Kenmare Resources plc : Interim Management Stat...

Kenmare Resources plc ("Kenmare" or "the Company")

24 April 2014

Interim Management Statement

Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global producers of titanium minerals, issues the following trading update with respect to the period from 1 January 2014 to 23 April 2014 and covering production and shipments from 1 January 2014 to 31 March 2014 ("Q1" or "Q1 2014") in accordance with the Disclosure and Transparency Rules. 

Overview

• Ore mined up 81% to 7,543,000 tonnes (Q1 2013: 4,156,000 tonnes)
• Production of heavy mineral concentrate ("HMC") up 51% to 287,000 tonnes (Q1 2013: 189,800 tonnes)
• Production of ilmenite up 53% to 210,800 tonnes (Q1 2013: 137,500 tonnes)
• Production of primary zircon up 35%  to 7,700 tonnes (Q1 2013: 5,700 tonnes)
• Sales of finished products up 299% to 193,900 tonnes (Q1 2013: 48,500 tonnes)
• Debt restructuring completed in February 2014
• Continued focus on increasing production
• Contract signed for rental of 7.5MW diesel-powered electricity generation plant, expected to be available for use at site from early H2 2014
• Programme to reduce operating and capital costs underway

Michael Carvill, Managing Director, said: 

"The first quarter of the year saw a significant increase in mining and production compared to Q1 2013 following the completion of the expansion of Moma in late 2013.  Q1 has historically been our lowest production quarter due to the issues associated with power supply in the Southern Hemisphere summer months.  Consequently, we are pleased to have reached an agreement to bring a diesel-powered electricity generating plant on site as an auxiliary power source, providing the Mineral Separation Plant ("MSP") with increased security of power supply to more effectively utilise our new expanded facilities.  With the rescheduling of debt payments completed and the problem of power fluctuation having been mitigated, we look forward to reporting further progress on lowering unit operating costs and ramping up production to nameplate capacity."

A conference call to discuss this update with investors and analysts will be hosted at 9:30am BST.  Participant dial-in numbers are as follows:

UK number:                          0808 237 0030
Alternative number:            [phone]
Conference ID:                    23130462#
Other dial in numbers are available here:
http://wpc.1726.planetstream.net/001726/FEL_Events_International_Access_List.pdf 

Operations

Production and shipments from the Moma Mine for Q1 2014 was as follows:

	Q1-2014	Q1-2013	Variance
	tonnes	tonnes
Ore mined*	7,543,000	4,156,000	81%
Grade*	4.21%	5.59%	-25%
Production
HMC	287,000	189,800	51%
Ilmenite	210,800	137,500	53%
Primary Zircon	7,700	5,700	35%
Secondary Zircon	1,100	4,700	-77%
Rutile	1,100	900	22%
Shipments	193,900	48,500	299%

* Ore mined and grade are prior to any losses before ore is presented for processing by the wet concentrator plants.

Notwithstanding difficult operating conditions during the first quarter, Kenmare mined 7,543,000 tonnes of ore at a grade of 4.21% and produced 287,000 tonnes of HMC in Q1 2014, compared with 4,156,000 tonnes of ore at a grade of 5.59% and produced 189,800 tonnes of HMC in Q1 2013.  The grade variation reflects known variability in the mine paths.

Production of ilmenite was up 53% to 210,800 tonnes, compared with 137,500 tonnes in Q1 2013.  Production of primary zircon was up 35% to 7,700 tonnes, compared with 5,700 tonnes in Q1 2013.  Despite continued but less severe power issues, the Moma Mine saw a significant improvement in ilmenite production as the quarter progressed with 82,400 tonnes produced in March.  Primary zircon production also increased during the course of the quarter, whilst secondary zircon output was lower than Q1 2013 due to a diminished feed stockpile and prioritisation of primary zircon.

Sales of total finished products were up 299% to 193,900 tonnes in Q1 2014, compared with 48,500 tonnes in Q1 2013.  Sales comprised 190,000 tonnes of ilmenite, 2,600 tonnes of zircon, and 1,300 of tonnes rutile.  Closing stock of finished products at 31 March 2014 was 133,900 tonnes.

As previously reported, electrical supply to the Moma Mine has been hindered by difficulties experienced by the Mozambique state electrical utility, Electricidade de Moçambique ("EdM"), in delivering stable power supply.  A combination of increased base load, electrical storm activity, and increased power demand in the Southern Hemisphere summer months resulted in volatile power conditions in the first two months of the quarter.  However, March saw a significant improvement in stable power supply following the end of the summer rainy season and the implementation by EdM of a load management plan.  This plan is intended to prevent base load from exceeding the network stability limits at peak times.  Availability of the synchronous condenser ("Dip Doctor") was lower than planned during the first quarter due to previously reported commissioning difficulties and storm damage.  These issues have now been resolved and the Dip Doctor is working as planned.

As the MSP is more sensitive to voltage fluctuations than the mining and wet concentrator plants, Kenmare is continuing to improve MSP operating procedures and equipment to minimise downtime caused by these fluctuations.  In addition, a rental contract has been signed to supply a 7.5MW diesel-powered electric generating plant to the Mine, which will supply stable power to the MSP during the Southern Hemisphere summer months when most voltage stability problems occur.  The generating plant is expected to be available for use on site from early H2 2014  and will also be available on standby in case of any unanticipated failure of the transmission system during the rest of the year.

Market

With improving and more stable economic activity in Europe and North America, there has been evidence of increased demand for TiO₂ pigment during the period.  Pigment plant operating rates are gradually improving in expectation of increased demand during the upcoming peak seasonal demand period.  This should lead to improved and more stable feedstock demand conditions as the long de-stocking process appears to be ending.

First quarter pigment and feedstock market conditions in China were weak due to a combination of the seasonally low demand period in Asia and more subdued Chinese economic activity in the industrial and construction sectors.  However, the Chinese economy continues to grow and more clarity on the extent of TiO2 feedstock market improvements should become more evident in the second quarter.

Zircon market conditions remained stable in the first quarter due to seasonal factors. Overall market conditions are expected to improve in the second quarter as general economic and construction activity improves in the main geographic regions.

Finance

As previously announced in the Preliminary Results on 12 March 2014, deferred subordinated debt payment obligations were rescheduled in February 2014.  The deferred subordinated debt balance as at 31 December 2013 was US$143.3 million.  Before this rescheduling, there was a requirement to bring the deferred subordinated debt current by 1 August 2015.  Agreement was reached with the lender group to reschedule all subordinated debt that remains deferred as at 31 July 2015, providing for the repayment of half of such deferred debt in August 2019 and the balance in nine semi-annual payments running from August 2015 to August 2019.  Given the current subdued nature of Kenmare's product market, the re-scheduling of the subordinated debt payment obligations was an important step in matching the maturity of debt obligations with the Company's ability to generate cash and, assuming recovery in product prices, will enable the Company to begin paying dividends to shareholders in due course.

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]

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Source: Kenmare Resources via Globenewswire

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