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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.50 | -0.45% | 330.00 | 331.00 | 332.00 | 335.00 | 331.50 | 335.00 | 54,624 | 16:35:04 |
| 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")
24 August 2016
Half-Yearly Results for the six months to 30 June 2016
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 half year results for the six month period ended 30
June 2016 ("H1 2016").
Overview
-- Ilmenite production in H1 2016 increased 24% to 402,900 tonnes compared
to H1 2015, zircon production in H1 increased 20% to 28,500 tonnes
-- Total shipments of finished products in H1 2016 increased 7% to 441,700
tonnes, a new half yearly record
-- Revenues of US$56.2 million (H1 2015: US$73.9 million), as a result of
lower average prices due to pricing and subsequent contracts being at the
bottom of the cycle in late 2015, and a reduced value sales mix during
the period
-- The ilmenite market has shown signs of recovery in recent months with
prices increasing
-- Cash operating costs per tonne of finished product declined 22% in H1
2016 to US$153 per tonne (H1 2015: US$197 per tonne), a result of
continued cost savings and increased production
-- EBITDA of negative US$10.7 million remains stable year on year (H1 2015:
negative US$10.6 million), despite commodity prices reaching lowest point
in H1
-- Operating loss reduced to US$24.9 million (H1 2015: US$27.2 million)
-- On 28 July 2016, the Group completed a capital restructuring to reduce
debt to US$100 million (from US$392.4 million using agreed exchange
rates) and to provide an additional US$75 million of cash for working
capital and to meet fees and expenses of the capital restructuring
Michael Carvill, Managing Director, said:
"The Company has made significant progress in reducing unit operating
costs by 22% during the period, through cost savings and increased
production. Further reductions are expected in the second half of the
year as higher production is generated from increased grade levels,
volumes of ore mined, recoveries and operating time. Prices received for
our products in H1 2016 are a reflection of the weak market conditions
experienced at the end of 2015, when prices for the majority of H1 2016
shipments were struck.
I am pleased with the recent improvement in ilmenite prices from their
low point, following four years of decline, and expect higher prices to
flow through our revenues in H2 2016 and thereafter. The conclusion of
the capital restructuring has provided the Company with a robust balance
sheet, reduced interest payments and enhanced liquidity and will
position the business to take advantage of what we believe will be a
sustained recovery in the market."
Results conference call & presentation
A conference call for analysts will be held at 09:30am BST on Wednesday,
24 August 2016. A presentation to accompany the conference call is
available on the Company website, www.kenmareresources.com. Participant
dial-in numbers are as follows:
UK: 0808 237 0030
Ireland: 1800 936 842
Rest of the world: +44 (0) 203 139 4830
Participant ID# 69337500#
The Half Yearly Financial Report for the period ended 30 June 2016 is
available on the Company website, www.kenmareresources.com
For further information, please contact:
Kenmare Resources plc
Michael Carvill, Managing Director
Tel: +353 1 671 0411
Mob: + 353 87 674 0110
Tony McCluskey, Financial Director
Tel: +353 1 671 0411
Mob: + 353 87 674 0346
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
Tel: +44 207 466 5000
Forward Looking Statements
This announcement contains some forward-looking statements that
represent Kenmare's expectations for its business, based on current
expectations about future events, which by their nature involve risks
and uncertainties. Kenmare believes that its expectations and
assumptions with respect to these forward-looking statements are
reasonable. However, because they involve risk and uncertainty, which
are in some cases beyond Kenmare's control, actual results or
performance may differ materially from those expressed or implied by
such forward-looking information.
INTERIM MANAGEMENT REPORT
Overview
On 28 July 2016, the Group completed a capital restructuring to reduce
debt to US$100 million (from US$392.4 million using agreed exchange
rates) and to provide an additional US$75 million of cash for working
capital and to meet fees and expenses of the capital restructuring. This
was achieved by the raising of new equity from new and existing
shareholders, the conversion of certain debt to equity in the Company,
and certain debt write-offs agreed by Lenders. The capital restructuring
also provided for a reduction in the interest rates on outstanding debt,
an extension to the term of that debt, and a principal repayment holiday
until February 2018.
In H1 2016, production volumes of Heavy Mineral Concentrate ("HMC") and
finished products (ilmenite, zircon and rutile) increased by 33% and 24%,
respectively, compared to H1 2015, primarily due to the improvements in
power supply and reliability, as well as improved mining techniques and
recovery rates at the Mineral Separation Plant ("MSP").
Key Performance Measures
H1 2016 H1 2015 Change
%
Revenue US$56.2m US$73.9m (24%)
EBITDA (US$10.7m) (US$10.6m) (1%)
Cash operating cost per tonne of finished
product US$153 US$197 (22%)
Operating cashflow after additions to
sustaining capex US$3.6m (US$4.2m) N/A
Net Debt US$345.5m US$317.0m 9%
*Additional information in relation to these Alternative Performance
Measures ("APMs") is disclosed in the glossary
Revenue of US$56.2 million decreased by 24% or US$17.7 million compared
to H1 2015 despite a 7% increase in shipments. H1 2016 ilmenite prices
were mainly agreed at the bottom of the market in December 2015. The
drop in revenue was principally a result of the average ilmenite prices
received during the period declining by 31% on a Free On Board ("FOB")
basis, a sharper decline than the underlying commodity market due to a
change in sales mix as finished product inventories were reduced,
resulting in a higher proportion of lower quality ilmenite sales.
Total operating costs of US$81.1 million decreased by US$20.0 million
from H1 2015. Total cash operating costs declined by 4% to US$66.6
million as a result of the full effect of the 2015 cost control measures
delivering savings and foreign exchange gains in the period. Management
continues to pursue further sustainable cost reductions.
Kenmare recorded an operating loss for the first half of 2016 of US$24.9
million (H1 2015: US$27.2 million) and negative EBITDA of US$10.7
million (H1 2015: negative US$10.6 million). Cash flow generated by
operating activity increased by US$9.8 million over the prior period,
from negative US$3.2 million in H1 2015 to positive US$6.6 million in H1
2016, benefitting from management's focus on disciplined management of
working capital.
Operations
Production H1 2016 H1 2015 Change
(tonnes) (tonnes) %
HMC 606,100 454,500 33%
Ilmenite 402,900 324,100 24%
Zircon* 28,500 23,800 20%
Rutile 3,000 2,800 7%
Total finished product production 434,400 350,700 24%
* Includes 9,200 tonnes secondary zircon product (H1 2015: 4,000 tonnes)
Shipments H1 2016 H1 2015 Change
(tonnes) (tonnes) %
Product Shipped 441,700 412,000 7%
HMC production increased 33% in H1 2016 compared to H1 2015 as the Mine
benefitted from increased power quality and reliability as a result of
additional power transmission capacity commissioned by Electricidade de
Mocambique ("EdM") in December 2015. Electricity generation capacity in
northern Mozambique has also been increased by EdM, with a ship-based
100MW mobile power generation plant positioned nearby at Nacala since
April 2016. The plant provides significant additional capacity as well
as stabilising EdM's northern transmission network. These enhancements
have led to increased operating times and production in H1 2016.
Production of ilmenite was up 24% to 402,900 tonnes, compared with
324,100 tonnes in H1 2015. The increase is attributed to recovery
improvements in the MSP, as well as increased HMC production, impacted
in H1 2015 by power outages as a result of extreme weather and flooding.
Production of primary zircon decreased by 3% to 19,300 tonnes compared
with 19,800 tonnes in H1 2015, as non-magnetic concentrate stocks from
circuit improvement projects contributed to higher yields in the prior
period. Steady primary zircon recovery improvements took place, aided by
power stability, and the processing of reject streams led to increased
secondary zircon production. Rutile recoveries improved by 50% in H1
2016, compared to H1 2015, as a result of circuit improvement projects.
The benefits of the 2015 cost reduction programme continued through H1
2016, resulting in cost savings compared to H1 2015. Total cash
operating costs declined 4% in H1 2016 to US$66.6 million, compared to
US$69.1 million H1 2015, despite higher production volumes of finished
products. As a result, cash operating costs per tonne of finished
product declined 22% over the same period to US$153 per tonne (H1 2015:
US$197 per tonne). Building on this progress to date the Company is
committed to further reducing costs where possible.
Sales of total finished products were at record levels, and up 7% to
441,700 tonnes in H1 2016 compared to 412,000 tonnes in H1 2015. Sales
in H1 2016 comprised 414,800 tonnes of ilmenite, 24,300 tonnes of zircon
and 2,600 tonnes of rutile. Closing stock of finished products at 30
June 2016 was 230,100 tonnes, down from 237,300 tonnes at 31 December
2015. The closing stock of finished products includes 103,900 tonnes for
which the Group has received advance payment from certain customers.
Market
The titanium dioxide pigment industry is the largest consumer of
titanium feedstocks, of which Kenmare produces the minerals ilmenite and
rutile. The pigment industry has been performing well after an extended
period of weakness, inventories have normalised and demand is
increasing. Given the improved pigment market outlook, feedstock
purchasing activity has increased due to improved offtake requirements
and re-stocking. Sulphate ilmenite demand, in particular, saw good
improvement in Q2 2016 with increased activity in China as a result of
strong pigment production and reduced ilmenite supply from domestic
producers. The impact of low iron ore prices on Chinese ilmenite
production (a by-product of iron ore mining) has continued a downward
trend in domestic ilmenite production seen in the second half of 2015.
There has also been reduced supply due to mine closures in Russia and
Australia and restricted output from other suppliers, partially offset
by increased supply from some regions including from that which Kenmare
operates.
Sulphate ilmenite prices have started to move up in response to the
tightening supply outlook in recent months, and a shortage of supply is
now forecast for the remainder of 2016. While the impact of market
improvement has not impacted on H1 figures, Kenmare is currently setting
prices for the second half of the year with contracted customers at a
point when prices have just started to trend up and we expect further
gains going into 2017.
Demand for Kenmare's chloride ilmenite continues to be strong and
shipments to date in 2016 are in line with expectations. The demand for
chloride ilmenite is expected to remain strong given the recent mine
closures and increased demand for pigment production and beneficiation.
Market conditions for zircon in the first half of the year were more
subdued than H2 2015 due to weak offtake in China, partially offset by
stronger demand in other regions, notably Europe. Although construction
activity is improving in China, excess ceramic tile inventories remain
with producers and distributors. Enforcement of stricter environmental
regulations by Chinese authorities is also negatively impacting on
ceramic tile production. The outlook beyond 2016 is better as Chinese
ceramic production activity is expected to recover. Some stability has
returned to zircon pricing in Q3 2016, helped by price increase
announcements by some of the larger producers.
Kenmare continues to receive good support from its global ilmenite and
zircon customer base and we continue to target new growth markets for
our products. Our expanded production capability and high quality
ilmenite product suite, suitable for both sulphate and pigment
production processes, as well as a feed for upgrading into higher grade
titanium feedstocks, positions the Company well to benefit from the
improving demand conditions and tightening feedstock supply outlook.
Financial Review for the six months ended 30 June 2016
Revenues for the period decreased to US$56.2 million (H1 2015: US$73.9
million), notwithstanding a 7% increase in tonnes sold to 441,700 tonnes
(H1 2015: 412,000 tonnes) of ilmenite, zircon and rutile. The drop in
revenue is principally a result of received average ilmenite prices
declining by 31% on an FOB basis, a sharper decline than the underlying
commodity market due to a change in sales mix as finished product
inventories were reduced, resulting in a higher proportion of lower
quality ilmenite sales.
Total operating costs, consisting of cost of sales and other operating
costs, of US$81.1 million decreased by US$20.0 million from US$101.1
million in H1 2015. A reduction in operating costs of US$3.7 million
contributed to this decrease, reflecting the cost savings implemented in
2015 and foreign exchange gains in the period. Depreciation and
amortisation decreased by US$2.4 million, due to an increase in the life
of mine resulting in a lower depreciation charge on property, plant and
equipment. These reductions were offset by an increase in arbitration
costs of US$3.1 million in the period, due to the February 2015 hearing
in relation to Kenmare's construction contractor arbitration
proceedings. In H1 2015, due to lower production, finished product
inventory of US$6.0 million was drawn down to meet shipment obligations
and inventory was written down by US$8.6 million to reflect lower prices
being achieved in the market at the end of the financial period.
Included as an offset to cost of sales in H1 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 Q1
2015.
Included in other operating costs are freight, demurrage and
distribution costs of US$8.3 million (H1 2015: US$8.1 million),
administration costs of US$0.9 million (H1 2015: US$0.2 million),
arbitration costs of US$3.7 million (H1 2015: US$0.6 million), and a
share-based payment cost of US$0.2 million (H1 2015: US$0.2 million).
Adjusting total operating costs for depreciation of US$14.2 million (H1
2015: US$16.6 million), total Group share-based payments of US$0.1
million (H1 2015: US$0.8 million credit), freight reimbursable by
customers of US$2.4 million (H1 2015: US$1.6 million) and the increase
in mineral product inventory for the period of US$2.2 million (H1 2015:
US$14.6 million decrease), the total cash operating cost for the period
amounted to US$66.6 million (H1 2015: US$69.1 million).
EBITDA for the period amounted to negative US$10.7 million (H1 2015:
negative US$10.6 million). The gross loss for the period was US$11.8
million (H1 2015: US$18.1 million) and the operating loss was US$24.9
million (H1 2015: US$27.2 million). The decrease in the gross loss for
the period is a result of the lower cost of sales of US$23.9 million,
offset by lower weighted average sales prices in the period (H1 2016:
US$123 per tonne on FOB basis; H1 2015: US$178 per tonne on FOB basis)
reducing revenue by US$17.7 million. The cost of sales decreased as a
result of finished product write downs of US$8.6 million and finished
product stock level reduction of US$9.4 million in H1 2015 and
production cost decreases of US$5.9 million in H1 2016 compared to H1
2015. The operating loss reduction was a result of the gross loss
reduction of US$6.3 million, detailed above offset by additional
arbitration costs of US$3.1 million, additional administration costs of
US$0.7 million and additional freight and demurrage costs of US$0.2
million in the period.
Net finance costs of US$21.5 million (H1 2015: US$18.2 million)
increased as a result of additional interest charges (including on Super
Senior Loans of US$10.0 million which were outstanding during the
period), an increase in the subordinated loan balances as a result of
capitalisation of interest, a higher subordinated loan fixed interest
rate of 11%, agreed in the April 2015 Amendment, higher US Dollar costs
of Euro denominated loans, as a result of the strengthening of the Euro
against the US Dollar in the period, and higher loan fees amortised in
the period.
The Group reported a foreign exchange loss of US$2.7 million (H1 2015:
US$17.4 million gain), due to the retranslation of Euro-denominated
loans. A deferred tax asset of US$1.9 million is recognised in the
period as it is anticipated that unused tax losses of Kenmare Moma
Mining (Mauritius) Limited ("KMML") will be carried forward for offset
against future profits. The resultant net loss after tax is US$47.1
million for the period (H1 2015: US$27.9 million).
During the period, additions to property, plant and equipment were
US$3.0 million (2015: US$1.0 million), reflecting continued tight
expenditure control. Depreciation during the period decreased to US$14.2
million from US$16.6 million in H1 2015 as a result of the increase in
the life of mine. The mine plan, based on the Namalope and Nataka proved
and probable reserves, runs to 2056. The Group carried out an impairment
review of property, plant and equipment. The key assumptions of this
review are set out in Note 5. No impairment provision is required as a
result of this review.
Inventory at the period end amounted to US$47.4 million (2015: US$46.2
million), consisting of intermediate and final mineral products of
US$29.8 million (2015: US$27.6 million) and consumables and spares of
US$17.6 million (2015: US$18.6 million). Closing stock of finished
products at 30 June 2016 was 230,100 tonnes (2015: 237,300 tonnes). The
Group has received advance payment from customers for 103,900 tonnes
(2015: 40,000 tonnes) of finished product. The revenue for this stock
will be recognised in the statement of comprehensive income when all
criteria for recognition as a sale are met, including delivery to the
customer's vessel.
Trade and other receivables amounted to US$12.5 million (2015: US$20.9
million), of which US$8.2 million (2015: US$17.2 million) were trade
receivables from the sale of mineral products and US$4.3 million (2015:
US$3.7 million) was comprised of prepayments, mainly insurance premia.
During the period there were sales of US$56.2 million and receipts of
US$65.2 million resulting in a reduction in trade receivables since the
year-end.
Included in trade and other payables of US$63.9 million (2015: US$47.8
million) is US$19.6 million (2015: US$19.6 million) relating to capital
projects which are disputed by the Group in arbitration proceedings, and
US$12.4 million (2015: US$3.0 million) relating to advanced payments
from certain customers as noted above.
Bank loans amounted to US$357.7 million (2015: US$341.9 million) at the
end of the period. The reported bank loans have been adjusted for
applicable lender fees of US$29.2 million (2015: US$25.9 million).
On 28 July 2016, the Group completed a capital restructuring to reduce
debt to US$100 million (from US$392.4 million using agreed exchange
rates) and to provide an additional US$75 million of cash for working
capital and to meet fees and expenses of the capital restructuring. This
was achieved by the raising of new equity from new and existing
shareholders, the conversion of certain debt to equity in the Company,
and certain debt write-offs agreed by Lenders. The capital restructuring
also provided for a reduction in the interest rates on outstanding debt,
an extension to the term of that debt, and a principal repayment holiday
until February 2018.
At 30 June 2016 the Group was in breach of a number of loan covenants
which, as and from 1 July 2016 were temporarily waived by Lenders. As a
result, the loan balances as at 30 June 2016 were classified as falling
due on demand in the statement of financial position. Upon the
effectiveness of the Amended Financing Agreements on 28 July 2016, all
then-existing breaches were permanently waived, with the effect that, as
from such date, the loan balances are no longer classified as falling
due on demand.
During the period, loan interest of US$2.7 million (H1 2015: US$3.4
million) was paid, interest of US$18.6 million (H1 2015: US$15.2
million) accrued, and the Euro-denominated loans increased by US$3.3
million (H1 2015: US$16.1 million decrease) as a result of the US Dollar
weakening against the Euro. Loan fees and expenses of US$5.7 million
were incurred (H1 2015: US$5.7 million) and US$2.4 million loan fees and
expenses amortised (H1 2015: US$2.2 million). The average interest rate
on the Group loans at the period end was 10.0% (2015: 9.1%).
Cash and cash equivalents as at 30 June 2016 amounted to US$12.3 million
(2015: US$14.4 million).
Health, Safety and Community
The Lost Time Injury Frequency Rate ("LTIFR") was 0.37 for the twelve
months to 30 June 2016 as compared to 0.14 for the twelve months to 30
June 2015. There was one lost time injury experienced in H1 2016, a
significant improvement on H1 2015 (3 lost time injuries) as a result of
the delivery of a safety improvement strategy. Kenmare remains committed
to providing a safe and healthy work environment for its employees,
contractors and visitors.
The Kenmare Moma Development Association (KMAD) continued to support
local communities during the period through its economic, social and
infrastructure projects, notwithstanding increased capital constraints
as a result of lower commodities prices.
Board Update
Mr. Tony Lowrie has provided great service to the Board and the Company
as a Non-Executive Director for more than nine years and retired at the
AGM on 25 July 2016. The Board and the Company would like to thank him
for all that he has done for the Company and wish him well for the
future.
Outlook
The outlook for the mineral sands market has been steadily improving
since the beginning of the year. Ilmenite has been the main beneficiary
due to a combination of improved offtake from the pigment sector and the
continued decline of ilmenite supply from a number of regions. As a
result, Chinese domestic ilmenite prices have been steadily increasing
since the beginning of the year and Kenmare has implemented price
increases on spot sales during Q2 to be shipped in the early part of Q3.
In H2 2016, it is expected that increases in ore mined, ore grades,
recoveries and operating time should all contribute to higher production
levels in order for the Company to achieve production forecasts for
2016. Given the largely fixed cost base and continued progress that
management has made in executing operating cost savings, increased
production will further reduce unit operating costs.
In addition, the completion of the capital restructuring has provided
the Company with an enhanced working capital position and significantly
reduced debt, greatly strengthening the Company's balance sheet.
Principal risks and uncertainties
The Group's business may be affected by risks similar to those faced by
many companies in the mining industry. There are a number of potential
risks and uncertainties that could have a material effect on the Group's
performance over the remaining six months of the financial year and
could cause actual results to differ materially from expected results.
These principal risks and uncertainties, together with relevant
mitigating factors, are outlined below.
The Group's performance depends on the demand and the prices it receives
for its products
The Group's revenue and earnings depend upon the demand for and
prevailing prices of ilmenite, zircon and, to a lesser extent, rutile.
Such prices are based on world supply and demand and are subject to
large fluctuations in response to changes in the demand for such
products, whether as a result of uncertainty or a variety of additional
factors also beyond the Group's control, as well as changes in supply,
including as a result of new heavy mineral sands projects commencing
production or closure of existing operations. Weighted average prices
for Kenmare's products (on a Free On Board ("FOB") basis) in H1 2016
declined 31% compared to H1 2015. Demand for the Group's products may be
reduced by thrifting or substitution by users of the Group's products.
The Group's revenue generation, results of operations and financial
condition may be significantly and adversely affected by declines in the
demand for and prices of ilmenite, zircon and rutile.
Product prices may not increase as anticipated or may fall
The Group's revenue and earnings depend upon prevailing prices for
ilmenite and zircon and, to a lesser extent, rutile. If the increase in
prevailing market prices for the Group's products that is anticipated by
the Directors were not to occur (or if the prices negotiated by the
Group were not to capture any such increase in market price) or if
market prices were to fall or the Group were otherwise unable to
negotiate satisfactory pricing terms, this would have an adverse impact
on the Group's revenue generation, cash flow, results of operations and
financial condition.
The Group fixes its prices for its products under certain contracts by
reference to the market price prevailing at the time of the entry into,
or renewal, of the contract. Some of the Group's products are sold to
customers under contracts of three to five year duration, which provide
for the supply of fixed volumes of product at fixed prices with annual
inflation-related price escalation. The balance of the Group's products
are sold to its customers under contracts providing for the delivery of
fixed volumes with annual or semi-annual price negotiations or under
spot contracts for specific shipments. As some of the Group's products
are sold under contracts at fixed price, or price set by a discount to
market price, the Group will not immediately capture the full benefit of
any increase in prevailing market prices for the Group's products.
The Group is dependent on contracts with, and the Group has credit
exposure to, a number of key customers
As is typical in the titanium minerals industry, a small number of
customers account for a significant proportion of the Group's revenue.
In H1 2016 substantially all of the Group's revenues were derived from
sales to less than ten customers. If any customer were to cease dealing
with the Group or if any such customer with an existing off-take
contract sought to cancel or defer delivery or payment, and the Group
was unable to sell the product in the market on comparable or superior
terms, then this would have an adverse impact on the Group's revenue
generation, cash flow, financial condition and results of operations.
Further, the Group's contracts and sales process is such that, other
than in specific cases where pre-payment has been negotiated by the
Group, the customer receives the product prior to the due date for
payment. If any of the customers were unable to, or failed to, pay for
such products, then, unless the relevant customer's invoice had been
factored (pursuant to the terms of the Group's factoring agreement),
this would have an adverse impact on the Group's revenue generation,
cash flow, results of operations and financial condition. Contracts can
vary in duration from less than a year to up to five years, in some
cases with the possibility of extensions of duration by the relevant
customer. In the case of zircon, rutile and spot ilmenite sales, prices
are generally variable in nature and agreed at the time of order.
The Group's production is concentrated on a single asset, the Moma Mine,
and if production is delayed or interrupted, Kenmare's ability to
generate revenue would be harmed, which would have a material adverse
effect on its business, financial condition and results of operation
As a result of the concentration of its production on Moma, Kenmare is
exposed, without the benefit of diversification which would come from
multiple assets at multiple locations, to the effect of disruptions,
loss of licence or interests at Moma, Government regulation, mining,
processing or transportation capacity constraints, availability of
equipment, equipment failure, facilities, personnel or services market
limitations, weather events, or interruption of the transportation of
diesel.
Physical aspects of the Moma reserve may impact adversely on production
The Namalope mineral deposit being mined has declining head feed grades
(for the five year period from 2011 -2015 head grade at the Mine was c
5.2% but over the following five years from 2016 - 2020 it is expected
that the average grade will decline to c. 4.5%) and hence over time
additional mining capacity is required to maintain heavy mineral
concentrate feed to fill the mineral separation plant and therefore
maximise production.
The timing of further capital investment to meet the additional mining
capacity required depends on the performance of existing operations as
well as market demand and prices. Development of an optimal plan is
underway and prefeasibility studies are to be undertaken in 2016 and
2017 to optimise the mine plan from a production and financial
perspective. The capital expenditure required to enhance the mining
fleet to take account of declining head grades has yet to be approved by
the Board and will be subject, inter alia, to market conditions. However,
preliminary studies estimate the additional capital requirement to be
approximately US$100 million over the five year period. No decision has
been made on any such expenditure and no significant capital expenditure
is expected prior to 2018 in any event. This estimate of capital
expenditure may alter as further studies are completed. In addition,
while such expenditure would only be progressed in the event of market
conditions being favourable (such that the expenditure could be financed
from existing resources) and would, if occurring, occur primarily in and
subsequent to 2018, the consequence of failing to make all or any of the
investment required in the envisaged time frame would be a decline in
volume produced. This would have an adverse impact on the financial
performance of the Group.
The production rates forecast in the mining plan are based on the
expected performance of the mining units in response to the
characteristics of the orebody. Kenmare operates a model that predicts
operating throughputs in response to varying orebody characteristics.
The metallurgical performance of the mining operations has remained
steady and of high quality and is expected to be maintained in the
future based on proper maintenance and operational procedures.
The Namalope deposit is currently being mined and will be mined until
2026 by WCP A and until 2022 by WCP B. There will be a capital cost
associated with the movement of the plants from the Namalope deposit to
the Nataka deposit which, absent alternative financing, would be
intended to be financed from operating cash flows. This capital cost may
be in excess of the amount currently estimated by the Group and/or the
Group may have insufficient resources to finance this capital cost. In
such a situation mining would be unable to move from the Namalope
deposit to the Nataka deposit, resulting initially in a reduction in
output and, as Namalope is depleted, in cessation of mining pending the
re-location.
In addition, the WCP A dredge path envisages mining an area known as
Monte Filipe in late 2016 and in 2017 and 2018. The area is within the
Mining Concession; however, there has been some opposition to mining
Monte Filipe on spiritual and economic development grounds. The Group
continues to have extensive engagement with the local community and
local and provincial Government seeking resolution of the matter. Should
the matter not be resolved in a timely fashion, a change in the dredge
path to avoid Monte Filipe could have an adverse effect on the Group's
production and consequently on the Group's business, results of
operations and financial condition.
Dry mining operations are used to supplement the Mine's dredge mining
operations, including to address mining ore body characteristics such as
elevated slimes levels and to optimise product mix. Dry mining
operations are currently being used, have been used from time to time in
the past, and may be used in the future.
While dry mining is suitable for purposes of supplementing dredge
operations, it is more expensive to operate than dredge mining,
resulting in some of the benefits of the Mine's inherently low-cost
dredging being reduced.
In the event of any further difficulties being experienced, it may be
necessary to expand dry mining. There can be no certainty that dry
mining of the scale which may be required would be financially
efficient.
The Mine is heavily reliant on the power supply and power transmission
line to the Mine for which supply may fluctuate
The Mine is highly reliant on the power supply comprising the Cahora
Bassa hydroelectric power station on the Zambezi River, the electricity
transmission system of northern Mozambique that is owned and operated by
the national power company Electricidade de Mocambique ("EdM") and a
single 170km transmission line, owned by the Company, to the Mine from
EdM's Nampula substation.
Despite significant improvements in power generating and transmission
capacity and reliability, power stability in EdM's northern transmission
system remains a point of focus for the Board and management.
In the first quarter of 2015, northern Mozambique experienced
exceptionally heavy rains and unprecedented flooding. The unprecedented
flooding resulted in sections of the transmission line being brought
down, cutting power to the Mine for extended periods. Physical loss of
power lines had not been experienced before in Kenmare's operations.
EdM has, both before and since this time, been investing in the power
line infrastructure to increase capacity on the power network servicing
the Moma Mine, from 118MW to 168MW. While power supply quality remained
poor during 2015, since December 2015 there has been a marked
improvement in power quality and consistency and further equipment is
expected to be installed through 2016, providing another 10MW of
transmission capacity. Additions to date appear to have fixed the
network overloading issues which were previously the cause of voltage
collapse during peak demand periods. Electricity generation capacity in
northern Mozambique has also been increased by EdM, with a ship-based
100MW mobile power generation plant positioned nearby at Nacala since
April 2016. These improvements in grid transmission and generation
capacity help to provide a more stable power supply to the Mine, with
additional capacity to allow for increased power needs in the future.
Despite these measures, there is no certainty that there will not be
further interruptions to power which could affect production.
If either the Cahora Bassa power station or the transmission line to the
Mine were to experience faults for a prolonged period of time, resulting
in serious disruptions to electricity supply, the Group might be unable
to produce sufficient ilmenite, rutile and zircon to fulfil customer
contracts, which would reduce cash flow and which could impact customer
relationships and have an adverse impact on the Group's trading and
financial position. The rented 10MW diesel generation capability at the
Mine partially mitigates such risk. While the Group has insurance
covering business interruption in respect of its operations, such
insurance may not be sufficient and/or fully cover the consequences of
such business interruption. No assurance can be given that such
insurance will continue to be available, or that it will be available at
economically feasible premiums.
The Mine is heavily reliant on diesel, the price for which may fluctuate
Certain of the Group's operations and facilities are intensive users of
diesel. Factors effecting the global energy market, such as the level of
supply of oil by OPEC, the level of supply of oil by the fracking
industry in the US, and the level of economic activity and subsequent
demand for oil in China are beyond the control of the Group and may put
upward pressure on the prices paid by the Group for the fuel used by it.
Any increases in energy costs will adversely affect the results of
operations and financial condition of the Group.
The Group depends on marine operations for the export of products and
may not be able to export final products if, in particular, the jetty is
out of commission
The Group is reliant on the continued successful operation of the marine
terminal for the export of products. If the marine terminal became
unusable (as a result of damage or otherwise) or inaccessible for any
significant period, the Group would be unable to export its products or
would be limited in the amount which it could export. In this case, the
Group would be unable to meet its commitments to customers, which could
result in ocean freight penalties and reduced revenue, each of which
would have an adverse effect on the Group's cash flow, results of
operations and financial condition.
The Group is also reliant on the effective operation of its
trans-shipment system. The Group operates two trans-shipment vessels
which transport products from the jetty to the trans-shipment point,
where they self-discharge into the customer's vessel. If both
trans-shipment vessels became unavailable or were simultaneously in need
of repair, the Group would seek to implement alternative methods of
loading customers' vessels. If this were to occur, it could adversely
affect the business and financial position of the Group as the loading
rate could be less than that of the current trans-shipment system, in
which case, demurrage costs may be payable by the Company.
In addition, the Group and its customers depend upon ocean freight to
transport products purchased from the Group. Disruption of ocean freight
as a result of any impact of piracy, terrorism, weather-related problems,
key equipment or infrastructure failures, strikes, lock-outs or other
events could temporarily impair the Group's ability to supply its
products to its customers and thus could adversely affect the Group's
cash flow, results of operations and financial condition.
The Group is required to maintain licences for the current mining
operation
Kenmare is currently mining the Namalope Reserve which contains the
titanium minerals ilmenite and rutile and the zirconium silicate mineral,
zircon. This reserve is held under Mining Concession 735C issued by the
Government of Mozambique which is valid until 26 August 2029 and is
renewable thereafter.
Mining is governed by the terms of a Mineral Licensing Contract which
was entered into in January 2002 covering an initial period of 25 years
of mining and renewable thereafter.
A further key agreement with the Government of Mozambique in relation to
the Mine is the Implementation Agreement which governs the operation of
an Industrial Free Zone covering the processing and exporting aspects of
the Mine and provides favourable tax treatment. This agreement was
entered into in January 2002.
The Company is not aware of any incidents which may result in the Mining
Concession, Mineral Licensing Contract or Implementation Agreement being
revoked by the Government of Mozambique.
The permissions, approvals and leases required for the Group's
operations are subject, in certain circumstances, to the occurrence of
certain events or to modification, renewal or revocation. The Group may
not receive the permits or renewals or modifications thereof necessary
for it to operate profitably, or at all. Further, if the Group does not
receive the necessary permits, it may not be able to implement its
required production plans which may adversely affect the results of
operations and financial condition of the Group.
The Group could face increased risk and uncertainty in the event of
political, economic, regulatory and fiscal developments in Mozambique
The Mine is located in Mozambique, which has been politically stable for
over two decades. Kenmare has operated in Mozambique since 1987, and has
executed the Mineral Licensing Contract and the Implementation Agreement
which each contain provisions that provide certain protections to the
Group against adverse changes in Mozambican law. The Group's operations
in Mozambique may, however, become subject to risks similar to those
which are prevalent in many developing countries, including extensive
political or economic instability, other political, economic or
regulatory developments, changes in fiscal policy or application thereof
(including increased taxes or royalty rates), nationalisation, inflation,
and currency restrictions, as well as renegotiation, nullification,
termination or rescission of existing concessions, licences, permits,
approvals and contracts. In addition, there may be an increase in, and
tightening of, the regulatory requirements (including for example in
relation to employee health and safety, permitting and licensing,
planning and developments and environmental compliance). The occurrence
of these events could adversely affect the economics of the Mine and
could have a material adverse effect on the results of operations or
financial condition of the Group.
Health, safety, environmental and other regulations, standards and
expectations evolve over time and unforeseen changes could have an
adverse effect on the Group's earnings and cash flows
The Mine is subject to the environmental laws and standards in force in
Mozambique, together with international standards and guidelines of the
World Bank, African Development Bank and FMO, as well as its own
policies. The Mine applies the International Finance Corporation ("IFC")
Performance Standards (2006), as set out in the Environmental Management
Plan ("EMP") and is targeting compliance with the IFC Performance
Standards 2012. The Mine consistently seeks to apply best practice in
all of its activities. Where standards differ, Kenmare has committed to
meeting the most stringent standard applicable.
Governmental authorities and the courts have the power to enforce
compliance (and, in some jurisdictions, third parties and members of the
public can initiate private procedures to enforce compliance) with
applicable laws and regulations, violations of which may result in civil
or criminal penalties, the curtailment or cessation of operations,
orders to pay compensation, orders to remedy the effects of violations
and/or orders to take preventative steps against possible future
violations.
In addition, a violation of environmental or health and safety laws
relating to the Mine or production facility or a failure to comply with
the instructions of the relevant environmental or health and safety
authorities could lead to, among other things, a temporary shutdown of
all or a portion of the Mine or production facility, a loss of the right
to mine or to continue with production or the imposition of costly
compliance procedures, fines and penalties, liability for clean-up costs
or damages. If environmental, health and safety authorities require the
Group to shut down all or a portion of the Mine or to implement costly
compliance measures, or impose fines and penalties, liability for
clean-up costs or damages on the Group, whether pursuant to existing or
new environmental, health and safety laws and regulations, such measures
could have a material adverse effect on the Group's results of
operations and financial condition.
The Company may face the risk of industrial action
Non-supervisory employees, amounting to over 80% of the workforce, are
represented by a union under a collective agreement. The Group may not
be able to satisfactorily renegotiate labour agreements when they expire
and may face higher wage demands. In addition, existing labour
agreements may not prevent a strike or work stoppage, which could have
an adverse effect on the Group's results of operations, financial
condition and reputation.
The Group is dependent on the continued services of senior management
and skilled technical personnel. Should key personnel leave or should
the Group be unable to attract and retain qualified personnel, the
Group's business, results of operations and financial condition may be
adversely affected.
The Group's success depends upon the expertise and continued service of
certain key executives and technical personnel, including the Executive
Directors. The loss of the services of certain key employees, including
to competitors, could have a material adverse effect on the results of
operations or financial condition of the Group. In addition, as the
Group's business develops and expands, the Group's future success will
depend on its ability to attract and retain highly skilled and qualified
personnel. Due to the increasing extractive industry activity in
Mozambique and new projects in the heavy mineral sands industry in
recent years, the Group has encountered increasing competition in
attracting and retaining experienced mining professionals. Should key
personnel leave or should the Group be unable to attract and retain
qualified personnel, the Group's business, results of operations and
financial condition may be adversely affected.
The Mine employs a number of non-Mozambicans, including in senior
management and technical positions. Should expatriate personnel be
unable to work at the Mine for prolonged periods of time, this could
have an adverse effect on the Group's results of operations and
financial condition.
Cash flow constraints have impacted on the continued development of the
Moma operation and this may adversely impact on current or future
production
Due to cash flow constraints in recent years, pressures have been placed
on the capital budgets allocated to the Mine. This has impacted the
continued development of the Mine in terms of operational efficiency,
with the principal areas impacted being the Group's replacement strategy
for mobile equipment used to support the operations and the Group's
planning for improvement of product recovery and quality in the MSP.
In recent years, Kenmare has not followed a defined replacement strategy
for the mobile equipment used to support the Moma operations. There is a
risk that without further investment in new equipment, production rates
at Moma may be impacted. Kenmare has sought to mitigate this risk
through measures to extend the life of the existing equipment and
rentals but a catch-up spend is required.
Kenmare has delayed implementation of identified projects for the
improvement of product recovery and quality in the mineral separation
plant.
If production, process or recovery rates are lower than anticipated, the
Group may generate lower revenue and cash flow than anticipated which
would have an adverse effect on the Group's results of operations and
financial condition.
Kenmare is exposed to a number of operational factors which may be
outside its control, does not insure against certain risks, and its
insurance coverage may not be adequate for covering losses arising from
potential operational hazards and unforeseen interruptions
The success of the Group's business is affected by a number of factors
which are, to a large extent, outside its control. Such factors include
the availability of water and power. In addition, the Group's business
is subject to numerous other operating risks which include: unusual or
unexpected geological features, seismic activity, climatic conditions
(including as a result of climate change) such as flooding, cyclones or
drought, interruption to power supplies, industrial action or disputes,
environmental hazards, and technical failures, fires, explosions and
other accidents at the Mine and related facilities. These and other risks and hazards could result in damage to, or destruction of, the mining, processing or trans-shipment facilities, may reduce or cause production to cease, may result in personal injury or death, environmental damage, business interruption, monetary losses and possible legal liability, and may result in actual production differing from estimates of production. While the Group has insurance covering various types of business interruption arising from property damage or machinery breakdown in respect of its operations, such insurance may not be sufficient and/or fully cover the consequences of such business interruption and, in particular, may not cover interruption arising from all types of equipment failure, labour disputes or "force majeure" events. No assurance can be given that such insurance will continue to be available, or that it will be available at economically feasible premiums. Equally, there can be no assurance that operating risks and the costs associated with them will not adversely affect the results of operations or financial condition of the Group. Although the Group maintains liability insurance, the Group's insurances do not cover every potential risk associated with its operations and meaningful coverage at reasonable rates is unobtainable for certain types of environmental hazards. The occurrence of a significant adverse event, the damage from which is not adequately covered by insurance, or in respect of which adequate disaster recovery arrangements may not be in place, could have a material adverse effect on the results of operations and financial condition of the Group. The Group is a party to a number of disputes that are subject to resolution through court or arbitral proceedings and may, from time to time, face the risk of other litigation in connection with its business and/or other activities The Group is a party to a number of disputes that are subject to resolution through court or arbitral proceedings and may from time to time face the risk of other litigation in connection with its business and/or other activities. Recovery may be sought against the Group for significant but indeterminate amounts and the existence and scope of liabilities may remain unknown for substantial periods of time. Of the two current material claims against the Group, the estimated defence costs of one have been provided for under legal provisions, with further details disclosed in Note 8 to these interim condensed consolidated financial statements, and the value of the other is included in the Group's current liabilities, in relation to a capital projects dispute with a construction contractor, although the Group is disputing the claim in full and has raised a substantial counter-claim. A substantial legal liability and/or an adverse ruling could have a material adverse effect on the Group's financial condition. The Group's reserves and resources estimates may be materially different from quantities it may ultimately recover, its estimates of mine life may prove inaccurate, and market price fluctuations and changes in operating and capital costs may render certain reserves or resources uneconomical to mine The reserves and resources of the Group were compiled by Mr Paul Leandri (MAusIMM and MAIG) and Dr Alastair Brown (FIMMM). Both Mr Leandri and Dr Brown have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they undertook to qualify as Competent Persons as defined in the JORC Code 2012. The Group's estimates of ore reserves and mineral resources are subject to a number of assumptions that may be incorrect and may be materially different from mineral quantities that may ultimately be recovered. Actual ore reserves may not conform to geological or other expectations and the volume and grade of ore recovered may be below the estimated level. Changes in the forecast prices of the Group's products, exchange rates, production costs or recovery rates may result in reserves ceasing to be economically viable and needing to be downgraded or reduced. Moreover, short-term operating factors relating to the reserves, such as the need for sequential development of ore bodies and variations in ore grades, may adversely affect the Group's production and profitability in any particular accounting period. Changes in operating and capital costs within the mining industry Mining requires substantial maintenance to prolong the life of the mining equipment and infrastructure, thus enabling the full recovery of the mining reserve. The Group believes that the technology it uses to mine and process titanium minerals and zircon is advanced and, in part due to high investment costs, subject only to slow technological change. However, there can be no assurance that more cost-effective production or processing technology will not be developed, or that the economic conditions in which current technology is applied will not change. Capital expenditure required to keep pace with unexpected technological advances of equipment would negatively impact the Group's future cash flows if there were insufficient benefit from such expenditures. Additionally, as the prices the Group receives for its products is determined by demand and supply, its competitiveness and long-term profitability depend, to a significant degree, on its ability to control costs and maintain low-cost, efficient operations. Important cost inputs in the Group's operations generally include the extraction and processing costs of raw materials and consumables, such as power, fuels, labour, transport and equipment, many of which have been, and continue to be, particularly susceptible to inflationary and supply and demand pressures. It is difficult for the Group to pass these costs in full onto its customers due to the fact that prices are determined by demand and supply of the products and not by cost pressures. Any increases in input costs would adversely affect the results of operations or financial condition of the Group. Kenmare is exposed to fluctuations in interest rates and exchange rates that could have a material adverse impact on its profitability As and from 28 July 2016 the interest rates on the Group's bank loans are variable. The combined interest rate on senior and subordinated loans is US LIBOR for the applicable period (typically six months) plus a margin, which until 31 January 2020 is 4.75% per annum and thereafter is 5.50% per annum. Commencing 1 August 2016, interest on both senior and subordinated loans is payable in cash on 1 February and 1 August. Any increase in the six month US Dollar LIBOR would increase finance costs and therefore have a negative effect on the Group's profitability. All the Group's sales are denominated in US Dollars. Although, as and from 28 July 2016, all Project Loans are denominated in US Dollars, the Group's operating and capital costs are incurred in a variety of currencies, including in US Dollars, South African Rand, Mozambican Metical, Euro, Sterling, and to a lesser extent in Australian Dollars and Chinese Renminbi. Fluctuations in these currencies will affect the Group's financial results. Group's ability to meet its obligations under the Amended Financing Documents The terms of the Group's Project Loans under the Amended Financing Agreements include a number of covenants (including operational, organisational, insurance and financial covenants) applicable to the Group. Any failure to comply with any of the foregoing provisions could result in an event of default under the Amended Financing Agreements. The details of these covenants are set out in Note 7. Uncertainties in relation to the realisation of assets of the Group The ability of the Group to realise the value of property, plant and equipment of US$824 million included in the consolidated statement of financial position as at 30 June 2016 is dependent on the successful operation of the Mine and the realisation of cash flow forecasts. An emphasis of matter to this effect and reflecting the related uncertainties is included in the independent auditor's review report in respect of the financial statements for the six month period ended 30 June 2016 and it is noted that no adjustments relating to the uncertainties concerning the realisation of assets has been included and that the ultimate outcome can not be determined at the time of the review report. Related party transactions There have been no material changes in the related party transactions affecting the financial position or the performance of the Group in the period other than those disclosed in Note 10 to the condensed consolidated financial statements. Going Concern On 28 July 2016, the Group completed a capital restructuring to reduce debt to US$100 million (from US$392.4 million using agreed exchange rates), to provide an additional US$75 million of cash for working capital and to meet fees and expenses of the capital restructuring. This was achieved by the raising of new equity from new and existing shareholders, the conversion of certain debt to equity in the Company, and certain debt write-offs agreed by Lenders. The capital restructuring also provided for a reduction in the interest rates on outstanding debt, an extension to the term of that debt, and a principal repayment holiday until February 2018. As a result of the capital restructuring and based on the cash flow forecast the Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis of accounting in preparing the financial statements. Key assumptions upon which the forecast is based over the next twelve
months include a mine plan covering production using the Namalope
reserves as set out in the Reserve and Resources table in the 2015
Annual Report. Production levels for the purpose of the forecast are
approximately 1 million tonnes of ilmenite, zircon and rutile.
Assumptions of 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 taking into account independent titanium mineral
sands expertise and management expectations. Operating costs are based
on budget costs for 2016 taking into account current running costs of
the mine. Capital costs are based on the capital budget for 2016 taking
into account revisions to this plan and the scheduling of outlay over
the next twelve months.
Events after the Statement of Financial Position Date
Effective 25 July 2016, Mr. Tony Lowrie retired as a Non-Executive
Director of the Company.
On 28 July 2016, the Group completed a capital restructuring to reduce
debt to US$100 million (from US$392.4 million using agreed exchange
rates), to provide an additional US$75 million of cash for working
capital and to meet fees and expenses of the capital restructuring. This
was achieved by the raising of new equity from new and existing
shareholders, the conversion of certain debt to equity in the Company,
and certain debt write-offs agreed by Lenders. The capital restructuring
also provided for a reduction in the interest rates on outstanding debt,
an extension to the term of that debt, and a principal repayment holiday
until February 2018.
Forward-looking statements
This report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the
information available to them up to the time of their approval of this
report and such statements should be treated with caution due to the
inherent uncertainties, including both economic and business risk
factors, underlying any such forward-looking information.
On behalf of the Board,
Managing Director Financial Director
Michael Carvill Tony McCluskey
24 August 2016 24 August 2016
RESPONSIBILITY STATEMENT
The Directors are responsible for the preparation of the Half Yearly
Financial Report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007, the Transparency Rules of the Central
Bank of Ireland, and with IAS 34, Interim Financial Reporting as adopted
by the European Union. The names and function of the Directors is as
listed in the Group's 2015 Annual Report and Accounts, with the
exception that effective 25 July 2016, Mr. Tony Lowrie retired as a
Non-Executive Director of the Company. A list of the current Directors
is maintained on the Kenmare Resources plc website:
www.kenmareresources.com.
The Directors confirm that, to the best of their knowledge:
-- The Group condensed consolidated financial statements for the half year
ended 30 June 2016 have been prepared in accordance with IAS 34 'Interim
Financial Reporting', as adopted by the European Union;
-- The Interim Management Report includes a fair review of the information
required by Regulation 8(2) of the Transparency (Directive 2004/109/EC)
Regulations 2007, being an indication of important events that have
occurred during the first six months of the financial year and their
effect on the condensed consolidated financial statements, and a
description of the principal risks and uncertainties for the remaining
six months of the year; and
-- The Interim Management Report includes a fair review of the information
required by Regulation 8(3) of the Transparency (Directive 2004/109/EC)
Regulations 2007, being related party transactions that have taken place
in the first six months of the current financial year and that materially
affected the financial position or performance of the entity during that
period; and any changes in the related party transactions described in
the last annual report that could do so.
On behalf of the Board,
Managing Director Financial Director
Michael Carvill Tony McCluskey
24 August 2016 24 August 2016
INDEPENT REVIEW REPORT TO THE MEMBERS OF KENMARE RESOURCES PLC
Introduction
We have been engaged by the Company to review the group condensed
consolidated set of financial statements in the Half-Yearly Financial
Report for the six months ended 30 June 2016 which comprises the Group
Condensed Consolidated Statement of Comprehensive Income, the Group
Condensed Consolidated Statement of Financial Position, the Group
Condensed Consolidated Statement of Changes in Equity, the Group
Condensed Consolidated Statement of Cash Flows and related notes 1 to
13. We have read the other information contained in the Half-Yearly
Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
group condensed consolidated set of financial statements.
This report is made solely to the Company's members, as a body, in
accordance with International Standard on Review Engagements (UK and
Ireland) 2410 "Review of Interim Financial Information performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body, for
our review work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The Half-Yearly Financial Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing
the Half-Yearly Financial Report in accordance with the Transparency
(Directive 2004/109/EC) Regulations 2007 and the Transparency Rules of
the Central Bank of Ireland.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
group condensed consolidated set of financial statements included in
this Half-Yearly Financial Report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting,' as
adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the
condensed consolidated set of financial statements in the Half-Yearly
Financial Report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410, "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued
by the Auditing Practices Board for use in Ireland. A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently does not enable
us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the group condensed consolidated set of financial
statements in the Half-Yearly Financial Report for the six months ended
30 June 2016 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 (IAS 34 -Interim Financial
Reporting) as adopted by the European Union, the Transparency (Directive
2004/109/EC) Regulations 2007, and the Transparency Rules of the Central
Bank of Ireland.
Emphasis of Matter - Recoverability of Property, Plant and Equipment
In forming our conclusion on the condensed consolidated financial
statements for the six months ended 30 June 2016, which is not modified,
we have considered the adequacy of the disclosures in note 5 concerning
the recoverability of Property, Plant and Equipment of US$824 million
which is dependent on the recovery in market prices for titanium mineral
sands and consequently the realisation of the underlying cashflow
forecast assumptions. The Group condensed financial statements do not
include any adjustments relating to these uncertainties and the ultimate
outcome cannot at present be determined.
Kevin Sheehan
for and on behalf of Deloitte
Statutory Audit Firm
Dublin
24 August 2016
KENMARE RESOURCES PLC
GROUP CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2016
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
30 June 30 June 31 Dec
2016 2015 2015
Notes US$'000 US$'000 US$'000
Revenue 2 56,195 73,887 142,583
Cost of sales (67,961) (91,941) (168,138)
Gross loss (11,766) (18,054) (25,555)
Other operating costs (13,116) (9,125) (21,780)
Operating loss (24,882) (27,179) (47,335)
Finance income 20 25 543
Finance costs (21,535) (18,151) (37,805)
Foreign exchange
(loss)/gain (2,664) 17,376 22,658
Loss before tax (49,061) (27,929) (61,939)
Income tax credit 1,917 - 1,320
Loss for the
period/year (47,144) (27,929) (60,619)
Attributable to equity
holders (47,144) (27,929) (60,619)
Cent per share Cent per share Cent per share
Loss per share: basic 4 (1.69) (1.00) (2.18)
Loss per share: diluted 4 (1.69) (1.00) (2.18)
The accompanying notes form part of these condensed consolidated
financial statements.
KENMARE RESOURCES PLC
GROUP CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2016 2015 2015
Notes US$'000 US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 5 823,775 849,609 834,961
Deferred tax asset 3,236 - 1,320
Other receivables 464 835 649
827,475 850,444 836,930
Current assets
Inventories 47,438 46,829 46,228
Trade and other receivables 12,058 29,345 20,268
Cash and cash equivalents 12,279 12,928 14,352
71,775 89,102 80,848
Total assets 899,250 939,546 917,778
Equity
Capital and reserves attributable to the Company's
equity holders
Called-up share capital 6 214,941 225,523 214,941
Share premium 431,380 431,380 431,380
Retained losses 6 (226,590) (142,961) (175,651)
Other reserves 32,943 22,126 32,804
Total equity 452,674 536,068 503,474
Liabilities
Non-current liabilities
Bank loans 7 - 218,606 -
Obligations under finance lease - 512 264
Provisions 8 22,440 22,166 22,100
22,440 241,284 22,364
Current liabilities
Bank loans 7 357,742 111,294 341,943
Obligations under finance lease 512 447 479
Provisions 8 1,714 2,006 1,714
Other financial liability 236 863 22
Trade and other payables 63,932 47,584 47,782
424,136 162,194 391,940
Total liabilities 446,576 403,478 414,304
Total equity and liabilities 899,250 939,546 917,778
The accompanying notes form part of these condensed consolidated
financial statements.
KENMARE RESOURCES PLC
GROUP CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2016
Called-Up Share Capital Capital Retained Share Total
Share Premium Conversion Redemption Losses Option
Capital Reserve Reserve Reserve
Fund Fund
US$'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 period - - - - (27,929) - (27,929)
Share-based payments - - - - - (770) (770)
Balance at 30 June 2015 225,523 431,380 754 - (142,961) 21,372 536,068
Loss for the period - - - - (32,690) - (32,690)
Share-based payments - - - - - 96 96
Redemption of deferred shares (10,582) - - 10,582 - - -
Balance at 31 December 2015 214,941 431,380 754 10,582 (175,651) 21,468 503,474
Loss for the period - - - - (47,144) - (47,144)
Share-based payments - - - - - 139 139
Transaction costs of an equity transaction - - - - (3,795) - (3,795)
Balance at 30 June 2016
214,941 431,380 754 10,582 (226,590) 21,607 452,674
The accompanying notes form part of these condensed consolidated
financial statements.
KENMARE RESOURCES PLC
GROUP CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2016
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
30 June 30 June 31 Dec
2016 2015 2015
US$'000 US$'000 US$'000
Cash flows from operating activities
Loss for the financial period/year before tax (49,061) (27,929) (61,939)
Adjustment for:
Foreign exchange movement 2,664 (17,376) (22,658)
Share-based payments 139 (770) (674)
Finance income (20) (25) (45)
Finance costs 21,535 17,808 37,805
Depreciation 14,155 16,604 35,820
Increase/(decrease) in other financial
liability 214 343 (498)
Increase/(decrease) in provisions 112 (119) (742)
Operating cash outflow (10,262) (11,464) (12,931)
(Increase)/decrease in inventories (1,210) 15,623 16,224
Decrease/(increase) in trade and other
receivables 8,395 (2,042) 7,222
Increase/(decrease) in trade and other
payables 12,377 (1,945) (1,901)
Cash generated by operations 9,300 172 8,614
Interest received 20 25 45
Interest paid (2,703) (3,365) (5,700)
Net cash from/(used in) operating activities 6,617 (3,168) 2,959
Cash flows from investing activities
Additions to property, plant and equipment (2,969) (996) (5,564)
Net cash used in investing activities (2,969) (996) (5,564)
Cash flows used in financing activities
Increase in borrowings - - 10,000
Loan amendment fees (5,730) (5,673) (17,330)
Equity transaction costs (460) - -
Payment of obligations under finance leases (280) (280) (560)
Net cash used in financing activities (6,470) (5,953) (7,890)
Net decrease in cash and cash equivalents (2,822) (10,117) (10,495)
Cash and cash equivalents at the beginning of
period/year 14,352 21,795 21,795
Effect of exchange rate changes on cash and
cash equivalents 749 1,250 3,052
Cash and cash equivalents at end of
period/year 12,279 12,928 14,352
The accompanying notes form part of these condensed consolidated
financial statements.
KENMARE RESOURCES PLC
NOTES TO THE GROUP CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODED 30 JUNE 2016
1. BASIS OF PREPARATION AND GOING CONCERN
The annual financial statements of Kenmare Resources plc are prepared in
accordance with IFRSs as adopted by the European Union. The Group
Condensed Consolidated Financial Statements for the six months ended 30
June 2016 have been prepared in accordance with the Transparency
(Directive 2004/109/EC) Regulations 2007, the Transparency Rules of the
Central Bank of Ireland and with IAS 34 'Interim Financial Reporting',
as adopted by the European Union.
The accounting policies and methods of computation adopted in the
preparation of the Group Condensed Consolidated Financial Statements are
the same as those applied in the Annual Report for the financial year
ended 31 December 2015 and are described in the Annual Report.
In the current financial year, the Group has adopted all Standards and
Interpretations which are effective from 1 January 2016. Adoption has
resulted in no effect on the financial statements.
The financial information presented in this document does not constitute
statutory financial statements. The amounts presented in the Half Yearly
Financial Statements for the six months ended 30 June 2016 and the
corresponding amounts for the six months ended 30 June 2015 have been
reviewed but not audited. The independent review report is on pages X
and X. The financial information for the year ended 31 December 2015,
presented herein, is an abbreviated version of the annual financial
statements for the Group in respect of the year ended 31 December 2015.
The Group's financial statements have been filed in the Companies
Registration Office and the independent auditors issued an unqualified
audit report, with emphases of matter in relation to going concern and
realisation of assets in the opinion, in respect of those annual
financial statements.
Other than the transaction costs of an equity transaction, as disclosed
in the Consolidated Statement of Changes in Equity, there were no other
gains or losses during the six month period ended 30 June 2016 other
than those reported in the Condensed Consolidated Statement of
Comprehensive Income.
On 28 July 2016, the Group completed a capital restructuring to reduce
debt to US$100 million (from US$392.4 million using agreed exchange
rates) and to provide an additional US$75 million of cash for working
capital and to meet fees and expenses of the capital restructuring. This
was achieved by the raising of new equity from new and existing
shareholders, the conversion of certain debt to equity in the Company,
and certain debt write-offs agreed by Lenders. The capital restructuring
also provided for a reduction in the interest rates on outstanding debt,
an extension to the term of that debt, and a principal repayment holiday
until February 2018.
As a result of the capital restructuring and based on the Group's
forecast the Directors have, at the time of approving the financial
statements, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. They therefore continue to adopt the going concern basis of
accounting in preparing the financial statements.
Key assumptions upon which the forecast is based over the next twelve
months include a mine plan covering production using the Namalope
reserves as set out in the Reserve and Resources table in the 2015
Annual Report. Production levels for the purpose of the forecast are
approximately 1 million tonnes of ilmenite, zircon and rutile.
Assumptions of 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 taking into account independent titanium mineral
sands expertise and management expectations. Operating costs are based
on budget costs for 2016 taking into account current running costs of
the mine. Capital costs are based on the capital budget for 2016 taking
into account revisions to this plan and scheduling of outlay over the
next twelve months.
2. SEGMENTAL INFORMATION
Information on the operations of the Moma Titanium Minerals Mine in
Mozambique is reported to the Group's Board for the purposes of resource
allocation and assessment of segment performance. Information regarding
the Group's operating segment is reported below.
Unaudited Unaudited Audited
30 June 16 30 June 15 31 Dec 15
US$'000 US$'000 US$'000
Segment revenues and results
Moma Titanium Minerals Mine
Revenue 56,195 73,887 142,583
Cost of sales (67,961) (91,941) (168,138)
Gross loss (11,766) (18,054) (25,555)
Other operating costs (12,047) (8,849) (20,529)
Segment operating loss (23,813) (26,903) (46,084)
Other corporate operating costs (1,069) (276) (1,251)
Group operating loss (24,882) (27,179) (47,335)
Finance income 20 25 543
Finance expense (21,535) (18,151) (37,805)
Foreign exchange (loss)/gain (2,664) 17,376 22,658
Loss before tax (49,061) (27,929) (61,939)
Income tax credit 1,917 - 1,320
Loss for the period/year (47,144) (27,929) (60,619)
Segment assets
Moma Titanium Minerals Mine assets 890,091 925,759 905,795
Corporate assets 9,159 13,787 11,983
Total assets 899,250 939,546 917,778
3. SEASONALITY OF SALE OF MINERAL PRODUCTS
Sales of the Group's mineral products are not seasonal in nature.
4. LOSS PER SHARE
The calculation of the basic and diluted loss per share attributable to
the ordinary equity holders of the Company is based on the following
data:
Unaudited Unaudited Audited
30 June 16 30 June 15 31 Dec 15
US$'000 US$'000 US$'000
Loss for the period/year attributable to equity
holders of the Company (47,144) (27,929) (60,619)
Unaudited Unaudited Audited
30 June 16 30 June 15 31 Dec 15
Number of Number of Number of
Shares Shares Shares
Weighted average number of issued ordinary
shares
for the purposes of basic loss per share 2,781,905,503 2,781,905,503 2,781,905,503
Effect of dilutive potential ordinary shares:
Shares,share options and warrants - - -
Weighted average number of ordinary shares for
the purpose of diluted loss per share 2,781,905,503 2,781,905,503 2,781,905,503
Cent per Cent per Cent per
share share share
Loss per share: basic (1.69) (1.00) (2.18)
Loss per share: diluted (1.69) (1.00) (2.18)
For the six months ended 30 June 2016, the basic loss per share and the
diluted loss per share are the same, as the effect of the outstanding
share awards, share options and warrants is anti-dilutive.
5. PROPERTY, PLANT AND EQUIPMENT
Plant Other Construction Development Total
&
Equipment Assets in Progress Expenditure
US$'000 US$'000 US$'000 US$'000 US$'000
Cost
Balance at 1 January 2015 776,953 52,917 9,808 249,984 1,089,662
Transfer from construction in progress 9,808 - (9,808) - -
Additions during the period 502 494 - - 996
Balance at 30 June 2015 787,263 53,411 - 249,984 1,090,658
Transfer to/from construction in progress (1,206) 277 929 - -
Additions during the period - - 4,568 - 4,568
Balance at 31 December 2015 786,057 53,688 5,497 249,984 1,095,226
Transfer from construction in progress 3,081 681 (3,762) - -
Additions during the period (279) - 3,248 - 2,969
Balance at 30 June 2016 788,859 54,369 4,983 249,984 1,098,195
Accumulated Depreciation
Balance at 1 January 2015 96,745 22,537 - 105,163 224,445
Charge for the period 11,369 2,549 - 2,686 16,604
Balance at 30 June 2015 108,114 25,086 - 107,849 241,049
Charge for the period 14,240 2,750 - 2,226 19,216
Balance at 31 December 2015 122,354 27,836 - 110,075 260,265
Charge for the period 9,613 2,176 - 2,366 14,155
Balance at 30 June 2016 131,967 30,012 - 112,441 274,420
Carrying Amount
Balance at 30 June 2016 656,892 24,357 4,983 137,543 823,775
Balance at 30 June 2015 679,149 28,325 - 142,135 849,609
Balance at 31 December 2015 663,703 25,852 5,497 139,909 834,961
During the period 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 cash flows, before finance costs and before
tax costs are considered, discounted at 11%.
Key assumptions include the following:
-- 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
year-end review, when it was applied for the purposes of the impairment
test. Application of this change in assumption was applied to the
provision for mine closure calculation in the Consolidated Statement of
Financial Position as at 30 June 2016, as disclosed in Note 8.
-- Average annual production of approximately 1 million tonnes of finished
products ilmenite, zircon and rutile over the life of the mine. Minimum
stock quantities are forecast to be maintained at period ends. The
assumption has not changed from the year-end review.
-- 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, 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 the mine from the year-end review.
-- Operating costs are based on budget costs for 2016 taking into account
the current running costs of the Mine and escalated by 2% per annum
thereafter.
-- Sustaining capital costs are based on a life of mine capital plan
considering inflation at 2% per annum from 2016.
As a result of this review, the recoverable amount, being its value in
use, is greater than its carrying amount, and therefore, no impairment
loss (2015: nil) was recognised in the statement of comprehensive
income.
The discount rate is the 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 an impairment charge of US$55.7 million in
the period.
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 reporting date, the recoverable amount of property, plant and
equipment exceeds its carrying amount, and based on the planned mine
production levels, the Moma Titanium Minerals Mine will achieve positive
cash flows.
All additions to property, plant and equipment during the period have
been for sustaining capital purposes.
The carrying amount of the Group's plant and equipment includes an
amount of US$0.5 million (2015: US$0.7 million) in respect of assets
held under finance leases.
Substantially all the property, plant and equipment is mortgaged,
pledged or otherwise encumbered to secure project loans as detailed in
Note 7.
6. SHARE CAPITAL
Share capital as at 30 June 2016 amounted to US$214.9 million (2015:
US$214.9 million). During the period, no ordinary shares in the Company
were issued.
At 30 June 2016, transaction costs of US$3.8 million relating to an
equity transaction were recognised as a deduction from equity. These
costs represent costs directly attributable to the equity transaction
which were committed at the period end. The transaction to which these
costs relate is detailed in Note 12.
7. BANK LOANS
Unaudited Unaudited Audited
30 June 16 30 June 15 31 Dec 15
US$'000 US$'000 US$'000
Corporate Loan - 19,647 -
Project Super Senior Loans 10,456 - 10,417
Project Senior Loans 79,511 79,209 79,178
Project Subordinated Loans 297,021 246,558 278,216
Total Loans 386,988 345 414 367,811
Project Loan fees and expenses (29,246) (15,514) (25,868)
Total Bank Loans 357,742 329,900 341,943
Within one year 357,742 111,294 341,943
In the second year - 30,477 -
In the third to fifth years - 188,129 -
After five years - - -
357,742 329,900 341,943
Less amounts due for settlement within 12
months (357,742) (111,294) (341,943)
Amount due for settlement after 12 months - 218,606 -
Project Loans
Balance at 1 January 341,943 318,275 318,275
Loan interest accrued 18,607 13,964 31,264
Loan interest paid (2,703) (2,134) (4,242)
Loan drawdown - - 10,000
Loan amendment fees (5,730) (5,673) (17,303)
Loan fees and expenses 2,352 1,939 3,214
Novated corporate loan - - 20,000
Foreign exchange movement 3,273 (16,118) (19,265)
Balance at 30 June/31 December 357,742 310,253 341,943
Corporate Loan
Balance at 1 January - 19,399 19,399
Loan interest accrued - 1,224 1,441
Loan interest paid - (1,241) (1,458)
Loan fees and expenses - 265 618
Novated corporate loan - - (20,000)
Balance at 30 June/31 December - 19,647 -
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 for purposes of the proposed 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. On 1 July
2016, the Group published the prospectus detailing the capital
reorganisation and capital restructuring.
At 30 June 2016 the Group was in breach of a number of loan covenants
which, as and from 1 July 2016, were temporarily waived by the Lenders.
As a result, the loan balances as at 30 June 2016 were classified as
falling due on demand in the statement of financial position. Upon the
effectiveness of the Amended Financing Agreements on 28 July 2016, all
then-existing breaches were permanently waived, with the effect that as
from such date the loan balances are no longer classified as falling due
on demand.
Amendment, Repayment and Equitisation Agreement
On 22 June 2016 the Group entered into an Amendment, Repayment and
Equitisation Agreement with the Lenders which, amongst other things, set
out their respective obligations to implement the capital restructuring.
The Amendment, Repayment and Equitisation Agreement provided 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, 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 Subordinated Lenders. In consideration for
providing the underwriting, the Subordinated 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. US$0.6 million of shares were issued to Absa in
settlement of an outstanding fee.
The repayments above are not subject to any prepayment or other Lender
fees. 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 deferred restructuring fees and commitment fees
of the Super Senior Facilities.
Subject to certain exceptions, Lenders will not be permitted to dispose
of ordinary shares issued to them for a period of 179 days after 28 July
2016.
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 are now 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 will rank 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 will be calculated on the basis of aggregate
outstanding debt, being the aggregate of outstanding senior debt and
outstanding subordinated debt. Decisions will be 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 each tranche of the senior debt is 1 February
2022. Interest on the senior debt will be 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
The 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.
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.
Subordinated Debt
The final maturity date of each tranche of the subordinated debt is 1
February 2022. Interest on the subordinated debt is payable in cash on 1
February and 1 August and will no longer be capitalised. The interest
rate on each tranche of 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, payments based on cash available for restricted
payments are required under a cash sweep mechanism, commencing 1
February 2018.
Repayment waterfall
All principal repayments, whether scheduled repayments, prepayments with
insurance proceeds, prepayments with proceeds from any arbitral award
related to the dispute with E+PC Aveng, and prepayments under the cash
sweep mechanism, will be allocated as follows:
1. the lesser of (i) 50% of the principal repayment and (ii) the principal
amount of senior loans outstanding will be applied to repaying the
principal amounts outstanding under the senior loans on a pro rata basis
to each Senior Lender, provided that once the Absa senior loan is reduced
to US$10 million, Absa shall not participate in the senior loan
instalment and shall participate instead in the subordinated loan
instalment on a pro rata basis.
2. the balance shall be applied to repaying the principal amounts
outstanding under the subordinated loans (and, if applicable, under the
Absa senior loan) on a pro rata basis to each subordinated lender (and,
if applicable, to Absa). Once the senior loans (other than the Absa
senior loan) have been fully repaid, the whole amortisation is applied to
repaying principal amounts outstanding under the subordinated loans, and,
if applicable under the Absa senior loan.
Cash Sweep
From and including the first principal Payment Date (1 February 2018),
the Project Companies will be required to prepay outstanding debt in an
amount equal to 25% of cash available for restricted payments (as
defined below) in accordance with and subject to conditions set out in
the Amended Financing Agreements, on each semi-annual payment date (1
February and 1 August), on which all conditions to making a restricted
payment set out in the Amended Financing Agreements are met. For this
purpose only, conditions to making a restricted payment will be deemed
to have been met unless the Project Companies notify the administrative
agent on or before the day falling 10 business days prior to the Payment
Date that one or more conditions are not met.
Cash sweep payments in accordance with the preceding paragraph will be
applied towards repayment of outstanding debt in inverse order of
maturity and in accordance with the repayment waterfall summarised above,
without any break costs, prepayment premia, charges or penalties. If any
Lender elects not to participate in a cash sweep payment, the amount
that would otherwise be available to prepay that Lender shall be applied
in mandatory prepayment of loans from the other Lenders of the same
ranking (senior or subordinated) as such non-participating Lender.
Cash available for restricted payments means in respect of any Payment
Date on or after 1 February 2018 the Project Companies' estimate of (a)
the aggregate balance expected to be (i) remaining in the Proceeds
Accounts, after making of all payments and transfers required or
permitted to be made for operating and capital costs, agents' fees,
schedule principal and interest payments, mandatory prepayments from
proceeds from the E+PC/Aveng dispute, mandatory prepayments upon
illegality of Project Loans, and deposits to a reserve account to fund
certain expected capital expenditures, (ii) in the senior debt reserve
account and (iii) in the sinking fund account, minus (b) (i) the amounts
that are required to be in each of the senior debt reserve accounts and
the sinking fund account in order to meet the applicable Restricted
Payment condition on the Restricted Payment Date associated with that
Payment Date and (ii) the amount of Project Costs (other than those
related to and payable with funds in the insurance account, the price
drop reserve account or the expropriation account) reasonably estimated
by the Project Companies for the month in which the Payment Date falls,
provided that the balance of Net Arbitration Proceeds retained by the
Project Companies shall not in any case count as cash available for
restricted payments unless expected by the Project Companies to be used
(in part or in whole) for purposes of making a Restricted Payment on the
Restricted Payment Date associated with such Payment Date.
Arbitration Proceeds Mandatory Prepayment
In the event that the arbitration between the Project Companies and E+PC
Aveng is resolved in favour of the Project Companies (whether by way of
arbitral award, settlement or otherwise), the resulting proceeds
received by the Project Companies following such resolution (net of all
costs incurred by the Project Companies in connection with such
arbitration) (such net proceeds, the "Net Arbitration Proceeds") shall
be applied by the Project Companies as follows:
1. the lesser of (i) 50% of the Net Arbitration Proceeds and (ii) the
principal amounts outstanding under the senior loans and the subordinated
loans, shall be applied towards repayment of principal amounts of senior
loans and subordinated loans then outstanding in accordance with the
repayment waterfall described above, in inverse order of maturities; and
2. any residual amounts of Net Arbitration Proceeds may be retained by the
Project Companies to apply in accordance with applicable waterfalls and
must be deposited in an operating cost reserve account to fund future
capital expenditures or be transferred to the proceeds account and
applied in accordance with the priority of payments.
Withdrawals from accounts: priority of payments
Unless a declared default has occurred and is continuing, moneys to the
credit of the Project Companies held in the accounts (other than the
senior debt reserve account, the operating cost reserve account, the
price drop reserve account, the sinking fund account, the insurance
account and the expropriation account) shall be applied in the following
order of priority and solely for the following purposes:
1. Project costs;
2. Agents' fees;
3. On each payment date, accrued senior debt interest then due and payable;
4. On each payment date, accrued subordinated debt interest then due and
payable;
5. On each payment date, senior principal repayment;
6. On each payment date, subordinated debt principal repayment;
7. Mandatory prepayments related to Net Arbitration Proceeds and in the
event of illegality of a Project Loan;
8. Deposits to the senior debt reserve account;
9. Deposits to the sinking fund account;
10. On the first business day of the month in which a payment date falls,
deposits in the price drop reserve account to fund permitted capital
expenditures;
11. On each cash sharing date, cash sweep payments; and
12. Restricted payments or other general corporate purposes for cash
available for restricted payments
Undertakings
Key amendments to the undertakings of the Project Companies are
summarised below.
1. Undertakings added by the April 2015 Amendment, including those listed at
items (1) to (5) and (7) of page 126 of the 2014 Annual Report, are
deleted.
2. The limitation on indebtedness has been amended such that the unsecured
financial indebtedness the Project Companies are able to incur without
the consent of the Lenders increases from US$350,000 to US$7.5 million in
aggregate at any time, provided that (a) such unsecured financial
indebtedness is in connection with overdraft facilities, working capital
facilities and/or capital leases of any mobile or other equipment and
other similar arrangements involving the deferral of the purchase price
and (b) the interest rate for any such unsecured indebtedness does not
exceed that of similar facilities on commercial and arms' length terms.
3. Offtake Agreements: KMPL will be able to cancel, terminate or agree to a
reduction in term or quantity of product to be delivered under certain
Offtake Agreements without the consent of majority Lenders (i) where the
consequent reduction of gross revenues in the subsequent 12 months, when
aggregated with any previous cancellation or amendment without majority
Lenders' consent from the preceding 12 months, would not reasonably be
expected to result in a reduction of gross revenues by an amount that is
greater than 10% of the aggregate annual gross revenues set forth in the
most recent annual budget and operating plan delivered to the Lenders and
(ii) such termination, cancellation or reduction, does not give rise to
any liability of KMPL.
4. Restricted payments: these will be permitted subject to the Project
Companies meeting certain conditions. See paragraph entitled "Restricted
payments" below.
5. The Annual Budget and Operating Plan will no longer be subject to the
approval of the Lenders.
6. KMML and KMPL will be released from certain information undertakings
relating to short term cash flow projections, production figures, monthly
management accounts, offtake agreements and similar.
7. In addition, certain existing undertakings which are historical and
relate to construction, expansion, first disbursement or similar have
been deleted.
Events of Default
Key amendments to the events of default are summarised below.
1. Events of default added by the April 2015 Amendment, listed at items (1)
to (8) of pages 127-8 of the 2014 Annual Report are deleted.
2. KMML and KMPL will be able to remedy any event of default that is not a
declared default, and will have more time to do so with grace periods for
certain events of default being increased. The grace period for events of
default under individual loan agreements has increased from 60 days to 90
days. Events of default arising from breach of certain undertakings which
prior to 28 July 2016 had no grace period now have a grace period ranging
from 15 days to 90 days. Grace periods for events of default for breach
of or non-compliance with a covenant run from the earlier of the
administrative agent or any Lender giving written notice of the breach or
non-compliance, and the date on which either of the Project Companies
become aware of the breach or non-compliance.
3. It is an event of default if any litigation, arbitration, administrative,
governmental, regulatory or other investigation or proceeding or dispute
which is reasonably likely to be adversely determined and if adversely
determined, could be expected to have a material adverse effect (as
defined in the Amended Financing Agreements), is commenced on or after
the date on which the Amended Financing Agreements become effective (as
defined in the Amended Financing Agreements) against any member of the
Group and is not stayed or discharged within 120 days of commencement.
4. DSCR Default: the Project Companies fail to maintain an historical debt
service coverage ratio of at least 1.25:1 as calculated in relation to
the previous six months on any Payment Date falling on or after the
earlier of Completion and 1 February 2018. Prior to 28 July 2016, this
applied only after Completion, and Lenders could only take action if
there were three consecutive defaults.
5. In addition, certain existing events of default which are historical and
relate to construction, completion or similar have been deleted.
A single Lender is able to unilaterally declare a declared default only
in relation to a payment default or default under its individual loan
agreement. A decision by the majority Lenders is required to declare a
declared default in connection with all other events of default.
The regime for taking enforcement action is simplified as a result of
the ability to remedy events of default, longer grace periods and
simplified debt structure. Majority Lenders will have the right to take,
or direct the taking of, enforcement action on and from the date an
event of default is declared a declared default.
Restricted payments
The prohibition on the Project Companies making restricted payments to
other Group companies (and hence on the Company paying dividends to its
shareholders) under the April 2015 Amendments has been removed. The
Project Companies will be permitted to make payments to other Group
companies by way of dividend or repayment of shareholder loans (other
than amounts invoiced under the existing Management Services Agreement
between the Company and the Project Companies which remains unchanged)
("restricted payments"), subject to the conditions referred to below.
The result is that from 1 February 2018 the Project Companies would be
permitted to make payments to the Company for the purposes of dividend
payments to shareholders if the relevant conditions are met.
The Project Companies will be permitted to make restricted payments:
1. after the later of (i) 1 February 2018 and (ii) the date on which the
Project Companies have delivered the financial certificate (as such term
is defined in the completion agreement); and
2. if the other conditions to making restricted payments (including the cash
sweep debt prepayment summarised above) are satisfied. The other
conditions to making restricted payments are generally those that were in
place prior to the April 2015 Amendments, with certain amendments in
favour of the Company. For example, conditions relating to (i)
maintaining eligible offtake agreements (as defined in the Amended
Financing Agreements) in place to generate revenues above a certain
percentage of project costs, (ii) maintaining a specified balance in the
operating cost reserve account, and (iii) certain aspects of the periodic
marketing certificate, have been removed.
Completion Agreement
Key amendments to the undertakings of the Company and events of default
(a "completion default") in each case under the Completion Agreement are
summarised below.
1. Kenmare is no longer required to give Lenders notice of any change of its
ownership in excess of 3%.
2. Kenmare procures that on each cash sharing date, amounts to be prepaid to
Lenders in connection with the cash sharing arrangement summarised above
are applied by the Project Companies. The cash sweep summarised at page
125 of the 2014 Annual Report no longer applies.
3. The limitation on unsecured indebtedness incurred by Kenmare or any other
affiliate other than Kenmare Moma Mining (Mauritius) Limited and Kenmare
Moma Processing (Mauritius) Limited will be increased from US$150,000 to
US$2.5 million in aggregate at any time, provided that (a) in each case
the interest rate of such indebtedness does not exceed that for similar
facilities on commercial and arms' length terms, and (b) no creditor of
Kenmare receives a preferential right to the proceeds of a subsequent
equity raise. The restriction on the use of such indebtedness has been
broadened to include overdraft facilities, working capital facilities,
capital leases of any IT or office equipment and/or corporate credit card
facilities.
4. Kenmare is no longer subject to cooperation undertakings relating to
Lenders' financial advisors, site visits, full cooperation and weekly
updates to Lenders on implementation of certain steps required by the
April 2015 Amendment.
5. Completion defaults for breaches by Kenmare of an undertaking under the
Completion Agreement are now subject to a grace period of 30 days other
than breaches of the limitation on indebtedness and the limitation on
guarantees, which now have a grace period of 15 days. Prior to 28 July
2016 there was no grace period in most cases.
Other
The Subordinated Lenders' Option Agreement, FMO/EAIF Standby Put Rights
Deed dated 30 June 2005 and the EIB Standby Put Right Deed dated 30 June
2005 have been terminated.
The parties to each super senior loan agreement have agreed to
irrevocably cancel all available super senior commitments and terminate
each super senior loan agreement.
The security trustee will release any security given by the Project
Companies in respect of the super senior debt obligations and the
Novated Absa debt obligations upon payment and discharge in full of such
obligations under the Amendment, Repayment and Equitisation Agreement,
which occurred on 28 July 2016.
Lenders' right to appoint a Lender-Approved Non-Executive Director has
been terminated effective 28 July 2016.
Group borrowings interest and currency 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 or one month LIBOR. The average effective borrowing
rate at the period end was 10.0%.
The interest rate profile of the Group's loan balances at the period end
was as follows:
Unaudited Unaudited Audited
30 June 16 30 June 15 31 Dec 15
US$'000 US$'000 US$'000
Fixed rate debt 310,800 201,096 294,932
Variable rate debt 46,942 128,804 47,011
Total debt 357,742 329,900 341,943
Under the assumption that all other variables remain constant and using
the 6 month LIBOR (and ignoring the capital restructuring), a 1% change
in LIBOR would in principle result in a US$0.5 million (2015: US$1.1
million) change in finance costs for the year in respect of these loan
balances.
The currency profile of the bank loans at the period end was as follows:
Unaudited Unaudited Audited
30 June 16 30 June 16 31 Dec 15
US$'000 US$'000 US$'000
Euro 181,545 176,952 170,195
US Dollars 176,197 152,948 171,748
Total debt 357,742 329,900 341,943
During H1 2016, the Euro-denominated loans exposed the Group to currency
fluctuations. These currency fluctuations are realised on payment of
Euro-denominated debt principal and interest. Under the assumption that
all other variables remain constant (and ignoring the capital
restructuring), a 10% strengthening or weakening of Euro against the US
Dollar, would in principle result in a US$2.1 million (2015: US$1.9
million) change in finance costs and a US$18.2 million (2015: US$17.0
million) change in foreign exchange gain or loss for the year, in
respect of these loan balances.
The above sensitivity analyses are estimates of the effect of market
risks assuming the specified change occurs based on the currency and
interest rate profile of the bank loans at 30 June 2016. However, with
effect from 28 July 2016, all Group bank loans are denominated in US
Dollars, and have been reduced to US$100 million, so the above currency
sensitivity ceased to be relevant from such date. From such date, a 1%
change in LIBOR would result in a US$1.0 million change in finance costs
over a 12 month period.
8. PROVISIONS
Unaudited Unaudited Audited
30 June 16 30 June 15 31 Dec 15
US$'000 US$'000 US$'000
Mine closure provision 20,117 19,595 19,890
Mine rehabilitation provision 2,593 2,786 2,480
Legal provision 1,444 1,444 1,444
Executive Directors' bonus provision - 347 -
Total provision 24,154 24,172 23,814
Current 1,714 2,006 1,714
Non-current 22,440 22,166 22,100
24,154 24,172 23,814
The mine closure provision represents the Directors' best estimate of
the Group's liability for close-down, dismantling and restoration of the
mining and processing site. A corresponding amount equal to the
provision is recognised as part of property, plant and equipment. The
costs are estimated on the basis of a formal closure plan and are
subject to regular review. The costs are estimated based on the net
present value of estimated future cost. Mine closure costs are a normal
consequence of mining, and the majority of close-down and restoration
expenditure is incurred at the end of the life of the mine.
The unwinding of the discount is recognised as a finance cost and US$0.2
million (2015: US$0.3 million) has been recognised in the statement of
comprehensive income for the period.
During the period the mine closure provision was adjusted as a result of
the increased life of mine. In 2015 there was a reclassification of 776
million tonnes of ore from the Nataka indicated resource to the Nataka
probable reserve. Inclusion of these additional reserves extended the
last year of operations from 2033 in the 2014 mine plan to 2056 in the
2015 mine plan. Offsetting the increase in life of mine was a reduction
in the discount factor to 2.3% to reflect the 30 year US Treasury yield
rate as at 30 June 2016.
The main assumptions used in the calculation of the estimated future
costs include:
-- a discount rate of 2.3% (2015: 3%) based on a 30 year (2015: 20 year) US
Treasury yield rate;
-- an inflation rate of 2% (2015: 2%);
-- an estimated life of mine of 40 years (2015: 24 years); and
-- an estimated closure cost of US$21.7 million (2015: US$20.4 million) and
an estimated post-closure monitoring provision of US$1.7 million (2015:
US$1.9 million).
The significant factor in determining the estimated future cost is the
discount factor and a 1% change in the discount rate results in a 34%
change in the estimated future cost.
The mine rehabilitation provision was increased by US$0.1 million as a
result of additional provision of US$0.4 million for areas disturbed net
of US$0.3 million released for areas rehabilitated during the period.
US$0.3 million (2015: US$0.2 million) of the mine rehabilitation
provision has been included in current liabilities to reflect the
estimated cost of rehabilitation work to be carried out over the next
year.
On 17 November 2010, a High Court jury delivered a verdict of damages of
EUR10 million in a defamation case taken by a former Company Director.
The Company has submitted an appeal to the Supreme Court with a view to
setting aside both the verdict and the amount, with the intention of
securing a retrial. The High Court granted a stay on the award subject
to the payment of EUR0.5 million until the hearing of the Supreme Court
appeal. The Company's legal team strongly advise that the award will be
set aside on appeal. The same former director has also served notice
that he intends to pursue a number of non-defamation actions against the
Company.
9. SHARE-BASED PAYMENTS
The Company has a share option scheme for certain Directors, employees
and consultants. Options are exercisable at a price equal to the quoted
market price of the Company's shares on the date of grant. The options
generally vest over a three year period, in equal annual amounts. If
options remain unexercised after a period of seven years from the date
of grant, the options expire. The option expiry period may be extended
at the discretion of the Board of Directors. The Company also has an
incentive plan under which annual awards have a cash element and a
separate share element.
During the period the Group recognised share-based payment expenses of
US$0.1 million (2015: US$0.8 million credit).
10. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in
this note.
Apart from existing remuneration arrangements there were no material
transactions or balances between Kenmare and its key management
personnel or members of their close families during the period under
review.
11. FAIR VALUE
The fair value of the Group borrowings of US$318.4 million (2015:
US$333.3 million) has been calculated by reference to the terms of
capital restructuring that were agreed with lenders at 30 June 2016,
subject to approval by shareholders which was given at an Extraordinary
General Meeting on 25 July 2016. These terms provided for a debt
write-off by lenders of US$68.6 million. The fair value is calculated
by deducting this write-off from the gross book value of group
borrowings of US$387.0 at 30 June 2016 and by applying period end
exchange rates.
The fair value of trade and other receivables, trade and other payables,
other financial liabilities and the finance lease are equal to their
carrying amounts.
12. EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
Effective 25 July 2016, Mr. Tony Lowrie retired as a Non-Executive
Director of the Company.
On 28 July 2016, the Group completed a capital restructuring to reduce
debt to US$100 million (from US$392.4 million using agreed exchange
rates) and to provide an additional US$75 million of cash for working
capital and to meet fees and expenses of the capital restructuring. This
was achieved by the raising of new equity from new and existing
shareholders, the conversion of certain debt to equity in the Company,
and certain debt write-offs agreed by Lenders. The capital restructuring
also provided for a reduction in the interest rates on outstanding debt,
an extension to the term of that debt, and a principal repayment holiday
until February 2018.
13. INFORMATION
The Half Yearly Financial Report was approved by the Board on 24 August
2016.
Copies are available from the Company's registered office at Chatham
House, Chatham Street, Dublin 2, Ireland. The report is also available
on the Company's website at www.kenmareresources.com.
Glossary - Alternative Performance Measures
Certain financial measures set out in our Half Yearly Report to 30 June
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 Total costs less freight and other non-cash costs, Eliminates the non-cash impact on costs to identify
operating including inventory movements, divided by final product the actual cash outlay for production and, as production
cost per production (tonnes) levels increase or decrease, highlights operational
tonne of performance by providing a comparable cash cost per
finished tonne of product produced over time
product
Net Debt Bank loans net of cash and cash equivalents Measures the Group's's ability to repay its debts
if they were to fall due immediately, and aids in
developing an understanding of the leveraging of the
Group
Operating The result of cash inflows and outflows from operating Provides a measure of the cash the Group is able to
cashflow activities minus sustaining additions to property, generate after expenditure required to maintain its
after plant and equipment in the period asset base, and highlights the resources available
additions to allow the Group pursue opportunities to enhance
to shareholder value
sustaining
capex
EBITDA
H1 2016 H1 2015 2015
US$m US$m US$m
Operating loss (24.9) (27.2) (47.3)
Depreciation and amortisation 14.2 16.6 35.8
EBITDA (10.7) (10.6) (11.5)
Cash operating cost per tonne of finished product
H1 2016 H1 2015 2015
US$m US$m US$m
Cost of sales 68.0 91.9 168.1
Other operating costs 13.1 9.2 21.8
Total operating costs 81.1 101.1 189.9
Freight charges (2.4) (1.6) (3.7)
Total operating costs less freight 78.7 99.5 186.2
Non cash costs
Depreciation and amortisation (14.2) (16.6) (35.8)
Share-based payments (0.1) 0.8 0.7
Inventory movements
Finished product movements 2.2 (14.6) (14.7)
Adjusted cash operating costs 66.6 69.1 136.4
Final product production 434,400 350,700 821,300
Cash operating cost per tonne of finished product US$153 US$197 US$$166
Net Debt
H1 2016 H1 2015 2015
US$m US$m US$m
Bank loans 357.7 329.9 341.9
Cash and cash equivalents (12.3) (12.9) (14.4)
Net Debt 345.5 317.0 327.5
Operating cashflow after additions to sustaining capex
H1 2016 H1 2015 2015
US$m US$m US$m
Net cash from/(used in) operating activities 6.6 (3.2) 2.9
Additions to property, plant and equipment (3.0) (1.0) (5.5)
Operating cashflow after additions to sustaining
capex 3.6 (4.2) (2.6)
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX 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
HUG#2036849
http://www.kenmareresources.com/
(END) Dow Jones Newswires
August 24, 2016 02:01 ET (06:01 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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