Buy
Sell
Share Name Share Symbol Market Type Share ISIN Share Description
Kenmare Res. LSE:KMR London Ordinary Share IE00BDC5DG00 ORD EUR0.001
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +2.00p +1.01% 200.50p 197.00p 204.00p 200.00p 200.00p 200.00p 13,125 16:35:03
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Mining 205.6 44.0 36.1 5.7 219.75

Kenmare Resources 2018 Preliminary Results

13/03/2019 7:00am

UK Regulatory (RNS & others)


 
TIDMIRSH 
 
 
   Kenmare Resources plc ("Kenmare" or "the Company") 
 
   13 March 2019 
 
   2018 Preliminary Results 
 
   Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global 
producers of titanium minerals and zircon, which operates the Moma 
Titanium Minerals Mine (the "Mine" or "Moma") in northern Mozambique, 
today announces its preliminary results for the twelve months to 31 
December 2018. 
 
   Statement from Michael Carvill, Managing Director: 
 
   "2018 was Kenmare's third consecutive year of achieving our production 
guidance and delivering record shipment volumes. We recorded a 54% 
increase in EBITDA to US$93.3 million (up US$32.8 million) and a 
year-end net cash position of US$13.5 million, compared to US$34.1 
million of net debt at the end of 2017 (up US$47.6 million). Importantly, 
we also achieved a significant improvement in our safety performance, 
with a Lost Time Injury Frequency Rate ("LTIFR") of 0.12 per 200,000 man 
hours worked in 2018, the lowest level to date. 
 
   In terms of our development programme, we made good progress towards our 
core objective of delivering an approximate 20% increase in our 
production rate to 1.2 million tonnes per annum of ilmenite by 2021. The 
first of our three development projects, the 20% expansion of Wet 
Concentrator Plant ("WCP") B, was commissioned during the year, more 
than 25% under budget. The second project, WCP C, is well underway and 
expected to commission in Q4 2019. The definitive feasibility study 
("DFS") for the third project, the move of WCP B to the high grade 
Pilivili ore zone, is on track for completion in H1 2019. 
 
   Average received prices for our products were higher in 2018 compared to 
2017 and we see a positive outlook due to continued demand growth, 
depletion of existing mines and limited supply from new mines in the 
coming years." 
 
   Overview 
 
 
   -- 26% increase in revenues to US$262.2 million (2017: US$208.3 million), 
      primarily due to increased volumes shipped and higher average received 
      prices 
 
   -- 54% increase in EBITDA to US$93.3 million (2017: US$60.5 million) 
 
   -- 162% increase in profit after tax to US$50.9 million (2017: US$19.4 
      million) 
 
   -- Net cash position of US$13.5 million achieved at the end of 2018, up from 
      US$34.1 million net debt at the end of 2017 
 
   -- Mid-point of original 2018 production guidance exceeded for all products 
 
   -- 4% increase in Heavy Mineral Concentrate ("HMC") production to 1,370,800 
      tonnes (2017: 1,323,000 tonnes) 
 
   -- Ilmenite production of 958,500 tonnes (2017: 998,200 tonnes) and primary 
      zircon production of 48,400 tonnes (2017: 48,600 tonnes) 
 
   -- 3% increase in total shipments of finished products to 1,074,400 tonnes, 
      a new annual record (2017: 1,040,400 tonnes) 
 
   -- 11% increase in cash operating costs to US$145 per tonne of final product 
      (2017: US$131 per tonne) due in part to higher utilisation of 
      diesel-powered electric generators 
 
   -- Significant decrease in LTIFR to 0.12 per 200,000 man hours worked in 
      2018 (2017: 0.39) 
 
   -- WCP B upgrade commissioned on time and more than 25% below budget, WCP C 
      construction underway and DFS for WCP B move on track for completion in 
      H1 2019 
 
   Results conference call 
 
   The Company will host a briefing and a conference call for analysts, 
investors and media today at 08:30am UK time. The briefing will be held 
at the offices of Buchanan (107 Cheapside, London, EC2V 6DN) and 
participant dial-in numbers for the conference call are as follows (a 
pin code is not required to access the call): 
 
 
 
 
UK:        +44 203 194 0544 
Ireland:    +353 169 681 82 
 
 
 
   For further information, please contact: 
 
   Kenmare Resources plc 
 
   Michael Carvill, Managing Director 
 
   Tel: +353 1 671 0411 
 
   Tony McCluskey, Financial Director 
 
   Tel: +353 1 671 0411 
 
   Jeremy Dibb, Corporate Development and Investor Relations Manager 
 
   Tel: +353 1 671 0411 
 
   Mob: + 353 87 943 0367 
 
   Murray 
 
   Joe Heron 
 
   Tel: +353 1 498 0300 
 
   Mob: +353 87 690 9735 
 
   Buchanan 
 
   Bobby Morse / Chris Judd 
 
   Tel: +44 207 466 5000 
 
   CHAIRMAN'S STATEMENT 
 
   Dear Shareholders, 
 
   Kenmare has become a stronger and more resilient company in recent years 
and 2018 was another year of robust performance. Increased sales volumes 
and higher commodity prices increased profitability and free cash flow 
generation, resulting in year-end net cash of US$13.5 million, compared 
to net debt of US$34.1 million a year earlier. 
 
   Shareholder return 
 
   Your Board is acutely aware of the need to deliver tangible returns to 
shareholders who have supported the Company through a number of 
difficult years. I am therefore pleased to report that in October 2018, 
Kenmare announced a dividend policy to return a minimum of 20% of profit 
after tax to shareholders. The Company is working towards paying modest 
dividends from 2019, with plans to increase capital returns materially 
from 2021 after our current development projects have been delivered. In 
December 2018, shareholders voted to eliminate Kenmare's historic losses 
and the capital reduction was subsequently confirmed by the High Court 
of Ireland. We are currently in process of completing the group 
rationalisation and addressing the applicable conditions for the payment 
of dividends. 
 
   Growth strategy 
 
   Kenmare has a market-leading position and a well-established business 
model. The Moma Mine in northern Mozambique is a tier-one asset with a 
resource life of over 100 years at planned production levels, supporting 
increased global demand for titanium feedstocks. 
 
   During 2018 we announced plans to expand mining and processing capacity 
to deliver an approximate 20% production increase by 2021. Capital 
investment of approximately US$145 million will be required during the 
next two years to secure this platform for future growth, which will 
also reduce unit costs and expand margins. 
 
   We have also identified opportunities to generate additional revenues 
through the production of Mineral Sands Concentrate, including the rare 
earth mineral monazite, with production having commenced in 2018 and the 
first sales scheduled for 2019. 
 
   Sustainable and responsible operations 
 
   Kenmare has been operating in Mozambique for over 30 years and we 
continue to enjoy strong support from the Government, and the regulatory 
and regional authorities in the country. We are committed to being a 
responsible corporate citizen and to leaving a positive and sustainable 
legacy in our host communities. In 2018, through the Kenmare Moma 
Development Association (KMAD), we supported various community 
initiatives focused on sustainable livelihoods, healthcare and 
education. 
 
   The safety and well-being of our staff and the community near the Moma 
Mine are of the highest importance to everyone at Kenmare. In 2018 I am 
pleased to report zero fatalities and our lowest ever Lost Time Injury 
Frequency Rate of 0.12 per 200,000 man hours worked on site, a credit to 
our team in Mozambique. Our people are our greatest asset and we are 
dedicated to raising our safety standards further during the coming 
years. 
 
   While we believe the presence of the Mine has significantly enhanced the 
well-being of our host communities, we are very conscious of the risks 
associated with mining operations to staff and the surrounding community, 
and hence we pro-actively manage these risks. However sadly, in 2018 
there were some road traffic and other fatal accidents involving 
community members. We are working closely with the community and 
re-doubling our efforts to create a safer environment. 
 
   Corporate governance 
 
   The Board follows corporate governance best practice, including meeting 
the recently strengthened and expanded UK Corporate Governance Code for 
Premium-listed FTSE companies. We are satisfied that the Group has 
fit-for-purpose processes in place for identifying and managing the 
risks faced by the Company, and an effective system of internal controls 
to safeguard the integrity of the business. 
 
   We will be proposing to change our Group audit firm at the 2019 Annual 
General Meeting, in accordance with EU legislation. Hence 2018 is 
expected to be the last year that Deloitte, with whom we have had a 
positive working relationship for many years, will be auditing our 
annual report and accounts. 
 
   Board development 
 
   Your Board recognised the need to ensure that the highest level of 
independent specialist mining industry skills and experience are 
available from our Non-Executive Directors, especially given the 
significant Mine development programme now underway. I was therefore 
pleased to welcome Clever Fonseca as a Non-Executive Director in July 
2018. Clever has over 35 years' experience in the titanium minerals 
industry and extensive knowledge and management experience of mineral 
sands mining, including dredging operations. 
 
   Coincident with Clever's appointment, to maintain the same number of 
Directors and to increase the ratio of Non-Executive Directors to 
Executive Directors, Terry Fitzpatrick retired from the Board. Terry has 
served with great distinction for many years as Technical Director, and 
has now taken up various Board positions with our subsidiary operating 
companies. 
 
   We will continue to evaluate Board composition to ensure that we have 
the skills and expertise necessary for the Company's success. 
 
   2019 outlook 
 
   Kenmare has delivered steady improvements in operating metrics and now 
has the solid foundation required to fund our growth plans. We will be 
assessing additional measures to enhance financial flexibility while we 
deliver our outlined projects, in addition to providing stability and 
protection against inevitable economic and commodity cycles. 
 
   Acknowledgements 
 
   I would like to thank all employees and the management team at Kenmare 
for their outstanding dedication and teamwork during 2018, when they 
delivered material improvements in both safety and profitability, and 
compelling progress on our development projects. 
 
   Finally, I would like to thank all of our shareholders for their 
continued support. My fellow Directors and I are confident that Kenmare 
will continue to create real value for our all of our stakeholders in 
2019 and beyond. 
 
   Steven McTiernan 
 
   Chairman 
 
   MANAGING DIRECTOR'S STATEMENT 
 
   In 2018 Kenmare delivered record total shipments of 1,074,400 tonnes of 
finished products and we achieved improved average received pricing for 
all products. Our financial performance reflected these strong 
operational results, with a 54% increase in EBITDA to US$93.3 million 
and a 162% increase in profit after tax to US$50.9 million. 
 
   In addition, we commissioned the first of three growth projects, on time 
and more than 25% below budget. The growth projects will allow us to 
deliver an approximate 20% increase in ilmenite production (plus 
associated co-products) from 2021. During 2018 we also continued to work 
closely with our partners in Mozambique to maintain a strong social 
licence to operate. 
 
   Safety 
 
   The safety and well-being of our employees and host communities will 
always be our first priority. As promised last year, we have 
strengthened our safety culture, resulting in a decrease in our lost 
time injury frequency rate (LTIFR) to 0.12 per 200,000 man-hours worked 
in 2018 (2017: 0.39). We also retained our five-star NOSA safety 
accreditation. However, we will continue to target further improvement 
and to ensure that safer work practices become embedded in our 
workforce. 
 
   While we believe that the presence of the Mine has created a huge 
improvement in the lives of local people, more traffic and movement of 
heavy mobile equipment has increased certain risks.  Hence in 2019 there 
will be a particular emphasis on community safety through education. 
 
   Sustainability 
 
   We remain committed to being a responsible corporate citizen and I offer 
my thanks to our host communities, local suppliers, the Government of 
Mozambique and our other stakeholders for helping us to achieve this 
goal. We are proud to contribute to the economic growth of the 
communities, region and country in which we work and we value our 
partnerships highly. Kenmare also continues to be an engaged participant 
in the Extractive Industries Transparency Initiative. 
 
   Relations with our stakeholders in Mozambique remain strong, and a key 
highlight of our corporate social responsibility programme in 2018 was 
the completion of a technical school, funded by KMAD. This school will 
provide skills development and training opportunities for local people 
and it is the first secondary school in the local area and the first 
technical school in the region. 
 
   We also progressed our goal to increase the localisation of our 
workforce and at the end of 2018, 95% of our employees were Mozambican, 
compared to 93% the previous year. We also recognise that diversity is a 
key driver of success in modern business and as a result, at the end of 
2018, women represented 7% of our workforce, up from 5% in 2017. 
Kenmare is focused on advancing the interests of women in Mozambique and 
by the end of 2020 we intend that 10% of our employees will be female. 
 
   Achieving new operational records 
 
   The mid-point of our original 2018 production guidance was exceeded for 
all products and volumes of ore mined increased. This was driven by 
improvement in mechanical availability, plant utilisation and the 
upgrade of WCP B, which facilitated higher mining rates. Enhanced 
business systems, better equipment and continued staff training also 
played a part in higher throughputs. 
 
   In December 2018, the Mineral Separation Plant ("MSP") produced at an 
annualised run-rate of 1.2 million tonnes per annum of ilmenite, a new 
monthly operational record, highlighting the operational improvement 
evident when sufficient HMC is available. 
 
   However, costs were marginally above the guided range, due in part to 
higher utilisation of the diesel-powered electric generators in 2018. 
Power has not been a fundamental constraint on Moma's ability to produce 
since 2015, but some instability was experienced in the national grid 
during 2018. Generators were used to provide stable power to the MSP, 
which is particularly sensitive to voltage fluctuations.  We are working 
closely with Electricidade de Moçambique ("EdM"), the state 
electricity grid operator, and work is underway to increase power 
stability. 
 
   Expanding production to 1.2 million tonnes per annum 
 
   At our Capital Markets Day in October 2018, we announced that Kenmare 
intends to expand annual ilmenite production volumes to 1.2 million 
tonnes. We outlined three development projects to fully utilise our 
installed asset base: 
 
 
   -- WCP B expansion - commissioned and operating (delivered on time and more 
      than 25% under budget); 
 
 
   -- WCP C - major contracts have been awarded, construction is well underway 
      and the project is on schedule for commissioning before the end of 2019; 
      and 
 
 
   -- WCP B move to Pilivili -- the DFS will be completed in H1 2019, with the 
      Environmental Impact and Social Action Plan under discussion with the 
      Government of Mozambique and the local community. Commissioning is due 
      before the end of 2020. 
 
 
   Robust product markets 
 
   Kenmare achieved higher average prices for all finished products in 2018 
compared to 2017. The outlook remains positive as existing mines reach 
the later stages of production and, although current prices are 
profitable for Kenmare, they largely remain insufficient to fund the 
development of new projects. 
 
   Kenmare continues to be the largest global producer of merchant ilmenite 
and is the leading supplier to a number of existing ilmenite upgrading 
facilities in China. Additional upgrading plants are set to be 
commissioned in 2019, requiring high quality ilmenite to be imported to 
serve the growing chloride pigment sector in China. We are well 
positioned to benefit from this growth. 
 
   Zircon prices increased by 46% in 2018, following strong global demand 
and limited production growth.  Zircon supply from Indonesia and 
concentrates from various regions for processing in China increased 
during 2018, which, coupled with weaker demand in China, has led to some 
modest softening of prices in the Chinese market towards the end of 
2018. However, zircon production is consolidated and global production 
is forecast to decline due to orebody depletion, supporting long-term 
prices. 
 
   Outlook 
 
   I would like to thank our employees and Board for their continued 
commitment to Kenmare's evolution. The outlook for our products remains 
positive and in combination with our plans to grow ilmenite production 
to 1.2Mtpa, provides a platform for increased cashflows and shareholder 
returns. 
 
   Michael Carvill 
 
   Managing Director 
 
   KENMARE RESOURCES PLC 
 
   CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
 
   AS AT 31 DECEMBER 2018 
 
 
 
 
                                   Notes             2018             2017 
                                                  US$'000            US$'000 
Assets 
Non-current assets 
Property, plant and 
 equipment                             9          806,011          793,630 
Deferred tax asset                                      -            4,160 
                                          ---------------  --------------- 
                                                  806,011          797,790 
                                          ---------------  --------------- 
 
Current assets 
Inventories                                        53,872           52,707 
Trade and other receivables                        22,445           25,412 
Cash and cash equivalents             10           97,030           68,774 
                                          ---------------  --------------- 
                                                  173,347          146,893 
                                          ---------------  --------------- 
 
Total assets                                      979,358          944,683 
                                          ---------------  --------------- 
 
Equity 
Capital and reserves 
 attributable to the 
Company's equity holders 
Called-up share capital               11          215,046          215,046 
Share premium                                     730,897          730,897 
Retained losses                                 (133,179)        (184,053) 
Other reserves                                     35,671           34,251 
                                          ---------------  --------------- 
Total equity                                      848,435          796,141 
                                          ---------------  --------------- 
 
Liabilities 
Non-current liabilities 
Bank loans                            12           61,905           81,174 
Provisions                                         22,359           18,622 
                                          ---------------  --------------- 
                                                   84,264           99,796 
                                          ---------------  --------------- 
 
Current liabilities 
Bank loans                            12           21,558           21,693 
Provisions                                          1,437            1,720 
Other financial liabilities                             1                8 
Trade and other payables                           23,663           25,325 
                                          ---------------  --------------- 
                                                   46,659           48,746 
                                          ---------------  --------------- 
 
Total liabilities                                 130,923          148,542 
                                          ---------------  --------------- 
 
Total equity and 
 liabilities                                      979,358          944,683 
                                          ---------------  --------------- 
 
 
 
   KENMARE RESOURCES PLC 
 
   CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 
 
   FOR THE FINANCIAL YEARED 31 DECEMBER 2018 
 
 
 
 
                                       Notes           2018           2017 
                                                  US$'000         US$'000 
 
 
Revenue                                    2        262,199        208,299 
 
Cost of sales                              4      (168,251)      (156,622) 
                                              -------------  ------------- 
 
Gross profit                                         93,948         51,677 
 
Other operating costs                      5        (31,012        (23,212 
                                              -------------  ------------- 
 
 
  Operating profit                                   62,936         28,465 
 
Finance income                                          871            136 
 
Finance costs                              6         (7,751        (7,680) 
 
Foreign exchange gain/(loss)                             48        (2,473) 
                                              -------------  ------------- 
 
Profit before tax                                    56,104         18,448 
 
Income tax (expense)/credit                7        (5,230)            923 
                                              -------------  ------------- 
 
Profit for the financial year 
and total comprehensive income 
 for the financial year                              50,874         19,371 
                                              -------------  ------------- 
 
Attributable to equity holders                       50,874         19,371 
                                              -------------  ------------- 
 
 
                                              US$ per share    US$ per share 
Profit per share: Basic                    8           0.46           0.18 
                                              -------------  ------------- 
Profit per share: Diluted                  8           0.46           0.18 
                                              -------------  ------------- 
 
 
 
 
   KENMARE RESOURCES PLC 
 
   CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
 
   FOR THE FINANCIAL YEARED 31 DECEMBER 2018 
 
 
 
 
                                        Capital Conversion 
              Called-Up Share   Share         Reserve       Capital Redemption Reserve   Retained   Share-Based Payment 
                  Capital      Premium         Fund                    Fund               Losses          Reserve         Total 
                  US$'000      US$'000       US$'000                 US$'000             US$'000         US$'000         US$'000 
Balance at 1 
 January 
 2017                 215,046  730,897                 754                      10,582  (203,424)                21,911  775,766 
Profit for 
 the 
 financial 
 year                       -        -                   -                           -    19,371                      -   19,371 
Share-based 
 payments                   -        -                   -                           -         -                  1,004    1,004 
              ---------------  -------  ------------------  --------------------------  --------   --------------------  ------- 
Balance at 1 
 January 
 2018                 215,046  730,897                 754                      10,582  (184,053)                22,915  796,141 
Profit for 
 the 
 financial 
 year                       -        -                   -                           -    50,874                      -   50,874 
Share-based 
 payments                   -        -                   -                           -         -                  1,420    1,420 
              ---------------  -------  ------------------  --------------------------  --------   --------------------  ------- 
Balance at 
 31 December 
 2018                 215,046  730,897                 754                      10,582  (133,179)                24,335  848,435 
              ---------------  -------  ------------------  --------------------------  --------   --------------------  ------- 
 
   Capital Conversion Reserve Fund 
 
   The capital conversion reserve fund arose from the renominalisation of 
the Company's share capital from Irish Punts to Euros. 
 
   Capital Redemption Reserve Fund 
 
   The deferred shares of EUR0.25 were created in 1991 by subdividing each 
existing ordinary share of IR25 pence into one deferred share of IR20 
pence and one new ordinary share of IR5 pence.  The deferred shares were 
non-voting, carried no dividend rights, and the Company had the right to 
purchase any or all of these shares at a price not exceeding EUR0.01 per 
share for all the deferred shares so purchased or could execute a 
transfer of such shares without making any payment to the holders. 
 
   On 12 October 2015, it was resolved that the Company acquire all of the 
48,031,467 deferred shares of EUR0.25 each in the capital of the Company 
in issue by transfer or surrender to the Company otherwise than for 
valuable consideration in accordance with Section 102(1)(a) of the 
Companies Act 2014 and Article 3(ii) of the Articles of Association of 
the Company and, in accordance with Section 106(1) of the Companies Act 
2014, cancel such deferred shares. 
 
   Retained Losses 
 
   Retained losses comprise the expenses on the issue of equity in July 
2016 and accumulated profit and losses in the current and prior 
financial years. 
 
   Share-Based Payment Reserve 
 
   The share-based payment reserve arises on the grant of share options and 
shares to certain Directors, employees and consultants under the share 
option scheme, the Kenmare Incentive Plan and the Kenmare Restricted 
Share Plan. 
 
   KENMARE RESOURCES PLC 
 
   CONSOLIDATED STATEMENT OF CASH FLOWS 
 
   FOR THE FINANCIAL YEARED 31 DECEMBER 2018 
 
 
 
 
                                                        Notes   2018      2017 
                                                               US$'000      US$'000 
 
 
Operating activities 
Profit for the financial year before tax                        56,104    18,448 
                                                        ----- 
Adjustment for: 
Foreign exchange movement                                          (48)    2,473 
Share-based payments                                        5    1,420     1,004 
Finance income                                                    (871)     (136) 
Finance costs                                               6    7,751     7,680 
Depreciation                                                9   30,442    32,000 
(Decrease)/increase in other financial liabilities                  (7)        4 
Increase/(decrease) in provisions                                  210      (315) 
                                                               -------   ------- 
Operating cash flow                                             95,001    61,158 
 
Increase in inventories                                         (1,165)   (4,960) 
Decrease in trade and other receivables                          1,556    (2,458) 
Decrease in trade and other payables                            (3,080)   (8,481) 
                                                               -------   ------- 
Cash from operations                                            92,314    45,259 
 
Interest received                                                  871       136 
Interest paid                                              12   (6,227)   (6,051) 
                                                               -------   ------- 
 
Net cash from operating activities                              86,958    39,344 
                                                        -----  -------   ------- 
 
Investing activities 
Additions to property, plant and equipment                  9  (39,761)  (28,055) 
                                                               -------   ------- 
 
Net cash used in investing activities                          (39,761)  (28,055) 
                                                               -------   ------- 
 
Financing activities 
Repayment of debt                                          12  (19,048)        - 
Payment of obligations under finance leases                          -      (280) 
                                                               -------   ------- 
 
Net cash used in financing activities                          (19,048)     (280) 
                                                               -------   ------- 
 
Net increase in cash and cash equivalents                       28,149    11,009 
 
Cash and cash equivalents at the beginning of the 
 financial year                                                 68,774    57,786 
                                                        ----- 
Effect of exchange rate changes on cash and cash 
 equivalents                                                       106       (21) 
                                                        -----  -------   ------- 
 
Cash and cash equivalents at the end of the financial 
 year                                                      10   97,030    68,774 
                                                               -------   ------- 
 
 
 
   KENMARE RESOURCES PLC 
 
   NOTES TO THE FINANCIAL STATEMENTS 
 
   FOR THE FINANCIAL YEARED 31 DECEMBER 2018 
 
   1. STATEMENT OF ACCOUNTING POLICIES 
 
   On 12 March 2019, the Directors approved the preliminary results for 
publication. While the unaudited consolidated financial statements for 
the year ended 31 December 2018, from which the preliminary results have 
been extracted, are prepared in accordance with International Financial 
Reporting Standards (IFRS) as adopted by the European Union, these 
preliminary results do not contain sufficient information to comply with 
IFRS. The Directors expect to publish the full financial statements that 
comply with IFRS as adopted by the European Union in March 2018. 
 
   Based on the Group's cash flow forecast, the Directors believe that the 
Group has adequate resources for the foreseeable future and continue to 
adopt the going concern basis of accounting in preparing the annual 
financial statements. 
 
   The auditors have not yet issued their audit opinion on the financial 
statements in respect of the year ended 31 December 2018. The financial 
information included within this unaudited preliminary results statement 
for the years ended 31 December 2018 and 31 December 2017 does not 
constitute the statutory financial statements of the Company within the 
meaning of section 293 of the Companies Act 2014. The Group financial 
information in this preliminary statement for the year ended 31 December 
2018 is unaudited. A copy of the statutory financial statements in 
respect of the year ended 31 December 2018 will be annexed to the next 
annual return and filed with the Registrar of Companies. 
 
   The Group financial information for the year ended 31 December 2017 
included in this preliminary statement represents an abbreviated version 
of the Company's group financial statements for that year. The statutory 
financial statements for the Group for the year ended 31 December 2017, 
upon which the auditors have issued an unqualified opinion, but with an 
emphasis of matter drawing attention to the recoverability of assets of 
the Group, were annexed to the annual return of the company and filed 
with the Registrar of Companies. 
 
   In the current year the Group has applied IFRS 9 Financial Instruments 
and IFRS 15 Revenue from Contracts with Customers. The impact of these 
accounting policies, method of computation and presentation applied by 
the Group are detailed below. 
 
   IFRS 9 Financial Instruments 
 
   IFRS 9 introduces new requirements for the classification and 
measurement and impairment for financial assets and general hedge 
accounting. 
 
   Classification of financial assets and liabilities 
 
   IFRS 9 largely retains the existing requirements in IAS 39 for the 
classification and measurement of financial liabilities. However, it 
eliminates the previous IAS 39 categories for financial assets of held 
to maturity, loans and receivables and available for sale. The adoption 
of IFRS 9 has not had a significant effect on the Group's accounting 
policies related to financial liabilities in particular the bank debts. 
Under IFRS 9 the classification and measurement of financial assets is 
that they are measured at amortised cost if they are not designated as 
at fair value through profit and loss, if they are held within a 
business model whose objective is to hold assets to collect contractual 
cash flows and contractual terms give rise on specified dates to cash 
flows that are solely payments of principal and interest on the 
principal amount outstanding. 
 
   As at 31 December 2018 financial assets except for trade receivables 
which can be factored are measured at amortised costs. The Group has 
trade finance facilities with Absa Corporate and Business Bank and 
Barclays Bank and may elect to receive early payment for certain 
customers of their invoice from the banks by factoring the receivable. 
These facilities assist the Group in managing its liquidity for funding 
of operations. Trade receivables which are always factored are measured 
at fair value through profit or loss (FVTPL). Trade receivables where it 
is not known at initial recognition if they will be factored are 
classified as fair value through other comprehensive income (FVOCI). 
This is because their cashflows are generated through a combination of 
collection and sales (by factoring). At 31 December 2018 the Group had 
trade receivables which it can factor of US$2.0 million.  At 1 January 
2018 the Group had trade receivables which it can factor of US$8.5 
million. 
 
   Impairment 
 
   In relation to the impairment of financial assets, IFRS 9 requires an 
expected credit loss model as opposed to an incurred credit loss model 
under IAS 39. The expected credit loss model requires the Group to 
account for expected credit losses and changes in those expected credit 
losses at each reporting date to reflect changes in credit risk since 
initial recognition of the financial assets. It is no longer necessary 
for a credit event to have occurred before credit losses are recognised. 
 
   The Group measures the loss allowance for all trade receivables (those 
which cannot be factored, those that are always factored and those which 
can be factored) at an amount equal to lifetime expected credit losses. 
The expected credit losses on trade receivables are estimated by 
reference to past default experience of the debtor and an analysis of 
the debtor's current financial position, adjusted for factors that are 
specific to the debtors, general economic conditions of the industry and 
an assessment of both the current as well as the forecast direction of 
those conditions at the reporting date. Sales to certain customers are 
done on a letter of credit basis thereby reducing the credit risk of 
these customers. 
 
   The Group writes off a trade receivable when there is information 
indicating that the debtor is in severe financial difficulty and there 
is no realistic prospect of recovery e.g. when the debtor has been 
placed in liquidation or has entered into bankruptcy proceedings. 
 
   As at 1 January 2018, the Group reviewed and assessed the Group's 
existing trade receivables for impairment using reasonable and 
supportable information to determine the credit risk of the respective 
customers at the date they were initially recognised. Trade receivables 
at 1 January 2018 had Moody's credit ratings ranging from Ba2 to A3, had 
no history of bad debts, were all current and payable in a period of two 
months and had no additional factors which could result in an expected 
future credit loss. 
 
   Trade receivables at 31 December 2018 had Moody's credit ratings ranging 
from Ba2 to A3, had no history of bad debts, were all current and 
payable in a period of three months and had no additional factors which 
could result in an expected future credit loss. As a result, no loss 
allowance was recognised to 31 December 2018. 
 
   IFRS 15 Revenue from Contracts with Customers 
 
   IFRS 15 establishes a single comprehensive model for entities to use in 
accounting for revenue arising from contracts with customers. In the 
current year the Group has adopted IFRS 15 and has elected to apply the 
modified retrospective approach without restatement of comparatives. The 
Group has not used any of the practical expedients in adoption of the 
standard. 
 
   The core principle of IFRS 15 is that an entity should recognise revenue 
to depict the transfer of promised goods or services to customers in an 
amount that reflects the consideration to which the entity expects to be 
entitled in exchange for those goods or services. 
 
   The Group has a mixture of long term and spot contracts with customers 
for the sale of mineral products ilmenite, zircon and rutile. The 
contracts stipulate price and/or quantity commitments. The long-term 
contracts range over periods from one to three years. The spot contracts 
deal with one-off sales. The performance obligations in relation to the 
sale of mineral products are similar under all the contracts and 
stipulate that the Group deliver the specified product to the customer. 
Delivery takes place when the product is loaded on the ocean-going 
vessel chartered by either the customer or the Group at the port at the 
mine. Control of the mineral products passes from the Group to the 
customer on delivery. Sale of mineral products are recognised when the 
products are delivered. As these performance criteria and sales 
recognition have remained unchanged from previous years, the adoption of 
IFRS 15 has not resulted in a material impact on the revenue recognised 
in the period. 
 
   The Group sells its mineral products on the Incoterms Free on Board 
(FOB), Cost and Freight (CFR), Cost, Insurance and Freight (CIF). For 
mineral products sold on an FOB basis, the customer is responsible for 
freight and insurance. For FOB sales where the Group acts solely as an 
agent for the customer in respect to the shipping, amounts billed to 
customers for shipping are offset against the relevant costs. 
 
   For mineral products sold on a CFR and CIF basis, the Group is 
responsible for providing shipping services and, in the case of CIF, 
insurance after the date at which control of the mineral products passes 
to the customer on loading at the port of the mine. Sale of shipping 
services are recognised when these performance obligations are met. The 
costs of freight and insurance in relation to CFR and CIF shipments are 
recognised in other operating costs. 
 
   During the period the Group's marketing arrangements changed whereby 
ilmenite sales to China previously on an FOB basis were sold on a CFR 
basis. This resulted in freight recognised in revenue of US$16.3 million 
(2017: US$5.5 million). This change is not as a result of the adoption 
of IFRS15. 
 
 
 
   There is no material variable consideration, significant financing 
component or other material rights in the customer contracts which would 
require a change in revenue accounting. 
 
   2.  REVENUE 
 
 
 
 
                            2018     2017 
                           US$'000  US$'000 
Sale of mineral products   262,199  208,299 
 
 
   During the financial year, the Group sold 1,074,400 tonnes (2017: 
1,040,400 tonnes) of finished products ilmenite, rutile and zircon to 
customers at a sales value of US$262.2 million (2017: US$208.3 million). 
 
   3.  SEGMENT REPORTING 
 
   Information on the operations of the Moma Titanium Minerals Mine in 
Mozambique is reported to the Board for the purposes of resource 
allocation and assessment of segment performance. Information regarding 
the Group's operating segment is reported below. 
 
 
 
 
Segment revenues and results 
                                            2018       2017 
Moma Titanium Minerals Mine                US$'000       US$'000 
Revenue                                    262,199    208,299 
Cost of sales                             (168,251)  (156,622) 
                                          --------   -------- 
Gross profit                                93,948     51,677 
Other operating costs                      (26,960)   (20,572) 
                                          --------   -------- 
Segment operating profit                    66,988     31,105 
 
Other corporate operating costs             (4,052)    (2,640) 
                                          --------   -------- 
 
Group operating profit                      62 936     28,465 
 
 
  Finance income                               871        136 
Finance expenses                            (7,751)    (7,680) 
Foreign exchange gain/(loss)                    48     (2,473) 
                                          --------   -------- 
Profit before tax                           56,104     18,448 
Income tax (expense)/credit                 (5,230)       923 
                                          --------   -------- 
Profit for the financial year               50,874     19,371 
                                          --------   -------- 
 
Segment assets 
Moma Titanium Minerals Mine assets         922,652    885,892 
Corporate assets                            56,706     58,791 
                                          --------   -------- 
Total assets                               979,358    944,683 
                                          --------   -------- 
 
Segment liabilities 
Moma Titanium Minerals Mine liabilities    125,656    143,575 
Corporate liabilities                        5,267      4,967 
                                          --------   -------- 
Total liabilities                          130,923    148,542 
                                          --------   -------- 
 
Other segment information 
                                          ---------  ----------- 
Depreciation and amortisation 
Moma Titanium Minerals Mine                 30,307     31,997 
Corporate                                      135          3 
                                          --------   -------- 
Total                                       30,442     32,000 
                                          --------   -------- 
 
Additions to non-current assets 
                                          ---------  ----------- 
Moma Titanium Minerals Mine                 39,606     28,550 
Corporate                                      445        601 
                                          --------   -------- 
Total                                       40,051     29,151 
                                          --------   -------- 
 
 
 
 
 
 
Revenue from major products 
                               2018     2017 
                              US$'000  US$'000 
Ilmenite                      181,776  152,614 
Zircon                         75,385   51,703 
Rutile                          5,038    3,982 
                              -------  ------- 
Total                         262,199  208,299 
                              -------  ------- 
 
 
 
 
 
 
Geographical information           2018     2017 
Revenue from external customers   US$'000  US$'000 
 
China                             103,196   95,462 
USA                                27,760   31,957 
Italy                              22,871   22,249 
Rest of the world                 108,372   58,631 
                                  -------  ------- 
Total                             262,199  208,299 
                                  -------  ------- 
 
 
   The Group's revenue from external customers is generated by the Moma 
Titanium Minerals Mine, the non-current assets of which are US$802.2 
million (2017: US$797.2 million). 
 
   Cost of sales for the financial year amounted to US$168.3 million (2017: 
US$156.6 million), including depreciation and amortisation of US$26.4 
million (2017: US$27.1 million). 
 
   Information about major customers 
 
   Included in revenues are US$37.6 million (2017: US$72.5 million) from 
sales to the Group's largest customer, US$29.8 million (2017: US$37.0 
million) from sales to the Group's second largest customer and US$28.5 
million (2017: US$23.9 million) from sales to the Group's third largest 
customer. All revenues are generated by the Moma Titanium Minerals Mine. 
 
   4.  COST OF SALES 
 
 
 
 
                                     2018      2017 
                                    US$'000      US$'000 
Opening stock of mineral products    30,882    30,631 
Production costs                    141,997   129,816 
Depreciation                         26,409    27,057 
Closing stock of mineral products   (31,037)  (30,882) 
                                    -------   ------- 
Total                               168,251   156,622 
                                    -------   ------- 
 
 
   Mineral products consist of finished products, intermediate magnetic 
concentrate and heavy mineral concentrate. Mineral stock value increased 
by US$0.1 million (2017: US$0.3 million increase). 
 
   5.  OTHER OPERATING COSTS 
 
 
 
 
                                         2018     2017 
                                        US$'000  US$'000 
Distribution costs                        9,458   10,587 
Freight and demurrage costs              16,873    5,538 
Administration costs                      4,681    3,321 
Arbitration costs                             -    3,766 
                                        -------  ------- 
Total                                    31,012   23,212 
                                        -------  ------- 
 
Included in administration costs are: 
                                        -------  ------- 
Share-based payments                      1,420    1,004 
                                        -------  ------- 
 
 
   Distribution costs of US$9.5 million (2017: US$10.6 million) represent 
the cost of running the Mine's finished product storage, jetty and 
marine fleet. Included in distribution costs is depreciation of US$3.9 
million (2017: US$4.9 million). Freight costs of US$16.3 million (2017: 
US$5.5 million) arise from sales to customers on a CIF or CFR basis. 
Demurrage costs were US$0.6 million (2017: US$0.05 million) during the 
financial year. Administration costs of US$4.7 million (2017: US$3.3 
million) are the Group administration costs and include depreciation of 
US$0.1 million (2017: nil) and share-based payments of US$1.4 million 
(2017: US$1.0 million). There were arbitration costs incurred in 2017 of 
US$3.8 million. 
 
   6.  FINANCE COSTS 
 
 
 
 
                                                    2018     2017 
                                                   US$'000  US$'000 
 
  Interest on bank borrowings                        5,871    6,300 
Finance lease interest                                   -       16 
Change in fair value of warrants                         -        4 
Factoring fees                                       1,409      882 
Mine closure provision unwinding of the discount       471      478 
                                                   -------  ------- 
Total                                                7,751    7,680 
                                                   -------  ------- 
 
 
   The interest on all Group borrowings has been expensed in the financial 
year. 
 
   7.  INCOME TAX EXPENSE 
 
 
 
 
                   2018     2017 
                  US$'000    US$'000 
Corporation tax     1,070       - 
Deferred tax        4,160    (923) 
                  -------  ------ 
Total               5,230    (923) 
                  -------  ------ 
 
 
 
 
 
 
Reconciliation of effective tax rate 
Profit before tax                                       56,104     18,448 
                                                       -------   -------- 
 
 
  Profit before tax multiplied by the applicable tax 
  rate (12.5%)                                           7,013     (2,306   ) 
Differences in effective tax rates on overseas 
 earnings                                               (7,013)     2,306 
Taxes on overseas earnings                               1,070          - 
Applied losses                                           4,160      1,157 
Recognition of deferred tax asset                            -     (2,080) 
                                                       -------   -------- 
Total                                                    5,230       (923) 
                                                       -------   -------- 
 
 
   GROUP 
 
   An income tax expense of US$5.2 million (2017: credit US$0.9 million) 
has been recognised during the year ended 31 December 2018. During the 
year the Group had taxable profits of US$14.6 million (2017: US$6.6 
million). US$11.9 million (2017: US$6.6 million) of tax losses were 
offset against the taxable profit resulting in a tax charge of US$4.2 
million being recognised.  The income tax payable on the balance of the 
taxable profits was US$1.1 million. 
 
   The income tax rate applicable to taxable profits of Kenmare Moma Mining 
(Mauritius) Limited is 35%. 
 
   Kenmare Moma Mining (Mauritius) limited is charged a royalty of 3% based 
on heavy mineral concentrate sold to Kenmare Moma Processing (Mauritius) 
Limited. The royalty charge payable to the Government of Mozambique for 
the financial year ended 31 December 2018 was US$3.0 million (2017: 
US$2.9 million) and is recognised in cost of sales for the financial 
year or inventory at 31 December 2018. Under the fiscal regime 
applicable to mining activities, Kenmare Moma Mining (Mauritius) Limited 
is exempted from import and export taxes and VAT on imports.  The 
Company has elected and the fiscal regime applicable to mining allows 
for the option to deduct as an allowable deduction depreciation of 
exploration and development expense and capital expenditure over the 
life of mine. Whilst withholding tax is levied on certain payments to 
non-residents, mining companies are exempt from withholding tax on 
dividends for the first ten years or until their investment is recovered, 
whichever is earlier. The withholding tax charge payable to the 
Government of Mozambique for the financial year ended 31 December 2018 
was US$1.1 million (2017: US$0.9 million). 
 
   Deferred tax is the tax expected to be payable or recoverable on 
differences between the carrying amount of assets and liabilities in the 
financial statements and the corresponding tax bases used in the 
computation of taxable profit, and is accounted for using the Statement 
of Financial Position liability method. The fiscal regime applicable to 
mining allows for the option to use accumulation of exploration and 
development expense and optional depreciation at 25% per annum with tax 
losses allowed to be carried forward for three years. 
 
   Kenmare Moma Processing (Mauritius) Limited has Industrial Free Zone 
(IFZ) status. As an IFZ company, it is exempted from import and export 
taxes, VAT and other corporation taxes. Kenmare Moma Processing 
(Mauritius) Limited is charged a revenue tax of 1%. The revenue tax 
payable to the Government of Mozambique for the financial year ended 31 
December 2018 was US$2.6 million (2017: US$2.1 million) and is 
recognised in cost of sales for the financial year. There is no dividend 
withholding tax under the IFZ regime. 
 
   8. EARNINGS PER SHARE 
 
   The calculation of the basic and diluted earnings per share attributable 
to the ordinary equity holders of the parent is based on the following 
data: 
 
 
 
 
 
                                                          2018         2017 
                                                         US$'000      US$'000 
 
Profit for the financial year attributable to equity 
 holders of the parent                                      50,874       19,371 
                                                       -----------  ----------- 
 
                                                              2018         2017 
                                                         Number of    Number of 
                                                            shares       shares 
 
Weighted average number of issued ordinary shares 
 for 
 the purpose of basic earnings per share               109,601,551  109,601,551 
 
Effect of dilutive potential ordinary shares: 
Share awards                                             1,061,983      412,101 
                                                       -----------  ----------- 
Weighted average number of ordinary shares for 
 the purposes of diluted earnings per share            110,663,534  110,013,652 
                                                       -----------  ----------- 
 
                                                           US$ per      US$ per 
                                                             share        share 
 
Earnings per share: basic                                     0.46         0.18 
                                                       -----------  ----------- 
 
Earnings per share: diluted                                   0.46         0.18 
                                                       -----------  ----------- 
 
 
   9. PROPERTY, PLANT AND EQUIPMENT 
 
 
 
 
                    Plant &   Development   Construction    Other      Total 
                   Equipment  Expenditure   In Progress    Assets 
                    US$'000     US$'000       US$'000      US$'000    US$'000 
Cost 
At 1 January 2017   774,745       249,984     5,418        53,836   1,083,983 
Transfer from 
construction in 
progress              1,786           342    (3,166     )   1,038           - 
Additions during 
 the financial 
 year                   557             -    27,993           601      29,151 
Disposals                 -             -         -          (375)       (375) 
Adjustment to 
 mine closure 
 cost                 2,604             -         -             -       2,604 
Reclassification 
 of assets              479             -         -          (479)          - 
                   --------   -----------  --------        ------   --------- 
 
At 1 January 2018   780,171       250,326    30,245        54,621   1,115,363 
Transfer from 
 construction in 
 progress            13,690             -   (28,034)       14,344           - 
Additions during 
 the financial 
 year                   179             -    39,427           445      40,051 
Disposals              (941)            -         -        (5,959)     (6,900) 
Adjustment to 
 mine closure 
 cost                 2,772             -         -             -       2,772 
                   --------   -----------  --------        ------   --------- 
 
At 31 December 
 2018               795,871       250,326    41,638        63,451   1,151,286 
                   --------   -----------  --------        ------   --------- 
 
Accumulated 
Depreciation 
At 1 January 2017   143,635       114,980         -        31,493     290,108 
Charge for the 
 financial year      22,264         6,043         -         3,693      32,000 
Disposals                 -             -         -          (375)       (375) 
                   --------   -----------  --------        ------   --------- 
 
At 1 January 2017   165,899       121,023         -        34,811     321,733 
Charge for the 
 financial year      22,041         5,500         -         2,901      30,442 
Disposals              (941)            -         -        (5,959)     (6,900) 
                   --------   -----------  --------        ------   --------- 
At 31 December 
 2018               186,999       126,523         -        31,753     345,275 
                   --------   -----------  --------        ------   --------- 
 
Carrying Amount 
At 31 December 
 2018               608,872       123,803    41,638        31,698     806,011 
                   --------   -----------  --------        ------   --------- 
 
At 31 December 
 2017               614,272       129,303    30,245        19,810     793,630 
                   --------   -----------  --------        ------   --------- 
 
 
 
 
   During the financial year the Group carried out an impairment review of 
property, plant and equipment. The cash-generating unit for the purpose 
of impairment testing is the Moma Titanium Minerals Mine. The basis on 
which the recoverable amount of the Moma Titanium Minerals Mine is 
assessed is its value in use.  The cash flow forecast employed for the 
value-in-use computation is from a life of mine financial model. The 
recoverable amount obtained from the financial model represents the 
present value of the future pre-tax, pre-finance cash flows discounted 
at 12%. 
 
   Key assumptions include the following: 
 
 
   -- The discount rate is based on the Group's weighted average cost of 
      capital. This rate is a best estimate of the current market assessment of 
      the time value of money and the risks specific to the Mine, taking into 
      consideration country risk, currency risk and price risk. The factors 
      making up the cost of equity, cost of debt and capital structure have 
      changed from the prior year review resulting in a discount rate of 12%. 
      The Group does not consider it appropriate to apply the full current 
      country risk premium to the calculation of the Group's weighted average 
      cost of capital as it believes the specific circumstances which have 
      resulted in the county risk increase over the past number of years are 
      not appropriate to the specific circumstances of the Moma Mine.  Hence, 
      the calculation of country risk applicable to the calculation of the cost 
      of equity has been adjusted accordingly. 
 
 
   Using a discount rate of 12%, the recoverable amount is greater than the 
carrying amount by US$201.3 million. The discount rate is a significant 
factor in determining the recoverable amount. A 1% increase in the 
discount rate to 13% which management believes could be a reasonably 
possible change in this assumption, would result in the recoverable 
amount being greater than the carrying amount by US$114.7 million. A 1% 
increase in the discount rate in the prior year to 12.5% would have 
resulted in the recoverable amount being greater than the carrying 
amount by US$81.3 million. The improvement in the recoverable amount 
from the prior year is a result of increased production in the near term 
as a result of the change in mine plan assumptions detailed below. 
 
 
   -- A mine plan based on the Namalope, Nataka and Pilivili proved and 
      probable reserves which runs to 2058. The Mine life assumption of 40 
      years has not changed from the prior year review. 
 
   -- Average annual production is approximately 1.1 million tonnes (2017: 0.9 
      million tonnes) of ilmenite plus co-products zircon and rutile over the 
      life of the mine. This mine plan does not include investment in 
      additional mining capacity. Certain minimum stocks of final and 
      intermediate products are assumed to be maintained at period ends. The 
      average annual production of final products has increased from the prior 
      year due to the mine optimisation of WCP A in the Nataka orebody and an 
      update of the production forecast for WCP B mining in the Pilivili 
      orebody. 
 
   -- Product sales prices are based on contract prices as stipulated in 
      marketing agreements with customers, or where contracts are based on 
      market prices or production is not presently contracted, prices are 
      forecast by the Group taking into account independent titanium mineral 
      sands expertise and management expectations including general inflation 
      of 2% per annum. Average forecast product sales prices have decreased 
      slightly over the life of mine from the prior year end review as a result 
      of revised forecast pricing. An 8% reduction in average sales prices over 
      the life of mine reduces the recoverable amount by US$201.3 million. 
 
   -- Operating costs are based on approved budget costs for 2019 taking into 
      account the current running costs of the mine and escalated by 2% per 
      annum thereafter. Average forecast operating costs have increased from 
      the prior year end review as a result of increased operating costs in 
      2018, which formed the basis for the 2019 budget and life of mine 
      forecast thereafter. A 16% increase in operating costs over the life of 
      mine reduces the recoverable amount by US$201.3 million. 
 
   -- Sustaining capital costs are based on a life of mine capital plan 
      considering inflation at 2% per annum from 2019.  Average forecast 
      sustaining capital costs have increased from the prior year end review as 
      based on updated sustaining capital plans required to maintain the 
      existing plant over the life of mine. The forecast takes into account 
      reasonable cost increases and therefore a sensitivity to this assumption 
      has not been applied which would give rise to a reduction in the 
      recoverable amount. 
 
 
   As a result of the review no impairment provision was recognised in the 
current financial year. No impairment was recognised in the prior 
financial year. Given the sensitivities of the forecast to the discount 
rate, pricing and to a lesser extent operating costs the impairment loss 
of US$64.8 million which was recognised in the Consolidated Statement of 
Comprehensive Income in 2014 is not reversed. 
 
   Depreciation during the year was US$30.4 million (2017: US$32.0 
million). 
 
   There was an adjustment to the mine closure cost of US$2.8 million 
(2017: US$2.6 million) during 2018 as a result of a change in the 
estimated closure cost. 
 
   Included in other assets is an amount of US$0.9 million (2017: US$0.6 
million) in respect of leasehold property and motor vehicles of the 
Company. There was depreciation of US$0.1 million (2017: nil) during the 
year on these assets . 
 
   Included in plant and equipment are capital spares of US$2.9 million 
(2017: US$2.6 million). 
 
   During the year there were disposals of property, plant and equipment of 
US$6.9 million (2017: US$0.4 million). 
 
   Substantially, all the property, plant and equipment of the Group is or 
will be mortgaged, pledged or otherwise secured to provide collateral 
for the Group's Senior and Subordinated Loans as detailed in Note 12. 
 
   The recovery of property, plant and equipment is dependent upon the 
successful operation of the Moma Titanium Minerals Mine; the realisation 
of the cash flow forecast assumptions as set out in this note would 
result in the recovery of such amounts.  The Directors are satisfied 
that at the Statement of Financial Position date, the recoverable amount 
of property, plant and equipment exceeds its carrying amount and, based 
on the planned mine production levels that, the Moma Titanium Minerals 
Mine will continue to achieve positive cash flows. 
 
   10. CASH AND CASH EQUIVALENTS 
 
 
 
 
                                   GROUP            COMPANY 
                               2018     2017     2018     2017 
                              US$'000  US$'000  US$'000  US$'000 
Immediately available 
 without restriction           55,099   57,866   32,671   43,208 
Contingency Reserve Account         2        2        -        - 
Project Companies' Account     41,929   10,906        -        - 
                              -------  -------  -------  ------- 
                               97,030   68,774   32,671   43,208 
                              -------  -------  -------  ------- 
 
 
   Cash and cash equivalents comprise cash balances held for the purposes 
of meeting short-term cash commitments and investments which are readily 
convertible to a known amount of cash and are subject to an 
insignificant risk of change in value. Where investments are categorised 
as cash equivalents, the related balances have a maturity of three 
months or less from the date of investment. 
 
   The Contingency Reserve Account ("CRA") is an account established under 
a cash collateral and shareholder funding deed to provide for 
shareholder funding to the Project Companies and to secure the 
obligations of the Company and Congolone Heavy Minerals Limited (a 
wholly-owned subsidiary undertaking) under the Completion Agreement. 
 
   Interest rate risk 
 
   Cash at bank earns interest at variable rates based on daily bank 
deposit rates, which may be zero. Short-term deposits are made for 
varying periods of between one day and three months, depending on the 
cash requirements of the Group, and earn interest at the respective 
short-term deposit rates.  The interest rate profile of the Group's cash 
balances at the financial year end was as follows: 
 
 
 
 
                                                            2018        2017 
                                                         US$'000     US$'000 
Cash and cash equivalents at variable interest rate       70,789      52,205 
Cash at bank on which no interest is received             26,241      16,569 
                                                      ----------  ---------- 
                                                          97,030      68,774 
                                                      ----------  ---------- 
 
 
   Currency risk 
 
   The currency profile of cash and cash equivalents at the financial year 
end is as follows: 
 
 
 
 
GROUP                    2018           2017 
                           US$'000        US$'000 
 
US Dollar                   94,556         66,721 
South African Rand           1,956             10 
Mozambican Metical             307            460 
Euro                           109            583 
Sterling                        51            957 
Renminbi                        33             24 
Australian Dollars              18             19 
                     -------------  ------------- 
                            97,030         68,774 
                     -------------  ------------- 
 
 
   Fluctuations in the currencies noted above will impact on the Group's 
financial results. 
 
   Credit risk 
 
   The credit risk on cash and cash equivalents is limited because funds 
available to the Group are deposited with banks with high credit ratings 
assigned by international credit rating agencies. For deposits in excess 
of US$50 million the Group requires that the institution has an A 
(S&P)/A2 (Moody's) long-term rating. For deposits in excess of US$20 
million or South African Rand-denominated deposits, the Group requires 
that the institution has a BBB+ (S&P)/Baa1 (Moody's) long-term rating. 
US$74.4 million of the bank deposits are with Barclays Bank plc, which 
has a long-term credit rating of A Stable (S&P)/A2 Stable (Moody's). 
US$22.4 million of the bank deposits are with HSBC plc which has a 
long-term credit rating of AA- Stable (S&P)/Aa3 Stable (Moody's). 
 
 
   11. CALLED-UP SHARE CAPITAL 
 
 
 
 
                                                          2018        2017 
                                                       EUR'000     EUR'000 
Authorised share capital 
181,000,000 ordinary shares of EUR0.001 each               181         181 
4,000,000,000 deferred shares of EUR0.059995 each      239,980     239,980 
                                                    ----------  ---------- 
                                                       240,161     240,161 
                                                    ----------  ---------- 
 
                                                          2018        2017 
                                                       US$'000     US$'000 
Allotted, called up and fully paid 
                                                    ----------  ---------- 
Ordinary shares 
                                                    ----------  ---------- 
Opening and closing balance 
                                                    ----------  ---------- 
109,601,551 ordinary shares of EUR0.001 each               120         120 
2,781,905,503 deferred shares of EUR0.059995 each      214,926     214,926 
                                                    ----------  ---------- 
Total called-up share capital                          215,046     215,046 
                                                    ----------  ---------- 
 
 
 
 
   12. BANK LOANS 
 
 
 
 
                                                    2018             2017 
                                                  US$'000          US$'000 
Project Loans 
 Senior Loans                                      16,055          25,902 
 Subordinated Loans                                67,408          76,965 
                                            -------------   ------------- 
 Total Project Loans                               83,463         102,867 
                                            -------------   ------------- 
 
The borrowings are repayable as follows: 
Within one year                                    21,558          21,693 
In the second year                                 19,048          19,048 
In the third to fifth years inclusive              42,857          62,126 
                                            -------------   ------------- 
                                                   83,463         102,867 
Less: amount due for settlement within 
 twelve months                                    (21,558)        (21,693) 
                                            -------------   ------------- 
Amount due for settlement after twelve 
 months                                            61,905          81,174 
                                            -------------   ------------- 
 
 
  Project Loans 
Balance at 1 January                              102,867         102,618 
Loan interest accrued                               5,871           6,300 
Loan interest paid                                 (6,227)         (6,051) 
Principal paid                                    (19,048)              - 
                                            -------------   ------------- 
Balance at 31 December                             83,463         102,867 
                                            -------------   ------------- 
 
   Project Loans 
 
   Project Loans have been made to the Mozambique branches of Kenmare Moma 
Mining (Mauritius) Limited and Kenmare Moma Processing (Mauritius) 
Limited (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. 
 
   Senior debt ranks in priority to subordinated debt in repayment, subject 
to the waterfall provision summarised below, on insolvency of the Group 
and on enforcement of security. 
 
   Voting thresholds are calculated on the basis of aggregate outstanding 
debt, being the aggregate of outstanding senior debt and outstanding 
subordinated debt. Decisions are taken by majority Lenders (Lenders 
whose principal amount of outstanding debt aggregate more than 50.1% of 
all outstanding debt) or supermajority Lenders (Lenders whose principal 
amount of outstanding debt aggregate more than 66.7% of all outstanding 
debt). 
 
   In October 2018 the Company announced a dividend policy to return a 
minimum of 20% of profit after tax to shareholders and noted that the 
payment of a dividend would require the completion of a capital 
reduction to capitalise historic losses for Kenmare Resources plc as 
well as a group restructuring to put in place the internal mechanics to 
permit profits generated by the Project Companies to be paid as 
dividends to shareholders. The Group and the Lenders entered into a 
Conditional Consent Agreement on 15 October 2018 which, amongst other 
things, provided for the capital reduction of Kenmare Resources plc and 
restructuring of the Group. In relation to the capital reduction, on 5 
December 2018 the shareholders approved the capital reduction, the High 
Court of Ireland confirmed the capital reduction at the start of 
February and the reduction became effective as of 5 February 2019. In 
relation to the group restructuring, many of these steps have been 
successfully completed. Kenmare is addressing with Lenders the remaining 
aspects of the group restructuring and conditions applicable to the 
making of "restricted payments" in relation to dividends. 
 
   Senior debt 
 
   The final maturity date of the senior debt is 1 February 2022. Interest 
on the senior debt is payable in cash on each semi-annual payment date 
(1 February and 1 August). The interest rate on each tranche of senior 
debt is LIBOR plus a margin of 3.00% from and including 28 July 2016 to 
and including 31 January 2020, and 3.75% thereafter. 
 
   Scheduled repayment of the senior debt and subordinated debt is based on 
the following repayment schedule, the percentage being applied to total 
senior and subordinated debt outstanding on 28 July 2016 of US$100 
million, in each case subject to the waterfall provisions summarised 
below: 
 
 
 
 
Payment date   Principal amount to be repaid (%) 
-------------  --------------------------------- 
1 Feb 2018                               9.52381 
-------------  --------------------------------- 
1 Aug 2018                               9.52381 
-------------  --------------------------------- 
1 Feb 2019                               9.52381 
-------------  --------------------------------- 
1 Aug 2019                               9.52381 
-------------  --------------------------------- 
1 Feb 2020                               9.52381 
-------------  --------------------------------- 
1 Aug 2020                               9.52381 
-------------  --------------------------------- 
1 Feb 2021                               9.52381 
-------------  --------------------------------- 
1 Aug 2021                              11.11111 
-------------  --------------------------------- 
1 Feb 2022                              22.22222 
-------------  --------------------------------- 
 
 
   Each principal instalment is allocated 50% to senior debt until senior 
debt is fully repaid (provided that once the amount of Absa senior debt 
is reduced to US$10 million, Absa ceases to participate in the senior 
debt instalment and thereafter participates in the subordinated 
instalment) with the balance being applied to subordinated debt.  The 
effect of the sharing provision is that senior debt, other than Absa's 
senior debt, will be repaid by 1 August 2019 under the agreed 
amortisation schedule. 
 
   In addition to the scheduled instalments of senior debt, prepayments 
based on 25% of cash available for restricted payments are required 
under a cash sweep mechanism, commencing 1 February 2018.  Until the 
senior debt has been repaid in full, 50% of the prepayments will be 
allocated to senior debt (provided that once the amount of Absa senior 
debt is reduced to US$10 million, Absa ceases to participate in the 
senior debt prepayments and thereafter participates in the subordinated 
debt prepayments) with the balance applied to prepayments of 
subordinated debt.  Senior debt prepayments are applied in inverse order 
of maturity. 
 
   Subordinated debt 
 
   The final maturity date of the subordinated debt is 1 February 2022. 
Interest on the subordinated debt is payable in cash on 1 February and 1 
August. The interest rate on subordinated debt is LIBOR plus a margin of 
4.75% from and including 28 July 2016 to and including 31 January 2020, 
and 5.50% thereafter.  Subordinated Lenders will receive additional 
interest allocated pro rata to principal amounts outstanding equal to 
the difference between (i) interest on the senior loans calculated on 
the basis of subordinated loan margins and (ii) actual interest on the 
senior loans. Taken together, the margin on the senior and subordinated 
loans is thus 4.75% from and including 28 July 2016 to and including 31 
January 2020, and 5.50% thereafter. 
 
   As mentioned above, scheduled principal instalments on subordinated 
loans will equal the total principal instalment due on a payment date 
less the principal instalment on senior loans.  In addition to the 
scheduled instalments, prepayments based on 25% cash available for 
restricted payments less senior debt prepayments are required under a 
cash sweep mechanism, commencing 1 February 2018. Subordinated debt 
prepayments are applied in inverse order of maturity. 
 
   Group borrowings interest, currency and liquidity risk 
 
   The loan facilities are arranged at variable rates and expose the Group 
to cash flow interest rate risk. Variable rates are based on six-month 
LIBOR. The average effective borrowing rate at financial year end was 
7.3% (2017: 5.7%).  The interest rate profile of the Group's loan 
balances at the financial year end was as follows: 
 
 
 
 
                      2018     2017 
                     US$'000  US$'000 
Variable rate debt    83,463  102,867 
                     -------  ------- 
 
 
   The fair value of the Group borrowings of US$83.2 million (2017: 
US$102.5 million) has been calculated by discounting the expected future 
cash flows at a market rate of 6%. The 6% market rate was estimated by 
reviewing borrowing rates of the mining sector and other relevant market 
yields. For B+ to B- rated debt the borrowing rates are in the range of 
5 to 6%. 
 
   Under the assumption that all other variables remain constant, a 1% 
change in the 6-month LIBOR rate results in a US$0.8 million (2017: 
US$1.0 million) change in finance costs for the financial year. 
 
   The currency profile of loans at the financial year end is as follows: 
 
 
 
 
                      2018           2017 
                   US$'000        US$'000 
US Dollars          83,463        102,867 
             -------------  ------------- 
 
 
   The above sensitivity analyses are estimates of the impact of market 
risks assuming the specified change occurs. Actual results in the future 
may differ materially from these results due to developments in the 
global financial markets which may cause fluctuations in interest rates 
to vary from the assumptions made above and therefore should not be 
considered a projection of likely future events. 
 
   13. 2018 ANNUAL REPORT AND ACCOUNTS 
 
   The Annual Report and Accounts will be posted to shareholders before 30 
April 2019. 
 
   Glossary - Alternative Performance Measures 
 
   Certain financial measures set out in the Annual Report to 31 December 
2018 are not defined under International Financial Reporting Standards 
(IFRSs), 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, tax and depreciation 
                                                   amortisation                                               to allow assessment of the earnings and performance 
                                                                                                              of the Group 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
Capital costs                                      Additions to property, plant and equipment in the         Provides the amount spent by the Company on additions 
                                                    period                                                    to property, plant and equipment in the period 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
Cash operating cost per tonne of finished product  Total costs less freight and other non-cash costs,        Eliminates the non-cash impact on costs to identify 
 produced                                           including inventory movements, divided by final product   the actual cash outlay for production and, as production 
                                                    production (tonnes)                                       levels increase or decrease, highlights operational 
                                                                                                              performance by providing a comparable cash cost per 
                                                                                                              tonne of product produced over time 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
Net cash/debt                                      Bank loans before loan amendment fees and expenses        Measures the amount the Group would have to raise 
                                                    net of cash and cash equivalents                          through refinancing, asset sale or equity issue if 
                                                                                                              its debt were to fall due immediately, and aids in 
                                                                                                              developing an understanding of the leveraging of the 
                                                                                                              Group 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
Mining -- HMC produced                             Heavy mineral concentrate extracted from mineral sands    Provides a measure of heavy mineral concentrate extracted 
                                                    deposits and which include ilmenite, zircon, rutile       from the Mine 
                                                    and other heavy minerals and silica 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
Processing -- finished products produced           Finished products produced by the mineral separation      Provides a measure of finished products produced from 
                                                    process                                                   the processing plants 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
Marketing -- finished products shipped             Finished products shipped to customers during the         Provides a measure of finished products shipped to 
                                                    period                                                    customers 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
LTIFR                                              Lost time injury frequency rate                           Measures the number of injuries causing lost time 
                                                                                                              per 200,000 man hours worked on site 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
AI                                                 All injuries                                              Provides the number of injuries at the Mine in the 
                                                                                                              year 
-------------------------------------------------  --------------------------------------------------------  --------------------------------------------------------- 
 
 
   EBITDA 
 
 
 
 
                                2013  2014    2015    2016    2017  2018 
------------------------------  ----  -----   -----   -----   ----  ---- 
                                US$m   US$m    US$m    US$m   US$m  US$m 
------------------------------  ----  ------  ------  ------  ----  ---- 
Operating profit/(loss)          4.7  (31.5)  (47.3)  (25.4)  28.5  62.9 
------------------------------  ----  -----   -----   -----   ----  ---- 
Depreciation and amortisation   24.3   40.9    35.8    30.6   32.0  30.4 
------------------------------  ----  -----   -----   -----   ----  ---- 
EBITDA                          29.0    9.4   (11.5)    5.2   60.5  93.3 
------------------------------  ----  -----   -----   -----   ----  ---- 
 
 
   Cash operating cost per tonne of finished product 
 
 
 
 
                2013      2014      2015      2016       2017        2018 
-------------  -------   -------   -------   -------   ---------   --------- 
                 US$m      US$m      US$m      US$m       US$m             US$m 
-------------  --------  --------  --------  --------  ----------  ------------ 
Cost of sales    113.7     173.4     168.1     144.0       156.6       168.3 
-------------  -------   -------   -------   -------   ---------   --------- 
Other 
 operating 
 costs            19.5      32.4      21.8      22.8        23.2        31.0 
-------------  -------   -------   -------   -------   ---------   --------- 
Total 
 operating 
 costs           133.2     205.8     189.9     166.8       179.8       199.3 
-------------  -------   -------   -------   -------   ---------   --------- 
Freight 
 charges          (3.4)     (8.2)     (3.7)     (5.4)       (5.5)      (16.3) 
-------------  -------   -------   -------   -------   ---------   --------- 
Total 
 operating 
 costs less 
 freight         129.8     197.6     186.2     161.4       174.3       183.0 
-------------  -------   -------   -------   -------   ---------   --------- 
Non-cash 
costs 
-------------  --------  --------  --------  --------  ----------  ------------ 
Depreciation 
 and 
 amortisation    (24.3)    (40.9)    (35.8)    (30.6)      (32.0)      (30.4) 
-------------  -------   -------   -------   -------   ---------   --------- 
Share-based 
 payments         (0.6)     (1.4)      0.7      (0.4)       (1.0)       (1.4) 
-------------  -------   -------   -------   -------   ---------   --------- 
Costs 
 capitalised      27.2         -         -         - 
-------------  -------   -------   -------   -------   ----------  ------------ 
Mineral 
 product 
 movements        18.3      17.7     (14.7)      3.0         0.3         0.1 
-------------  -------   -------   -------   -------   ---------   --------- 
Adjusted cash 
 operating 
 costs           150.4     173.0     136.4     133.4       141.6       151.3 
-------------  -------   -------   -------   -------   ---------   --------- 
Final product 
 production 
 tonnes        755,500   911,500   821,300   979,300   1,081,300   1,043,300 
-------------  -------   -------   -------   -------   ---------   --------- 
Cash             US$199    US$190    US$166    US$136      US$131        US$145 
 operating 
 cost per 
 tonne of 
 finished 
 product 
-------------  --------  --------  --------  --------  ----------  ------------ 
 
 
   Net cash/debt 
 
 
 
 
                2013     2014     2015     2016     2017    2018 
-------------  ------   ------   ------   ------   ------   ----- 
                US$m     US$m     US$m     US$m     US$m        US$m 
-------------  -------  -------  -------  -------  -------  -------- 
Bank loans     (355.2)  (337.7)  (341.9)  (102.6)  (102.9)  (83.5) 
-------------  ------   ------   ------   ------   ------   ----- 
Loan 
 amendment 
 fees and 
 expenses        (6.7)   (12.4)   (25.9)       -        -       - 
-------------  ------   ------   ------   ------   ------   ----- 
Gross debt     (361.9)  (350.1)  (367.8)  (102.6)  (102.9)  (83.5) 
-------------  ------   ------   ------   ------   ------   ----- 
Cash and cash 
 equivalents     67.5     21.8     14.4     57.8     68.8    97.0 
-------------  ------   ------   ------   ------   ------   ----- 
Net 
 cash/(debt)   (294.4)  (328.3)  (353.4)   (44.8)   (34.1)   13.5 
-------------  ------   ------   ------   ------   ------   ----- 
 
 
 
 
 
 
 
 
 
 

(END) Dow Jones Newswires

March 13, 2019 03:00 ET (07:00 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

1 Year Kenmare Chart

1 Year Kenmare Chart

1 Month Kenmare Chart

1 Month Kenmare Chart
Your Recent History
LSE
KMR
Kenmare
Register now to watch these stocks streaming on the ADVFN Monitor.

Monitor lets you view up to 110 of your favourite stocks at once and is completely free to use.

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V:gb D:20190419 01:02:55