Kenmare Resources Q2 & H1 2018 Production Report

 
TIDMKMR 
 
 
   Kenmare Resources plc ("Kenmare" or "the Company") 
 
   17 July 2018 
 
   Q2 & H1 2018 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 quarter and half year ending 
30 June 2018. 
 
   Statement from Michael Carvill, Managing Director: 
 
   "I am pleased to report that production in Q2 2018 increased from Q1 
2018, in line with expectations and guidance for the full year. Final 
product shipment also achieved new records, whilst average product 
prices received increased, resulting in strong cash flow generation in 
H1 2018. Our net debt has consequently been reduced by a further US$25.0 
million. 
 
   This strong cash flow has been achieved in spite of planned spending on 
capital projects to expand mining capacity. I have been encouraged by 
the progress of the WCP B upgrade, which is currently commissioning, 
ahead of time and below budget. 
 
   Kenmare looks forward to providing more clarity on our plans for the 
future at a Capital Markets Day scheduled for October this year. The 
focus will be on our drive to increase production and reduce unit costs 
by 2021, funded by internally generated cashflow. We will also provide 
an outline of our dividend policy." 
 
   Overview 
 
 
   -- Heavy Mineral Concentrate ("HMC") production increased by 5% to 377,900 
      tonnes (Q2 2017: 359,200 tonnes). 
 
   -- Ilmenite production decreased by 4% to 238,500 tonnes (Q2 2017: 248,300 
      tonnes) but increased 13% on Q1 2018 figures. 
 
   -- Primary zircon production decreased by 9% to 11,700 tonnes (Q2 2017: 
      12,900 tonnes) but increased 4% relative to Q1 2018. 
 
   -- Total shipments increased 15% to 322,000 tonnes (Q2 2017: 279,600 tonnes) 
      setting a new quarterly record. 
 
   -- Wet Concentrator Plant B ("WCP B") upgrade currently being commissioned, 
      ahead of time and under budget. 
 
   -- Average received final product prices increased in Q2 2018, led by 
      zircon. 
 
   -- Net debt reduced to US$9.1 million (31 December 2017: US$34.1 million), 
      with cash on hand of US$84.2 million. 
 
   -- Capital Markets Day scheduled for 16 October 2018. 
 
 
   Production 
 
   Production from the Moma Mine in Q2 & H1 2018 was as follows: 
 
 
 
 
                       Q2-2018   Q2-2017   Q1-2018    H1-2018    H1-2017 
                       Tonnes    % Change  % Change    Tonnes    % Change 
Excavated Ore *       8,409,000       -6%        8%  16,215,000       -7% 
Grade*                    4.68%        5%        4%       4.60%       -1% 
Production 
 HMC                    377,900        5%       22%     688,900       -3% 
 Ilmenite               238,500       -4%       13%     449,500      -11% 
 Zircon                  16,800      -13%       -1%      33,700      -11% 
 of which primary        11,700       -9%        4%      23,000      -11% 
 of which secondary       5,100      -19%       -9%      10,700      -11% 
Rutile                    2,000      -13%       -5%       4,100       -7% 
Shipments               322,000       15%       21%     589,200       10% 
 
 
   * Excavated Ore and grade prior to any floor losses. 
 
   During Q2 2018, Kenmare mined 8.4 million tonnes of ore at an average 
grade of 4.68%, producing 377,900 tonnes of HMC. Finished product 
volumes for the period included 238,500 tonnes of ilmenite, 16,800 
tonnes of zircon and 2,000 tonnes of rutile. 
 
   The tonnage of ore excavated was up 8% in comparison to Q1 2018, as 
dredge and supplementary mining benefitted from higher throughput and 
utilisation rates and were less impacted by planned stoppages. Grades 
increased slightly in comparison to Q1 2018 to 4.68%, up 4%. Capacity 
improvements have been implemented at WCP A supplementary dry mining to 
increase throughputs, and a similar programme is currently underway at 
WCP B. 
 
   Ilmenite production for the quarter was 238,500 tonnes, down 4% on Q2 
2017, but up 13% compared to Q1 2018, reflecting higher HMC production 
levels and availability. Despite improved plant reliability in Q2 2018, 
production utilisations in the Mineral Separation Plant ("MSP") were 
impacted by reduced reliability in the power network as unplanned 
outages, normally associated with the wet season, continued for longer 
than expected this year. We are liaising closely with Electricidade de 
Moçambique, our electricity provider, to seek resolution on these 
matters. 
 
   Zircon production of 16,800 tonnes for the period was broadly in line 
with Q1 2018 (16,900 tonnes), yet declined 13% in comparison to Q2 2017 
(19,200 tonnes). Zircon production in Q2 2017 was supported by an 
additional 26,900 tonnes of zircon rich spillage material that was 
reprocessed. 
 
   The upgrade of WCP B, from 2,000 tonnes per hour to 2,400 tonnes per 
hour, is being commissioned ahead of schedule and the project is 
currently under budget of US$16 million. Further details will be 
provided as part of the H1 2018 interim results, due to be announced on 
20 August 2018. 
 
   Grades are forecast to be lower in H2 2018 and mining conditions are 
expected to become more challenging, particularly at WCP A. These issues 
will be addressed by higher levels of supplemental mining and increased 
production at WCP B. Production of final products will also be supported 
by HMC stock, which has increased during the quarter. 
 
   Kenmare shipped 322,000 tonnes of finished products in Q2 2018, 
comprising 298,300 tonnes of ilmenite, 21,300 tonnes of zircon 
(including 8,300 tonnes of secondary grade zircon) and 2,400 tonnes of 
rutile. This represents a new quarterly record, which benefitted from 
good demand and favourable shipment variations at the beginning and end 
of the period. As product inventories have substantially reduced, it is 
expected that shipping volumes will be lower in H2 2018. 
 
   Closing stock of HMC at the end of Q2 2018 was 52,300 tonnes, compared 
with 24,200 tonnes at the beginning of the quarter. Closing stock of 
finished products at the end of Q2 2018 was 129,600 tonnes (Q2 2017: 
202,500 tonnes, Q1 2018: 194,200 tonnes). 
 
   Market 
 
   Strong demand for Kenmare ilmenite continued into Q2, with record 
volumes shipped for the quarter and half year, resulting in a further 
drawdown of inventory at Moma. This was driven by steady sales to the 
China spot market as well as some accelerated shipments to contracted 
customers as western pigment plants maintained high utilisation rates. 
 
   As in previous years, we are seeing some seasonal weakness in the 
Chinese ilmenite market over the summer months.  Coupled with ongoing 
disruption to pigment plant operating rates driven by the implementation 
of environmental regulations, this is leading to a slowdown in ilmenite 
purchasing activity. Domestic ilmenite production in China has increased, 
as has the supply of ilmenite concentrates from Africa, which has 
rebalanced the market and led to some softening of prices in recent 
weeks. 
 
   Global pigment demand growth was favourable in the first half of 2018, 
driving increased feedstock demand, but there are some signs of demand 
growth slowing outside North America. 
 
   The zircon market continues to benefit from steady demand and 
constrained supply, driving higher prices. Further price increases were 
achieved in Q2 2018 and are being implemented in Q3 2018 in line with 
the prevailing movement in the market. 
 
   Finance Update 
 
   Following the first principal debt repayment on 1 February 2018, gross 
bank loans, including accrued interest, amounted to US$93.3 million at 
30 June 2018 (31 December 2017: US$102.9 million). Cash and cash 
equivalents were US$84.2 million (31 December 2017: US$68.8 million). 
Consequently, net debt stands at US$9.1 million (31 December 2017: 
US$34.1 million). 
 
   The Company's half-yearly results in respect of the six months ended 30 
June 2018 will be issued on 20 August 2018. Kenmare will also be holding 
a Capital Markets Day in London on 16 October 2018, providing further 
information on the Company's development projects and dividend policy. 
 
   For further information, please contact: 
 
   Kenmare Resources plc 
 
   Michael Carvill, Managing Director 
 
   Tel: [phone] 
 
 
   Tony McCluskey, Financial Director 
 
   Tel: [phone] 
 
 
   Jeremy Dibb, Corporate Development and Investor Relations Manager 
 
   Tel: [phone] 
 
   Mob: + 353 87 943 0367 
 
   Murray 
 
 
   Joe Heron / Aimee Beale 
 
 
   Tel: [phone] 
 
 
   Mob: [phone] 
 
 
   Buchanan 
 
   Bobby Morse / Chris Judd 
 
   Tel: [phone] 
 
   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

July 17, 2018 02:00 ET (06:00 GMT)

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