Kenmare Resources : Q2 & H1 2015 Production Report

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

 

27 July 2015

 

Q2 & H1 2015 Production Report

 

Overview 

 

· H1 2015 production was constrained by 57 days of storm related grid power outages in Q1 and sporadic power outages in Q2, as a result of remedial work to the power line

· Power stability is expected to improve significantly following the installation of new power infrastructure in Q3

· Ilmenite production in H1 decreased 27% to 324,100 tonnes (H1 2014: 445,600 tonnes)

· Zircon production in H1 increased 11% to 23,800 tonnes (H1 2014: 21,400 tonnes)

· Total shipments of finished products in H1 increased 3% to 412,000 tonnes  (H1 2014: 399,000 tonnes)

· Cost control measures succeeding and achieving significant cost savings

· Project Loan Amendment dated 29 April, 2015 now effective 

 

Statement from Michael Carvill, Managing Director:  

"Production in H1 2015 was severely impacted by weather related power outages in Q1. Production in Q2 improved, though remained hampered by remedial work to the power line and unofficial industrial action in June - reducing operating hours for the plant. The outlook for production in H2 looks stronger as the national power utility commissions equipment that will increase grid power capacity and stability."

 

Production

 

Production from the Moma Mine for Q2 2015 and H1 2015 was as follows:

	Q2-2015	Q2-2014	Variance	H1-2015	H1-2014	Variance
	tonnes	tonnes	%	tonnes	tonnes	%
Excavated Ore *	8,210,400	8,746,100	-6%	11,421,400	16,289,100	-30%
Grade*	4.64%	4.40%	+5%	4.98%	4.31%	+16%
Production
HMC	310,000	317,200	-2%	454,500	604,200	-25%
Ilmenite	195,100	234,800	-17%	324,100	445,600	-27%
Zircon	13,400	12,600	+6%	23,800	21,400	+11%
of which primary	10,600	10,600	0%	19,800	18,300	+8%
of which secondary	2,800	2,000	+40%	4,000	3,100	+29%
Rutile	1,400	1,700	-18%	2,800	2,800	0%
Shipments	202,400	205,100	-1%	412,000	399,000	+3%

* Excavated Ore and grade are prior to any floor losses.

 

Production in Q2 2015 rebounded significantly following the power outages as a result of flooding in Q1 2015. Nevertheless, Q2 2015 production was constrained by sporadic power outages due to remediation of power lines damaged earlier in the year and unofficial industrial action that caused the loss of 9 days of mine production. Head feed grades, metallurgical recoveries and product grades at the mine were all above target for Q2 2015. 

 

Kenmare mined 8,210,400 tonnes of ore at a grade of 4.64% and produced 310,000 tonnes of HMC in Q2 2015, compared with 8,746,100 tonnes of ore at a grade of 4.40% and production of 317,200 tonnes of HMC in Q2 2014. Production of ilmenite was down 17% to 195,100 tonnes, compared with 234,800 tonnes in Q2 2014. Production of primary zircon was unchanged at 10,600 tonnes compared with Q2 2014.  

 

All areas of the mine are now operational following unofficial industrial action in June. As part of a cost reduction initiative, a retrenchment programme has been implemented and is expected to yield a significant annualised cost saving. In June, a decision was made to cease dry mining operations as a further cost saving measure. 

 

Two ilmenite shipments totalling approximately 40,000 tonnes originally scheduled for Q2 2015 were delayed as a result of the unofficial industrial action; the shipments were made in early July. Despite this, sales of total finished products were up 3% to 412,000 tonnes in H1 2015 compared to 399,000 tonnes in H1 2014. Sales in H1 2015 comprised 387,400 tonnes of ilmenite, 21,800 tonnes of zircon and 2,800 of rutile. Closing stock of finished products at 30 June 2015 was 158,400 tonnes, down from 219,500 tonnes at 31 December 2014. 

 

Power

 

Grid power related disruption reduced markedly in Q2, following the extensive flooding and related power outages in Q1. Short interval power related stoppages continued to affect operations as repair work to the line was made to replace earlier temporary repairs. All permanent repairs are expected to be completed by Electricidade de Moçambique ("EdM") before the start of the rainy season later this year.

 

Separately, power was also impacted as the capacity of the EdM network to supply in peak periods was compromised. EdM has been investing in the power line infrastructure to increase capacity on the line from ~118MW to ~178MW. Significant elements of this project are expected to be completed in Q3 2015, with the full works expected to be completed in early 2016. This 50% increase in power line capacity will help to provide a more stable power supply to the mine with additional capacity to allow for increased power needs in northern Mozambique. In addition to measures being taken by Kenmare, this will significantly help address the challenges faced by the mine in recent years.

 

Market

 

Market conditions for titanium feedstocks have remained broadly unchanged through Q2 2015. Chinese domestic ilmenite production has declined with reduced iron ore mining economics as a consequence of the lower prevailing ore price. This has led to a drawdown of ilmenite inventories in China, further evidenced by a reduction in port inventories. However, this improving market dynamic is yet to result in an improvement in the demand for, or pricing of, imported ilmenite.

 

Zircon pricing remained stable through the quarter. Offtake support from our customers remains strong and we continue to sell all of our zircon. 

 

Finance

 

Further to the announcement of 30 April 2015, all conditions precedent to effectiveness of the loan amendments signed in April have now been satisfied. The appointment of John Ensall as a lender approved Non-Executive Director was announced separately this morning. A request for disbursement of US$10 million of working capital loans has been made to the super senior lenders.  

 

The Company's half-yearly results in respect of the six months ended 30 June 2015 will be issued on 28 August 2015.

 

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 / Gordon Poole 

Tel: [phone]

 

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.

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Source: Kenmare Resources via Globenewswire

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