Kenmare Resources : Q3 Trading Update

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

27 October 2015

Q3 Trading Update

Kenmare Resources plc, which operates the Moma Titanium Minerals Mine (the "Mine" or "Moma") in Mozambique, today issues, in accordance with the reporting requirements of the EU Transparency Directive, the following Q3 Trading Update with respect to the period from 1 July 2015 to 25 October 2015 and covering production and shipments from 1 July 2015 to 30 September 2015 ("Q3" or "Q3 2015").

Overview 

• Record production of Heavy Mineral Concentrate ("HMC") and finished product, including record ilmenite production in Q3 2015
• Ore mined in Q3 increased 1% to 9,057,500 tonnes (Q3 2014: 9,000,000 tonnes), despite dry mining being placed on care and maintenance in Q2 2015
• Production of HMC increased 7% to 339,600 tonnes (Q3 2014: 316,500 tonnes)
• Ilmenite production in Q3 increased 11% to 244,800 tonnes (Q3 2014: 220,200 tonnes)
• Zircon production in Q3 decreased 9% to 13,300 tonnes (Q3 2014: 14,600 tonnes), offset by a significant increase in the proportion of the higher grade of the two primary zircon products following completion of a cost benefit analysis
• Total shipments of finished products in Q3 increased 4% to 190,000 tonnes  (Q3 2014: 183,200 tonnes)

Statement from Michael Carvill, Managing Director: 
"I am pleased to announce record quarterly production of HMC and ilmenite in Q3 2015. Increased production, in combination with the progress we have been making to reduce absolute cash operating costs, is predicted to result in a significant commensurate reduction in our unit operating costs for H2 2015. I would like to thank all Kenmare employees for their contributions to improving our production and cost effectiveness."

Production

Production from the Moma Mine for Q3 2015 was as follows:

	Q3-2015	Q3-2014	Variance	Q2-2015	Variance
	tonnes	tonnes	%	tonnes	%
Excavated Ore *	9,057,500	9,000,000	+1%	8,210,400	+10%
Grade*	4.54%	4.29%	+6%	4.64%	-2%
Production
HMC	339,600	316,500	+7%	310,000	+10%
Ilmenite	244,800	220,200	+11%	195,100	+25%
Zircon	13,300	14,600	-9%	13,400	-1%
of which primary	9,400	12,900	-27%	10,600	-11%
of which secondary	3,900	1,800	+117%	2,800	+39%
Rutile	1,500	1,600	-6%	1,400	+7%
Shipments	190,000	183,200	+4%	202,400	-6%

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

Production in Q3 2015 continued to increase as the mine resumed steady operations following the flood damage to the power lines and industrial action in H1 2015. Kenmare mined 9,057,500 tonnes of ore at a grade of 4.54% compared with 9,000,000 tonnes of ore at a grade of 4.29% in Q3 2014. Despite dry mining operations having been suspended in Q2 2015 as a cost reduction measure, tonnes mined remained flat as a result of improved dredge utilisation. HMC production increased 7% to 339,600 tonnes in Q3 2015 compared with 316,500 tonnes in Q3 2014, principally as a result of increased grade and dredger throughputs.

Production of ilmenite increased 11% to 244,800 tonnes in Q3 2015, compared with 220,200 tonnes in Q3 2014. Previously stockpiled magnetic concentrate was used to supplement production of final ilmenite product. 

Zircon production decreased 9% to 13,300 tonnes in Q3 2015, compared with 14,600 tonnes in Q3 2014. This was partially due to some non-magnetic stockpiles that had been processed in Q3 2014. A series of three zircon improvement programmes are currently underway and are expected to show benefits as they are commissioned between now and Q1 2016. A recently completed project is expected to result in increased production of secondary zircon as a consequence of zircon recovery from previous reject streams. Separately, following cost and benefit analysis, another project has resulted in a reduction of total primary zircon volume in favour of a large increase in the proportion of the higher grade of the two primary zircon products.

Sales of total finished products were up 4% to 190,000 tonnes in Q3 2015 compared to 183,200 tonnes in Q3 2014. Sales in Q3 2015 comprised 178,900 tonnes of ilmenite, 10,000 tonnes of zircon and 1,100 of rutile. Closing stock of finished products at 30 September 2015 was 228,700 tonnes (30 June 2015: 158,400 tonnes).

Power

Power reliability and stability continued to improve in Q3 2015, helping to increase the utilisation levels at the mine, which contributed to higher production volumes in the quarter. All permanent repairs to the previously damaged transmission lines are expected to be completed by Electricidade de Moçambique ("EdM") before the start of the rainy season later this year.

Separately, EdM has been investing in the power line infrastructure to increase capacity on the line. These projects continued to make progress during the quarter, with all three phases planned for delivery between now and early 2016. These projects equate to a 50% increase in the power line capacity and will help to provide a more stable power supply to the mine with additional capacity to allow for increased power needs in northern Mozambique.

Market

Market conditions for titanium feedstocks have remained challenging in Q3 2015. Overcapacity in global pigment markets has driven further competition for market share and consequently reduced pricing. All evidence suggests that Chinese domestic ilmenite production continues to decline with reduced iron ore mining economics as a consequence of the falling iron ore price. This has led to a drawdown of ilmenite inventories in China, further evidenced by a reduction in port inventories. However, while the volume of Chinese titanium feedstock imports has been increasing in recent months, this market dynamic has yet to result in an improvement for imported ilmenite prices.

There was some moderate softening of zircon prices through the quarter due to positioning for sales volumes by some producers. Offtake support from our customers remains strong and we continue to sell all of our zircon. 

Finance

As previously announced, on 24 July 2015 the conditions precedent to the April 2015 Amendment were satisfied and the Group drew down US$10.0 million from the US$30.0 million working capital element of the Super Senior Facility on 11 August 2015. The Company remains in discussions with Lenders in relation to required waivers to the April 2015 Amendment in the context of planned further disbursements.

During H1 2015, total cash operating costs reduced by 17% compared with H1 2014 and the ongoing active cost reduction programme has continued through H2 2015. In addition to the significant progress on capital and operating cost control achieved to date by the Moma management team, an external consultant has also now been appointed to support and extend this ongoing cost control and efficiency programme.

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 / Anna Michniewicz
Tel: [phone]

This Q3 Trading Update constitutes an Interim Management Statement for the purposes of regulations applicable to companies listed in Ireland and contains certain forward looking statements which involve risk and uncertainty because they relate to events and depend on circumstances that occur in the future.  There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements.

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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