TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
11 January 2018
Q4 & FY 2017 Trading Update & FY 2018 Guidance
Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global
producers of titanium minerals and zircon, which operates the Moma
Titanium Minerals Mine (the "Mine" or "Moma") in northern Mozambique, is
pleased to provide a trading update for the fourth quarter and year
ended 31 December 2017 and production guidance for FY 2018.
Overview
-- Record annual production of ilmenite, rutile and zircon - achieving
production guidance for all products
-- Ilmenite production increased 11% to 998,200 tonnes (2016: 903,300
tonnes)
-- Zircon production increased 9% to 74,000 tonnes (2016: 68,200 tonnes)
-- Heavy Mineral Concentrate ("HMC") production decreased 6% to 1,323,000
tonnes (2016: 1,405,500 tonnes)
-- Total shipments of finished products were up 2% to 1,040,400 tonnes
(2016: 1,024,200 tonnes)
-- Production guidance range mid-point of 950,000 tonnes of ilmenite
production in 2018 (2017: 998,200 tonnes)
-- Prices increased for all products during 2017
-- Favourable demand outlook for ilmenite and zircon markets in 2018
-- Net debt declined to US$34.1 million (2016: US$44.8 million)
Statement from Michael Carvill, Managing Director:
"2017 was a further consecutive year of record delivery for Kenmare.
Both production and shipments of all products were at record levels.
Production in 2018 is expected to moderate slightly, mainly due to lower
opening stockpiles, though ilmenite shipment volumes are expected to be
maintained as finished goods inventory is drawn down.
In 2018, Kenmare will upgrade capacity of Wet Concentrator Plant B ("WCP
B") by up to 20% uplift in capacity. Further options are being examined
which will both address grade reduction in future years and facilitate
an increase in ilmenite production beyond 1 million tonnes per annum.
Average received prices for H1 2018 are expected to continue to show
improvement on H2 2017, benefitting from new contract prices and higher
spot prices, particularly for zircon".
Production
Production from the Moma Mine in Q4 2017 and FY-2017 was as follows:
Q4-2017 vs Q4-2016 vs Q3-2017 FY-2017 vs FY-2016
tonnes % change % change tonnes % change
Excavated Ore * 8,414,300 -1% 8% 33,585,500 12%
Grade* 4.34% -27% 5% 4.46% -12%
Production
HMC 337,800 -29% 24% 1,323,000 -6%
Ilmenite 235,900 -8% -8% 998,200 11%
Zircon 18,100 -9% 0% 74,000 9%
of which primary 10,900 -19% -9% 48,600 8%
of which secondary 7,300 8% 18% 25,400 9%
Rutile 2,500 8% 13% 9,100 17%
Shipments 296,300 -2% 42% 1,040,400 2%
* Excavated ore and grade prior to any floor losses.
During 2017, Kenmare mined more than 33 million tonnes of ore, up 12% on
2016, at an average grade of 4.46% and produced 1,323,000 tonnes of HMC,
a 6% decrease. In Q4 2017, Kenmare mined 8,414,300 tonnes of ore, up 8%
over the prior quarter, at an average grade of 4.34% and produced
337,800 tonnes of HMC. Finished product volumes for the year included
998,200 tonnes of ilmenite, up 11%, and 74,000 tonnes of zircon
(including 25,400 tonnes of a lower grade secondary zircon product), up
9%.
In 2017, excavated ore volumes benefitted from improved dredge mining
operation and a higher dry mining contribution. Increased plant
utilisations through enhanced maintenance systems and improvement
projects, together with continued power stability, also supported higher
excavated ore volumes. However, in addition to grade reduction, as
previously reported, HMC production in Q3 2017 was adversely impacted by
elevated slimes levels which affected recoveries.
Ilmenite production which increased by 11% to 998,200 tonnes (2016:
903,300 tonnes), in line with guidance, benefited from good recoveries
as well as a drawdown of HMC and intermediate product stockpiles.
Total zircon production includes an 8% increase in primary zircon
production to 48,600 tonnes (2016: 44,900 tonnes), driven by drawdown
from intermediate stockpiles and increased recoveries. Secondary zircon
volumes increased by 9% to 25,400 (2016: 23,300 tonnes) as tailings
recovery projects were completed and started to contribute.
During 2017, Kenmare shipped 1,040,400 tonnes of finished products
(2016: 1,024,200 tonnes) comprising 961,800 tonnes of ilmenite, 70,800
tonnes of zircon (including 24,500 tonnes of secondary grade zircon) and
7,800 tonnes of rutile. In Q4 2017, shipments of total finished products
were up 42% to 296,300 tonnes (Q3 2017: 208,400 tonnes), benefitting
from both transhipment vessels being in operation for the full quarter
following the planned maintenance of Kenmare's main transhipment vessel
in Q3 2017. Sales comprised 269,900 tonnes of ilmenite, 24,700 tonnes of
zircon (including 8,900 tonnes of secondary grade zircon), and 1,700
tonnes of rutile.
Closing stock of HMC at the end of 2017 was 16,800 tonnes, compared with
66,500 tonnes at the start of the year. Closing stock of finished
products at the end of 2017 was 202,000 tonnes (2016: 192,300 tonnes),
of which 9,200 tonnes has been paid for and is being held for a
customer.
Costs
Subject to completion of the full year financial results and adjusting
for arbitration costs of US$3.7 million, total cash operating costs are
expected to be within the guided range of US$120-132 per tonne for FY
2017. Total cash operating costs include all mine production,
transhipment, royalties and corporate costs.
2018 Guidance
The 2018 guidance on production and operating costs is as follows:
2018 Guidance 2017 Actual
Production
Ilmenite tonnes 900,000-1,000,000 998,200
Zircon tonnes 65,000-72,000 74,000
of which primary tonnes 42,000-46,000 48,600
of which secondary tonnes 23,000-25,000 25,400
Rutile tonnes 7,000-8,000 9,100
Costs
Total cash operating costs US$m 133-147 N/R*
Cash costs per tonne of finished US$/t 130-143 N/R*
product
* to be reported in full year financial statements
Production in 2018 is expected to moderate slightly, mainly due to lower
opening HMC stockpiles, though ilmenite shipment volumes are expected to
be maintained as finished goods inventory is drawn down.
Work is on-going to optimise increased mining capacity to offset grade
reduction in the Namalope Zone in the coming years. US$19 million has
been approved for expenditure on growth projects and studies in 2018,
the main elements of which are represented by the WCP B upgrade project,
a monazite concentrate project and feasibility studies to increase
mining capacity. Approval of further capital expenditure by the Board
will be subject to, inter alia, positive outcomes from feasibility
studies, attractive financial returns, and supportive market conditions.
Sustaining capital costs in 2018 are expected to be approximately US$22
million.
Market
The ilmenite pricing outlook for 2018 is positive, supported by
favourable supply demand fundamentals. Demand for titanium dioxide
pigment, the main market for ilmenite, has continued to increase with
global GDP which supports demand for our products.
In 2017, Chinese demand for imported ilmenite grew despite domestic
ilmenite production, as a by-product of iron ore mining, operating near
capacity. Domestic pigment and ilmenite production have both been
affected by increased environmental regulations and enforcement. This
has caused disruption to the pigment industry, particularly in H2 2017,
moderating ilmenite demand and price growth. However, Kenmare has agreed
higher prices with customers for H1 2018 and expects that spot prices
will improve over the course of the year.
Zircon prices grew strongly through 2017, supported by increased demand,
falling global inventories and limited supply growth. These market
dynamics are expected to persist in 2018, potentially supporting further
price increases.
Finance Update
At 31 December 2017, gross bank loans, including accrued interest,
amounted to US$102.9 million (2016: US$102.6 million) and cash and cash
equivalents were US$68.8 million (2016: US$57.8 million). Consequently,
net debt has declined to US$34.1 million (2016: US$44.8 million).
For further information, please contact:
Kenmare Resources plc
Michael Carvill, Managing Director
Tel: +353 1 671 0411
Tony McCluskey, Financial Director
Tel: +353 1 671 0411
Jeremy Dibb, Corporate Development and Investor Relations Manager
Tel: +353 1 671 0411
Mob: + 353 87 943 0367
Murray
Joe Heron / Aimee Beale
Tel: +353 1 498 0300
Mob: +353 87 690 9735
Buchanan
Bobby Morse / Chris Judd
Tel: +44 207 466 5000
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.
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Kenmare Resources via Globenewswire
http://www.kenmareresources.com/
(END) Dow Jones Newswires
January 11, 2018 02:00 ET (07:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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