Kenmare Resources Q2 And H1 2019 Production Report

 
TIDMKMR 
 
 
   Kenmare Resources plc ("Kenmare" or "the Company") 
 
   11 July 2019 
 
   Q2 and H1 2019 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 2019 ("Q2 2019" and "H1 2019"). 
 
   Q2 2019 overview 
 
 
   -- Continued strong safety performance with lost time injury frequency rate 
      ("LTIFR") of 0.12 per 200,000 man-hours worked (Q2 2018: 0.30) 
 
   -- Kenmare on track to achieve 2019 guidance on all stated metrics 
 
   -- Despite an 18% increase in tonnes of excavated ore, Heavy Mineral 
      Concentrate ("HMC") production decreased by 27% to 274,700 tonnes (Q2 
      2018: 377,900 tonnes) due to planned mining of lower ore grades, with 
      grades expected to improve in Q3 2019 
 
   -- 8% decrease in ilmenite production to 220,100 tonnes (Q2 2018: 238,500 
      tonnes) and a 6% decrease in primary zircon production to 11,000 tonnes 
      (Q2 2018: 11,700 tonnes) due to lower HMC production 
 
   -- 84% increase in concentrates production to 9,400 tonnes (Q2 2018: 5,100 
      tonnes), benefitting from the introduction of a mineral sands concentrate 
      product 
 
   -- 5% decrease in total shipments of finished products to 307,000 tonnes (Q2 
      2018: 322,000 tonnes) but a 74% increase compared to Q1 2019 (176,500 
      tonnes) -- 2019 total shipment volumes are expected to be in line with 
      2018 
 
   -- Project execution has commenced for the relocation of WCP B to Pilivili, 
      following completion of a Definitive Feasibility Study ("DFS") and Board 
      approval 
 
   -- At the end of H1 2019 Kenmare had a net cash position of US$3.5 million 
      (31 December 2018: US$13.5 million net cash), with cash and cash 
      equivalents of US$77.0 million (31 December 2018: US$97.0 million) due to 
      reduced shipments in H1 2019 and development capital spend on the 
      Company's growth projects 
 
   -- Market conditions for ilmenite continued to improve in Q2 2019, with 
      further price strengthening continuing into H2 2019 
 
   -- Zircon market remained stable in Q2 2019, with strong long-term 
      fundamentals 
 
 
   Statement from Michael Carvill, Managing Director: 
 
   "At the end of the first half, we are on track to achieve our 2019 
guidance on all stated metrics. Excavated ore volumes continued to 
increase during Q2, as the investments we are making to grow our mining 
capacity are already beginning to deliver. Q2 was the weakest quarter 
forecasted for 2019 in terms of grade, which resulted in lower HMC 
production, but consequently higher grades are anticipated for the 
remainder of the year. 
 
   Shipments recovered significantly in the second quarter, following 
Cyclone Idai in March 2019, despite further adverse weather. We remain 
confident that full year 2019 sales volumes will not be impacted. 
 
   We continued to see stronger market conditions in Q2 2019, with 
increased demand for ilmenite leading to higher prices and we expect 
this trend to continue through the second half of 2019." 
 
   Production 
 
   Production from the Moma Mine in Q2 and H1 2019 was as follows: 
 
 
 
 
                    Q2 2019    Q2 2018     Q1 2019     H1 2019     H1 2018 
-----------------  ---------  ----------  ----------  ----------  ---------- 
                    tonnes    % variance  % variance    tonnes    % variance 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Excavated ore(1)   9,907,000         18%          7%  19,198,000         18% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Grade(1)               3.07%        -34%        -25%       4.60%          0% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Production 
-----------------  ---------  ----------  ----------  ----------  ---------- 
HMC                  274,700        -27%        -23%     633,400         -8% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Ilmenite             220,100         -8%         -8%     458,200          2% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Primary zircon        11,000         -6%         -9%      23,100          0% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Rutile                 2,200         10%          5%       4,400          7% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Concentrates(2)        9,400         84%         -7%      19,500         82% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Shipments            307,000         -5%         74%     483,500        -18% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
 
 
   1. Excavated ore and grade prior to any floor losses. 
 
   2. Concentrates include secondary zircon and mineral sands concentrate. 
 
 
   During Q2 2019 Kenmare maintained its strong safety performance, with a 
LTIFR of 0.12 per 200,000 man-hours worked. One lost time injury was 
recorded during the quarter and Kenmare is focused on improving its 
safety performance further, with initiatives including the Golden Rules 
of Safety, a programme to further strengthen Kenmare's safety culture. 
 
   During Q2 2019, Kenmare mined 9.9 million tonnes of ore at an average 
grade of 3.07%, producing 274,700 tonnes of HMC. HMC production 
decreased by 27% compared to Q2 2018 (377,900 tonnes) due to lower grade 
ore mined. Q2 2019 was expected to be the lowest grade quarter of the 
year and consequently higher grades are anticipated for the remainder of 
the year. 
 
   Production from WCP B averaged 2,500 tonnes per hour ("tph") in June 
2019, in excess of the targeted nameplate capacity of 2,400 tph, 
following a 20% capacity upgrade in 2018 and further optimisation work 
undertaken during the quarter. 
 
   Ilmenite production decreased by 8% to 220,100 tonnes during the period 
(Q2 2018: 238,500 tonnes), primarily as a result of reduced HMC 
production. Scheduled maintenance work was also undertaken on the 
ilmenite dryers in the Mineral Separation Plant ("MSP") during early 
June 2019. 
 
   Primary zircon production was also impacted by reduced HMC availability 
in Q2 2019, decreasing by 6% to 11,000 tonnes (Q2 2019: 11,700 tonnes). 
Rutile production increased by 10% to 2,200 tonnes compared to Q2 2018 
(2,000 tonnes) and by 5% compared to Q1 2019 (2,100 tonnes). Both 
primary zircon and rutile production benefitted from the processing of 
spillage inventories during the quarter. 
 
   Concentrates production was 9,400 tonnes during Q2 2019, representing an 
increase of 84% compared to the corresponding quarter in 2018 (Q2 2018: 
5,100 tonnes). This increase was due to the introduction of a mineral 
sands concentrate product, following the successful commissioning of 
this product stream in Q4 2018. The first mineral sands concentrate 
shipment left Moma during Q2 2019. 
 
   At the end of the first half of the year, Kenmare remains on track to 
achieve its 2019 guidance on all stated metrics. 
 
   Kenmare shipped 307,000 tonnes of finished products during the period 
(Q2 2018: 322,000 tonnes), which comprised 275,400 tonnes of ilmenite, 
14,900 tonnes of primary zircon, 3,400 tonnes of rutile and 13,300 
tonnes of concentrates. 
 
   Q1 2019 shipments were significantly impacted by adverse weather 
conditions, including Cyclone Idai, and unscheduled maintenance work. In 
Q2 2019, shipments increased by 74% compared to Q1 2019, despite further 
adverse weather and continued poor sea conditions. The Company expects 
shipments to increase further in Q3 2019, despite the third quarter 
typically being seasonally weaker, and management remains confident that 
total shipping volumes in 2019 will be in line with 2018 volumes. 
 
   Closing stock of HMC at the end of Q2 2019 was 25,600 tonnes, compared 
with 36,600 tonnes at the end of Q1 2019. Closing stock of finished 
products at the end of Q2 2019 was 222,200 tonnes (Q1 2019: 286,500 
tonnes). 
 
   Capital projects update 
 
   Kenmare previously announced three development projects that together 
have the objective of increasing ilmenite production to 1.2 million 
tonnes (plus co-products) per annum on a sustainable basis from 2021. 
 
   By the end of 2018 the first development project, a 20% expansion of WCP 
B, was commissioned, on time and at a cost more than 25% below budget. 
Further optimisation work was completed on WCP B during Q2 2019, 
including feed distribution improvements and as a result, in combination 
with favourable mining conditions, WCP B exceeded targeted nameplate 
capacity in June 2019. Other factors that contributed to higher 
throughput were the commissioning of the dredge automation project at 
WCP B during Q2 2019, as expected, and continued utilisation 
improvements as a result of Projecto Oitenta, which is focused on 
increasing mine utilisation from 70% to 80%. 
 
   The second development project, the construction of WCP C, continues to 
progress on time and on budget, with commissioning scheduled for Q4 
2019. The dredge was launched at the shipbuilders' yard in the 
Netherlands in late May 2019 and it will be dismantled and shipped to 
Mozambique. The construction of the WCP also remains on track, with the 
starter pond and construction site also in line with the project 
delivery timeline. 
 
   Project execution commenced for the third development project, the 
relocation of WCP B to the high grade Pilivili ore zone, following 
completion of a DFS. The DFS confirmed the technical and economic 
feasibility of the project and it was subsequently approved by the 
Board. The contract for civil engineering work, including the 
construction of the purpose-built road and other key contracts, are 
anticipated to be awarded during Q3 2019. The relocation of WCP B is 

scheduled to be completed in Q3 2020, with commissioning in Q4 2020. 
 
   For more information about relocation of WCP B to Pilivili, an 
announcement entitled, 'Results of DFS for Relocation of Wet 
Concentrator Plant B to Pilivili', dated 4 June 2019, is available at 
https://www.globenewswire.com/Tracker?data=ecAYeMQ_VWLP8Gxr6BwRZJZl1Xl0ktVgEjbYxcLVTKhSVXkP6Ggfrc8DnioZAXc0R23NPKqNBU2qB0O7G0qwyNhf_3Qke7XZwoAKpQQfHvlGFp69fJk7tdIruPefAMVUPwX13x0cUa339hxsb4XzLgC3LGDcHLupMuTiUlE3LTRRAQ9XoDQMI8HA9ZHCOCql 
https://www.kenmareresources.com/investors/regulatory-news and the 
Investor Presentation June 2019 is available at 
https://www.kenmareresources.com/investors/reports-and-presentations. An 
animation outlining the various stages of the move of WCP B from 
Namalope to Pilivili is available at 
https://www.kenmareresources.com/media/video-library. 
 
   Market 
 
   Kenmare continued to see improving market conditions in Q2 2019, with 
increased demand for ilmenite products leading to higher product prices. 
Price increases accelerated in June 2019 and this trend continued into 
the start of Q3 2019. 
 
   Following seasonal weakness in Q1, the pigment industry strengthened 
during Q2 2019 as excess pigment stocks were drawn down. Pigment 
production increased, particularly in China, as utilisation rates 
improved and chloride pigment volumes increased. 
 
   Ilmenite supply continues to be limited, due to the ongoing suspension 
of mining in India, the delayed renewal of export quotas in Vietnam and 
reduced production from depleting mines. Ilmenite concentrate imports to 
China have also decreased. Chinese domestic ilmenite production has 
continued to grow due to strong iron ore pricing, but this has been more 
than offset by the lower imported ilmenite volumes. 
 
   The ilmenite market is expected to tighten further in H2 2019 as 
ilmenite inventories continue to decrease. 
 
   The zircon market remained stable in Q2 2019. While demand has been 
weaker than anticipated, this has been balanced by reduced supply. 
Kenmare anticipates continued steady market conditions for zircon for 
the remainder of 2019, with long-term supply deficits emerging as global 
supply reduces from aging mines in the coming years. 
 
   Finance update 
 
   At 30 June 2019, cash and cash equivalents were US$77.0 million (31 
December 2018: US$97.0 million) and gross bank loans, including accrued 
interest, amounted to US$73.5 million (31 December 2018: US$83.5 
million). Consequently at the end of the first half of the year, the 
Company had a net cash position of US$3.5 million (31 December 2018: 
US$13.5 million net cash). The reduction in net cash is due in part to 
reduced shipments during H1 2019, as a result of adverse weather, and 
development capital required to fund the Company's growth projects. 
 
   Kenmare will announce its results for the six months ended 30 June 2019 
on 20 August 2019. 
 
   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 
 
   Tel: [phone] 
 
   Mob: [phone] 
 
   Buchanan 
 
   Bobby Morse / Chris Judd 
 
   Tel: [phone] 
 
   About Kenmare Resources 
 
   Kenmare Resources plc is one of the world's largest producers of mineral 
sands products. Listed on the London Stock Exchange and the Euronext 
Dublin, Kenmare operates the Moma Titanium Minerals Mine in Mozambique. 
Moma's production accounts for approximately 7% of global titanium 
feedstocks and the Company supplies to customers operating in more than 
15 countries. Kenmare produces raw materials that are ultimately 
consumed in everyday "quality-of life" items such as paints, plastics 
and ceramic tiles. 
 
   Forward Looking Statements 
 
   This announcement contains some forward-looking statements that 
represent Kenmare's expectations for its business, based on current 
expectations about future events, which by their nature involve risks 
and uncertainties. Kenmare believes that its expectations and 
assumptions with respect to these forward-looking statements are 
reasonable. However, because they involve risk and uncertainty, which 
are in some cases beyond Kenmare's control, actual results or 
performance may differ materially from those expressed or implied by 
such forward-looking information. 
 
 
 
 
 
 

(END) Dow Jones Newswires

July 11, 2019 02:00 ET (06:00 GMT)

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