TIDMKMR
Kenmare Resources plc
("Kenmare" or "the Company" or "the Group")
22 March 2023
2022 PRELIMINARY RESULTS
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, today announces its preliminary results for the twelve
months to 31 December 2022.
Statement from Michael Carvill, Managing Director:
"2022 was a record year of financial performance for Kenmare.
Our financial results were driven by steady production volumes and
record product prices. Mineral product revenues increased 18% and
EBITDA rose by 39% to $298 million.
We are tracking within guidance for 2023, despite suffering an
extremely severe lightning strike which halted production for an
extended period in February, albeit towards the bottom end of our
range for ilmenite and rutile. In 2023, the market for our products
remains buoyant, although at marginally lower levels than the highs
of Q3 2022, with strong customer demand for volume.
Kenmare moved to a net cash position of $27.5 million at the end
of 2022, which represents a $110.3 million improvement over the 12
months. The Board is recommending a 2022 dividend of USc54.31 per
share, up 66% from USc32.71 per share for 2021."
2022 overview
Financial
-- Recommended 2022 dividend of $51.5 million or USc54.31 per share (2021:
USc32.71), up 66% on 2021, comprising an interim dividend of USc10.98 per
share (paid in October 2022) and a final dividend of USc43.33 per share
(payable May 2023)
-- 18% increase in mineral product revenue to $498.4 million in 2022 (2021:
$420.5 million), benefitting from a 42% increase in the average price
received for Kenmare's products
-- 13% increase in total cash operating costs to $216.7 million (2021:
$191.8 million) as a result of higher prices for fuel and labour costs as
well as increased electricity consumption
-- 16% increase in cash operating costs per tonne to $180 (2021: $156) as a
consequence of higher total cash operating costs and a 2% decrease in
finished product production
-- 36% decrease in cash operating cost per tonne of ilmenite to $60 (2021:
$95) due to higher co-product revenues
-- 39% increase in EBITDA to $298.0 million (2021: $214.2 million), due to
stronger product pricing, representing a 60% EBITDA margin (2021: 51%)
-- 60% increase in profit after tax to $206.0 million (2021: $128.5 million)
due to higher product prices
-- 83% increase in diluted earnings per share to $2.12 (2021: $1.16)
-- Net cash of $27.5 million at year end 2022 (2021: $82.8 million net debt),
with cash and cash equivalents of $108.3 million (2021: $69.1 million)
Operational
-- Heavy Mineral Concentrate ("HMC") production increased 2% in 2022 to
1,586,200 tonnes (2021: 1,555,900 tonnes), benefitting from higher
excavated ore volumes mined
-- Ilmenite production decreased 3% in 2022 to 1,088,300 tonnes (2021:
1,119,400 tonnes)
-- Shipments of finished products of 1,075,600 tonnes in 2022, a 16%
decrease compared to record tonnes shipped in 2021, reflecting four
months planned maintenance on a transshipment vessel, the Bronagh J
-- 2023 ilmenite production guidance range of 1,050,000 to 1,150,000 tonnes
Dividend timetable
The Company confirms the dates for the proposed 2022 final
dividend are as follows:
Ex-dividend date 13 April 2023
--------------------------------- ---------------------------------
Record date 14 April 2023
--------------------------------- ---------------------------------
Currency election date 18 April 2023 at 12:00 noon (IST)
--------------------------------- ---------------------------------
AGM date for shareholder approval 11 May 2023
--------------------------------- ---------------------------------
Payment date 19 May 2023
--------------------------------- ---------------------------------
Irish Dividend Withholding Tax (25%) must be deducted from
dividends paid by the Company, unless a shareholder is entitled to
an exemption and has submitted a properly completed exemption form
to the Company's Registrar.
Analyst and investor briefing and conference call
Kenmare will host a briefing and conference call for analysts,
institutional investors, lenders and media today at 09:00 UK time.
Participant dial-in numbers for the conference call are as follows
(a pin code is not required to access the call):
UK: +44 (0) 20 3481 4247
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Ireland: +353 (0) 1 582 2023
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US: +1 (646) 307-1963
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To register for the webcast click here
https://www.globenewswire.com/Tracker?data=0ISKdPSdvYbbFyk5rJ4dBVFyRSH9Jii2AvZOvzyz-uzOKADzraPySpRReO6wAjrrpkRFlpW_5RpF2G3l92yOnA==
. A playback of the webcast will be available at
www.kenmareresources.com.
Private investor webinar
There will also be a separate webinar for private investors on
Tuesday, 28 March 2023 at 12:30 UK time. To access the webinar,
please register in advance by clicking here
https://www.globenewswire.com/Tracker?data=0ISKdPSdvYbbFyk5rJ4dBW11IQMhlCtlmwo3dk8t4gDV6uUZDh_F3jm70xWsXfCvj8kGeTlun0ame2TP8TbLaNMpr2X4JoJ-BMrM0EFmn2EmhwtxqYaC9hzvlGFRWBNpeiKAwA7j7zF_qVhLHS1LoA==
.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Michael Starke
Investor Relations
ir@kenmareresources.com
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Tel: +353 1 671 0411
Mob: +353 87 943 0367
Murray Group (PR advisor)
Paul O'Kane
pokane@murraygroup.ie
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Tel: +353 1 498 0300
Mob: +353 86 609 0221
About Kenmare Resources
Kenmare Resources plc is one of the world's largest producers of
mineral sands products. Listed on the London Stock Exchange and the
Euronext Dublin, Kenmare operates the Moma Titanium Minerals Mine
in Mozambique. Moma's production accounts for approximately 7% of
global titanium feedstocks and the Company supplies to customers
operating in more than 15 countries. Kenmare produces raw materials
that are ultimately consumed in everyday quality-of-life items such
as paints, plastics and ceramic tiles.
All monetary amounts refer to United States dollars unless
otherwise indicated.
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.
CHAIRMAN'S STATEMENT
Dear shareholders,
Introduction
It is a great honour to have succeeded Steven McTiernan as Chair
of Kenmare following our AGM in May 2022. Kenmare has a world-class
asset at Moma, a dedicated and talented workforce, safe and
well-run operations, and a strong balance sheet.
I'm delighted that the Company achieved record financial results
in 2022, including revenues, profitability and dividends.
A highlight of my year was getting out to site at Moma, meeting
so many of our colleagues and seeing the passion and enthusiasm
they have for our business. Our conversations really drove home to
me the strength of Kenmare's culture and how it is lived on a daily
basis by staff at all levels of the business.
The visit also provided an opportunity to see the new maternity
unit at the Pilivilli health centre and inspect the high quality
housing which was being built in preparation for the relocation of
86 households from the Isoa village. The Isoa relocation, which was
completed in late 2022, has received extremely positive feedback:
the new housing delivers a genuine uplift in living standards which
I hope will be of lasting value to the community.
Transition to Nataka
Moma first achieved production in 2007, and 2022 marked 15 years
of continuous operations there. The feasibility studies for the
move to Nataka have demonstrated a clear route to the efficient and
effective mining of this ore body and Wet Concentrator Plant (WCP)
A is expected to begin transitioning to Nataka from 2025. Nataka
represents the majority of our mineral resources and the detailed
work we are doing now will underpin low-cost operations for decades
to come. TZMI, the leading independent titanium minerals
consultancy, has confirmed that Kenmare was a first quartile
producer in 2021. When assessing financial investments, our
priority is maintaining the best industry position possible on a
sustainable basis to ensure strong business performance through the
cycle. Further updates on the Nataka plans will be provided by the
management team at the Capital Markets Day in April 2023.
Shareholder returns
2022 marks the fourth consecutive year of dividend payments to
shareholders. The Board is recommending a final dividend for 2022
of USc43.33 per share (2021: USc25.42), taking total dividends to
$51.5 million or USc54.31 per share (2021: USc32.71), up 66% on
2021.
Looking forward, Kenmare remains committed to returning excess
cash to shareholders. In 2023 we expect to begin making capital
investments to support the transition of WCP A to Nataka, and there
will be a need to balance our planning for long-term returns to
shareholders with these funding requirements. We intend to maintain
a strong balance sheet as we fund this capital programme,
recognising a less certain global economic outlook.
Sustainability
We achieved almost 12 million hours worked without a Lost Time
Injury to late September 2022, representing more than 18 months of
operations. This was a phenomenal achievement, made possible by the
hard work and dedication of all our colleagues. Maintaining this
focus on safety is an important goal for 2023.
I am pleased that we have increased the number of female mine
employees from 6.9% in 2018 to 14.5% at the end of 2022. This met
our gender diversity target for the year but, looking beyond
numerical targets, our talented female colleagues are demonstrating
the real benefits of diversity through their invaluable
contributions across the Kenmare team.
We acknowledge the human contribution to climate change and aim
to reduce emissions from our already low carbon intensity
operations. Kenmare has an ambition to achieve Net Zero on Scope 1
and 2 emissions by 2040, through ongoing decarbonisation of our
operations and active offsetting to abate residual emissions.
Absolute greenhouse gas emissions reduced by 6% year on year in
2022, benefitting from the investment we made in Rotary
Uninterruptible Power Supply (RUPS) to reduce the usage of diesel
generators, whilst maintaining stable power to support operations
at the Mineral Separation Plant. An extensive maintenance programme
at the Mineral Separation Plant also delivered significant diesel
efficiencies at the dryers. More details on our achievements,
targets and challenges can be found in the Sustainability section
of our Annual Report.
Board Developments
Steven McTiernan stepped down as Chair of the Board of Directors
following our 2022 AGM, having served nine years on the Board, most
of them as Chair. During his time Steven greatly improved the
Board's strength and diversity and its governance of Kenmare. I'd
like to thank Steven for his guidance, dedication and the time he
took to ensure a smooth handover.
In May 2022, the Company announced that our longstanding
Financial Director, Tony McCluskey, would be stepping down from the
role. Alongside Michael Carvill, Tony led the Company from the
exploration phase through to mine development and onto expansion
and his dedication to the role was unwavering through his
tenure.
Tom Hickey was appointed as Tony's replacement and brings
significant financial and natural resources experience to Kenmare,
having served for 15 years as Executive Director of several public
companies, including eight years as Chief Financial Officer of the
African and South American-focused oil and gas producer Tullow Oil
plc.
On 31 December 2022, Sameer Oundhakar stepped down from his role
with Oman Investment Authority (OIA), which controls African
Acquisition S.à.r.l. (AAS), one of Kenmare's largest investors, and
which had nominated Sameer to the Kenmare Board. As a result, he
stepped down from the Kenmare Board on that date and AAS nominated
Issa Al Balushi in his place, who was appointed as a Director in
early 2023.
Consequently, four of our nine Directors have been appointed in
the last eighteen months. Priorities for 2023 include continued
senior management succession planning.
I was pleased to see that this year's internal performance
evaluation process indicated a high level of satisfaction with the
composition, performance and effectiveness of the Board and
Committees. We will continue to improve this effectiveness through
a number of initiatives in 2023.
Acknowledgements
On behalf of the Board, I would like to thank Steven McTiernan
and Tony McCluskey for their leadership and contributions to the
growth of Kenmare over many years, making it the business it is
today.
Thank you to everyone who has contributed to the Company's
success over the past year: in particular our employees, customers,
contractors, local communities and suppliers.
We are a business of scale, supplying over 7% of global titanium
feedstocks, and we are fortunate to have mineral resources to grow
even further. We are continuing to invest in Moma to ensure a
smooth transition to mining at Nataka, where the bulk of our
mineral resources lie, whilst seeking to maintain a first quartile
industry position for decades to come.
I look to the future with great optimism and excitement and
firmly believe that the successful transition to Nataka will
establish a foundation for the long-term success of the Company, to
the benefit of all our stakeholders.
Andrew Webb
Chairman
MANAGING DIRECTOR'S STATEMENT
Dear shareholders,
Introduction
2022 marked a year of outstanding financial performance for
Kenmare, supported by strong product markets. Record revenue and
EBITDA, for a second consecutive year, moved the Company into a net
cash position by year end.
This has enabled the Board to recommend significantly increased
dividends, up 66% on 2021 to USc54.31 per share; also benefitting
from the reduced share count related to the buyback completed in
late 2021.
After over 30 years with Kenmare, Tony McCluskey retired in 2022
and I'd like to personally thank him for his huge contribution. He
leaves Kenmare in the strongest financial position in its history.
I would also like to welcome Tom Hickey who has been appointed as
Tony's successor, an experienced CFO with 15 years as Executive
Director in public companies and significant experience in natural
resources and operating in Africa.
Safety
We achieved almost 12 million hours worked without any Lost Time
Injuries (LTI) to late September 2022 -- a huge achievement and
testament to the strong safety culture we have been striving to
build.
While Kenmare's LTIFR increased to 0.09 incidents per 200,000
hours worked compared to 0.03 in 2021, it nevertheless reduced by
50% relative to the 3-year rolling average of 0.18. For a seventh
consecutive year we also retained our NOSA maximum five-star level,
based on NOSA's independent assessment of the safety systems and
procedures at Moma.
However, the three LTIs recorded in late 2022 have caused us to
redouble efforts to ensure consistent observance of good safety
practices.
Sustainability
At Kenmare, we have always tried to put Sustainability at the
heart of everything we do by being a trusted corporate citizen that
aims to deliver a net positive impact to all stakeholders.
In 2022 the Company completed the RUPS project; this helps to
mitigate power supply disruptions at the Mineral Separation Plant
and successfully reduced outages during the 2022/3 wet season. It
also helps to drive lower carbon emissions, through the reduced
usage of diesel generators.
The RUPS project is a good example of NPV positive projects that
are also aligned to our goals of achieving Net Zero on Scope 1 and
2 emissions by 2040. We are working hard to identify more projects
in the same vein.
Kenmare prides itself on being an organisation where employees
can continue to grow and develop over many years. It was
particularly pleasing for me to present at our Long Service Awards
ceremony at Moma in September 2022, where we congratulated almost
500 employees who had completed more than 10, 20, or even 30 years
of service. I was very honoured to see the long-term commitment
many of our colleagues have made to the success of our business. We
have continued to invest in our people. Each employee at Moma
received an average of 46 hours of training during the year,
including 186 employees taking part in a bespoke management and
leadership coaching programme.
We recently completed our second bi-annual employee engagement
survey. Overall engagement levels were found to be 83%, which is
high relative to the 65% average reported by the company that
carried out the survey. However, the results are lower than our
previous survey (2020: 97% engaged) and we will be analysing them
closely to form thematic action plans.
Operational performance
In 2022, revised production guidance was achieved for ilmenite
and rutile while original production guidance was achieved for
primary zircon and concentrates. HMC production in 2022 was
1,586,200 tonnes, a 2% increase compared to 2021. Whilst this was a
slight improvement, excavated ore and recoveries were impacted by
power outages, difficult mining conditions and slimes, as well as
the previously reported bad weather early in the year.
Shipments were impacted by our Bronagh J transshipment vessel
going into five-yearly dry dock for maintenance work in Q2/Q3 and
by poor weather conditions. However, Q4 2022 was the strongest
quarter of the year for shipments and close to a record, with
365,700 tonnes shipped, demonstrating our ability to achieve a 1.3
Mtpa run rate.
Costs were negatively impacted by high inflation rates and unit
costs were a product of lower production and higher operating
costs.
It has been a stated core strategy of the business to achieve a
first quartile revenue to cash cost position in our industry and we
were delighted that TZMI, the leading independent commodity
consultancy in mineral sands, declared that Kenmare achieved this
goal in respect of 2021.
Product market
Kenmare's unique 100-year life-of-mine operation produces a
range of titanium feedstocks and accounts for 7% of global titanium
feedstock supply. Titanium is listed on the critical minerals list
of a number of countries, including the US and in Europe, and used
in a wide variety of applications such as providing opacity and
colour in paints, paper, plastics, fabrics, inks, and in the
manufacture of titanium metal. Zircon products are used in the
ceramic industry and in the production of zirconia chemicals, which
in turn are used in screens and electronics. Our mineral sands
concentrate product contains Rare Earth Oxides which have also been
highlighted as critical minerals for the energy transition.
2022 was a strong year for Kenmare's sales. The average price of
Kenmare's product suite increased 42% to a record of $463/t as
Kenmare continued to establish its position as a reliable supplier
of titanium feedstocks. With security and reliability of supply
increasingly prominent considerations for many downstream
customers, we are seeing the market assign a greater value to
Kenmare as a proven, stable long-term supplier, enabling us to
place our products in the strongest downstream markets. As
high-grade feedstocks continue to deplete, Kenmare's position as
the largest merchant supplier of ilmenite provides an optimal
position from which to capitalise on ilmenite's growing market
share through beneficiation. It also enables us to invest for the
future with confidence.
The first half of 2022 saw momentum continue from 2021 as
pigment producers operated at close to full capacity and were
constrained due to shortages of titanium feedstocks. Pigment demand
decreased throughout the year as the global economic outlook
weakened and China's zero-COVID-19 policy muted industrial
activity. Pigment destocking and inflationary cost increases
pressured pigment producers' margins, forcing some producers to
delay purchases, constrain production or idle pigment lines. We
expect pigment stocks to have depleted in early 2023 with strong
signs of increasing demand and the restarting of pigment lines.
Despite increased pressure on the pigment market, Kenmare continued
to see robust demand and in Q4 2022 achieved a ninth consecutive
quarterly price increase for ilmenite.
Capital projects
To support the future mine life at Moma, we will need to
transition production to Nataka, the largest ore zone in Moma's
portfolio, in the coming years. Studies to support WCP A's
transition to Nataka, which starts mining there from 2025, continue
to progress well.
Unlike the move of WCP B via road, WCP A will mine its way to a
high-grade path in Nataka through a transition corridor from
Namalope. Once WCP A has arrived in Nataka, the plant will spend
the rest of its economic life there. The ore we mine contains very
fine particles that do not settle easily in water - known as
slimes. They cause challenges with our operations and slimes
management is a key factor in keeping our operating costs low. The
slimes levels in our mining path have been growing in recent years
and the move to Nataka will further raise the levels of slimes
encountered. Management of these conditions is essential to
successful production at Nataka and we expect to introduce a
dedicated desliming circuit at WCP A in advance of the move to
fully address these operational challenges.
Studies have been focused on the optimisation of mining in this
new ore zone to make sure that we can remain in the first quartile
of the revenue to cash cost position in our industry, as this is
central to our strategy of ensuring strong cashflows through the
cycle. This has involved extensive work developing a robust
operating model and assessing the appropriate balance between
capital and operating costs to obtain the optimal solution.
Outlook
I would like to thank all our colleagues who have continued to
work tirelessly to support the growth of Kenmare. Working closely
with our partners, particularly those in Mozambique, is a key
element to our success and I would like to thank them all for their
support last year.
The work Kenmare completed since 2018 to increase production
volumes, control costs and become a first quartile producer in our
industry has built a great foundation. Despite a potentially softer
global economy in the short term, we remain strongly positioned
with record profitability.
In 2023 we expect our product markets to be more challenging,
although our fundamentals remain strong. We have an industry
leading safety record and a long-life ore body, with mineral
resources to support production for more than 100 years. Our robust
balance sheet and strong cashflow generation give us confidence in
our ability to maintain strong shareholder returns whilst funding
the transition of WCP A, to secure mining for decades to come.
I look forward to laying out our future plans in more detail at
the Capital Markets Day on 26 April 2023.
Michael Carvill
Managing Director
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
FINANCIAL YEARED 31 DECEMBER 2022
Unaudited
2022 2021 Restated*
Notes $'000 $'000
Revenue 2 525,988 455,944
Cost of sales 4 (282,694) (295,010)
Gross profit 243,294 160,934
Administration Expenses 4 (9,862) (9,825)
Operating profit 233,432 151,109
Finance income 5 1,147 265
Finance costs 5 (12,472) (14,078)
Profit before tax 222,107 137,296
Income tax expense 6 (16,073) (8,770)
Profit for the financial year and total comprehensive
income for the financial year 206,034 128,526
------------------------------------------------------ ----- --------- --------------
Attributable to equity holders 206,034 128,526
$ per
share $ per share
Basic earnings per share 7 2.17 1.18
Diluted earnings per share 7 2.12 1.16
*Refer to Note 4 for further details on the 2021
restatement.
The accompanying notes form part of these financial
statements.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
DECEMBER 2022
Unaudited
2022 2021
Notes $'000 $'000
Assets
Non-current assets
Property, plant and equipment 8 930,759 954,558
Right-of-use assets 9 1,608 2,136
932,367 956,694
----------------------------------------- ----- --------- ---------
Current assets
Inventories 10 84,171 60,219
Trade and other receivables 11 124,018 74,747
Cash and cash equivalents 12 108,271 69,057
316,460 204,023
----------------------------------------- ----- --------- ---------
Total assets 1,248,827 1,160,717
----------------------------------------- ----- --------- ---------
Equity
Capital and reserves attributable to the
Company's equity holders
Called-up share capital 13 104 104
Share premium 545,950 545,950
Other reserves 232,759 230,539
Retained earnings 324,721 154,050
Total equity 1,103,534 930,643
----------------------------------------- ----- --------- ---------
Liabilities
Non-current liabilities
Bank loans 14 46,180 74,757
Lease liabilities 9 1,540 971
Provisions 15 19,746 38,999
67,466 114,727
----------------------------------------- ----- --------- ---------
Current liabilities
Bank loans 14 32,398 73,342
Lease liabilities 9 245 1,207
Trade and other payables 16 35,293 32,768
Current tax liabilities 17 8,893 4,808
Provisions 15 998 3,222
77,827 115,347
----------------------------------------- ----- --------- ---------
Total liabilities 145,293 230,074
----------------------------------------- ----- --------- ---------
Total equity and liabilities 1,248,827 1,160,717
The accompanying notes form part of these financial
statements.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
FINANCIAL YEARED 31 DECEMBER 2022
Unaudited
Unaudited Called-Up Share Share Unaudited Retained Unaudited
Capital Premium Unaudited Other Reserves Earnings Total
$'000 $'000 $'000 $'000 $'000
Balance at 1 January 2021 120 545,950 231,350 123,083 900,503
Total comprehensive income for the year
Profit for the financial year -- -- -- 128,526 128,526
Total comprehensive income for the year -- -- -- 128,526 128,526
--------------------------------------------------- ------------------------- --------- ------------------------ ------------------ ---------
Transactions with owners of the Company
Recognition of share-based payment expense -- -- 3,420 -- 3,420
Exercise of share-based payment awards -- -- (2,283) -- (2,283)
Unvested and expired share-based payments -- -- (1,964) 1,964 --
Tender offer share buyback (16) -- 81,605 (81,589) --
Tender offer share buyback transaction costs -- -- -- (1,540) (1,540)
Cancellation of treasury shares -- -- (81,589) -- (81,589)
Dividends paid -- -- -- (16,394) (16,394)
Total contributions and distributions (16) -- (811) (97,559) (98,386)
--------------------------------------------------- ------------------------- --------- ------------------------ ------------------ ---------
Balance at 1 January 2022 104 545,950 230,539 154,050 930,643
Total comprehensive income for the year
Profit for the financial year -- -- -- 206,034 206,034
Total comprehensive income for the year -- -- -- 206,034 206,034
--------------------------------------------------- ------------------------- --------- ------------------------ ------------------ ---------
Transactions with owners of the Company
Recognition of share-based payment expense -- -- 5,601 -- 5,601
Exercise of share-based payment awards -- -- (3,363) -- (3,363)
Shares acquired by the Kenmare Employee Benefit
Trust -- -- (1,797) -- (1,797)
Shares distributed by the Kenmare Employee Benefit
Trust -- -- 1,779 -- 1,779
Odd lot offer share buyback -- -- 515 (515) --
Cancellation of treasury shares -- -- (515) -- (515)
Odd lot offer share buyback transaction costs -- -- -- (122) (122)
Dividends paid -- -- -- (34,726) (34,726)
Total contributions and distributions -- -- 2,220 (35,363) (33,143)
--------------------------------------------------- ------------------------- --------- ------------------------ ------------------ ---------
Balance at 31 December 2022 104 545,950 232,759 324,721 1,103,534
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL
YEARED 31 DECEMBER 2022
Unaudited
2022 2021
Notes $'000 $'000
Cash flows from operating activities
Profit for the financial year after tax 206,034 128,526
Adjustment for:
Foreign exchange movement included in operating
costs 4 1,123 1,872
Expected credit losses 18 1,110 225
Share-based payments 5,601 3,420
Finance income 5 (1,147) (265)
Finance costs 5 12,472 14,078
Income tax expense 6 16,073 8,770
Depreciation 8, 9 64,596 63,136
305,862 219,762
------------------------------------------------------ ----- --------- ---------
Change in:
Provisions (2,141) 2,372
Inventories (23,952) 3,451
Trade and other receivables (47,627) (45,057)
Trade and other payables (1,680) (15,681)
Exercise of share-based payment awards (1,566) (2,283)
Cash generated from operating activities 228,896 162,564
Income tax paid (10,461) (6,284)
Interest received 4 657 265
Interest paid 14 (6,921) (7,147)
Factoring and other trade facility fees 5 (2,218) (1,431)
Debt commitment fees paid 5 (534) (161)
Net cash from operating activities 209,419 147,806
------------------------------------------------------ ----- --------- ---------
Investing activities
Additions to property, plant and equipment 8 (59,867) (60,342)
Net cash used in investing activities (59,867) (60,342)
------------------------------------------------------ ----- --------- ---------
Financing activities
Dividends paid (34,726) (16,394)
Odd lot offer share buyback (515) --
Odd lot offer share buyback transaction costs (122) --
Tender offer share buyback -- (81,589)
Tender offer share buyback transaction costs -- (1,540)
Market purchase of equity under Kenmare Restricted
Share Plan (1,797) --
Drawdown of debt 14 20,000 20,000
Repayment of debt 14 (91,429) (20,000)
Payment of lease liabilities (1,142) (1,449)
Net cash used in financing activities (109,731) (100,972)
------------------------------------------------------ ----- --------- ---------
Net increase/(decrease) in cash and cash equivalents 39,821 (13,508)
Cash and cash equivalents at the beginning of the
financial year 69,057 87,244
Effect of exchange rate changes on cash and cash
equivalents (607) (4,679)
Cash and cash equivalents at the end of the financial
year 12 108,271 69,057
UNAUDITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
FINANCIAL YEARED 31 DECEMBER 2022
1. Statement of accounting policies
Kenmare Resources plc (the "Company") is domiciled in the
Republic of Ireland. The Company's registered address is Styne
House, Hatch Street Upper, Dublin 2. The Company has a premium
listing on the Main Market of the London Stock Exchange and a
secondary listing on Euronext Dublin. These unaudited consolidated
financial statements comprise the Company and its subsidiary
undertakings (the "Group"). The principal activity of the Group is
the operation and further development of the Moma Titanium Minerals
Mine in Mozambique.
On 21 March 2023, the Directors approved the preliminary results
for publication. While the consolidated financial statements for
the year ended 31 December 2022, from which the preliminary results
have been extracted, are prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union, these preliminary results do not contain sufficient
information to comply with IFRS. The Directors expect to publish on
6 April 2023 the full financial statements that comply with IFRS as
adopted by the European Union.
The auditor, KPMG, has not yet issued their audit opinion on the
financial statements in respect of the year ended 31 December 2022.
The financial information included within this unaudited
preliminary results statement for the year ended 31 December 2022
does not constitute the statutory financial statements of the Group
within the meaning of section 293 of the Companies Act 2014. The
Group financial information in this preliminary statement for the
year ended 31 December 2022 is unaudited. A copy of the statutory
financial statements in respect of the year ended 31 December 2022
will be annexed to the next annual return and filed with the
Registrar of Companies.
The Group financial information for the year ended 31 December
2021 included in this preliminary statement represents an
abbreviated version of the Group's financial statements for that
year. The statutory financial statements for the Group for the year
ended 31 December 2021, upon which the auditor, KPMG, has issued an
unqualified opinion, were annexed to the annual return of the
Company and filed with the Registrar of Companies.
None of the new and revised standards and interpretations which
are effective for accounting periods beginning on or after 1
January 2022, have a material effect on the Group's financial
statements.
Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
issued by the International Accounting Standards Board (IASB) and
interpretations issued by the IFR Interpretations Committee (IFRIC)
as adopted by the EU and those parts of the Companies Act 2014
applicable to companies reporting under IFRS and Article 4 of the
IAS Regulation.
The 2021 income statement has been restated in order to
reclassify freight costs and distribution costs from other
operating costs to cost of sales. In addition, foreign exchange
losses have been reclassified to other operating costs and are no
longer presented separately on the face of the income statement.
Management feel these presentational changes more appropriately
reflect the nature of each category of expense. Further details can
be found in Note 4.
Going concern
The Directors have evaluated the appropriateness of the going
concern basis in preparing the 2022 Consolidated Financial
Statements for a period of at least twelve months from the date of
approval of these financial statements (the 'period of
assessment'). The evaluation is based on the Group's cash flow
forecast ("the Group Forecast").
The Group Forecast has been prepared by management with best
estimates of production, pricing and cost assumptions over the
period of assessment. The Group recognises the principal risks
which can impact on the outcome of the Group Forecast and have
therefore applied sensitivity analysis to the assumptions to test
the robustness of the cash flow forecast for changes in market
prices, shipments, operating and capital cost assumptions.
Changes in these assumptions affect the level of sales and
profitability of the Group and the amount of capital required to
deliver the projected production levels. Debt covenants are
complied with and Group liquidity is maintained, although at lower
levels, in each of these scenarios.
Having assessed the principal risks facing the Group, together
with the Group's cash flow forecast, the Directors have a
reasonable expectation that the Group has adequate resources for
the foreseeable future and can continue to adopt the going concern
basis of accounting in preparing the annual financial
statements.
2. Revenue
2022 2021
$'000 $'000
Revenue from contracts with customers
Revenue derived from the sale of mineral products 498,339 420,550
Revenue derived from freight services 27,649 35,394
Total Revenue 525,988 455,944
Revenue by product
The principal categories for disaggregating mineral products
revenue are by product type and by country of the customer's
location. The product types are ilmenite, zircon, rutile and
concentrates. Concentrates includes secondary zircon and mineral
sands concentrates.
During the financial year, the Group sold 1,075,600 tonnes
(2021: 1,285,300 tonnes) of finished products to customers at a
sales value of $498.3 million (2021: $420.5 million). The Group
earned revenue derived from freight services of $27.6 million
($35.4 million).
2022 2021
$'000 $'000
Revenue derived from sales of mineral products by primary
product
Ilmenite 347,446 334,714
Primary zircon 99,152 62,727
Concentrates 33,057 19,554
Rutile 18,684 3,555
Total revenue from mineral products 498,339 420,550
Revenue derived from Freight services 27,649 35,394
Total Revenue 525,988 455,944
Revenue by destination
In the following table, revenue is disaggregated by primary
geographical market. The Group allocates revenue from external
customers to individual countries and discloses revenues in each
country where revenues represent 10% or more of the Group's total
revenue. Where total disclosed revenue disaggregated by country
constitutes less than 75% of total Group revenue, additional
disclosures are made on a regional basis until at least 75% of the
Group's disaggregated revenue is disclosed. There were no
individual countries within Europe, Asia (excluding China) or the
Rest of the World with revenues representing 10% or more of the
Group's total revenue during the year.
2022 2021
$'000 $'000
Revenue derived from sales of mineral product by destination
China 154,704 192,635
Europe 130,440 77,891
Asia (excluding China) 108,487 74,583
USA 51,600 44,312
Rest of the World 53,108 31,129
Total revenue from mineral products 498,339 420,550
Revenue derived from Freight services 27,649 35,394
Total Revenue 525,988 455,944
Revenue by major customers
The Group evaluates the concentration of mineral product revenue
by major customer. The following table disaggregates mineral
product revenue from the Group's four largest customers.
2022 2021
$'000 $'000
Mineral product revenue from external customers
Largest customer 74,671 65,500
Second largest customer 62,791 62,285
Third largest customer 58,413 50,642
Fourth largest customer 41,015 42,029
Total 236,890 220,456
All Group revenues from external customers are generated by the
Moma Titanium Minerals Mine in Mozambique. Further details on this
operating segment can be found in Note 3. Sales to and from Ireland
were $nil (2021: $nil) in the year.
3. Segment reporting
Information on the operations of the Moma Titanium Minerals Mine
in Mozambique is reported to the Group's Board for the purposes of
resource allocation and assessment of segment performance.
Information regarding the Group's operating segment is reported
below:
2022 2021 Restated
--------------- -------------------------------- --------------------------------
Corporate Mozambique Total Corporate Mozambique Total
Revenue &
Results
Revenue* -- 525,988 525,988 -- 455,944 455,944
Cost of sales -- (282,694) (282,694) -- (295,010) (295,010)
Gross profit -- 243,294 243,294 -- 160,934 160,934
Administrative
expenses (7,848) (2,014) (9,862) (7,700) (2,125) (9,825)
Segment
operating
profit (7,848) 241,280 233,432 (7,700) 158,809 151,109
Finance income 23 1,124 1,147 47 218 265
Finance
expenses (83) (12,389) (12,472) (98) (13,980) (14,078)
Profit before
tax (7,908) 230,015 222,107 (7,751) 145,047 137,296
Income tax
expense (1,601) (14,472) (16,073) (3,083) (5,687) (8,770)
Profit for the
financial
year (9,509) 215,543 206,034 (10,834) 139,360 128,526
--------------- --------- ---------- --------- --------- ---------- ---------
Segment assets
& Liabilities
Segment Assets 12,583 1,236,244 1,248,827 6,798 1,153,919 1,160,717
Segment
Liabilities 4,722 140,571 145,293 4,221 225,853 230,074
Additions to
non-current
assets
Segment
Additions to
non-current
assets -- 59,867 59,867 -- 60,342 60,342
*Revenue excludes inter-segment revenue of $24.2m earned by the
corporate segment relating to marketing and management services fee
income. Inter-segment revenue is determined by intercompany
agreements between the Group's subsidiary undertakings but does not
form part of regular reporting reviewed by the Group's Board.
Corporate assets consist of the Company's property, plant and
equipment including right-of-use assets, cash and cash equivalents
and prepayments at the reporting date. Corporate liabilities
consist of trade and other payables at the reporting date.
4. Cost and income analysis
Restated
2022 2021
$'000 $'000
Expenses by function
Cost of sales 282,694 295,010
Administration expenses 9,862 9,825
Total 292,556 304,835
Expenses by nature can be analysed as follows:
Restated
2022 2021
$'000 $'000
Expenses by nature
Staff costs 55,907 46,712
Repairs and maintenance 43,151 43,208
Power and fuel 43,960 30,400
Freight 27,649 35,394
Distribution costs 5,699 5,215
Other production and operating costs 72,099 69,552
Movement of mineral products inventory (21,628) 9,346
Depreciation of property, plant and equipment and right-of-use
assets 64,596 63,136
Foreign exchange loss 1,123 1,872
Total 292,556 304,835
Mineral products consist of finished products and heavy mineral
concentrate as detailed in Note 10. Mineral stock movement in the
year was an increase of $21.6 million (2021: $9.3 million
decrease). Distribution costs of $5.7 million (2021: $5.2 million)
represent the cost of running the Mine's finished product storage,
jetty and marine fleet. Freight costs of $27.6 million (2021: $35.4
million) arise from sales to customers on a CIF or CFR basis. There
were no exceptional items within operating profit in 2022 (2021
restated: $nil).
The 2021 income statement has been restated in order to
reclassify freight costs and distribution costs from other
operating costs to cost of sales. In addition, foreign exchange
gains and losses have been reclassified to administrative costs and
are no longer presented separately on the face of the income
statement. Management feel these presentational changes more
appropriately reflect the nature of each category of expense.
As previously As restated
reported Adjustment $'000
Revenue 455,944 -- 455,944
Cost of sales (244,986) (50,024) (295,010)
Other Operating Costs/Administration Expenses (57,977) 48,152 (9,825)
Net Finance costs (11,788) (2,025) (13,813)
Foreign exchange (3,897) 3,897 --
Taxation (8,770) -- (8,770)
Profit for the financial year and total comprehensive
income for the financial year 128,526 -- 128,526
------------------------------------------------------ ------------- ---------- -----------
5. Net Finance costs
Restated
2022 2021
$'000 $'000
Finance costs
Interest on bank borrowings (8,829) (9,475)
Interest on lease liabilities (147) (239)
Factoring and other trade facility fees (2,218) (1,431)
Commitment and other fees (534) (161)
Unwinding of discount on mine closure provision (744) (747)
Foreign exchange loss -- (2,025)
Total Finance Costs (12,472) (14,078)
------------------------------------------------ -------- --------
Interest earned on bank deposits 657 265
Foreign exchange gain 490 --
Total Finance Income 1,147 265
------------------------------------------------ -------- --------
Net finance costs recognised in profit or loss (11,325) (13,813)
All interest has been expensed in the financial year. The Group
has classified factoring and other trade facility fees in net cash
from operating activities in the Consolidated Statement of
Cashflows.
6. Income tax expense
2022 2021
$'000 $'000
Corporation tax 16,073 8,770
Deferred tax -- --
Total 16,073 8,770
-------------------------------------------------------- -------- --------
Reconciliation of effective tax rate
Profit before tax 222,107 137,296
Profit before tax multiplied by the applicable tax rate
(12.5%) 27,763 17,162
Under provision in respect of prior years 546 --
Non-taxable income (18,120) (10,826)
Non-deductible expenses 483 331
Differences in effective tax rates on overseas earnings 5,401 2,103
Total 16,073 8,770
During the year, KMML Mozambique Branch had taxable profits of
$39.9 million (2021: $16.2 million), resulting in an income tax
expense of $14.5 million (2021: $5.7 million) being recognised. The
income tax rate applicable to taxable profits of KMML Mozambique
Branch is 35% (2021: 35%).
KMML Mozambique Branch has elected, and the fiscal regime
applicable to mining allows for, the option to deduct, as an
allowable deduction, depreciation of exploration and development
expense and capital expenditure over the life of mine. Tax losses
may be carried forward for three years. There are no tax losses
carried forward at 31 December 2022.
KMPL Mozambique Branch has Industrial Free Zone (IFZ) status. As
an IFZ Branch, it is exempted from corporation taxes and hence its
income is non-taxable.
During the year, Kenmare Resources plc had taxable profits of
$13.3 million (2021: $32.5 million) as a result of management and
marketing service fee income earned on services provided to
subsidiary undertakings, resulting in a corporate tax expense of
$1.6 million (2021: $3.1 million).
7. Earnings per share
The calculation of the basic and diluted earnings per share
attributable to the ordinary equity holders of the Company is based
on the following data:
2022 2021
$'000 $'000
Profit for the financial year attributable to equity
holders of the Company 206,034 128,526
2022 2021
Number of Number of
shares shares
Weighted average number of issued ordinary shares for
the purpose of basic earnings per share 94,919,944 108,843,459
Effect of dilutive potential ordinary shares:
Share awards 2,361,819 2,185,857
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 97,281,763 111,029,316
$ per share $ per share
Basic earnings per share 2.17 1.18
Diluted earnings per share 2.12 1.16
The denominator for the purposes of calculating both basic and
diluted earnings per share has been adjusted to reflect shares
acquired and subsequently cancelled during the year.
8. Property, plant and equipment
Plant and Development Construction Other
Equipment Expenditure In Progress Assets Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2021 995,856 249,971 52,416 63,114 1,361,357
Additions during the financial
year 784 -- 59,558 -- 60,342
Transfer from construction in
progress 29,586 8,201 (50,544) 12,757 --
Disposals (6,557) -- -- (11,440) (17,997)
Adjustment to mine closure cost (2,240) -- -- -- (2,240)
At 31 December 2021 1,017,429 258,172 61,430 64,431 1,401,462
------------------------------- ---------- ------------ ------------ -------- ---------
Additions during the financial
year 252 112 59,261 242 59,867
Transfer from construction in
progress 48,233 1,767 (69,918) 19,918 --
Disposals (10,230) -- -- (7,201) (17,431)
Adjustment to mine closure cost (20,080) -- -- -- (20,080)
At 31 December 2022 1,035,604 260,051 50,773 77,390 1,423,818
------------------------------- ---------- ------------ ------------ -------- ---------
Accumulated depreciation
At 1 January 2021 232,441 135,153 -- 35,255 402,849
Charge for the financial year 44,229 6,336 -- 11,487 62,052
Disposals (6,557) -- -- (11,440) (17,997)
At 31 December 2021 270,113 141,489 -- 35,302 446,904
Charge for the financial year 44,435 6,379 -- 12,772 63,586
Disposals (10,230) -- -- (7,201) (17,431)
At 31 December 2022 304,318 147,868 -- 40,873 493,059
------------------------------- ---------- ------------ ------------ -------- ---------
Carrying amount
At 31 December 2022 731,286 112,183 50,773 36,517 930,759
At 31 December 2021 747,316 116,683 61,430 29,129 954,558
An adjustment to the mine closure cost of $20.1 million (2021:
$2.2 million) was made during the year as a result of an update in
the discount rate as detailed in Note 15.
At each reporting date, the Group assesses whether there is any
indication that property, plant and equipment may be impaired. The
Group considers the relationship between its market capitalisation
and its book value, among other factors, when reviewing for
indicators for impairment. As at 31 December 2022, the market
capitalisation of the Group was below the book value of net assets,
which is considered an indicator of impairment. The Group carried
out an impairment review of property, plant and equipment as at 31
December 2022. As a result of the review, and given the performance
and outlook of the Group, no impairment provision was recognised in
the current financial year. No impairment was recognised in the
prior financial year. Given the historic volatility in product
pricing and sensitivity analysis of forecast product pricing, the
discount rate and to a lesser extent operating costs, the
impairment loss of $64.8 million, which was recognised in the
consolidated statement of comprehensive income in 2014, was not
reversed.
The cash-generating unit for the purpose of impairment testing
is the Moma Titanium Minerals Mine. The basis on which the Mine is
assessed is its value in use. The cash flow forecast employed for
the value in use computation is from a life of mine financial
model. The recoverable amount obtained from the financial model
represents the present value of the future discounted pre-tax,
pre-finance cash flows discounted at 14.0% (2021: 10.5%).
Key assumptions include the following:
-- The discount rate is based on the Group's weighted average
cost of capital. This rate is a best estimate of the current market
assessment of the time value of money and the risks specific to the
Mine, taking into consideration country risk, currency risk and
price risk. The factors making up the cost of equity, cost of debt
and capital structure have changed from the prior year review, to
reflect increases in the risk-free rate, resulting in a discount
rate of 14.0% (2021: 10.5%). The Group's estimation of the country
risk premium included in the discount rate has remained unchanged
from the prior year. The Group does not consider it appropriate to
apply the full current country risk premium for Mozambique to the
calculation of the Group's weighted average cost of capital as it
believes the specific circumstances which have resulted in the risk
premium increase over the past number of years are not relevant to
the specific circumstances of the Moma Mine. Hence, country risk
premium applicable to the calculation of the cost of equity has
been adjusted accordingly. Using a discount rate of 14.0%, the
recoverable amount is greater than the carrying amount by $86.9
million (2021: $384.0 million). The discount rate is a significant
factor in determining the recoverable amount. A 1.5% increase in
the discount rate to 15.5% reduces the recoverable amount by $86.9
million to $nil, assuming all other inputs remain unchanged. The
decrease in the recoverable amount from the prior year is a result
of decreased cash flows over the life of mine as a result of
increased forecast capital and operating costs and an increase in
the discount rate from 10.5% to 14.0%.
-- A mine plan is based on the Namalope, Nataka, Pilivili and
Mualadi proved and probable reserves and resources. Specific
resource material is included only where there is a high degree of
confidence in its economic extraction. The Mine life assumption of
40 years has not changed from the prior year review. Average annual
production is approximately 1.2 million tonnes (2021: 1.2 million
tonnes) of ilmenite and co-products zircon, rutile and concentrates
over the life of the Mine and remains unchanged from the prior year
review. This mine plan does not include investment in additional
mining capacity. Certain minimum stocks of final and intermediate
products are assumed to be maintained at period ends.
-- Product sales prices are based on contract prices as
stipulated in marketing agreements with customers, or where
contracts are based on market prices or production is not currently
contracted, prices are forecast by the Group taking into account
independent titanium mineral sands expertise provided by TiPMC
Solutions and management expectations including general inflation
of 2% per annum. Forecast prices provided by TiPMC Solutions have
been reviewed and found to be consistent with other external
sources of information. Average forecast product sales prices have
increased over the life of mine from the prior year end review as a
result of revised forecast pricing. A 2.5% reduction in average
sales prices over the life of mine reduces the recoverable amount
by $86.9 million to $nil, assuming all other inputs remain
unchanged.
-- Operating costs are based on approved budget costs for 2023
taking into account conservative estimated inflation rates for
2023. From 2024 onwards, operating costs are escalated by 2% per
annum as management expects inflation to normalise and average 2%
over the life of mine period. Average forecast operating costs have
increased from the prior year end review as a result of increased
production and inflation. Increased costs associated with estimated
future power consumption and unit prices for mining in Nataka have
also been included in the forecast cashflows. A 5.0% increase in
operating costs over the life of mine reduces the recoverable
amount by $86.9 million to $nil, assuming all other inputs remain
unchanged.
Whilst the Group has set ambitions to be net zero by 2040, the
financial impact is still being assessed as the Group considers how
it will work towards meeting this target. As such, estimates and
judgements within these financial statements do not consider the
expenditure (or any related savings) associated with the Company's
ambition to become net zero nor the financial impact of the climate
risks disclosed within the Group's TCFD reporting as a reliable
estimate cannot currently be made.
-- Capital costs are based on a life of mine capital plan
including inflation at 2% per annum from 2024. Average forecast
capital costs have increased and their scheduling has changed from
the prior year end review based on updated sustaining and
development capital plans required to maintain the existing plant
over the life of mine. A 8.0% increase in capital costs over the
life of mine reduces the recoverable amount by $86.9 million to
$nil, assuming all other inputs remain unchanged.
9. Right-of-use assets and lease liabilities
Plant and Land and
Equipment Buildings Total
$'000 $'000 $'000
Cost
At 1 January 2022 3,319 2,108 5,427
Additions -- 482 482
At 31 December 2022 3,319 2,590 5,909
Accumulated Depreciation
At 1 January 2022 2,489 802 3,291
Depreciation expense 830 180 1,010
At 31 December 2022 3,319 982 4,301
Carrying amount
At 31 December 2022 -- 1,608 1,608
At 31 December 2021 830 1,306 2,136
On 1 January 2019, the Group recognised a lease liability of
$3.3 million in relation to electricity generators at the Mine. The
lease for the electricity generators was renewed in November 2017
for a five-year period and rental payments were fixed for the five
years. The lease agreement expired in November 2022 and following
negotiations the Group completed the acquisition process of the
electricity generators in February 2023.
On 1 January 2019, the Group recognised a lease liability of
$1.7 million in respect of the rental of its Irish head office. The
lease has a term of 10 years commencing August 2017 and rental
payments are fixed for five years. This lease obligation is
denominated in Euros.
In February 2019, the Group recognised a lease liability of $0.4
million in respect of its Mozambican country office in Maputo. The
lease has a seven-year term commencing February 2019 and rental
payments are fixed for seven years. This lease obligation is
denominated in US Dollars. The Branch has discounted lease payments
using its incremental borrowing rates. The weighted average rate
applied is 7%.
In December 2022, the Maputo Office lease was modified and
remeasured. The lease term was extended to 10 years commencing 1
December 2022. In addition, additional floor space of 250 square
meters was leased as an addendum to the existing contract. The
Group has determined that the lease modification should not be
accounted for as a separate lease because the lease payments for
the new office space are not considered commensurate with market
rentals for office space of that size and characteristic. The
incremental borrowing rate applied to the remeasured lease is
10.2%.
At each reporting date, the Company assesses whether there is
any indication that right-of-use assets may be impaired. No
impairment indicators were identified as at 31 December 2022 or 31
December 2021.
The Group has recognised a rental expense of $3.9 million (2021:
$9.0 million) in relation to short term leases of machinery and
vehicles which have not been recognised as a right-of-use
asset.
Set out below are the carrying amounts of lease liabilities at
each reporting date:
2022 2021
$'000 $'000
Current 245 1,207
Non-current 1,540 971
Total 1,785 2,178
The consolidated income statement includes the following amounts
relating to leases:
2022 2021
$'000 $'000
Depreciation expense 1,010 1,084
Interest expense on lease liabilities 147 239
Total 1,157 1,323
10. Inventories
2022 2021
$'000 $'000
Mineral products 43,655 22,027
Consumable spares 40,516 38,192
84,171 60,219
At 31 December 2022, total final product stock was 213,500
tonnes (2021: 88,700 tonnes). Closing stock of heavy mineral
concentrate was 18,800 tonnes (2021: 11,500 tonnes). During the
year, inventory amounting to $235.2 million (2021: $246.4 million)
was recognised as an expense in cost of sales.
Net realisable value is determined with reference to forecast
prices of finished products expected to be achieved. There is no
guarantee that these prices will be achieved in the future,
particularly in weak product markets. During the financial year,
there was a write-down of $nil (2021: $0.5 million) to mineral
products charged to cost of sales to value mineral products at net
realisable value.
11. Trade and other receivables
2022 2021
$'000 $'000
Trade receivables 104,970 66,204
VAT receivable 4,527 790
Prepayments 14,521 7,753
124,018 74,747
12. Cash and cash equivalents
2022 2021
$'000 $'000
Bank balances 108,271 69,057
Cash and cash equivalents comprise cash balances held for the
purposes of meeting short-term cash commitments and investments
which are readily convertible to a known amount of cash and are
subject to an insignificant risk of change in value. Where
investments are categorised as cash equivalents, the related
balances have a maturity of three months or less from the date of
investment.
13. Called-up share capital
2022 2021
EUR'000 EUR'000
Authorised share capital
181,000,000 ordinary shares of EUR0.001 each 181 181
181 181
2022 2021
$'000 $'000
Allotted, called up and fully paid
Opening balance
94,921,970 (2021: 109,736,382) ordinary shares of EUR0.001
each 104 120
Acquired and cancelled
92,419 (2021: 14,814,412) ordinary shares of EUR0.001 each -- (16)
Closing balance
94,829,551 (2021: 94,921,970) ordinary shares of EUR0.001
each 104 104
Total called-up share capital 104 104
No ordinary shares were issued during the year (2021: $nil).
On 3 October 2022, under the authority granted at the Company's
Annual General Meeting held on 26 May 2022, and in accordance with
Section 1075 of the Companies Act 2014 and article 147 of the
Articles of Association, the Company completed an odd lot offer
which involved the acquisition of 92,419 ordinary shares of
EUR0.001 each in the capital of the Company representing 0.1% of
the then called-up share capital of the Company for a total cash
consideration of $0.5 million. The odd lot offer buyback was funded
from distributable reserves and all ordinary shares acquired by the
Company were subsequently cancelled. Transaction costs associated
with the transaction amounted to $0.1 million and were accounted
for as a deduction from retained earnings.
On 10 December 2021, under the authority granted at the
Company's extraordinary General Meeting held on 9 December 2021,
and in accordance with Section 105(1) and Section 106(1) of the
Companies Act 2014 and article 47 and article 48 of the Articles of
Association, the Company completed a tender offer buyback of
14,814,412 ordinary shares of EUR0.001 each in the capital of the
Company representing 13.5% of the then called-up share capital of
the Company for a total cash consideration of $81.6 million. The
tender offer share buyback was funded from distributable reserves
and all ordinary shares acquired by the Company were subsequently
cancelled. Transaction costs associated with the transaction
amounted to $1.5 million and were accounted for as a deduction from
retained earnings.
14. Bank loans
2022 2021
$'000 $'000
Borrowings 78,578 148,099
The borrowings are repayable as follows:
Less than one year 33,653 73,342
Between two and five years 47,142 78,572
80,795 151,914
Transaction costs (2,217) (3,815)
Total carrying amount 78,578 148,099
Borrowings
On 11 December 2019, the Group entered into debt facilities with
Absa Bank Limited (acting through its Corporate and Investment
Banking Division) ("Absa"), The Emerging Africa Infrastructure Fund
(part of the Private Infrastructure Development Group) ("EAIF"),
Nedbank Limited (acting through its Nedbank Corporate and
Investment Banking division) ("Nedbank"), Rand Merchant Bank and
Standard Bank Group ("Standard Bank").
The debt facilities comprise a $110 million Term Loan Facility
and a $40 million Revolving Credit Facility that share common terms
and a common security package. The finance documentation also
accommodates for a Mine Closure Guarantee Facility (provided by
either the existing lenders or other finance providers) of up to
$40 million, with the provider(s) of such a facility sharing in the
common security package. The potential total aggregate principal
amount of indebtedness secured under the finance documentation is
therefore $190 million. The transaction costs for arrangement of
the debt facilities amounted to $6.5 million. The Term Loan
Facility has a final maturity date of 11 March 2025. Interest is at
LIBOR plus 5.40% per annum. Repayment is in seven equal semi-annual
instalments, beginning 11 March 2022.
On 21 July 2022 the Revolving Credit Facility was extended by 12
months and now has a maturity date of 11 December 2023, which is
extendable by a further 12 months subject to lender consent. As at
the end of the period, interest is at LIBOR plus 4.25% per annum
(5.0% up to 11 December 2022).
The Group entered into a mine closure guarantee facility with
Absa Bank Moçambique SA effective from 1 July 2022 for an amount of
$18.9 million. This guarantee shares the security package with the
Term Loan Facility and Revolving Credit Facility on a pro rata and
pari passu basis.
The security package consists of (a) security over the Group's
bank accounts (subject to certain exceptions), (b) pledges of the
shares of Kenmare Moma Processing (Mauritius) Limited and Kenmare
Moma Mining (Mauritius) Limited (the "Project Companies"), (c)
security over intercompany loans, and (d) Mozambican law security
interests over certain rights and agreements with Mozambican
authorities, including over the Implementation Agreement, the
Mineral Licensing Contract and the Mining Licence.
The carrying amount of the secured bank accounts of the Group
was $102.9 million as at 31 December 2022 (2021: $66.9 million).
The shares of the Project Companies and intercompany loans are not
included in the consolidated statement of financial position as
they are eliminated on consolidation. They, therefore, do not have
a carrying amount but, upon enforcement of the pledges on behalf of
the lender group, the shares in the Project Companies would cease
to be owned or controlled by the Group. The secured rights and
agreements do not have a carrying amount. They are, however,
necessary for the Project Companies to operate the Mine in
Mozambique.
At 31 December 2022, total debt of $78.6 million (2021: $148.1
million) was recognised by the Group. The $40 million Revolving
Credit Facility was repaid in full in February 2022 and a further
$20 million was drawn down in September 2022 and subsequently
repaid in November 2022. $31.4 million of principal repayments were
made against the Term Loan over the course of the year. Unamortised
transaction costs of $2.2 million (2021: $3.8 million) plus
interest amortised of $2.2 million (2021: $2.0 million) were
recognised by the Group at 31 December 2022.
Reconciliation of movements of debt to cash flows arising 2022 2021
from financing activities (excluding leases) $'000 $'000
Bank loans
Balance at 1 January 148,099 145,771
Cash movements
Loan interest paid (6,921) (7,147)
Principal paid (91,429) (20,000)
Loan drawn down 20,000 20,000
Non-cash movements
Loan interest accrued 8,829 9,475
Balance at 31 December 78,578 148,099
IBOR reform
A fundamental reform of major interest rate benchmarks is being
undertaken globally, including the replacement of some interbank
offered rates (IBORs) with alternative nearly risk-free rates
(referred to as "IBOR reform"), including LIBOR (the London
Interbank Offered Rate). The Group had, at the reporting date,
exposure to US LIBOR on its debt facilities.
Pursuant to an Amendment and Restatement Agreement entered into
on 9 March 2023 in respect of the Group's debt facilities, the
basis on which interest is calculated in respect of those
facilities were amended with effect from 11 March 2023. As a result
of the amendment, interest rates for interest periods commencing
from 11 March 2023 onwards are no longer determined by reference to
US LIBOR; instead they are determined on the basis of the
applicable Term SOFR Rate. While US LIBOR represented an inter-bank
lending rate, Term SOFR is a published screen rate derived from
SOFR, being the secured overnight financing rate (SOFR)
administered by the Federal Reserve Bank of New York. As SOFR
represents a risk-free rate, a credit adjustment spread is applied
in addition, which spread varies according to the length of the
relevant interest period.
The 6-month SOFR rate set on 11 March 2023 for the next interest
period to 11 September 2023 was 5.4%. The credit adjustment spread
of 0.4% plus the margin of 5.4% results in an interest rate of
11.2% on the Term Loan. The Group has concluded that the new basis
for determining cashflows is economically equivalent to the
previous basis.
Covenants
The finance documents contain a number of representations,
covenants and events of default on customary terms, the breach of
which could lead to the secured parties under the finance
documentation accelerating the outstanding loans and taking other
enforcement steps, such as the enforcement of some or all of the
security interests, which could lead to, in extremis, the Group
losing its interest in the Mine. The most salient of the relevant
terms that could lead to acceleration of the loans and/or
enforcement of security are the financial covenants.
All covenants have been complied with during the year. The key
financial covenants are detailed below:
As at As at
31 December 31 December
2022 2021 Covenant
--------------- -----------
Interest
Coverage Ratio 34.96:1 21.8:1 Not less than 4.00:1
Net Debt to Not greater
EBITDA (0.09):1 0.38:1 than 2.00:1
Debt Service
Coverage Ratio 3.11:1 22.3:1 Not less than 1.20:1
Liquidity $148,271,000 $69,057,000 Not less than $15,000,000
Reserve Tail
Ratio 81% 78% Not less than 30%
The definition of the covenants under the debt facilities are
set out below:
-- Interest Coverage Ratio is defined as the ratio of EBITDA to
Net Interest Cost.
-- Net Debt is defined as total financial indebtedness excluding
leases less consolidated cash and cash equivalents.
-- The Debt Service Coverage Ratio is the ratio of cash and cash
equivalents at the beginning of a reporting period plus available
facilities plus cash generated in the period to debt repayments in
the period.
-- Liquidity is defined as consolidated cash and cash
equivalents plus undrawn amounts of the Revolving Credit
Facility.
-- Reserve Tail Ratio means the reserve tail ratio, expressed as
a percentage of the termination date reserves (estimated remaining
reserves in March 2025) divided by the initial reserves (estimated
reserves in December 2019).
15. Provisions
2022 2021
$'000 $'000
Mine closure provision 16,623 35,959
Mine rehabilitation provision 4,121 3,998
Other provisions -- 2,264
20,744 42,221
------------------------------ ------ ------
Current 998 3,222
Non-current 19,746 38,999
20,744 42,221
Mine Mine
Closure Rehabilitation
Provision Provision Other Total
$'000 $'000 Provisions $'000
At 1 January 2021 37,451 3,893 -- 41,344
(Decrease)/increase in provision during
the financial year (2,239) 470 2,264 495
Provision utilised during the financial
year -- (365) -- (365)
Unwinding of the discount 747 -- -- 747
At 1 January 2022 35,959 3,998 2,264 42,221
(Decrease)/Increase in provision during
the financial year (20,080) 4,131 948 (15,001)
Provision utilised during the financial
year -- (4,008) (3,212) (7,220)
Unwinding of the discount 744 -- -- 744
At 31 December 2022 16,623 4,121 -- 20,744
The Mine closure provision represents the Directors' best
estimate of the Project Companies' liability for close-down,
dismantling and restoration of the mining and processing site. A
corresponding amount equal to the provision is recognised as part
of property, plant and equipment. The costs are estimated on the
basis of a formal closure plan, are subject to regular review and
are estimated based on the net present value of estimated future
costs. Mine closure costs are a normal consequence of mining, and
the majority of close-down and restoration expenditure is incurred
at the end of the life of the Mine. The unwinding of the discount
is recognised as a finance cost and $0.7 million (2021: $0.7
million) has been recognised in the statement of comprehensive
income for the financial year.
The main assumptions used in the calculation of the estimated
future costs include:
-- a discount rate of 4.0% (2021: 2.1%);
-- an inflation rate of 2% (2021: 2%);
-- an estimated life of mine of 40 years (2021: 40 years). It is
assumed that all licences and permits required to operate will be
renewed or extended during the life of mine; and
-- an estimated closure cost of $34.1 million (2021: $34.1
million) and an estimated post-closure monitoring provision of $3.9
million (2021: $3.9 million).
The life of mine plan is based on the Namalope, Nataka, Pilivili
and Mualadi reserves and resources as set out in the reserve and
resources table. Specific resource material is included only where
there is a high degree of confidence in its economic extraction.
The Mine closure provision has decreased by $20.1 million as a
result of a change in the discount rate from 2.1% to 4.0%.
The discount rate is a significant factor in determining the
Mine closure provision. The discount rate increased to 4.0% (2021:
2.1%) as a result of movements in the US Treasury rates.
Thirty-year US Treasury yields are the longest period for which
yields are quoted. A 40-year rate to align with the estimated life
of mine has been calculated by taking the average of the increase
in yield from 10 to 20 years and the increase in yield from 20 to
30 years and adding this average to the 30-year Treasury rate to
arrive at an estimated extrapolated rate for 40 years. This
discount rate is deemed to provide the best estimate of the current
market assessment of the risk-free time value of money. Risks
specific to the liability are included in the cost estimate. A
reasonable possible increase of 1% in the estimated discount rate
results in the Mine closure provision decreasing to $11.2 million.
A 1% decrease in the estimated discount rate results in the Mine
closure provision increasing to $24.7 million.
The Mine rehabilitation provision represents the Directors' best
estimate of the Company's liability for rehabilitating areas
disturbed by mining activities. Rehabilitation costs are recognised
based on the area disturbed and estimated cost of rehabilitation
per hectare, which is reviewed regularly against actual
rehabilitation cost per hectare. Actual rehabilitation expenditure
is incurred approximately 12 months after the area has been
disturbed. During the financial year, there was a release of $4.0
million (2021: $0.4 million) to reflect the actual mine
rehabilitation costs incurred, and an addition to the provision of
$4.1 million (2021: $0.5 million) for areas newly disturbed.
Other provisions comprise an amount of $nil (2021: $2.3 million)
in relation to a potential indirect tax liability. The matter was
resolved following a final settlement of $3.2 million with the
Mozambican Tax Authority during the year.
16. Trade and other payables
2022 2021
$'000 $'000
Trade payables 7,305 7,186
Deferred income 2,740 --
Accruals 25,248 25,582
35,293 32,768
Included in accruals at the financial year end is an amount of
$1.6 million (2021: $1.6 million) for payroll and social insurance
taxes.
Deferred income relates to sales contracts which contain
separate performance obligations for the sale of mineral products
and the provision of freight services. The portion of the revenue
representing the obligation to perform the freight service is
deferred and recognised over time as the obligation is fulfilled,
along with the associated costs.
17. Current tax liabilities
2022 2021
$'000 $'000
Current tax liabilities 8,893 4,808
Refer to Note 6 for further information on the Group's tax
expense.
18. Financial instruments
2022 2021
Carrying Carrying
amount Fair value amount Fair value
$'000 $'000 $'000 $'000
Financial assets at fair
value through profit
and loss
Level Level
Trade receivables(1) 31,188 31,188 2 37,086 37,086 2
Financial assets at fair
value through OCI
Level Level
Trade receivables(2) 43,065 43,065 2 14,539 14,539 2
Financial assets not
measured
at fair value
Level Level
Trade receivables(3) 30,717 30,717 2 14,579 14,579 2
Level Level
Cash and cash equivalents 108,271 108,271 2 69,057 69,057 2
213,241 213,241 135,261 135,261
------------------------- -------- ---------- ----- -------- ---------- -------
Financial liabilities
not measured
at fair value
------------------------- -------- ---------- ----- -------- ---------- -----
Level
Bank loans 78,578 80,795 2 148,099 148,827 Level 2
The carrying amounts and fair values of financial assets and
financial liabilities including their levels in fair value
hierarchy are detailed above. The table does not include fair value
information for other receivables, prepayments, trade payables and
accruals as these are not measured at fair value as the carrying
amount is a reasonable approximation of their fair value.
Trade receivables which are factored through the Absa Bank
facility or letters of credit which are discounted through the
Barclays Bank facility are initially measured at fair value and
subsequently measured at fair value through profit or loss (FVTPL).
Trade receivables or letters of credit where it is not known at
initial recognition if they will be factored are classified as fair
value through other comprehensive income (FVOCI). Trade receivables
which will not be factored and for which balances will be recovered
under the sale contract credit terms are classified and
subsequently measured at amortised cost.
In the case of factored receivables, the Group derecognises the
discounted receivable to which the arrangement applies when payment
is received from the bank as the terms of the arrangement are
non-recourse. The payment to the bank by the Group's customers are
considered non-cash transactions for the purposes of the
consolidated statement of cashflows.
The valuation technique used in measuring Level 2 fair values is
discounted cash flows, which considers the expected receipts or
payments discounted using adjusted market discount rates or where
these rates are not available estimated discount rates.
The Group has exposure to credit risk, liquidity risk and market
risk arising from financial instruments.
Risk management framework
The Board is ultimately responsible for risk management within
the Group. It has delegated responsibility for the monitoring of
the effectiveness of the Group's risk management and internal
control systems to the Audit & Risk Committee. The Board and
Audit & Risk Committee receive reports from executive
management on the key risks to the business and the steps being
taken to mitigate such risks. The Audit & Risk Committee is
assisted in its role by internal audit. Internal audit undertakes
both regular and ad hoc reviews of risk management controls and
procedures, the results of which are reported to the Audit &
Risk Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or a counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
trade receivables from customers. The carrying amount of financial
assets represents the maximum credit exposure.
The Group's exposure to credit risk is influenced by the
individual circumstances of each customer. The Group also considers
the factors that may influence the credit risk of its customer
base, including the default risk associated with the industry and
country in which customers operate. The Group reduces its exposure
to customers perceived to have a higher credit risk through a
letter of credit trade facility. Under this facility, Barclays Bank
confirms the letter of credit from the issuing bank and therefore
assumes the credit risk.
The Group's customers have been transacting with the Group for a
significant number of years, and no customers' balances have been
written off or are credit impaired at the financial year end. In
monitoring customer credit risk, customers are regularly reviewed
individually and the Group has not identified any factors that
would merit reducing exposure to any particular customer. The Group
does not require collateral in respect of trade receivables.
The gross exposure to credit risk for trade receivables by
geographic region was as follows:
2022 2021
$'000 $'000
China 19,009 37,120
Asia (excluding China) 17,243 5,127
Europe 45,806 15,410
USA 22,776 8,547
Africa 136 --
Total 104,970 66,204
At 31 December 2022, $35.4 million (2021: $41.3 million) is due
from the Group's three largest customers.
A summary of the Group's exposure to credit risk for trade
receivables is as follows:
2022 2021
$'000 $'000
External credit ratings at least Baa3 (Moody's) 31,188 37,535
External credit ratings Ba3 to Ba1 (Moody's) -- 19,051
Other 75,316 10,042
Total gross carrying amount 106,504 66,628
Loss allowance (1,534) (424)
Total 104,970 66,204
The following table provides ageing information relevant to the
exposure to credit risk for trade receivables from individual
customers. No balances were considered credit impaired at 31
December 2022 or 31 December 2021.
More than More than More than
30 days 60 days 90 days
Current past due past due past due Total
$'000 $'000 $'000 $'000 $'000
2022 104,962 -- -- 8 104,970
2021 66,133 -- -- 71 66,204
Expected credit loss assessment of trade receivables
For trade receivables measured at fair value through OCI and
trade receivables measured at amortised cost, the Group allocates
to each customer a credit risk grade based on data that is
determined to be predictive of the risk of loss (including but not
limited to external ratings, financial statements and available
market information about customers) and applying experienced credit
judgement.
The following table provides information about the exposure to
credit risk and expected credit losses as at 31 December 2022.
Equivalent to Gross carrying Impairment
Moody's credit Weight average amount loss allowance Credit
rating loss rate $'000 $'000 impaired
Other 2.0% 75,316 1,534 No
The following table provides information about the exposure to
credit risk and expected credit losses as at 31 December 2021.
Equivalent to Gross carrying Impairment
Moody's credit Weight average amount loss allowance Credit
rating loss rate $'000 $'000 impaired
Baa3 to AAA 0.30% 25 -- No
Ba3 to Ba1 1.30% 19,051 248 No
Other 1.75% 10,042 176 No
29,118 424
The movement in expected credit losses in respect of trade
receivables were measured at amortised cost or fair value through
other comprehensive income during the year was as follows:
2022 2021
$'000 $'000
Balance at 1 January 424 199
Net remeasurement of loss allowance 1,110 225
Balance at 31 December 1,534 424
The credit risk on cash and cash equivalents is limited because
funds are deposited with banks with high credit ratings assigned by
international credit rating agencies. For deposits in excess of $75
million the Group requires that the institution has an A--
(S&P)/A3 (Moody's) long-term rating. For deposits in excess of
$50 million, the Group requires that the institution has a BB--
(S&P)/Ba3 (Moody's) long-term rating.
At 31 December 2022 and 2021 cash was deposited with the
following banks:
2022 2021
Long-term credit
rating Long-term credit rating
$ million S&P Moody's $ million S&P Moody's
Barclays A A--1 A A--1
Bank plc 81.4 Positive Stable 60.8 Positive Stable
FirstRand
Bank BBB -- Ba2 BBB-- Ba2
Limited -- Positive Stable 5.1 Stable Negative
HSBC Bank AA -- A1 --
plc 1.0 Stable Stable 0.8 A+ Stable A1 Stable
Absa Bank BB -- Ba2 BBB-- Ba2
Limited 20.5 Stable Negative 2.0 Stable Negative
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled in cash payments. The Group's
objective when managing liquidity is to ensure that it will have
sufficient liquidity to meet its liabilities when they are due.
The Group monitors mine payment forecasts, both operating and
capital, which assist it in monitoring cash flow requirements and
optimising its cash return on investments. The Group aims to
maintain the level of its cash and cash equivalents at an amount in
excess of expected cash outflows on financial liabilities. The
Group monitors the level of expected cash inflows on trade
receivables together with expected cash outflows on trade and other
payables.
The Group has a trade finance facility with Absa Bank for three
of the Group's largest customers. In accordance with this facility,
the bank purchases certain customer receivables without recourse.
The facility is for a maximum amount of $30 million with limits on
the maximum amount that can be factored for each of the customers
named in the facility. During the period, no trade receivables were
factored under this agreement. At the year end, trade receivables
amounting to $43.1 million (2021: $14.5 million) may be factored
under this facility and are therefore included in trade receivables
measured at fair value through OCI as at 31 December 2022. The cost
of this facility for the period, which amounted to $0.2 million
(2021: $0.2 million), is included in finance costs in the statement
of comprehensive income and in net cash from operating activities
in the statement of consolidated cash flows.
The Group has a trade facility with Barclays Bank for customers
which it sells to under letter of credit terms. Under this
facility, Barclays Bank confirms the letter of credit from the
issuing bank and therefore assumes the credit risk. Barclays Bank
can also discount these letters of credit thereby providing early
payment of receivables to the Group. There is no limit under the
Barclays Bank facility. During the period, trade receivables of
$201.4 million (2021: $224.4 million) were discounted under this
facility. At the year end, there were $31.2 million (2021: $37.1
million) of trade receivables which will be discounted under this
facility. The cost of this facility for the period, which amounted
to $2.0 million (2021: $1.2 million), is included in finance costs
in the statement of comprehensive income and in net cash from
operating activities in the statement of consolidated cash
flows.
The table below summarises the maturity profile of the Group's
financial liabilities at 31 December 2022 based on the gross
contractual undiscounted payments:
Between
Less than two and More than
Total one year five years five years
Financial liabilities $'000 $'000 $'000 $'000
Bank loans 89,536 38,005 51,531 --
Lease liabilities 2,409 390 1,447 572
Trade and other payables 32,553 32,553 -- --
124,498 70,948 52,978 572
The table below summarises the maturity profile of the Group's
financial liabilities at 31 December 2021 based on the gross
contractual undiscounted payments:
Between
Less than two and More than
Total one year five years five years
Financial liabilities $'000 $'000 $'000 $'000
Bank loans 151,914 73,342 78,572 --
Lease liabilities 2,684 1,207 1,317 160
Trade and other payables 32,768 32,768 -- --
187,366 107,317 79,889 160
As disclosed in Note 14, the Group has bank loans that contain
loan covenants. A future breach of covenant may require the Group
to repay the loan earlier than indicated in the above table. Under
the loan agreement, the covenants are monitored on a regular basis
by Group finance and regularly reported to management and the
lenders to ensure compliance with the agreement.
Furthermore, the group has authorised and committed expenditure
on operations-related capital projects amounting to $11.5 million
(2021: $18.9 million).
Risk concentration
Concentrations arise when a number of counterparties are engaged
in similar business activities, or activities in the same
geographical region, or have economic features that would cause
their ability to meet contractual obligations to be similarly
affected by changes in economic, political or other conditions.
Concentrations indicate the relative sensitivity of the Group's
performance to developments affecting a particular industry.
The Group evaluates the concentration of risk with respect to
trade receivables as low, as its customers are located in several
jurisdictions and industries and operate in largely independent
markets. Details of concentration of revenue are included in Note
2.
Market risk
Market risk is risk that changes in market prices, foreign
exchange rates and interest rates will affect the Group's income
statement. The objective of market risk management is to manage and
control market risk exposures while optimising returns.
Currency risk
The Group is exposed to transactional foreign currency risk to
the extent that there is a mismatch between the currencies in which
sales, purchases, receivables and borrowings are denominated and
the respective functional currencies of Group companies. The
functional currency of all Group entities is US Dollars. The
presentational currency of the Group is US Dollars. Sales and bank
loans are denominated in US Dollars, which significantly reduces
the exposure of the Group to foreign currency risk. Payable
transactions are denominated in Mozambican Metical, South African
Rand, Euro, Sterling, Australian Dollar and Renminbi.
Exposure to currency risk
The Group's gross exposure to currency risk as at 31 December
2022 is as follows.
Mozambican South African Australian
Metical Rand Euro Sterling Dollar Renminbi
$'000 $'000 $'000 $'000 $'000 $'000
Trade and other
receivables 12,172 756 489 72 88 --
Cash and cash
equivalents 1,397 12,894 892 1,129 17 34
Bank loans -- -- -- -- -- --
Leases -- -- (1,255) -- -- --
Trade and other
payables (20,367) (2,178) (502) (10) -- --
Net exposure (6,798) 11,472 (376) 1,191 105 34
The Group's exposure to currency risk as at 31 December 2021 is
as follows.
Mozambican South African Australian
Metical Rand Euro Sterling Dollar Renminbi
$'000 $'000 $'000 $'000 $'000 $'000
Trade and other
receivables 2,717 1,275 928 55 364 --
Cash and cash
equivalents 1,030 2,337 479 338 6 36
Bank loans -- -- -- -- -- --
Leases -- -- (1,528) -- -- --
Trade and other
payables (14,082) (1,905) (2,395) (35) (68) --
Net exposure (10,335) 1,707 (2,516) 358 302 36
Sensitivity analysis
A reasonably possible strengthening or weakening of the
Mozambique Metical, South African Rand, Euro, Sterling, Australian
Dollar and Renminbi by 10% against the US Dollar would have
affected profit or loss by the amounts shown below. The analysis
assumes that all other variables remain constant.
Mozambican South African Australian
Metical Rand Euro Sterling Dollar Renminbi
Profit or loss $'000 $'000 $'000 $'000 $'000 $'000
31 December
2022
Strengthening (680) 1,147 (38) 119 11 3
Weakening 680 (1,147) 38 (119) (11) (3)
31 December
2021
Strengthening (1,030) 170 (250) 40 30 4
Weakening 1,030 (170) 250 (40) (30) (4)
Interest rate risk
The loan facilities are arranged at variable rates and expose
the Group to cash flow interest rate risk. Variable rates are based
on six-month LIBOR. The borrowing rate at financial year end was
9.2% (2021: 5.8%). The interest rate profile of the Group's loan
balances at the financial year end was as follows:
2022 2021
$'000 $'000
Variable rate debt 80,795 151,914
Under the assumption that all other variables remain constant, a
reasonable possible change of 1% in the six-month LIBOR rate
results in a $0.8 million (2021: $1.5 million) change in finance
costs for the financial year.
The above sensitivity analyses are estimates of the impact of
market risks assuming the specified change occurs. Actual results
in the future may differ materially from these results due to
developments in the global financial markets, which may cause
fluctuations in interest rates to vary from the assumptions made
above and therefore should not be considered a projection of likely
future events.
As disclosed in Note 14, pursuant to an Amendment and
Restatement Agreement entered into on 9 March 2023 in respect of
the Group's debt facilities, the basis on which interest is
calculated in respect of those facilities were amended with effect
from 11 March 2023. As a result of the amendment, interest rates
for interest periods commencing from 11 March 2023 onwards are no
longer determined by reference to US LIBOR; instead they are
determined on the basis of the applicable Term SOFR Rate. The Group
has concluded that the transition to the applicable SOFR rate will
not result in a substantial change to finance costs during
2023.
Note 19. Events after the statement of financial position
date
On 21 March, the Board proposed a dividend of USc43.33 per
share. This proposed dividend is subject to approval by the
shareholders at the Annual General Meeting. These financial
statements do not reflect this dividend.
In February 2023, power lines nearby the mine were subject to a
direct lightning strike of unusually high intensity resulting in
severe disruption to mining operations. The Group is working to
establish and mitigate the capital and operating cost impacts of
the disruptions and a reliable estimate cannot be made at this
time. Insurance cover is in place and Kenmare is liaising with its
insurers to process claims in relation to the lightning strike.
GLOSSARY - ALTERNATIVE PERFORMANCE MEASURES
Certain financial measures set out in the Preliminary Results to
31 December 2022 are not defined under International Financial
Reporting Standards (IFRS), but represent additional measures used
by the Board to assess performance and for reporting both
internally and to shareholders and other external users.
Presentation of these Alternative Performance Measures (APMs)
provides useful supplemental information which, when viewed in
conjunction with the Group's IFRS financial information, allows for
a more meaningful understanding of the underlying financial and
operating performance of the Group.
These non-IFRS measures should not be considered as an
alternative to financial measures as defined under IFRSs.
Descriptions of the APMs included in this report, as well as their
relevance for the Group, are disclosed below.
APM Description Relevance
EBITDA Operating profit/loss Eliminates the effects of financing,
before depreciation tax and depreciation to allow assessment
and amortisation of the earnings and performance of
the Group
---------------------- -------------------------------- -----------------------------------------
EBITDA margin Percentage of EBITDA Provides a group margin for the earnings
to Revenue (FOB) and performance of the Group
---------------------- -------------------------------- -----------------------------------------
Capital costs Additions to property, Provides the amount spent by the
plant and equipment Company on additions to property,
in the period plant and equipment in the period
---------------------- -------------------------------- -----------------------------------------
Cash operating cost Cost of sales and administration Eliminates the non-cash impact on
per tonne of finished costs less freight, costs to identify the actual cash
product produced foreign exchange, depreciation outlay for production and, as production
and amortisation, expected levels increase or decrease, highlights
credit losses, share operational performance by providing
based payment expense, a comparable cash cost per tonne
mineral inventory movements of product produced over time
and the indirect tax
provision, divided by
final product production
(tonnes)
---------------------- -------------------------------- -----------------------------------------
Cash operating cost Cash operating costs Eliminates the non-cash impact on
per tonne of ilmenite less revenue of zircon, costs to identify the actual cash
net of co-products rutile and mineral sands outlay for production and, as production
concentrates, divided levels increase or decrease, highlights
by ilmenite production operational performance by providing
(tonnes) a comparable cash cost per tonne
of ilmenite produced over time
---------------------- -------------------------------- -----------------------------------------
Net cash/debt Bank loans before transaction Measures the amount the Group would
costs, loan amendment have to raise through refinancing,
fees and expenses net asset sale or equity issue if its
of cash and cash equivalents debt were to fall due immediately,
and aids in developing an understanding
of the leveraging of the Group
---------------------- -------------------------------- -----------------------------------------
ROCE Return on capital employed ROCE measures how efficiently we
generate profits from investment
in our portfolio of assets
---------------------- -------------------------------- -----------------------------------------
Shareholder returns Dividends and share Shareholder returns comprise the
buybacks interim dividend, the proposed final
dividend to be approved by shareholders
at the AGM and any share buybacks
---------------------- -------------------------------- -----------------------------------------
EBITDA
2018 Restated 2019 Restated 2020 Restated 2021 Restated 2022
$m $m $m $m $m
Operating
profit 62.9 57.3 33.4 151.1 233.4
Depreciation 30.4 33.4 42.3 63.1 64.6
EBITDA 93.3 90.7 75.7 214.2 298.0
EBITDA margin
2018 Restated 2019 Restated 2020 Restated 2021 Restated 2022
$m $m $m $m $'m
EBITDA 93.3 90.7 75.7 214.2 298.0
Revenue derived from the sale
of mineral product 245.9 255.5 231.5 420.5 498.4
EBITDA margin (%) 38% 35% 33% 51% 60%
Cash operating cost per tonne of finished product
2018 Restated 2019 Restated 2020 Restated 2021 Restated 2022
$m $m $m $m $m
Cost of sales 184.6 195.7 192.3 295.0 282.7
Freight (16.3) (15.4) (12.2) (35.4) (27.6)
Foreign exchange included in cost
of sales -- (1.9) (1.0) (1.9) (1.1)
Cost of sales excluding freight
and foreign exchange 168.3 178.4 179.1 257.7 254.0
Administrative expenses 14.7 17.9 18.1 9.8 9.9
Total operating costs less freight
and foreign exchange 183.0 196.3 197.2 267.5 263.9
Non-cash costs
Depreciation and amortisation (30.4) (33.4) (42.3) (63.1) (64.6)
Expected credit losses -- -- -- (0.2) (1.1)
Share-based payments (1.4) (1.8) (0.5) (1.1) (2.2)
Mineral product inventory movements 0.1 (4.5) 4.9 (9.3) 21.6
Indirect tax provision 0.0 0.0 0.0 (2.0) (0.9)
Total cash operating costs 151.3 156.6 159.3 191.8 216.7
Final product production tonnes 1,043,300 988,300 840,500 1,228,500 1,200,800
Cash operating cost per tonne
of finished product $145 $158 $190 $156 $180
Cash operating cost per tonne of ilmenite
2018 Restated 2019 Restated 2020 Restated 2021 Restated 2022
$m $m $m $m $'m
Total cash operating costs 151.3 156.6 159.3 191.8 216.7
Less revenue from co-products
zircon,
rutile and mineral sands concentrate (75.1) (84.5) (63.2) (85.8) (150.9)
Total cash costs less co-product
revenue 76.2 72.1 96.1 106 65.8
Ilmenite product production tonnes 958,500 892,900 756,000 1,119,400 1,088,300
Cash operating cost per tonne
of ilmenite $79 $81 $127 $95 $60
Net cash/debt
2018 2019 2020 2021 2022
$'m $'m $'m $'m $'m
Bank debt (83.5) (60.9) (145.8) (148.1) (78.6)
Transaction costs -- (6.6) (5.4) (3.8) (2.2)
Gross debt (83.5) (67.5) (151.2) (151.9) (80.8)
Cash and cash equivalents 97.0 81.2 87.2 69.1 108.3
Net cash/(debt) 13.5 13.7 (64.0) (82.8) 27.5
Return on Capital Employed
2018 Restated 2019 Restated 2020 Restated 2021 Restated 2022
$m $m $m $m $'m
Operating
profit 62.9 57.3 33.4 151.1 233.4
Total Equity
and
Non-Current
Liabilities 932.7 984.0 1,087.5 1,045.4 1,171.0
ROCE 7% 6% 3% 15% 20%
GLOSSARY - TERMS
Term Description
AGM Annual general meeting
-------------------- ----------------------------------------------------------------------
CIF The seller delivers when the goods pass the ship's rail in
the port of shipment. Seller must pay the cost and freight
necessary to bring goods to named port of destination. Risk
of loss and damage are the same as CFR. Seller also has to
procure marine insurance against buyer's risk of loss/damage
during the carriage. Seller must clear the goods for export.
This term can only be used for sea transport.
-------------------- ----------------------------------------------------------------------
CFR This term means the seller delivers when the goods pass the
ship's rail in port of shipment. Seller must pay the costs
and freight necessary to bring the goods to the named port
of destination, but the risks of loss or damage, as well as
any additional costs due to events occurring after the time
of delivery, are transferred from seller to buyer. Seller
must clear goods for export. This term can only be used for
sea transport.
-------------------- ----------------------------------------------------------------------
The Company or Kenmare Resources plc.
Parent Company
-------------------- ----------------------------------------------------------------------
DFS Definitive feasibility studies are the most detailed and will
determine definitively whether to proceed with the project.
A definitive feasibility study will be the basis for capital
appropriation, and will provide the budget figures for the
project. Detailed feasibility studies require a significant
amount of formal engineering work and are accurate to within
approximately 10-15%.
-------------------- ----------------------------------------------------------------------
EdM Electricidade de Moçambique.
-------------------- ----------------------------------------------------------------------
FOB Free on Board means that the seller delivers when the goods
pass the ship's rail at the named port of shipment. This means
the buyer has to bear all costs and risks to the goods from
that point. The seller must clear the goods for export. This
term can only be used for sea transport.
-------------------- ----------------------------------------------------------------------
Gender diversity Percentage of females in the workforce at the Moma Mine. We
recognise the benefits to our business of supporting diversity,
equity, and inclusion for long-term sustainable success. Increased
gender diversity has been an important metric at the Mine.
-------------------- ----------------------------------------------------------------------
GHG emissions Scope 1 & 2 Greenhouse Gas emissions. We acknowledge the human
contribution to climate change and aim to reduce emissions
from our already low carbon intensity operations.
-------------------- ----------------------------------------------------------------------
Group or Kenmare Kenmare Resources plc and its subsidiary undertakings.
-------------------- ----------------------------------------------------------------------
HMC Heavy mineral concentrate extracted from mineral sands deposits
and which include ilmenite, zircon, rutile and other heavy
minerals and silica.
-------------------- ----------------------------------------------------------------------
KMML Mozambique Mozambique branch of Kenmare Moma Mining (Mauritius) Limited
Branch (KMML).
-------------------- ----------------------------------------------------------------------
KMPL Mozambique Mozambique branch of Kenmare Moma Processing (Mauritius) Limited
Branch (KMPL).
-------------------- ----------------------------------------------------------------------
KRSP Kenmare Resources plc Restricted Share Plan
-------------------- ----------------------------------------------------------------------
Lenders Absa Bank Limited (acting through its Corporate and Investment
Banking Division) ("Absa"), The Emerging Africa Infrastructure
Fund (part of the Private Infrastructure Development Group
("PIDG")) ("EAIF"), Nedbank Limited (acting through its Nedbank
Corporate and Investment Banking division) ("Nedbank"), Rand
Merchant Bank and Standard Bank Group ("Standard Bank").
-------------------- ----------------------------------------------------------------------
LTI Lost time injury. Measures the number of injuries at the mine
that result in time lost from work.
-------------------- ----------------------------------------------------------------------
LTIFR Lost time injury frequency rate. Measures the number of injuries
causing lost time per 200,000 man hours worked on site
-------------------- ----------------------------------------------------------------------
Marketing - finished Finished products shipped to customers during the period.
products shipped Provides a measure of finished products shipped to customers
-------------------- ----------------------------------------------------------------------
Mining - HMC Heavy mineral concentrate extracted from mineral sands deposits
produced and which includes ilmenite, zircon, rutile, concentrates
and other heavy minerals and silica. Provides a measure of
heavy mineral concentrate extracted from the Mine
-------------------- ----------------------------------------------------------------------
Moma, Moma Mine The Moma Titanium Minerals Mine consisting of a heavy mineral
or the Mine sands mine, processing facilities and associated infrastructure,
which is located in the north east coast of Mozambique under
licence to the Project Companies.
-------------------- ----------------------------------------------------------------------
Mine Closure $40 million debt facility dated 11 December 2019 between the
Guarantee Facility Lenders and KMML Mozambique Branch and KMPL Mozambique Branch.
-------------------- ----------------------------------------------------------------------
MSP Mineral Separation Plant.
-------------------- ----------------------------------------------------------------------
Mtpa Million tonnes per annum.
-------------------- ----------------------------------------------------------------------
NOSA National Occupational Safety Association
-------------------- ----------------------------------------------------------------------
OIA Oman Investment Authority formerly the State General Reserve
Fund of the Sultanate of Oman.
-------------------- ----------------------------------------------------------------------
Odd lot offer The offer made by the Company to members in the UK and Ireland
who held certificated holdings of less than 200 ordinary shares
as described in the circular to shareholders dated 21 April
2022.
-------------------- ----------------------------------------------------------------------
Ordinary Shares Ordinary shares of EUR0.001 each in the capital of the Company.
-------------------- ----------------------------------------------------------------------
PFS A feasibility study is an evaluation of a proposed mining
project to determine whether the mineral resource can be mined
economically. Pre-feasibility study is used to determine whether
to proceed with a detailed feasibility study and to determine
areas within the project that require more attention. Pre-feasibility
studies are done by factoring known unit costs and by estimating
gross dimensions or quantities once conceptual or preliminary
engineering and mine design has been completed.
-------------------- ----------------------------------------------------------------------
PM Atmospheric particulate matter - also known as particulate
matter (PM) or particulates - are microscopic solid or liquid
matter suspended in the Earth's atmosphere.
-------------------- ----------------------------------------------------------------------
Processing - Finished products produced by the mineral separation process.
finished products Provides a measure of finished products produced from the
produced processing plants
-------------------- ----------------------------------------------------------------------
Project Companies Kenmare Moma Mining (Mauritius) Limited and Kenmare Moma Processing
(Mauritius) Limited, wholly owned subsidiary undertakings
of Kenmare Resources plc, which are incorporated in Mauritius.
-------------------- ----------------------------------------------------------------------
Revolving Credit $40 million debt facility dated 11 December 2019 between the
Facility Lenders and KMML Mozambique Branch and KMPL Mozambique Branch.
-------------------- ----------------------------------------------------------------------
RUPS Rotary uninterruptible power supply
-------------------- ----------------------------------------------------------------------
TCFD Task Force on Climate Related Financial Disclosures
-------------------- ----------------------------------------------------------------------
Tender Offer The invitation by the Company to eligible shareholders to
tender Ordinary Shares for purchase on-market by Peel Hunt
LLP on the terms and subject to the conditions set out in
the circular dated 16 November 2021.
-------------------- ----------------------------------------------------------------------
Term Loan Facility $110 million debt facility dated 11 December 2019 between
the Lenders and KMML Mozambique Branch and KMPL Mozambique
Branch.
-------------------- ----------------------------------------------------------------------
THM Total heavy minerals in the ore of which ilmenite (typically
82%), rutile (typically 2.0%) and zircon (typically 5.5%)
total approximately 90%.
-------------------- ----------------------------------------------------------------------
UK United Kingdom
-------------------- ----------------------------------------------------------------------
WCP Wet Concentrator Plant.
-------------------- ----------------------------------------------------------------------
WCP A The original WCP which started production in 2007.
-------------------- ----------------------------------------------------------------------
WCP B The second WCP which started production in 2013.
-------------------- ----------------------------------------------------------------------
WCP C The third WCP which started production in 2020.
-------------------- ----------------------------------------------------------------------
WHIMS Wet High Intensity Magnetic Separation Plant.
-------------------- ----------------------------------------------------------------------
(1) Relates to trade receivables which will be discounted
through the Barclay's Bank facility.
(2) Relates to trade receivables which may be factored through
the ABSA facility.
(3) Relates to trade receivables which will not be discounted or
factored.
(END) Dow Jones Newswires
March 22, 2023 03:00 ET (07:00 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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