Kenmare Resources Kenmare Resources : Q3 Trading Update

 
TIDMKMR 
 
 
   Kenmare Resources plc ("Kenmare" or "the Company") 
 
   27 October 2015 
 
   Q3 Trading Update 
 
   Kenmare Resources plc, which operates the Moma Titanium Minerals Mine 
(the "Mine" or "Moma") in Mozambique, today issues, in accordance with 
the reporting requirements of the EU Transparency Directive, the 
following Q3 Trading Update with respect to the period from 1 July 2015 
to 25 October 2015 and covering production and shipments from 1 July 
2015 to 30 September 2015 ("Q3" or "Q3 2015"). 
 
   Overview 
 
 
   -- Record production of Heavy Mineral Concentrate ("HMC") and finished 
      product, including record ilmenite production in Q3 2015 
 
   -- Ore mined in Q3 increased 1% to 9,057,500 tonnes (Q3 2014: 9,000,000 
      tonnes), despite dry mining being placed on care and maintenance in Q2 
      2015 
 
   -- Production of HMC increased 7% to 339,600 tonnes (Q3 2014: 316,500 
      tonnes) 
 
   -- Ilmenite production in Q3 increased 11% to 244,800 tonnes (Q3 2014: 
      220,200 tonnes) 
 
   -- Zircon production in Q3 decreased 9% to 13,300 tonnes (Q3 2014: 14,600 
      tonnes), offset by a significant increase in the proportion of the higher 
      grade of the two primary zircon products following completion of a cost 
      benefit analysis 
 
   -- Total shipments of finished products in Q3 increased 4% to 190,000 
      tonnes  (Q3 2014: 183,200 tonnes) 
 
   Statement from Michael Carvill, Managing Director: 
 
   "I am pleased to announce record quarterly production of HMC and 
ilmenite in Q3 2015. Increased production, in combination with the 
progress we have been making to reduce absolute cash operating costs, is 
predicted to result in a significant commensurate reduction in our unit 
operating costs for H2 2015. I would like to thank all Kenmare employees 
for their contributions to improving our production and cost 
effectiveness." 
 
   Production 
 
   Production from the Moma Mine for Q3 2015 was as follows: 
 
 
 
 
                       Q3-2015    Q3-2014   Variance   Q2-2015   Variance 
                       tonnes     tonnes       %       tonnes       % 
Excavated Ore *       9,057,500  9,000,000       +1%  8,210,400      +10% 
Grade*                    4.54%      4.29%       +6%      4.64%       -2% 
Production 
 HMC                    339,600    316,500       +7%    310,000      +10% 
 Ilmenite               244,800    220,200      +11%    195,100      +25% 
 Zircon                  13,300     14,600       -9%     13,400       -1% 
 of which primary         9,400     12,900      -27%     10,600      -11% 
 of which secondary       3,900      1,800     +117%      2,800      +39% 
 Rutile                   1,500      1,600       -6%      1,400       +7% 
Shipments               190,000    183,200       +4%    202,400       -6% 
 
 
 
 
   * Excavated Ore and grade are prior to any floor losses. 
 
   Production in Q3 2015 continued to increase as the mine resumed steady 
operations following the flood damage to the power lines and industrial 
action in H1 2015. Kenmare mined 9,057,500 tonnes of ore at a grade of 
4.54% compared with 9,000,000 tonnes of ore at a grade of 4.29% in Q3 
2014. Despite dry mining operations having been suspended in Q2 2015 as 
a cost reduction measure, tonnes mined remained flat as a result of 
improved dredge utilisation. HMC production increased 7% to 339,600 
tonnes in Q3 2015 compared with 316,500 tonnes in Q3 2014, principally 
as a result of increased grade and dredger throughputs. 
 
   Production of ilmenite increased 11% to 244,800 tonnes in Q3 2015, 
compared with 220,200 tonnes in Q3 2014. Previously stockpiled magnetic 
concentrate was used to supplement production of final ilmenite product. 
 
 
   Zircon production decreased 9% to 13,300 tonnes in Q3 2015, compared 
with 14,600 tonnes in Q3 2014. This was partially due to some 
non-magnetic stockpiles that had been processed in Q3 2014. A series of 
three zircon improvement programmes are currently underway and are 
expected to show benefits as they are commissioned between now and Q1 
2016. A recently completed project is expected to result in increased 
production of secondary zircon as a consequence of zircon recovery from 
previous reject streams. Separately, following cost and benefit analysis, 
another project has resulted in a reduction of total primary zircon 
volume in favour of a large increase in the proportion of the higher 
grade of the two primary zircon products. 
 
   Sales of total finished products were up 4% to 190,000 tonnes in Q3 2015 
compared to 183,200 tonnes in Q3 2014. Sales in Q3 2015 comprised 
178,900 tonnes of ilmenite, 10,000 tonnes of zircon and 1,100 of rutile. 
Closing stock of finished products at 30 September 2015 was 228,700 
tonnes (30 June 2015: 158,400 tonnes). 
 
   Power 
 
   Power reliability and stability continued to improve in Q3 2015, helping 
to increase the utilisation levels at the mine, which contributed to 
higher production volumes in the quarter. All permanent repairs to the 
previously damaged transmission lines are expected to be completed by 
Electricidade de Moçambique ("EdM") before the start of the rainy 
season later this year. 
 
   Separately, EdM has been investing in the power line infrastructure to 
increase capacity on the line. These projects continued to make progress 
during the quarter, with all three phases planned for delivery between 
now and early 2016. These projects equate to a 50% increase in the power 
line capacity and will help to provide a more stable power supply to the 
mine with additional capacity to allow for increased power needs in 
northern Mozambique. 
 
   Market 
 
   Market conditions for titanium feedstocks have remained challenging in 
Q3 2015. Overcapacity in global pigment markets has driven further 
competition for market share and consequently reduced pricing. All 
evidence suggests that Chinese domestic ilmenite production continues to 
decline with reduced iron ore mining economics as a consequence of the 
falling iron ore price. This has led to a drawdown of ilmenite 
inventories in China, further evidenced by a reduction in port 
inventories. However, while the volume of Chinese titanium feedstock 
imports has been increasing in recent months, this market dynamic has 
yet to result in an improvement for imported ilmenite prices. 
 
   There was some moderate softening of zircon prices through the quarter 
due to positioning for sales volumes by some producers. Offtake support 
from our customers remains strong and we continue to sell all of our 
zircon. 
 
   Finance 
 
   As previously announced, on 24 July 2015 the conditions precedent to the 
April 2015 Amendment were satisfied and the Group drew down US$10.0 
million from the US$30.0 million working capital element of the Super 
Senior Facility on 11 August 2015. The Company remains in discussions 
with Lenders in relation to required waivers to the April 2015 Amendment 
in the context of planned further disbursements. 
 
   During H1 2015, total cash operating costs reduced by 17% compared with 
H1 2014 and the ongoing active cost reduction programme has continued 
through H2 2015. In addition to the significant progress on capital and 
operating cost control achieved to date by the Moma management team, an 
external consultant has also now been appointed to support and extend 
this ongoing cost control and efficiency programme. 
 
   For further information, please contact: 
 
   Kenmare Resources plc 
 
   Michael Carvill, Managing Director 
 
   Tel: [phone] 
 
 
   Mob: + 353 87 674 0110 
 
 
   Tony McCluskey, Financial Director 
 
   Tel: [phone] 
 
 
   Mob: + 353 87 674 0346 
 
   Jeremy Dibb, Corporate Development and Investor Relations Manager 
 
   Tel: [phone] 
 
   Mob: + 353 87 943 0367 
 
   Murray Consultants 
 
 
   Joe Heron 
 
 
   Tel: [phone] 
 
 
   Mob: [phone] 
 
 
   Buchanan 
 
   Bobby Morse / Anna Michniewicz 
 
   Tel: [phone] 
 
   This Q3 Trading Update constitutes an Interim Management Statement for 
the purposes of regulations applicable to companies listed in Ireland 
and contains certain forward looking statements which involve risk and 
uncertainty because they relate to events and depend on circumstances 
that occur in the future.  There are a number of factors that could 
cause actual results or developments to differ materially from those 
expressed or implied by these forward looking statements. 
 
   The Directors of Kenmare accept responsibility for the information 
contained in this announcement. To the best of their knowledge and 
belief (having taken all reasonable care to ensure that such is the 
case), the information contained in this announcement is in accordance 
with the facts and does not omit anything likely to affect the import of 
such information. 
 
   This announcement is not intended to, and does not, constitute or form 
part of any offer, invitation or the solicitation of an offer to 
purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, 
any securities whether pursuant to this announcement or otherwise. The 
distribution of this announcement in jurisdictions outside Ireland or 
the United Kingdom may be restricted by law and therefore persons into 
whose possession this announcement comes should inform themselves about, 
and observe, such restrictions. Any failure to comply with the 
restrictions may constitute a violation of the securities law of any 
such jurisdiction. 
 
   A person interested in 1% or more of any class of relevant securities of 
Kenmare or Iluka may have disclosure obligations under Rule 8.3 of the 
Irish Takeover Rules, effective from 26 June 2014, the date of the 
commencement of the offer period for Kenmare under the Irish Takeover 
Rules. 
 
   This announcement is distributed by NASDAQ OMX Corporate Solutions on 
behalf of NASDAQ OMX Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 

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