KMR Kenmare Resources Plc

 
TIDMKMR 
 
Kenmare Resources plc ("Kenmare" or "the Company") 
 
25 January, 2012 
 
                                Moma Mine Update 
 
 
Overview 
  * Demand for all products robust during 2011 with strong growth in prices 
  * 192,400 tonnes of finished products shipped in Q4 2011, up from 188,200 
    tonnes in Q3 
  * 83% increase in revenue to US$167.5 million (unaudited) in 2011 from US$91.6 
    million in 2010 
  * 225,600 tonnes of heavy mineral concentrate produced in Q4 2011, a 15% 
    increase on Q3 2011 
  * Ilmenite and zircon production up 13% and 12% respectively in Q4 from Q3 
    2011 
  * Production expansion project progressing with delivery of critical items to 
    Moma 
 
 
Operations 
 
Mining  operations during the fourth  quarter of 2011 produced 225,600 tonnes of 
Heavy  Mineral Concentrate (HMC), compared  with 195,700 tonnes during the third 
quarter,  a 15% increase.  The mineral  separation plant produced 166,000 tonnes 
of  ilmenite and 12,500 tonnes of  zircon, 13% and 12% increases respectively on 
the third quarter. 
 
Total  production of  HMC for  2011 was 842,900 tonnes.   Final products volumes 
were 636,800 tonnes of ilmenite, 43,500 tonnes of zircon (including 6,200 tonnes 
of  a secondary  zircon product  produced from  a zircon  rejects stockpile) and 
6,500 tonnes of rutile. 
 
730,400 tonnes  of  finished  products  were  shipped during 2011, compared with 
712,900 during  2010. These  shipments  generated  revenues  of US$167.5 million 
(unaudited) in 2011, an increase of 83% from US$91.6 million during 2010. 
 
While  production for the year was planned to be below nameplate capacity due to 
interruptions  in mining  to facilitate  the expansion,  a further  reduction in 
mining  rate was experienced due  to a band of  clay-rich ore in the mine path. 
While  the clay band  was anticipated prior  to mining, the characteristics were 
different to clays previously mined. 
 
Partly  in response to  this development, a  supplementary dry mining system has 
been  installed and commissioned.  This system can  currently feed 500 tonnes of 
ore  per hour  to the  Wet Concentrator  Plant (WCP)  and is  being ramped up to 
1,000 tonnes  of ore per hour.  By varying its production rate, this system will 
serve  to enable  the mining  operation to  keep the  WCP fully  supplied with a 
constant amount of ore over a range of orebody conditions. 
 
The  upgraded jetty  facility has  now been  fully commissioned and is operating 
successfully, allowing ships to be loaded during a much broader range of weather 
conditions. 
 
The  pre-feasibility study for a Phase III expansion of the Moma Mine and design 
of  facilities for the production and export of monazite are progressing and due 
for completion later this year. 
 
Phase II Expansion 
 
The new dredge, manufactured and tested in the USA, has arrived at Moma and will 
be reassembled in the coming months. All of the pontoons which form the floating 
base of the new WCP have also arrived at Moma and are being put into position in 
the starter mining pond. 
 
Expansion  works  at  the  Mineral  Separation  Plant (MSP) are continuing, with 
substantial progress on civil engineering and steelwork on both the new Wet High 
Intensity  Magnetic Separation (WHIMS) plant  and the auxiliary ilmenite plant. 
However,  the EPCM  contractor, E+PC,  part of  the Aveng Group, has experienced 
delays  in issuing some drawings  which impacted on the  start of fabrication in 
some  areas. Whilst the  project cost has  not changed significantly, this delay 
has  regrettably extended the scheduled completion date of the expansion project 
well  into the second half of this year.  Every effort is being made to minimise 
this  delay,  including  the  employment  of  extra  resources  by  E+PC and the 
appointment of a new Project Manager to Kenmare's Owner's Team. 
 
In  December  2011, Kenmare  concluded  the  documentation  and  execution of an 
agreement  with  lenders  which  provided  that,  in  addition  to  cash already 
available in the Group, up to US$65 million of operating cashflow may be applied 
to expansion costs. 
 
Marketing 
 
The demand for all our products was robust during 2011 and prices grew strongly. 
The  market price for ilmenite  at the start of  2011 of around US$100 per tonne 
increased  three  to  four  fold  throughout  the  year,  driven by tight market 
conditions.  Going into 2012, Kenmare  has secured pricing  for new contracts in 
the range of US$300 to US$400 per tonne for the first half of the year. 
 
Zircon  prices more than doubled during  2011, with standard grade zircon prices 
increasing  from around US$1,000 per  tonne to US$2,400 per  tonne by the end of 
2011. Rutile  prices increased  strongly during  2011 and market  prices are now 
above US$2,000 per tonne. 
 
As a condition of the debt financing package which was used to fund Phase 1, the 
Company entered into several fixed price supply contracts.  All but one of these 
contracts  has now expired and this remaining contract has had the price revised 
upwards  with the  agreement of  the customer.   New contracts  entered into are 
generally based on annual quantities with six-monthly review of prices. 
 
In  the fourth  quarter of  2011, there was  a slowdown  in Chinese  real estate 
development   resulting  from  policy  instruments  introduced  by  the  Chinese 
Government  in order to  prevent the real  estate sector from overheating.  This 
resulted  in  reduced  demand  for  pigment  and  zircon products.  Commentators 
believe  that,  having  achieved  their  goals,  the  Government  will gradually 
withdraw  these policy instruments.  While the growth  of the Chinese economy is 
expected  to be somewhat lower  than that experienced during  the last couple of 
years, Chinese economic growth is still expected be substantial and sustainable, 
leading  to  a  strong  pricing  environment  for ilmenite and rutile, with some 
softening  in zircon prices over the coming months. The Company is therefore now 
in a position to more fully benefit from prevailing market conditions. 
 
Board of Directors 
 
On  January 23, Charles  Carvill retired  from the  Board of  Kenmare and passed 
Chairmanship to Justin Loasby. Mr. Loasby joined Kenmare's Board in August 2011 
as  a Non-Executive Director. He has extensive experience of African mining from 
his  former  position  as  Associate  Director  at the European Investment Bank, 
Luxembourg, where he led the EIB's financing of development of the mining sector 
in  Southern Africa and  the Indian Ocean  from 1994 to 2007, prior  to which he 
worked in investment banking in the City of London. 
 
 
For further information, please contact: 
 
Kenmare Resources plc. 
Tony McCluskey, Financial Director 
Tel: +353 1 671 0411 
Mob: + 353 87 674 0346 
 
Jacob Deysel, Operations Director 
Tel: +353 1 671 0411 
Mob: +353 87 613 9609 
 
Murray Consultants 
Joe Heron 
Tel: +353 1 498 0300 
Mob: +353 87 690 9735 
 
Tavistock Communication 
Paul Youens / Jos Simson 
Tel: +44 207 920 3150 
Mob: +44 7843 260 623 
 
 
 
 
 
 
This announcement is distributed by Thomson Reuters on behalf of 
Thomson Reuters clients. The owner of this announcement warrants that: 
(i) the releases contained herein are protected by copyright and 
    other applicable laws; and 
(ii) they are solely responsible for the content, accuracy and 
     originality of the information contained therein. 
 
Source: Kenmare Resources via Thomson Reuters ONE 
 
[HUG#1579855] 
 

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