Interim Management Statement

RNS Number : 2583Q

Kenmare Resources PLC

10 October 2013

 



Kenmare Resources plc

Chatham House, Chatham St, Dublin 2, Ireland.                        Tel: [phone]              Fax: [phone]

Rua de Chuindi No.67, Maputo, Mozambique.                           Tel: [phone]              Fax:  [phone]

Website : www.kenmareresources.com                                 Email : [e-mail]

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

10 October 2013

Interim Management Statement

Kenmare Resources plc issues the following update with respect to the period from 1 July 2013 to the date of this announcement in accordance with the Transparency Regulations 2007. 

Operations

	Quarter 1	Quarter 2	Movement	Quarter 3	Movement
	tonnes	tonnes	percent	Tonnes	percent
Production
HMC	189,800	290,200	+53%	346,200	+19%
Ilmenite	137,500	165,100	+20%	208,100	+26%
Zircon (primary grades)	5,700	6,000	+5%	3,800	-37%
Zircon (secondary grade)	4,700	2,700	-43%	1,900	-30%
Shipments	48,500	245,600	+406%	147,500	-40%

In the third quarter, production of Heavy Mineral Concentrate (HMC) was 346,200 tonnes (2013 Q2: 290,200 tonnes), an increase of 19%, substantially as a result of increased production from Wet Concentrator Plant B (WCP B).  33,400 tonnes of HMC was added to the HMC stockpile, bringing the total HMC in stock at 30 September 2013 to 88,100 tonnes.  HMC was processed into 208,100 tonnes of ilmenite (2013 Q2: 165,100 tonnes) and 5,700 tonnes of zircon, (2013 Q2: 8,700 tonnes), including 1,900 tonnes of secondary zircon product (2013 Q2: 2,700 tonnes).  147,500 tonnes of total products were shipped during the third quarter (2013 Q2: 245,600 tonnes). 

The non-magnetic circuits, the last part of the expansion to be completed, were being enhanced in the third quarter, resulting in interruptions and hence reduced production. Although the upgrade took longer than anticipated, the work is now complete and the ramp-up of the enhanced non-magnetic circuits to design production levels is in line with expectations.  All circuits have been tested and have demonstrated the ability to run at design throughput levels.  Following a successful shipping campaign during the second quarter, shipments were lower during the third quarter principally due to lower than forecast ilmenite sales to China and some shipment delays.

All of the main production facilities built as part of the 50% capacity expansion are substantially complete and operational.  No issues have been identified to date that are expected to have a major effect on the ramp up or the ultimate ability of the expanded facilities to operate at nameplate capacity.

The recently installed voltage stabilisation equipment (Dip Doctor) is performing its intended function in mitigating the effect of power dips.  However, September saw a number of unplanned power outages rather than power dips.  Kenmare is working closely with Electricidade de Moçambique (EdM) to identify and rectify the issues causing this instability. While production is expected to continue to increase in Q4 as the expansion ramp up proceeds, external power interruptions are a risk to achieving targeted production guidance for the year.

Market

Recent pricing, as well as the near-term pricing outlook, remains weak.  However, Kenmare has observed some improvement in demand for ilmenite with an increased level of orders and enquiries in recent weeks.  With an improving demand outlook for pigment and an anticipated gradual ramp up in pigment plant operating rates as inventories reduce, a more normal feedstock buying pattern is expected to emerge in 2014, which is expected to support stronger customer offtake.

The zircon market has continued its gradual recovery assisted by improving demand in China and Europe. Despite some impending seasonal reduction in ceramic tile plant operating rates, demand for zircon is holding up well and the pricing outlook remains stable.

Financing

During the period covered by this interim management statement and as previously announced on 1 August 2013 Kenmare agreed certain amendments of the terms of the Moma project financing. These included an effective postponement of the date on which deferred subordinated debt is required to be brought current from 1 August 2014 to 1 August 2015, deferment of the 1 August 2013 principal instalment of US$13 million of senior debt to 1 August 2014, and an extension in time and quantum of the ability of the Project to fund expansion-related costs from Project operating cash flows.

In relation to the Company's US$40 million loan from Absa Bank Limited, the Company is in discussion with Absa regarding an extension of US$20 million of this loan until March 2015.

The combination of weakness in pricing, lower shipments, and reduced zircon production, together with the continuing weak market conditions, have led the Company to conclude that an injection of capital will be required to provide the Group with important near term liquidity as well as medium-term flexibility.

For further information, please contact:

Kenmare Resources plc.

Michael Carvill, Managing Director                                            Tony McCluskey, Financial Director

Tel: [phone]                                                                  Tel: [phone]        

Mob: + 353 87 674 0110                                                            Mob: + 353 87 674 0346

Jacob Deysel, Operations Director                                             Virginia Skroski, Investor Relations Manager

Tel: [phone]                                                                  Tel: [phone]

Mob: + 353 87 613 9609                                                            Mob: + 353 87 739 1103

Murray Consultants                                                                 Tavistock Communications

Joe Heron                                                                                    Jos Simson / Mike Bartlett

Tel: [phone]                                                                  Tel: [phone]

Mob: [phone]                                                             Mob: [phone]

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

 

 

IMSQBLFFXBFFFBK