Final Results

Kenmare Resources PLC 30 April 2003 KENMARE RESOURCES PLC ('KENMARE' OR 'THE COMPANY') Kenmare Preliminary Results For the year ended 31st December 2002 Chairman's Statement Dear Shareholder, Since the publication of the 2001 Annual Report and Accounts, we have been working on the development of a funding package for the Moma Titanium Minerals Project and the appointment of a contractor to build it. We have also signed three off-take agreements and continue to work on penetrating the titanium minerals market. Project Construction Contract In September 2002, Kenmare initiated an Invitation to Bid process for the contract to build the project. Responses were received from three groups at the end of November. In consultation with the Lender Group, it was decided in December that Fluor Corporation would be awarded the contract to perform a delineation phase. During this time they would perform further definition work, go out to subcontractors, and reach a definitive cost number for the construction, commissioning and hand over of the mine. The definition work, due to be complete on 31 March, has taken longer than expected. Fluor has since requested an additional two months in order to complete this phase. Presently subcontractor packages are being put together, potential subcontractors are being interviewed and the packages are being distributed for competitive tender. Any tendering situation has a degree of inherent uncertainty until complete, but our interviews suggest that there is a strong interest in the work from subcontractors. Moma Project Implementation Director Kenmare appointed Frank Murray as Moma Project Implementation Director in August 2002. Frank has worked in project implementation for many years and has completed several successful projects. His latest major implementation position was the Project Implementation Director for the Collahuasi Copper Project in Chile. This is a Joint Venture between Anglo American and Falconbridge and, when first built, was the largest greenfield mine development ever. Frank has a small team of people supplied principally from Aker Kvaerner, our Client Engineering firm, who work with him in Fluor's office in Johannesburg to liaise with Fluor and ensure their activities are focused. As we move into the construction phase, the size of this team will be increased. Marketing As a precondition to first project loan disbursement, we need to have arranged advance sales of product covering a significant portion of the annual revenues from the mine. This process started with the signing of a major ilmenite contract in May 2002. Since the last Annual Report we have added two zircon contracts covering 100% of the zircon output and a rutile contract covering approximately 40% of the rutile output. A further off-take contract is under negotiation, which will add a significant additional tranche of ilmenite and rutile sales. Power Supply Agreement A Power Supply Agreement with the Mozambican State-owned utility, Electricidade de Mocambique, was signed in January covering the provision of low cost, hydro-electrically generated power to the project from the commencement of production. The Agreement, covering a 20 year period, sets out the terms and conditions for the provision of this power and ensures that the project will pay a highly competitive tariff for the power supplied. Environmental Licence Awarded The Environmental Licence for the project, which includes the licence over the power transmission line, was issued on 19 March 2003. Licence approval by the Department of the Environment in Mozambique comes after an extensive review process and consultation with the public and stakeholders, whose input was incorporated into the final recommendations. An Environmental Impact Assessment and Environmental Management Plan for the project have been prepared to World Bank Standards and Kenmare is working closely with the Government of Mozambique and the local communities at the project area to ensure the development of the Moma mine will meet these high environmental standards. A temporary water use licence has been granted; this will be converted into a long-term licence. Project Financing Certain members of the Lender Group are constrained by their charters to lend only to African entities. The project companies, which were party to the regulatory agreements with the Government of Mozambique, are based in Jersey. Hence, we have incorporated new companies to facilitate lender requirements and transfer the agreements to them. Mauritius was chosen as a base as it was judged to have the most appropriate legal framework for financing in Africa. The Council of Ministers of Mozambique approved the transfer of the Implementation Agreement on 11 March 2003. This document defines the rights and obligations of the Industrial Free Zone in which the project's mineral processing operates. The transfer of the Mineral Licensing Agreement has also been completed. The Lender Group appointed an independent engineering company, SRK Engineering, who have performed a due diligence process on the engineering work and costing previously performed on the project. Their final report issued in January states that the project is well engineered, will produce the volume of products predicted and should have a capital cost close to the number anticipated. The Lender Group also appointed an independent industry expert firm, IBMA Inc., to report on Moma's strategic position in the industry and on the likelihood that we will sell our product at the predicted prices. IBMA concluded that Moma would have the lowest operating cost of any potential entrant to the industry and lower operating costs than any existing producers with the exception of Richards Bay Minerals. Their report shows that there would be a deficit of supply of our products and that our price expectations were realistic. After several major plenary sessions and a site visit by the whole Lender Group, substantial agreement on the terms of a project financing package have been achieved between Kenmare and its advisors (N. M. Rothschild & Sons Ltd. and lawyers Sullivan & Cromwell) and the Lender Group and its advisors. A term sheet has been negotiated and is being considered by each of the lending institutions. Satisfactory outcomes of the marketing and contractor processes are now the key factors in moving the funding process to closure. Kenmare accounts for the year ended 31 December 2002 show a profit of US$968,520 arising mainly from foreign exchange gains and deposit interest income. Charles Carvill Chairman For more information: Kenmare Resources plc Tel: + 353 1 671 0411 Tony McCluskey, Financial Director Mob: + 353 87 6740346 Binns & Co PR Ltd Tel: + 44 207 786 9600 Paul McManus Mob: + 44 7980 541 893 Murray Consultants Tel: + 353 1 498 0339 Tom Byrne www.kenmareresources.com 30 April, 2003 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st DECEMBER 2002 2002 2001 US$ US$ Turnover - - ========== ========== Operating Income/(Expenses) 707,037 (983,638) ---------- ---------- Operating Profit/(Loss) 707,037 (983,638) Interest Receivable 261,483 110,806 ---------- ---------- Profit/(Loss) On Ordinary Activities Before 968,520 (872,832) Taxation Taxation - - ---------- ---------- Profit/(Loss) On Ordinary Activities After 968,520 (872,832) Taxation ========== ========== Earnings/(Loss) per share: Basic 0.41c (0.47c) ========== ========== Earnings/(Loss) per share: Diluted 0.36c (0.47c) ========== ========== CONSOLIDATED BALANCE SHEET AS AT 31st DECEMBER 2002 Notes 2002 2001 US$ US$ FIXED ASSETS Mineral Interests 4 18,618,309 11,137,129 Tangible Assets 5 41,630,810 41,639,177 --------- -------- 60,249,119 52,776,306 --------- -------- CURRENT ASSETS Debtors 95,473 76,826 Cash at Bank and In Hand 8,040,751 1,239,530 --------- -------- 8,136,224 1,316,356 CREDITORS: Amounts falling due within one (1,453,021) (1,484,230) year --------- -------- NET CURRENT ASSETS/(LIABILITIES) 6,683,203 (167,874) --------- -------- TOTAL ASSETS LESS CURRENT 66,932,322 52,608,432 LIABILITIES CREDITORS: Amounts falling due after one year (1,431,903) (1,379,571) PROVISION FOR LIABILITIES AND (2,826,000) (1,275,510) CHARGES --------- -------- 62,674,419 49,953,351 ========= ======== CAPITAL AND RESERVES Called Up Share Capital 24,556,528 20,684,504 Share Premium Account 25,592,896 16,303,622 Profit and Loss Account - (Deficit) (22,012,278) (22,980,798) Revaluation Reserve 30,141,002 31,549,752 Other Reserve 3,642,080 3,642,080 Capital Conversion Reserve Fund 754,191 754,191 --------- -------- Shareholders' Funds 62,674,419 49,953,351 ========= ======== GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31st DECEMBER 2002 Notes 2002 2001 US$ US$ Net cash inflow/(outflow) from 6 1,948,541 (63,175) operating activities -------- -------- Returns on Investments & Servicing of Finance Interest received 261,483 110,806 Net cash inflow from Returns on Investment & -------- -------- Servicing of Finance 261,483 110,806 -------- -------- Capital expenditure & financial investment Addition of Mineral Interests (7,583,927) (3,502,168) Net cash outflow from capital expenditure & -------- -------- financial investment (7,583,927) (3,502,168) -------- -------- Net cash outflow before use of liquid (5,373,903) (3,454,537) resources & financing -------- -------- Financing Issue of Ordinary Share Capital 14,530,686 5,409,437 Cost of share issues (1,369,388) (397,304) Finance Lease (15,690) (15,405) Debt due within one year (1,027,945) (2,022,213) Debt due beyond a year 57,461 323,441 -------- -------- Net cash inflow from financing 12,175,124 3,297,956 -------- -------- Increase/(Decrease) in cash 6,801,221 (156,581) ======== ======== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31ST DECEMBER 2002 Notes 2002 2001 US$ US$ Income (Loss) attributable to Group 968,520 (872,832) shareholders Movement in Revaluation Reserve (1,408,750) - Currency Translation Movement - 2,913,385 -------- -------- Total Recognised (Losses) and Gains for (440,230) 2,040,553 the year ======== ======== RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31st DECEMBER 2002 2002 2001 US$ US$ Total Recognised (Losses) and Gains for the (440,230) 2,040,553 year Issue of Shares 3,872,024 1,146,812 Share premium, net of costs 9,289,274 3,865,322 ---------- ---------- Net change in Shareholders' funds 12,721,068 7,052,687 Opening Shareholders' funds 49,953,351 42,900,664 ---------- ---------- Closing Shareholders' funds 62,674,419 49,953,351 ========== ========== Note 1. Basis of Accounting The preliminary accounts have been prepared under the historical cost convention, as modified by the revaluation of certain fixed assets, and in accordance with the accounting policies set out on page 23 of the 2001 Annual Report and Accounts save that the Directors have changed the reporting currency of the group to US Dollar as they view this as being the functional currency of the group. Note 2. Basis of Preparation The financial information presented above does not constitute statutory accounts within the meaning of the Companies Acts, 1963 to 2001. An audit report has not yet been issued on the accounts for the year ended 31st December 2002, nor have they been delivered to the Registrar of Companies. The comparative financial information for the year ended 31st December 2001 has been derived from the statutory accounts for the year and converted into US Dollars using the exchange rate at 1 January 2002. Those statutory accounts, upon which the auditors have issued an unqualified opinion, have been filed with the Registrar of Companies. Note 3. Earnings and Fully Diluted Earnings Per Share The calculation of the earnings and fully diluted earnings per share is based on the profit after taxation of US$968,520 (2001: Loss US$872,832) and the weighted average number of shares in issue during 2002 of 238,468,595 (2001 - 187,405,370 shares). The calculation of fully diluted earnings per share is based on the profit for the period after taxation as for basic earnings per share. The number of shares is adjusted to show the potential dilution if share options and share warrants are converted into ordinary shares. The weighted average number of shares in issue is increased to 267,046,911. For the 2001 comparatives, the fully diluted earnings per share and the basic earnings per share figures are the same as a loss was made during this period. Note 4. Mineral Interests The recovery of deferred development expenditure is dependent upon the successful development of economic ore reserves, which in turn depends on the availability of adequate funding from a joint venture party or other source. The Directors are satisfied that deferred expenditure is worth not less than cost less any amounts written off and that the exploration projects have the potential to achieve mine production and positive cash flows. Note 5. Tangible Assets Tangible Assets are stated at cost or valuation less accumulated depreciation. GRD Minproc Limited, an independent Australian engineering group, has appraised the Mining and Processing Plant on a depreciated replacement cost basis of valuation as at 30 June 2000. An inspection of the Mining and Processing Plant was carried out by GRD Minproc Limited in March 2002 concluding that no material alteration to the plants had taken place. Confirmation of the existence of the Processing Plant and the Mining Plant at the year end has been provided by Aker Kvaerner, an international engineering group. The recovery of the plant valuation is dependent upon the successful development of the Moma Titanium Minerals Project, which in turn depends on the availability of adequate funding being made available. The historical cost net book value of these assets at 31 December 2002 is US$8,118,204. The surplus arising on revaluation amounts to US$31,549,752. Note 6. Reconciliation of Operating Loss to Net Cashflow from Operating Loss to Net Cashflow from Operating Activities 2002 2001 US$ US$ OPERATING ACTIVITIES Operating Income (Loss) 707,037 (983,638) Depreciation 8,367 11,508 Increase in Debtors (18,647) (20,922) Increase /(Decrease) in operating creditors 1,007,297 (127,459) Increase/(Decrease) in Provision for 1,550,490 (36,911) Liabilities & Charges Impairment/Write off of Minerals Interests 102,747 1,170,848 Decrease in Revaluation Reserve (1,408,750) - Exchange (Gain) on translation of Fixed - (2,989,986) Assets Exchange Loss on translation of Revaluation - 788,346 Reserve Exchange Loss on translation of Subsidiaries - 2,125,039 ------- --------- Net Cash Flow from Operating Activities 1,948,541 (63,175) ======= ========= Note 7. Analysis of Net Debt At 1 Jan 2002 Cash Flow At 31 Dec 2002 US$ US$ US$ Cash at Bank and in hand 1,239,530 6,801,221 8,040,751 Debt due after 1 year (1,374,442) (57,461) (1,431,903) Debt due within 1 year (1,126,562) 1,027,945 (98,617) --------- ------- ---------- (1,261,474) 7,771,705 6,510,231 ========= ======= ========== Note 8. Reconciliation of Net Cashflow to Movement in Net Debt 2002 2001 US$ US$ Increase/(Decrease) in cash during the year 6,801,221 (156,581) Outflow from movements in debt & lease 970,484 1,698,772 financing ------- ------- Movement in net cash in the year 7,771,705 1,542,191 Net debt at start of year (1,261,474) (2,803,665) ------- ------- Net cash/(debt) at end of year 6,510,231 (1,261,474) ======= ======= Note 9. 2002 Annual Report and Accounts The Annual Report and Accounts will be posted to shareholders in due course. END This information is provided by RNS The company news service from the London Stock Exchange

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