Kenmare Resources Q4 & Fy 2017 Trading Update & Fy 2018 Guidance

 
TIDMKMR 
 
 
   Kenmare Resources plc ("Kenmare" or "the Company") 
 
   11 January 2018 
 
 
 
   Q4 & FY 2017 Trading Update & FY 2018 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 fourth quarter and year 
ended 31 December 2017 and production guidance for FY 2018. 
 
   Overview 
 
 
   -- Record annual production of ilmenite, rutile and zircon - achieving 
      production guidance for all products 
 
   -- Ilmenite production increased 11% to 998,200 tonnes (2016: 903,300 
      tonnes) 
 
   -- Zircon production increased 9% to 74,000 tonnes (2016: 68,200 tonnes) 
 
   -- Heavy Mineral Concentrate ("HMC") production decreased 6% to 1,323,000 
      tonnes (2016: 1,405,500 tonnes) 
 
   -- Total shipments of finished products were up 2% to 1,040,400 tonnes 
      (2016: 1,024,200 tonnes) 
 
   -- Production guidance range mid-point of 950,000 tonnes of ilmenite 
      production in 2018 (2017: 998,200 tonnes) 
 
   -- Prices increased for all products during 2017 
 
   -- Favourable demand outlook for ilmenite and zircon markets in 2018 
 
   -- Net debt declined to US$34.1 million (2016: US$44.8 million) 
 
 
   Statement from Michael Carvill, Managing Director: 
 
   "2017 was a further consecutive year of record delivery for Kenmare. 
Both production and shipments of all products were at record levels. 
Production in 2018 is expected to moderate slightly, mainly due to lower 
opening stockpiles, though ilmenite shipment volumes are expected to be 
maintained as finished goods inventory is drawn down. 
 
   In 2018, Kenmare will upgrade capacity of Wet Concentrator Plant B ("WCP 
B") by up to 20% uplift in capacity. Further options are being examined 
which will both address grade reduction in future years and facilitate 
an increase in ilmenite production beyond 1 million tonnes per annum. 
 
   Average received prices for H1 2018 are expected to continue to show 
improvement on H2 2017, benefitting from new contract prices and higher 
spot prices, particularly for zircon". 
 
   Production 
 
   Production from the Moma Mine in Q4 2017 and FY-2017 was as follows: 
 
 
 
 
                      Q4-2017   vs Q4-2016  vs Q3-2017   FY-2017    vs FY-2016 
                      tonnes     % change    % change     tonnes     % change 
Excavated Ore *      8,414,300         -1%          8%  33,585,500         12% 
Grade*                   4.34%        -27%          5%       4.46%        -12% 
Production 
 HMC                   337,800        -29%         24%   1,323,000         -6% 
 Ilmenite              235,900         -8%         -8%     998,200         11% 
 Zircon                 18,100         -9%          0%      74,000          9% 
 of which primary       10,900        -19%         -9%      48,600          8% 
 of which secondary      7,300          8%         18%      25,400          9% 
Rutile                   2,500          8%         13%       9,100         17% 
Shipments              296,300         -2%         42%   1,040,400          2% 
 
 
   * Excavated ore and grade prior to any floor losses. 
 
   During 2017, Kenmare mined more than 33 million tonnes of ore, up 12% on 
2016, at an average grade of 4.46% and produced 1,323,000 tonnes of HMC, 
a 6% decrease. In Q4 2017, Kenmare mined 8,414,300 tonnes of ore, up 8% 
over the prior quarter, at an average grade of 4.34% and produced 
337,800 tonnes of HMC. Finished product volumes for the year included 
998,200 tonnes of ilmenite, up 11%, and 74,000 tonnes of zircon 
(including 25,400 tonnes of a lower grade secondary zircon product), up 
9%. 
 
   In 2017, excavated ore volumes benefitted from improved dredge mining 
operation and a higher dry mining contribution. Increased plant 
utilisations through enhanced maintenance systems and improvement 
projects, together with continued power stability, also supported higher 
excavated ore volumes. However, in addition to grade reduction, as 
previously reported, HMC production in Q3 2017 was adversely impacted by 
elevated slimes levels which affected recoveries. 
 
   Ilmenite production which increased by 11% to 998,200 tonnes (2016: 
903,300 tonnes), in line with guidance, benefited from good recoveries 
as well as a drawdown of HMC and intermediate product stockpiles. 
 
   Total zircon production includes an 8% increase in primary zircon 
production to 48,600 tonnes (2016: 44,900 tonnes), driven by drawdown 
from intermediate stockpiles and increased recoveries. Secondary zircon 
volumes increased by 9% to 25,400 (2016: 23,300 tonnes) as tailings 
recovery projects were completed and started to contribute. 
 
   During 2017, Kenmare shipped 1,040,400 tonnes of finished products 
(2016: 1,024,200 tonnes) comprising 961,800 tonnes of ilmenite, 70,800 
tonnes of zircon (including 24,500 tonnes of secondary grade zircon) and 
7,800 tonnes of rutile. In Q4 2017, shipments of total finished products 
were up 42% to 296,300 tonnes (Q3 2017: 208,400 tonnes), benefitting 
from both transhipment vessels being in operation for the full quarter 
following the planned maintenance of Kenmare's main transhipment vessel 
in Q3 2017. Sales comprised 269,900 tonnes of ilmenite, 24,700 tonnes of 
zircon (including 8,900 tonnes of secondary grade zircon), and 1,700 
tonnes of rutile. 
 
   Closing stock of HMC at the end of 2017 was 16,800 tonnes, compared with 
66,500 tonnes at the start of the year.  Closing stock of finished 
products at the end of 2017 was 202,000 tonnes (2016: 192,300 tonnes), 
of which 9,200 tonnes has been paid for and is being held for a 
customer. 
 
   Costs 
 
   Subject to completion of the full year financial results and adjusting 
for arbitration costs of US$3.7 million, total cash operating costs are 
expected to be within the guided range of US$120-132 per tonne for FY 
2017. Total cash operating costs include all mine production, 
transhipment, royalties and corporate costs. 
 
   2018 Guidance 
 
   The 2018 guidance on production and operating costs is as follows: 
 
 
 
 
                                                  2018 Guidance    2017 Actual 
Production 
 Ilmenite                               tonnes  900,000-1,000,000      998,200 
 Zircon                                 tonnes      65,000-72,000       74,000 
 of which primary                       tonnes      42,000-46,000       48,600 
 of which secondary                     tonnes      23,000-25,000       25,400 
Rutile                                  tonnes        7,000-8,000        9,100 
Costs 
Total cash operating costs                US$m            133-147         N/R* 
Cash costs per tonne of finished         US$/t            130-143         N/R* 
 product 
 
 
   * to be reported in full year financial statements 
 
   Production in 2018 is expected to moderate slightly, mainly due to lower 
opening HMC stockpiles, though ilmenite shipment volumes are expected to 
be maintained as finished goods inventory is drawn down. 
 
   Work is on-going to optimise increased mining capacity to offset grade 
reduction in the Namalope Zone in the coming years. US$19 million has 
been approved for expenditure on growth projects and studies in 2018, 
the main elements of which are represented by the WCP B upgrade project, 
a monazite concentrate project and feasibility studies to increase 
mining capacity.  Approval of further capital expenditure by the Board 
will be subject to, inter alia, positive outcomes from feasibility 
studies, attractive financial returns, and supportive market conditions. 
 
   Sustaining capital costs in 2018 are expected to be approximately US$22 
million. 
 
   Market 
 
   The ilmenite pricing outlook for 2018 is positive, supported by 
favourable supply demand fundamentals. Demand for titanium dioxide 
pigment, the main market for ilmenite, has continued to increase with 
global GDP which supports demand for our products. 
 
   In 2017, Chinese demand for imported ilmenite grew despite domestic 
ilmenite production, as a by-product of iron ore mining, operating near 
capacity. Domestic pigment and ilmenite production have both been 
affected by increased environmental regulations and enforcement. This 
has caused disruption to the pigment industry, particularly in H2 2017, 
moderating ilmenite demand and price growth. However, Kenmare has agreed 
higher prices with customers for H1 2018 and expects that spot prices 
will improve over the course of the year. 
 
   Zircon prices grew strongly through 2017, supported by increased demand, 
falling global inventories and limited supply growth. These market 
dynamics are expected to persist in 2018, potentially supporting further 
price increases. 
 
   Finance Update 
 
   At 31 December 2017, gross bank loans, including accrued interest, 
amounted to US$102.9 million (2016: US$102.6 million) and cash and cash 
equivalents were US$68.8 million (2016: US$57.8 million). Consequently, 
net debt has declined to US$34.1 million (2016: US$44.8 million). 
 
   For further information, please contact: 
 
   Kenmare Resources plc 
 
   Michael Carvill, Managing Director 
 
   Tel: [phone] 
 
 
   Tony McCluskey, Financial Director 
 
   Tel: [phone] 
 
 
   Jeremy Dibb, Corporate Development and Investor Relations Manager 
 
   Tel: [phone] 
 
   Mob: + 353 87 943 0367 
 
   Murray 
 
 
   Joe Heron / Aimee Beale 
 
 
   Tel: [phone] 
 
 
   Mob: [phone] 
 
 
   Buchanan 
 
   Bobby Morse / Chris Judd 
 
   Tel: [phone] 
 
   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. 
 
   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

January 11, 2018 02:00 ET (07:00 GMT)

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