Kenmare Resources Kenmare Resources : Trading Update

 
TIDMKMR 
 
 
   Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global 
producers of titanium minerals, is pleased to provide a trading update 
on its Moma Mine for the fourth quarter and year ending 31 December 
2013, ahead of the publication of the Company's preliminary results on 
12 March 2014. 
 
   Overview 
 
 
   -- Moma expanded plant commissioned and in operation 
 
   -- Ore mined in 2013 increased 22% to 23,951,200 tonnes (2012: 19,588,800 
      tonnes) 
 
   -- Heavy Mineral Concentrate ("HMC") production increased 47% to 1,137,200 
      tonnes (2012: 772,300 tonnes) 
 
   -- Ilmenite production increased 25% to 720,100 tonnes (2012: 574,500 
      tonnes) 
 
   -- Zircon production decreased 33% to 31,400 tonnes (2012: 46,900 tonnes) 
 
   -- Total shipments 677,900 tonnes of finished products (2012: 680,800 
      tonnes) 
 
   -- Strategic focus in 2014 to increase production and identify and realise 
      operational efficiencies to reduce unit costs 
 
   Statement from Michael Carvill, Managing Director: 
 
   "Completion of the expansion is another important milestone in Kenmare's 
development.  I am delighted to see the positive contribution made by 
the expanded facilities and anticipate that production will continue to 
improve as we work with local authorities to manage the power supply 
issues.  Kenmare will use the leverage of additional production capacity 
to drive down unit costs.  We will also identify and realise operational 
efficiencies." 
 
   Production & Shipping 
 
   Production from the Moma Mine for fourth quarter and full year 2013 was 
as follows: 
 
 
 
 
             Q4-2013    Q4-2012   Variance   FY-2013     FY-2012    Variance 
             tonnes     tonnes       %        tonnes      tonnes       % 
Ore mined   7,655,700  3,483,500      120%  23,951,200  19,588,800       22% 
Grade           6.30%      5.70%       11%       5.90%       5.50%        7% 
HMC           311,000    157,000       98%   1,137,200     772,300       47% 
Ilmenite      209,400    123,600       69%     720,100     574,500       25% 
Zircon*         6,600     10,600      -38%      31,400      46,900      -33% 
 
 
   -- Including secondary grade zircon product in Q4 2013 1,000 tonnes (Q4 
      2012: 4,500 tonnes) and in FY 2013 10,300 tonnes (FY 2012: 19,400 tonnes) 
 
 
   During 2013, Kenmare mined 23,951,200 tonnes of ore at an average grade 
of 5.9% and produced 1,137,200 tonnes of HMC.  Finished product volumes 
for the year were 720,100 tonnes of ilmenite and 31,400 tonnes of zircon 
(including 10,300 tonnes of a secondary grade zircon product). 
 
   During the fourth quarter of 2013, Kenmare mined 7,655,700 tonnes of ore 
at a grade of 6.3% and produced 311,000 tonnes of HMC, compared with 
157,000 tonnes of HMC in the fourth quarter of 2012.  Whilst ore grade 
was approximately 11% higher and mining conditions improved, the 
principal driver of the additional 98% HMC production was the completion 
and ramp-up of the new dredge and concentrator plant in a second mine 
pond as part of the expansion of the Mine during the second half of 
2013. 
 
   Expansion of the Mineral Separation Pant ("MSP") enabled Kenmare to 
increase production of ilmenite by 69% to 209,400 tonnes during the 
fourth quarter 2013, up from 123,600 tonnes during the equivalent period 
in 2012.  However, production of zircon during the fourth quarter of 
2013 was 6,600 tonnes compared with 10,600 tonnes in the fourth quarter 
of 2012.  This was due to the downtime associated with integration of 
the expanded zircon and rutile circuits, which took longer than expected 
and consequently balancing and ramp up of these circuits were delayed. 
The ramp up was also hampered by periods of unstable power supply. 
Optimisation of the zircon and rutile circuits is ongoing, initially 
concentrating on the zircon circuit as this product generates greater 
revenues than rutile. 
 
   Closing stock of HMC at end of 2013 was 72,500 tonnes, compared with 
3,600 tonnes at the start of the year.  Closing stock of finished 
products at end of 2013 was 107,100 tonnes, compared with 29,600 tonnes 
at the start of the year. 
 
   Products shipped and sold by the Moma Mine for fourth quarter and full 
year 2013 were as follows: 
 
 
 
 
           Q4-2013  Q4-2012  Variance  FY-2013  FY-2012  Variance 
           tonnes   tonnes      %      tonnes   tonnes      % 
Ilmenite   226,600  184,000       23%  642,700  631,400        2% 
Zircon*      9,800   17,500      -44%   32,200   46,800      -31% 
 
 
   -- Including secondary grade zircon product in Q4 2013 2,100 tonnes (Q4 
      2012: 7,500 tonnes) and in FY 2013 10,300 tonnes (FY 2012: 22,400 tonnes) 
 
 
   During 2013, Kenmare shipped 677,800 tonnes of finished products, 
comprised of 642,700 tonnes of ilmenite, 32,200 tonnes of zircon 
(including 10,300 tonnes of secondary grade zircon) and 2,900 tonnes of 
rutile (2012: 2,600 tonnes of rutile).  Shipments of finished products 
in the fourth quarter 2013 were 236,400 tonnes, up from 204,100 tonnes 
shipped in the fourth quarter 2012.  December 2013 also saw the 200(th) 
shipment from the Moma Mine, bringing the cumulative product exports to 
over 3.5 million tonnes since commencement of operations. 
 
   Expansion facilities were ramping up through the second half of 2013. 
All major facilities except for the zircon and rutile circuits have 
operated at or near design capacity levels.  Utilisation levels are 
still below target levels, in large part due to unstable power supply. 
The zircon and rutile circuits have demonstrated their ability to 
operate at target throughput levels.  However, due to on-going 
optimisation of these circuits, output was low in the fourth quarter of 
2013. 
 
 
   Operations 
 
   One of the key operational challenges for Moma has been the reliability 
of power supply.  A number of initiatives have been taken by Kenmare to 
enhance transmission capacity and address power instability issues, 
including: 
 
 
   -- Upgrade of transmission grid, in collaboration with Electricidade de 
      Moçambique ("EdM"), the state electricity transmission utility. 
      This upgrade consisted of the installation of capacitor banks at Nampula 
      and Alto Molocue and the upgrading of the Alto Molocue SVC 
 
   -- Installation of voltage stabilisation equipment at Moma (Dip Doctor) 
 
   -- Installation of capacitor banks at Moma 
 
   -- Improvements to operational procedures to reduce recovery time following 
      power outages 
 
 
   Despite these initiatives, electricity supply has been subject to 
unplanned outages that have disrupted production.  After investigation, 
it has become apparent that load growth on the northern network had been 
increasing more rapidly than EdM had anticipated.  Consequently, 
especially with increased domestic load in the summer months, power 
demand at times exceeds the stable transmission capacity of the network, 
resulting in voltage instability. 
 
   To address this issue, several projects are being advanced by EdM: 
 
 
   -- A load management program amongst EdM customers in order to prevent at 
      peak times line load rising above the stability limit of 118MW at 
      Nampula. 
 
   -- Installation of series capacitors in the northern network and a Static 
      VAR Compensator in Nampula to significantly increase the transmission 
      capacity of the network. These projects have commenced and  EdM is 
      targeting completion in early 2015. 
 
   -- Development by EdM of a major project to build an additional 400kV line, 
      as a long term solution to the power supply issue. 
 
 
   Kenmare is working closely with EdM to progress these projects and is 
providing support to further improve the operation of the network. 
 
   Market 
 
   Whilst there was some growth in global pigment consumption during 2013 
it was largely met from pigment inventories, which reduced significantly 
over the course of the year as plant operating rates were curtailed. 
This led to reduced offtake of feedstock throughout the year, but there 
is evidence that we are now getting closer to the end of this prolonged 
destocking cycle. 
 
   Despite the general weaker market conditions, offtake of Moma ilmenite 
in the fourth quarter of 2013 was reasonably robust as shipments 
increased by 60% to 226,600 tonnes over the previous quarter, by 
focusing on deliveries to existing core customers and some spot sales to 
Asia. 
 
   Whilst feedstock demand in the first quarter of 2014 is expected to 
remain subdued, an improving macro-economic outlook in all key regional 
markets for 2014 should lead to stronger pigment demand conditions.  The 
peak painting season in the Northern Hemisphere commencing early in the 
second quarter is also expected to add a much needed boost to pigment 
demand, which should manifest itself in returning feedstock offtake 
rates to more normal levels as pigment plant operating rates are 
gradually ramped up over the course of the next few months. 
 
   There was some moderate softening of zircon prices in the final quarter 
of 2013 due to seasonal demand weakness in China and Europe, and 
competition amongst suppliers to conclude year-end sales.  Kenmare was 
able to sell substantially all of its zircon in 2013.  Overall zircon 
demand is expected to have declined marginally in 2013 compared to 2012, 
but 2014 is expected to see a return to growth driven by improved 
economic outlook in the global economy. 
 
   Outlook 
 
   As the expansion project is now operating, management focus is to ensure 
the new facilities smoothly integrate with the original plant and to 
deliver increased production.  Management will optimise efficiencies 
within operations with a view to achieving unit cost savings.  In 
respect of Kenmare's capital structure, the Company is in on-going 
discussion with lenders with a view to optimising the terms of the 
project financing.  We are also encouraged by improvements in the level 
of global economic activity, which should ultimately flow through to 
improved feedstock and zircon demand. 
 
   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 
 
   Virginia Skroski, Investor Relations Manager 
 
   Tel: [phone] 
 
   Mob: + 353 87 739 1103 
 
   Murray Consultants 
 
   Joe Heron 
 
   Tel: [phone] 
 
 
   Buchanan 
 
   Bobby Morse / Louise Mason / Gordon Poole 
 
   Tel: [phone] 
 
   This announcement is distributed by NASDAQ OMX Corporate Solutions on 
behalf of NASDAQ OMX Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Kenmare Resources via Globenewswire 
 
   HUG#1756514 
 
 
  http://www.kenmareresources.com/