrate extracted
deposits and which include ilmenite, zircon, rutile from the mine.
and other non-valuable heavy minerals and silica
LTIFR Lost time injury frequency rate Measures the number of injuries per 200,000 man hours
worked on site.
EBITDA
2015 2016
US$m US$m
Operating loss (47.3) (25.4)
Depreciation and amortisation 35.8 30.6
EBITDA (11.5) 5.2
Cash operating cost per tonne of finished product
2015 2016
US$m US$m
Cost of sales 168.1 144.0
Other operating costs 21.8 22.8
Total operating costs 189.9 166.8
Freight charges (3.7) (5.4)
Total operating costs less freight 186.2 161.4
Non cash costs
Depreciation and amortisation (35.8) (30.6)
Share-based payments 0.7 (0.4)
Costs capitalised - -
Mineral product movements (14.7) 3.0
Adjusted cash operating costs 136.4 133.4
Final product production 821,300 979,300
Cash operating cost per tonne of finished product US$166 US$136
Net Debt
June
December 2015 2016 December 2016
US$m US$m US$m
Bank loans 341.9 357.7 102.6
Loan amendment fees and expenses 25.9 29.3 -
Gross debt 367.8 387.0 102.6
Cash and cash equivalents (14.4) (12.3) (57.8)
Net Debt 353.4 374.7 44.8
Half yearly EBITDA
H1 2016 H2 2016
US$m US$m
Operating loss (24.9) (0.5)
Depreciation and amortisation 14.2 16.4
EBITDA (10.7) 15.9
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Kenmare Resources via Globenewswire
http://www.kenmareresources.com/
(END) Dow Jones Newswires
March 22, 2017 03:01 ET (07:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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