Kenmare Resources Q4 & Fy 2019 Production Report And Fy 2020 Guidance

 
TIDMKMR 
 
 
   Kenmare Resources plc ("Kenmare" or "the Company" or "the Group") 
 
   9 January 2020 
 
   Q4 & FY 2019 Production Report & FY 2020 Guidance 
 
   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 full year ("FY") and fourth 
quarter ending 31 December 2019 ("Q4 2019") and production guidance for 
FY 2020. 
 
   Statement from Michael Carvill, Managing Director: 
 
   "In 2019 Kenmare continued to advance its outlined strategy of 
delivering growth, margin expansion and shareholder returns. We achieved 
record shipments in Q4 2019 and record excavated ore in FY 2019. 
Ilmenite production was within one per cent of the original guidance 
range and we achieved guidance for all other products. 
 
   We are targeting ilmenite production of 1.2 million tonnes per annum 
from 2021, to be achieved through increased mining capacity and higher 
average ore grades. The construction of Wet Concentrator Plant C 
represents the final step in increasing our mining capacity and the move 
of Wet Concentrator Plant B to the high grade Pilivili ore zone later 
this year completes our outlined development programme. 
 
   These growth projects are expected to enhance our margins, provide 
stronger cashflow stability and position us in the first quartile of the 
industry revenue to cost curve. Following the completion of the capital 
expenditure programme, free cash flow will also benefit significantly. 
 
   In combination with these growth and margin expansion initiatives, we 
paid our maiden dividend in Q4 2019. We also secured new debt facilities, 
increasing our balance sheet strength and extending the maturity profile 
of our debt beyond the current short period of increased capital 
expenditure." 
 
   Overview 
 
 
   -- Lost time injury frequency rate ("LTIFR") of 0.27 per 200,000 man-hours 
      worked for the 12-months to 31 December 2019 (31 December 2018: 0.12) 
 
   -- Ilmenite production within 1% of original FY 2019 guidance range and 
      original guidance achieved for all other products 
 
   -- Record annual excavated ore of 36.8 million tonnes in FY 2019, 
      representing the fourth consecutive year of increase and benefitting from 
      a 20% capacity increase of WCP B undertaken in 2018 
 
   -- Heavy Mineral Concentrate ("HMC") production of 1,202,100 tonnes in FY 
      2019, representing a 12% decrease compared to FY 2018 (1,370,800 tonnes) 
      as a result of anticipated lower ore grades, partially offset by the 8% 
      increase in excavated ore 
 
   -- Ilmenite production of 892,900 tonnes, representing a 7% decrease 
      compared to FY 2018 (958,500 tonnes) 
 
   -- Primary zircon production of 46,900 tonnes (FY 2018: 48,400 tonnes) and 
      rutile production of 8,300 tonnes (FY 2018: 8,200 tonnes) in FY 2019, 
      broadly in line with FY 2018 
 
   -- Concentrates production of 40,200 tonnes, representing a 43% increase 
      compared to FY 2018 (28,200 tonnes), benefitting from the introduction of 
      a mineral sands concentrate product in Q4 2018 and the reprocessing of 
      tailings stockpiles 
 
   -- Total shipments of finished products of 1,029,300 tonnes, representing a 
      4% decrease compared to FY 2018 (1,074,400 tonnes) 
 
   -- Record shipments in Q4 2019 of 352,900 tonnes, representing a 23% 
      increase compared to Q4 2018 (286,300 tonnes) and an 83% increase 
      compared to Q3 2019 (192,900 tonnes) 
 
   -- Commissioning of the dredge for the WCP C development project commenced 
      in November 2019, with commissioning of the concentrator starting in 
      January 2020 -- project on track to be completed within the budget of 
      US$45 million 
 
   -- At the end of 2019 Kenmare had US$13.7 million of net cash (2018: US$13.5 
      million net cash), including cash and cash equivalents of US$81.1 million 
      (2018: US$97.0 million) and benefitting from a US$16.1 million reduction 
      in gross debt during the year 
 
   -- Higher average prices achieved for ilmenite and rutile in FY 2019, 
      compared to FY 2018, but lower average prices received for zircon -- FY 
      2020 pricing outlook for ilmenite remains strong 
 
   -- FY 2020 ilmenite production guidance of 800,000 to 900,000 tonnes, with 
      1.2 million tonnes per annum of ilmenite production targeted from 2021 
 
 
   Production 
 
   Production from the Moma Mine in Q4 2019 and FY 2019 was as follows: 
 
 
 
 
                    Q4 2019   vs Q4 2018  vs Q3 2019   FY 2019    vs FY 2018 
-----------------  ---------  ----------  ----------  ----------  ---------- 
                    tonnes     % change    % change     tonnes     % change 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Excavated ore(1)   8,290,500        -11%        -10%  36,803,800          8% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Grade(1)               3.60%        -21%         -1%       3.58%        -18% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Production 
-----------------  ---------  ----------  ----------  ----------  ---------- 
HMC production       264,700        -34%        -13%   1,202,100        -12% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
HMC consumption      268,600        -33%        -16%   1,214,700        -11% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Ilmenite             203,900        -26%        -12%     892,900         -7% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Primary zircon        10,900        -28%        -16%      46,900         -3% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Rutile                 1,900        -21%        -10%       8,300          1% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Concentrates(2)       10,000        -13%         -7%      40,200         43% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
Shipments            352,900         23%         83%   1,029,300         -4% 
-----------------  ---------  ----------  ----------  ----------  ---------- 
 
 
   1. Excavated ore and grade prior to any floor losses. 
 
   2. Concentrates include secondary zircon and mineral sands concentrate. 
 
 
   Kenmare recorded a LTIFR of 0.27 per 200,000 man-hours worked for the 12 
months to 31 December 2019, with three lost time injuries in Q4 2019 (12 
months to 31 December 2018: 0.12). The Company continues to focus on 
empowering employees and developing a culture of personal accountability 
for safety. An external audit of the Moma Mine's occupational health, 
safety and environment management was undertaken by the National 
Occupational Safety Association (NOSA) in Q4 2019 and the Mine retained 
its five star certification for the fourth consecutive year. 
 
   Kenmare achieved an annual record for excavated ore in FY 2019 
(36,803,800 tonnes), which represented an 8% increase compared to FY 
2018 (33,961,000 tonnes) and the fourth consecutive year of increase. 
Excavated ore tonnes benefitted from a 20% capacity expansion at WCP B 
during FY 2018, in addition to a dredge automation project and continued 
utilisation improvements. However, in Q4 2019 excavated ore volumes were 
impacted by reduced power reliability, due to upgrade work on the 
national power grid, and difficulties encountered during the WCP A 
dredge automation project, as previously announced. Work on the national 
power grid has been completed and power reliability has since improved. 
 
   Despite this increase in excavated ore, HMC production decreased by 12% 
to 1,202,100 tonnes in FY 2019 compared to FY 2018 (1,370,800 tonnes). 
This was due primarily to an 18% decline in ore grades to 3.58% (FY 
2018: 4.35%), due to WCP B approaching the end of its current mine path 
and lower grades at WCP A, as anticipated in the mine plan. 
 
   Ilmenite production was 892,900 tonnes, less than 1% below the lower end 
of original FY 2019 production guidance of 900,000 tonnes. This 
represents a 7% decrease compared to FY 2018 (958,500 tonnes), as a 
result of the reduction in available HMC feed, partially offset by 
production from spillage retreatment and reprocessing of scavenger 
circuit tailings. 
 
   Primary zircon production was 46,900 tonnes in FY 2019, representing a 
3% decrease compared to FY 2018 (48,400 tonnes), and rutile production 
was 8,300 tonnes, representing a 1% increase compared to FY 2018 (8,200 
tonnes). Primary zircon and rutile production benefitted from spillage 
retreatment and reprocessing of non-magnetic feed scavenged from 
ilmenite circuits during FY 2019, minimising the impact of reduced HMC 
consumption. 
 
   Concentrates production increased by 43% in FY 2019 to 40,200 tonnes 
compared to FY 2018 (28,200 tonnes), due primarily to the introduction 
of a mineral sands concentrate product in Q4 2018 and benefitting from 
the recovery of intermediate stockpiles. 
 
   Shipments increased significantly, as expected, in Q4 2019 to 352,900 
tonnes of finished products, due to strong customer demand and improved 
weather conditions. This represented a quarterly record and improved on 
the previous quarterly record by 10% (322,000 tonnes in Q2 2018). 
Shipments in Q4 2019 increased by 23% compared to Q4 2018 (286,300 
tonnes) and by 83% compared to Q3 2019 (192,900 tonnes). They were 
comprised of 318,200 tonnes of ilmenite, 17,500 tonnes of primary zircon, 
1,400 tonnes of rutile and 15,700 tonnes of concentrates. 
 
   As a result, Kenmare shipped 1,029,300 tonnes of finished products in FY 
2019 (FY 2018: 1,074,400 tonnes), which comprised 930,700 tonnes of 
ilmenite, 50,300 tonnes of primary zircon, 9,500 tonnes of rutile and 
38,900 tonnes of concentrates. Shipments in FY 2019 represented a 4% 

decrease compared to FY 2018 due primarily to poor weather conditions in 
the first three quarters of the year impacting loading rates. Kenmare 
utilised its finished product inventory during the year to maintain 
shipments at broadly the same level as in FY 2018. 
 
   Closing stock of HMC at the end of FY 2019 was 7,000 tonnes, compared 
with 19,600 tonnes at the start of the year. Closing stock of finished 
products at the end of FY 2019 was 160,100 tonnes (2018: 200,000 
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. 
The first development project, a 20% expansion of WCP B, was 
commissioned successfully in late 2018. 
 
   The second project is the development of WCP C, where commissioning of 
the dredge commenced, as planned, in November 2019. However, 
commissioning of the concentrator is now anticipated to start in January 
2020 due to delayed delivery of the plant by the contractor, with first 
HMC production expected in February 2020. The project remains on track 
to be completed within the budget of US$45 million. 
 
   During Q4 2019, project execution for the third development project, the 
relocation of WCP B to the high grade Pilivili ore zone, continued to 
advance on time and within budget. Kenmare commenced construction of the 
purpose-built road from within the existing Namalope permit area in late 
Q3 2019. Following receipt of the road Environmental, Social and Health 
Impact Assessment approval and forthcoming environmental licence, 
construction has now begun along the remainder of the route. The 
relocation is expected to take place in Q3 2020, with commissioning in 
Q4 2020. 
 
   Costs 
 
   Total cash operating cost guidance for FY 2019 remains unchanged 
(US$151-167 million). However, as previously announced in December 2019, 
cash operating cost per tonne guidance for FY 2019 has been revised to 
US$160-165 per tonne from US$150-160 per tonne, due to reduced ilmenite 
production volumes. 
 
   Finance update 
 
   On 25 October 2019 Kenmare paid its maiden dividend. It was an interim 
dividend and comprised of USc2.66 per share, which is in line with the 
Company's dividend policy to pay a minimum of 20% of profit after tax as 
shareholder returns. As previously stated, following completion of the 
development projects, the Company expects to be in a position to make 
higher capital returns from 2021. 
 
   On 11 December 2019, Kenmare announced the signing of new debt 
facilities, which were comprised of a US$110 million Term Loan Facility 
and a US$40 million Revolving Credit Facility. The first disbursement 
under the new debt facilities was made on 18 December 2019. It has been 
applied to repay the Moma Project Loans, of which US$64 million was 
outstanding and which were first disbursed in 2004, and to meet 
transaction costs. For more information about the new debt facilities, 
including frequently asked questions, visit 
https://www.globenewswire.com/Tracker?data=_wUJNFJGdtu25Koam-jePpjMJE7XSYUGgPIfK7pcFhaRqjv9usXUEvhppeKn3TYI270C8gmWJ_W_Or-Yjmw8D-yjY5RyYwSvxqkOwPsMh0X8FExuRT23dr4kva1eGmyFZL9MyonsDY8fEC4URbJ4eiKjUikmqYE6qfYEZ1QxmEmmF2tuZq7mRNP0VRCJidbB 
https://www.kenmareresources.com/investors/financing. 
 
   At 31 December 2019, Kenmare had net cash of US$13.7 million, which is 
in line with net cash at the end of 2018 (US$13.5 million). Cash and 
cash equivalents were US$81.1 million (2018: US$97.0 million) and gross 
bank loans, including accrued interest, were US$67.4 million (2018: 
US$83.5 million), representing a reduction in gross debt of US$16.1 
million during the year. 
 
   Market update 
 
   Kenmare achieved higher average prices for titanium feedstocks (ilmenite 
and rutile) during FY 2019 than in FY 2018, but lower average prices for 
zircon. 
 
   After a subdued first quarter, the ilmenite market improved continuously 
for the rest of the year. Despite lower global pigment production in FY 
2019, strong ilmenite market conditions were supported by continuing 
supply constraints. These include government restrictions in India and 
Vietnam and reducing production from major producing countries, such as 
Australia and Kenya, due to declining orebodies. Conversely, domestic 
Chinese ilmenite production increased by approximately 10% in 2019, 
partially offsetting decreasing production elsewhere. 
 
   Ilmenite imports to China reduced by approximately 24% (550,000 tonnes) 
for the 12 months to the end of November 2019, compared to the same 
period in 2018, driven largely by a shortage of available supply. 
Kenmare experienced strong demand growth for ilmenite to be upgraded 
into high grade chloride feedstocks, for which Chinese domestic ilmenite 
is also unsuitable. Kenmare believes the high-grade titanium feedstocks 
market is likely to continue to grow in coming years, both in China and 
the rest of the world, and the Company is well-positioned to benefit 
from this trend. 
 
   Kenmare achieved increased ilmenite prices in FY 2019, with H2 received 
prices up more than 10% on H1 2019, and prices have continued to 
increase in 2020. 
 
   The zircon market weakened in FY 2019 due primarily to slower global 
growth leading to lower demand, coincident with increased supply. This 
resulted in softer pricing, particularly in the Chinese market. Kenmare 
believes that FY 2020 is likely to be a challenging year for the zircon 
industry as the market remains in oversupply and producer inventories 
are high. However, global zircon production is forecast to decline in 
the coming years, with mine closures and orebody depletion at a number 
of operations, supporting higher long-term prices. 
 
   In FY 2019 Kenmare successfully introduced a mineral sands concentrate 
product to the market, completing two shipments in 2019. 
 
   FY 2020 Guidance 
 
   The FY 2020 guidance for production and operating costs is as follows: 
 
 
 
 
                                Unit  FY 2020 Guidance  FY 2019 Actual 
---------------------------  -------  ----------------  -------------- 
Production 
---------------------------  -------  ----------------  -------------- 
 Ilmenite                     tonnes   800,000-900,000         892,900 
---------------------------  -------  ----------------  -------------- 
 Primary zircon               tonnes     44,500-50,100          46,900 
---------------------------  -------  ----------------  -------------- 
 Rutile                       tonnes       7,700-8,700           8,300 
---------------------------  -------  ----------------  -------------- 
 Concentrates(1)              tonnes     34,700-39,000          40,200 
---------------------------  -------  ----------------  -------------- 
Costs 
------------------------------------  ----------------  -------------- 
Total cash operating costs      US$m           153-172          N/R(2) 
---------------------------  -------  ----------------  -------------- 
Cash costs per tonne of        US$/t           162-182          N/R(2) 
 finished product 
---------------------------  -------  ----------------  -------------- 
 
 
   1. Concentrates include secondary zircon and mineral sands concentrate. 
 
   2. To be reported in full year financial statements 
 
 
   Production of all finished products in FY 2020 is expected to be lower 
than in FY 2019, due primarily to WCP B mining lower grade ore as it 
approaches the end of its current mine path at Namalope and the 
predicted lower grades being mined by WCP A. WCP B is expected to cease 
production for up to 12 weeks during its relocation from Namalope to 
Pilivili, predominantly during Q3 2020, however production will benefit 
from the operation of WCP C. 
 
   Following WCP B's relocation to Pilivili, WCP B will begin mining higher 
grade ore in Q4 2020. WCP B accounts for approximately 40% of Moma's 
mining capacity and Pilivili is the highest grade ore zone in Moma's 
portfolio. As a result, Q4 2020 production is expected to be strongest 
quarter for the year. 
 
   Shipment volumes are expected to be higher than production volumes in FY 
2020 but lower than in FY 2019. 
 
   Approximately US$119.5 million has been approved for expenditure on 
development projects and studies in FY 2020. It primarily relates to the 
relocation of WCP B and US$14.5 million is attributable to upgrade works 
on the Mineral Separation Plant to allow it to process 1.2 million 
tonnes per annum of ilmenite on a consistent basis and improvement 
works. 
 
   Sustaining capital costs in FY 2020 are expected to be approximately 
US$22 million, in line with previously guided sustaining capital costs 
of US$20-25 million per annum from 2020 to 2025. 
 
   Total cash operating costs in FY 2020 are anticipated to increase 
marginally, primarily as a result of the addition of WCP C. Cash 
operating costs per tonne will also increase due to lower anticipated 
production volumes. From 2021, when Kenmare expects to be producing 1.2 
million tonnes per annum of ilmenite, the Company expects its cash 
operating cost per tonne to decrease to US$125-US$135 per tonne (in 2020 
real terms), in line with its objective to become a first quartile 
producer on the industry revenue to cost curve. 
 
   Kenmare will release its 2019 Preliminary Results on Thursday, 19 March 
2020. 
 
   For further information, please contact: 
 
   Kenmare Resources plc 
 
   Jeremy Dibb / Katharine Sutton 
 
   Investor Relations 
 
   https://www.globenewswire.com/Tracker?data=ISeLXzUxOZdgcymhlkoZ2ozJshzGsrL7c1ElMb_HL_LPcl2_5IjqJO-0pwWCowNkUuoD_rU0kQVsxiubR1BUlemf9PZmh7IX9c0Og2YEsuE= 
[e-mail] 
 
   Tel: [phone] 
 
   Mob: + 353 87 943 0367 / + 353 87 663 0875 
 
   Murray (PR advisor) 
 
   Joe Heron 
 
   Tel: [phone] 
 
   Mob: [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

January 09, 2020 02:00 ET (07:00 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.