Kenmare Resources Q3 2016 Production Report

 
TIDMKMR 
 
 
   Kenmare Resources plc ("Kenmare" or "the Company") 
 
 
 
   13 October 2016 
 
 
   Q3 2016 Production Report 
 
   Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global 
producers of titanium minerals and zircon, which operates the Moma 
Titanium Minerals Mine (the "Mine" or "Moma") in northern Mozambique, is 
pleased to provide a trading update for the third quarter ending 30 
September 2016. 
 
   Overview 
 
 
   -- Spot prices for domestically produced ilmenite in China have risen 70% 
      year to date and bode well for an increase in Kenmare's average received 
      ilmenite price for 2017. 
 
   -- Production of total finished products was a quarterly record for Q3 2016 
      and Moma is on track to achieve record finished product output for the 
      full year. 
 
   -- Cash operating costs per tonne of finished product have trended downwards 
      in Q3 2016 and are expected to be at the lower end of guidance for the 
      full year. 
 
   -- Ore mined in Q3 2016 decreased 21% to 7,160,800 tonnes compared to the 
      equivalent period in the prior year (Q3 2015: 9,057,500 tonnes). Ore 
      mined has been lower in 2016 as a result of harder mining conditions, 
      augmented by the higher grades achieved in these areas. 
 
   -- Production of Heavy Mineral Concentrate ("HMC") in Q3 2016 decreased 4% 
      to 325,100 tonnes (Q3 2015: 339,600 tonnes). 
 
   -- Ilmenite production in Q3 2016 was 243,500 tonnes, close to the record 
      quarterly production of 244,800 tonnes in Q3 2015 and up 12% when 
      compared with the prior quarter (Q2 2016: 217,900 tonnes). 
 
   -- Zircon production in Q3 2016 increased 48% to 19,700 tonnes (Q3 2015: 
      13,300 tonnes) as a result of increased recoveries. 
 
   -- Total shipments of finished products in Q3 2016 increased 48% to 280,800 
      tonnes (Q3 2015: 190,000 tonnes). 
 
   Statement from Michael Carvill, Managing Director: 
 
   "Q3 2016 represented a record quarter for finished product output, 
demonstrating the benefits of stable power supply, increased 
supplemental mining and higher grades. 2016 is also expected to be a 
record year for production of all final products, and for unit costs to 
be even lower in the second half of the year. Not only is production 
increasing and costs falling, Chinese spot prices for ilmenite have 
increased by over 70% as a result of the decline in domestic production 
and falling port inventories. Kenmare is well positioned to benefit from 
increasingly favourable operational and market dynamics in 2017." 
 
   Production 
 
   Production and shipments from the Moma Mine for Q3 2016 was as follows: 
 
 
 
 
                       Q3-2016     Q3-2015   Variance   Q2-2016   Variance 
                        tonnes     tonnes       %       tonnes       % 
Excavated Ore *        7,160,800  9,057,500      -21%  7,386,200       -3% 
Grade*                     4.81%      4.54%        6%      4.91%       -2% 
Production 
 HMC                     325,100    339,600       -4%    331,300       -2% 
 Ilmenite                243,500    244,800       -1%    217,900       12% 
 Zircon                   19,700     13,300       48%     16,900       17% 
 of which primary         12,300      9,400       31%     10,900       13% 
 of which secondary        7,400      3,900       90%      6,000       23% 
 Rutile                    2,500      1,500       67%      1,900       32% 
Shipments                280,800    190,000       48%    309,000       -9% 
 
 
 
 
   * Excavated Ore and grade are prior to any floor losses. 
 
   During Q3 2016, Kenmare mined 7,160,800 tonnes of ore at an average 
grade of 4.81% and produced 325,100 tonnes of HMC. Finished product 
volumes for the period included 243,500 tonnes of ilmenite and 19,700 
tonnes of zircon (including 7,400 tonnes of lower grade secondary 
zircon). 
 
   The production of total finished products in Q3 2016 was a quarterly 
record. Ilmenite production for the quarter was the second highest 
achieved, 1% lower than record production in Q3 2015. Total zircon 
production was up 17% on the previous record achieved in Q2 2016 and 
rutile production was 32% higher than the previous record achieved in Q2 
2016. 
 
   Ore mined in Q3 2016 was broadly in line with the prior quarter, as 
expected, declining slightly by 3% versus Q2 2016 to 7,160,800 tonnes 
(Q2 2016: 7,386,200 tonnes). The volume of ore mined has been generally 
lower in 2016 as a result of a decision to mine in more difficult 
conditions, augmented by the higher grades available in these areas. 
This decline was amplified by the particularly favourable mining 
conditions encountered in Q3 2015 (Q3 2015: 9,057,500 tonnes). 
 
   HMC production declined 4% to 325,100 tonnes in Q3 2016 compared with 
339,600 tonnes in Q3 2015, principally as a result of volumes of ore 
mined, offset by higher grades. The expected harder mining prevented the 
plant from running at maximum capacity and supplemental (dry) mining was 
unable to completely close this gap. It is expected that more favourable 
mining conditions will be encountered in Q4 2016, while the higher 
grades will be maintained, hence HMC production is expected to be higher 
in the fourth quarter. At WCP B, the commissioning of a supplementary 
(dry) mining unit is ensuring the plant operates at capacity. 
 
   Production of ilmenite was 243,500 tonnes in Q3 2016, the second highest 
quarterly production after the 244,800 tonnes achieved in Q3 2015. 
Production continued the trend of increasing through 2016, rising 12% in 
Q3 2016 when compared with the prior quarter (Q2 2016: 217,900 tonnes). 
In turn, production in Q2 2016 showed a 18% increase on production in 
the first quarter (Q1 2016: 185,000 tonnes). These gains have been 
achieved through improved Mineral Separation Plant operating times and a 
higher average HMC production through 2016. 
 
   Zircon production increased 48% to 19,700 tonnes in Q3 2016, compared 
with 13,300 tonnes in Q3 2015. Of this, primary zircon production rose 
31% due to improved recoveries. Higher volumes of secondary zircon 
production, up 90%, were the result of a successful project to recover 
zircon from previously rejected streams. Kenmare is now assessing the 
most efficient way to upgrade more secondary zircon into primary zircon, 
a higher value product. 
 
   Kenmare has reached agreement with the local community for the mining of 
Monte Filipe in the coming months. Monte Filipe is an area of special 
significance to the local community in the dredge path and the community 
expects to hold a traditional ceremony shortly to ratify the signed 
agreement. 
 
   The Moma Mine has benefitted from the increased stability and 
reliability of grid power supplied by Electricidade de Moçambique 
("EdM") throughout 2016. While supplementary diesel-powered generators 
would typically be used towards the end of the fourth quarter, these 
generators will not be turned on as a matter of course but will remain 
on standby should the need arise. 
 
   Sales of total finished products were up 48% to 280,800 tonnes in Q3 
2016 compared to 190,000 tonnes in Q3 2015. Sales demand remains strong, 
however, sales were 9% lower than the prior quarter (Q2 2016: 309,000 
tonnes) due to an ilmenite shipment being loaded over the period end 
which was therefore not reflected in the shipment figures for the 
quarter. Sales in Q3 2016 comprised 259,400 tonnes of ilmenite, 19,800 
tonnes of zircon and 1,600 of rutile. Closing stock of finished products 
at 30 September 2016 was 214,900 tonnes (30 June 2016: 230,100 tonnes), 
of which 60,000 tonnes were being held for a customer and which has been 
subject to an advanced payment. 
 
   Guidance Update 
 
   Production of each final product is expected to be within the range of 
guidance provided at the beginning of the year. Primary zircon 
production has shown a strong increase in the second half of this year 
but the rate of improvement is tracking slightly behind expectations. As 
such, there is a potential for primary zircon to be lower than 
previously thought, however, total zircon production is expected to be 
well within the guided range due to higher secondary zircon volumes. 
 
   Cost control remains a key focus for the Company and it is expected that 
unit costs per tonne of final product produced will reduce considerably 
in the second half of the year due to plant efficiencies, increased 
production and further cost reductions, resulting in full year average 
costs towards the lower end of guidance. 
 
   An update of the 2016 guidance on production and operating costs is as 
follows: 
 
 
 
 
2016 Guidance                                               Original   Updated 
Production 
 Ilmenite                                               kt  855-1,045  890-920 
 Zircon                                                 kt      63-77    65-70 
 of which primary                                       kt      45-55    43-46 
 of which secondary                                     kt      18-22    22-24 
Rutile                                                  kt        7-9      7-8 
Costs 
Cash operating costs per tonne of finished product   US$/t    127-155  131-141 
 
 
 
   Market 
 
   Sulphate ilmenite demand continued to see good improvement in Q3 2016 
with increased activity in China as a result of strong pigment 
production and the ongoing curtailment of Chinese domestic ilmenite 
production. A combination of increased demand, declining supply and 
reduced inventories has seen ilmenite prices recover from the very low 
levels seen at the start of 2016, and this tightening supply outlook is 
forecast to continue. 
 
   Sulphate ilmenite prices globally have also increased and Kenmare has 
agreed higher prices for the second half of 2016 with contracted 
customers (where pricing is set on a six monthly basis) and expects that 
the sustained improvement in market conditions should continue into 
2017. 
 
   Zircon prices were stable through the quarter following some weakness in 

Q2 2016. Some positive trends were evidenced at recent ceramics trade 
shows in Italy that augur well for zircon demand. 
 
   Finance 
 
   As previously announced 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. 
 
   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 
 
 
   Joe Heron / Aimee Beale 
 
 
   Tel: [phone] 
 
 
   Mob: [phone] 
 
 
   Buchanan 
 
   Bobby Morse / Chris Judd 
 
   Tel: [phone] 
 
   Forward Looking Statements 
 
   This announcement contains some forward-looking statements that 
represent Kenmare's expectations for its business, based on current 
expectations about future events, which by their nature involve risks 
and uncertainties. Kenmare believes that its expectations and 
assumptions with respect to these forward-looking statements are 
reasonable. However, because they involve risk and uncertainty, which 
are in some cases beyond Kenmare's control, actual results or 
performance may differ materially from those expressed or implied by 
such forward-looking information. 
 
   This announcement is distributed by Nasdaq Corporate Solutions on behalf 
of Nasdaq Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Kenmare Resources via Globenewswire 
 
 
  http://www.kenmareresources.com/ 
 

(END) Dow Jones Newswires

October 13, 2016 02:00 ET (06:00 GMT)

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