Kenmare Resources Amendment: Q2 & H1 2016 Production Report

 
TIDMKMR 
 
 
   An amendment has been made to the Q2 & H1 2016 Production Report 
released earlier this morning. The title Q2 2015 has been replaced by Q1 
2016 throughout the announcement. No other amendments have been made. 
 
   Kenmare Resources plc ("Kenmare" or "the Company") 
 
   2 August 2016 
 
 
   Amendment Q2 & H1 2016 Production Report 
 
   Overview 
 
 
   -- Total shipments of finished products in Q2 2016 up 133% to 309,000 tonnes 
      (Q1 2016: 132,700 tonnes), a new quarterly product shipment record 
 
   -- Ilmenite production increased 18% to 217,900 tonnes (Q1 2016: 185,000 
      tonnes) 
 
   -- Zircon production increased 46% to 16,900 tonnes (Q1 2016: 11,600 tonnes) 
 
   -- Ore mined in Q2 2016 increased 5% to 7,386,200 tonnes (Q1 2016: 7,061,000 
      tonnes) 
 
   -- Heavy Mineral Concentrate ("HMC") production in Q2 2016 increased 21% to 
      331,300 tonnes (Q1 2016: 274,800 tonnes), product of higher tonnes mined 
      and increased grade, as expected 
 
   -- Production guidance of  950,000 tonnes of ilmenite production in 2016 
      (+/- 10%) maintained 
 
   -- Production in H2 2016 expected to increase from H1 as a result of 
      increases in dry mining, grade and operating time 
 
   -- Power stability has remained consistent through Q2 2016 
 
   -- Capital restructuring and material deleveraging completed at end of July, 
      resulting in gross debt reduced 74% to US$100 million and US$75 million 
      of additional cash  for working capital purposes and fees and expenses 
 
   Statement from Michael Carvill, Managing Director: 
 
   "The strengthening of the balance sheet, allied with falling cash costs 
and consistent productivity gains at Moma, positions Kenmare to benefit 
from the improvement in the titanium feedstock market we are currently 
experiencing as higher ilmenite prices are reflected in revenues for the 
second half of 2016." 
 
   Production 
 
   Production from the Moma Mine for Q2 2016 and H1 2016 was as follows: 
 
 
 
 
               Q2-2016    Q1-2016   Variance   H1-2016     H1-2015    Variance 
               tonnes     tonnes       %        tonnes      tonnes       % 
Excavated 
 Ore *        7,386,200  7,061,000        5%  14,447,600  11,421,400       26% 
Grade*            4.91%      4.32%       14%       4.62%       4.98%       -7% 
Production 
 HMC            331,300    274,800       21%     606,100     454,500       33% 
 Ilmenite       217,900    185,000       18%     402,900     324,100       24% 
 Zircon          16,900     11,600       46%      28,500      23,800       20% 
 of which 
  primary        10,900      8,300       31%      19,300      19,800       -3% 
 of which 
  secondary       6,000      3,300       82%       9,200       4,000      130% 
 Rutile           1,850      1,100       68%       3,000       2,800        7% 
Shipments       309,000    132,700      133%     441,700     412,000        7% 
 
 
   * Excavated Ore and grade are prior to any floor losses. 
 
   During Q2 2016, Kenmare mined 7,386,200 tonnes of ore at an average 
grade of 4.91% and produced 331,300 tonnes of HMC.  Finished product 
volumes for the period included 217,900 tonnes of ilmenite and 16,900 
tonnes of zircon (including 6,000 tonnes of a lower grade secondary 
zircon product). 
 
   The tonnage of ore excavated increased 5% in comparison to Q1 2016 as 
mining conditions improved, while grade increased by 14% in Q2 2016 
compared with Q1 2016, resulting in an overall 21% increase in HMC 
production. As noted in the Q1 2016 operations report, grade was 
expected to rise from the end of Q2 2016 and is expected to rise through 
the second half of the year. Dry mining restarted towards the end of Q1 
2016 for Wet Concentrator Plant ("WCP") A and is currently being 
commissioned for WCP B, both of which should contribute to higher 
volumes of ore being mined in the second half of 2016. 
 
   Increased volumes of ore mined, grade levels, recoveries and operating 
time should all contribute to higher production levels in H2 2016, in 
order for the Company to achieve production forecasts for 2016. The 
expected drawdown of intermediate magnetic concentrate will also 
contribute to ilmenite production in H2 2016. 
 
   Ilmenite production for the quarter was 217,900 tonnes, up 18% compared 
to 185,000 tonnes in Q1 2016. Total zircon production for the period 
increased 46% over Q1 2016 to 16,900 tonnes. This was primarily a result 
of increased non-magnetic recoveries, which are forecast to continue 
increasing through the second half of 2016. Secondary zircon production 
in particular saw a pronounced improvement as a result of revenue 
maximisation projects being implemented through circuit changes to 
deliver additional zircon. 
 
   Shipments of total finished products in Q2 2016 amounted to 309,020 
tonnes, comprised of 291,628 tonnes of ilmenite, 15,682 tonnes of zircon 
(including 5,375 tonnes of secondary grade zircon) and 1,709 tonnes of 
rutile. The late arrival of a vessel and inclement weather at the end of 
March delayed the shipment of two large ilmenite parcels into April. 
These delayed shipments, in combination with strong underlying market 
demand for ilmenite, contributed to a record volume of shipments in Q2 
2016. 
 
   Closing stock of HMC at the end of Q2 2016 was 35,753 tonnes, compared 
with 14,809 tonnes at the start of the year. Closing stock of 
intermediate magnetic concentrate at the end of the period was 54,289 
tonnes. Closing stock of finished products at the end of H1 2016 was 
230,052 tonnes, of which 103,883 tonnes were being held for customers 
under bill and hold arrangements. 
 
   Power 
 
   The Moma mine has continued to experience stability in power quality and 
reliability as a result of the additional 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 is currently 
operating and provides significant additional capacity in the 
stabilisation of the network. Power should no longer be a fundamental 
constraint on Moma's ability to produce. However, the diesel-powered 
generators remain available on standby should the need arise. 
 
   Market 
 
   Kenmare saw improvement in the sulphate ilmenite market in Q2 as 
supply/demand conditions continued to tighten. 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. 
 
   This is due to a combination of improved offtake from the pigment sector, 
as price increases for pigment gather momentum on the back of improving 
global demand conditions, and continued decline of ilmenite supply from 
a number of regions, most notably Chinese domestic ilmenite production 
from Sichuan province. Ilmenite production in Sichuan is a by-product of 
iron ore mining, which is now in decline due to oversupply in the iron 
ore market as cheaper, better quality imported iron ore continues to 
displace higher cost, lower quality production in Sichuan. 
 
   Ilmenite supply reductions have also been seen in Russia and Australia, 
due to mine closure and depletion, while reductions in other regions are 
also evident, principally due to poor mining economics. Meanwhile excess 
ilmenite inventories, which ensured the market was adequately supplied 
in 2015 despite the reduction in primary production, appear to have 
declined significantly and Kenmare's market intelligence points to low 
inventory levels at other ilmenite producers. China port inventories by 
the end of Q2 2016 were the lowest levels seen in the past three years, 
down by circa 50% from peak levels in March 2015. Kenmare sells the 
majority of ilmenite production on long-term contracts with annual or 
six monthly price renegotiations. Therefore, the increase in ilmenite 
pricing that we have seen in the first half of 2016 will be largely 
reflected in revenues for the second half of the year. 
 
   In the zircon market there was further price weakness in Q2 due to 
competitive positioning for sales amongst producers. It is anticipated 
that a recent price increase announcement by a major zircon producer 
will reverse the downward price trend seen in recent months and help to 
provide some stability to the market. Kenmare continues to be well 
supported by its customer base. 
 
   Finance 
 
   At 30 June 2016, cash and cash equivalents were US$12.3 million, 
compared with US$14.4 million at 31 December 2015. The Company's 
half-yearly results in respect of the six months ended 30 June 2016 will 
be issued on 24 August 2016. 
 
   For further information, please contact: 
 
   Kenmare Resources plc 
 
   Michael Carvill, Managing Director 
 
   Tel: [phone] 
 
 
   Mob: + 353 87 674 0110 
 
 
   Tony McCluskey, Financial Director 
 
   Tel: [phone] 
 
 
   Mob: + 353 87 674 0346 
 
   Jeremy Dibb, Corporate Development and Investor Relations Manager 
 
   Tel: [phone] 
 
   Mob: + 353 87 943 0367 
 
   Murray Consultants 
 
 
   Joe Heron 
 
 
   Tel: [phone] 
 
 
   Mob: [phone] 
 
 
   Buchanan 
 
   Bobby Morse 
 
   Tel: [phone] 
 
   Forward Looking Statements 
 
   This announcement contains some forward-looking statements that 
represent Kenmare's expectations for its business, based on current 
expectations about future events, which by their nature involve risks 
and uncertainties. Kenmare believes that its expectations and 
assumptions with respect to these forward-looking statements are 
reasonable. However, because they involve risk and uncertainty, which 
are in some cases beyond Kenmare's control, actual results or 
performance may differ materially from those expressed or implied by 
such forward-looking information. 
 
   This announcement is distributed by NASDAQ 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#2032500 
 
 
  http://www.kenmareresources.com/ 
 

(END) Dow Jones Newswires

August 02, 2016 04:11 ET (08:11 GMT)

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