TIDMKMR
Kenmare Resources plc
("Kenmare" or "the Company" or "the Group")
13 July 2023
Q2 and H1 2023 Production Report
Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading
global producers of titanium minerals and zircon, which operates
the Moma Titanium Minerals Mine (the "Mine" or "Moma") in northern
Mozambique, is pleased to provide a trading update for the quarter
and half year ending 30 June 2023 ("Q2 2023" and "H1 2023").
Statement from Michael Carvill, Managing Director:
"Production in H1 2023 has unfortunately been lower than our
expectations as mining experienced lingering effects of the severe
lightning strike in Q1 and power reliability impacts in Q2. We are
therefore updating guidance for ilmenite production for the full
year. However, guidance for other products remains unchanged. We
anticipate significantly stronger production in H2 2023, supported
by higher grades and increased tonnes mined.
Cash generation has remained strong, supported by product
pricing and shipments. In addition to paying record dividends and
scheduled debt repayments, the business has continued to build
cash. In line with our capital allocation policy, we are
considering a share buyback of approximately $30 million. A further
update will be provided with our H1 2023 results in
mid-August."
Q2 2023 overview
-- Lost Time Injury Frequency Rate ("LTIFR") of 0.18 per 200,000 hours
worked for the 12 months to 30 June 2023 (30 June 2022: 0.0)
-- Heavy Mineral Concentrate ("HMC") production of 318,900 tonnes in Q2
2023, a 10% decrease compared to Q2 2022 (353,600 tonnes), due to lower
grades and mining rates impacted by power interruptions
-- Ilmenite production of 221,300 tonnes in Q2 2023, a 9% decrease compared
to Q2 2022 (242,900 tonnes), although better than the 12% reduction in
HMC processed, benefitting from the processing of stockpiled magnetic
concentrate
-- Primary zircon production of 11,600 tonnes, a 15% decrease compared to Q2
2022 (13,600 tonnes), due to the processing of stockpiles in the prior
period
-- Total shipments of finished products of 285,100 tonnes, a 48% increase
compared to Q2 2022 (192,800 tonnes) supported by the drawdown of
finished product stockpiles
-- Updated 2023 ilmenite production guidance range of 980,000 tonnes to
1,040,000 tonnes; no changes to guidance for zircon, rutile or
concentrates or total cash operating costs
-- Ilmenite prices were stable in Q2 2023, although a weaker titanium
pigment market is feeding into lower ilmenite prices in Q3 2023
-- Global macroeconomic conditions are also affecting demand for zircon with
spot prices moving below contracted prices
-- At the end of H1 2023, net cash increased to $42.2 million (31 December
2022: $25.7 million), supported by a drawdown of finished products and
robust pricing
-- Kenmare continues to generate strong free cashflow and in line with its
capital allocation policy, the Company is considering a share buyback of
approximately $30 million, subject to trading conditions, business
performance and necessary approvals. A further update to be provided at
the H1 2023 results in mid-August
Operations update
Production from the Moma Mine in Q2 2023 and H1 2023 was as
follows:
Q2 2023 Q2 2022 Q1 2023 H1 2023 H1 2022
------------------- --------- ---------- ---------- ---------- ----------
tonnes % variance % variance tonnes % variance
------------------- --------- ---------- ---------- ---------- ----------
Excavated ore(1)
(,) (2) 9,606,000 -5% 9% 18,380,000 -3%
------------------- --------- ---------- ---------- ---------- ----------
Grade(1) (,) (2) 4.03% -5% -8% 4.19% -4%
------------------- --------- ---------- ---------- ---------- ----------
Production
------------------- --------- ---------- ---------- ---------- ----------
HMC production 318,900 -10% 1% 633,900 -14%
------------------- --------- ---------- ---------- ---------- ----------
HMC processed 322,900 -12% 3% 637,600 -14%
------------------- --------- ---------- ---------- ---------- ----------
Ilmenite 221,300 -9% 8% 425,500 -15%
------------------- --------- ---------- ---------- ---------- ----------
Primary zircon 11,600 -15% 2% 23,000 -13%
------------------- --------- ---------- ---------- ---------- ----------
Rutile 1,900 -10% 12% 3,600 -10%
------------------- --------- ---------- ---------- ---------- ----------
Concentrates(3) 10,400 6% 3% 20,500 0%
------------------- --------- ---------- ---------- ---------- ----------
Shipments 285,100 48% 5% 556,800 31%
------------------- --------- ---------- ---------- ---------- ----------
1. Excavated ore tonnage and grade prior to any floor losses.
2. Excavated ore volumes and grade for Q1 2023 are restated as 8,774,000 tonnes and 4.36% from 9,258,000 tonnes and 4.13% to exclude tailings excavated by WCP C.
3. Concentrates include secondary zircon and mineral sands concentrate.
Kenmare's rolling 12-month LTIFR to 30 June 2023 was 0.18 per
200,000 hours worked (Q2 2022: 0.0), with one Lost Time Injury
recorded during Q2 2023. Kenmare is committed to building a strong,
employee-led safety culture at Moma and is focused on improving
safety leadership and ensuring best practices for identifying,
assessing and mitigating risks at Moma are fully implemented.
HMC production was 318,900 tonnes in Q2 2023, representing a 10%
decrease compared to Q2 2022 (353,600 tonnes). This was a product
of a 5% decrease in ore grades to 4.03% (Q2 2022: 4.23%) and a 5%
decrease in excavated ore volumes to 9.6 million tonnes (Q2 2022:
10.1 million tonnes).
HMC production in Q2 was impacted by:
-- Poor power quality as interruptions from the grid and unplanned
maintenance by Electricidade de Moçambique reduced mining operating
hours.
-- Lower recoveries at WCP A due to high slimes levels; recoveries have
improved since June due to the introduction of supplementary clean water
to the spirals, aiding separation efficiency.
-- WCP B was unable to operate in a fully automated mode in Q2 because of a
shortage of spares following the lightning strike in Q1. This impacted
recoveries from mining, as did lower-than-expected grades. WCP B is now
operating on a fully automated basis. Mining rates and recoveries were
also impacted by buried root matter; while these conditions are not
expected to recur in 2023, screening improvements have been implemented
and successfully addressed this issue.
-- WCP C undertook a planned transition through a tailings area from March
2023 to reach a new mining zone: this took longer than expected but was
completed in June.
Kenmare expects higher HMC production in H2 2023 benefitting
from higher grades at WCP A, full production at WCP C and the
resolution of the issues detailed above.
All transportation of HMC from WCP B to the Mineral Separation
Plant ("MSP") is now being undertaken by the positive displacement
pumps. H1 2023 has seen a significant improvement in the
performance of the pumps which have consistently run at design
throughputs and utilisations, eliminating the need for trucking of
HMC.
Ilmenite production was 221,300 tonnes, a 9% decrease compared
to Q2 2022 (242,900 tonnes), benefitting from drawdown of magnetic
intermediate stocks compared to the 12% reduction in HMC
processed.
The Mine has experienced an under-recovery of ilmenite in the
HMC at WCP B. The higher-grade fraction of ilmenite in an area of
Pilivili appears more weathered, reducing the apparent density and
magnetism of the material, impacting recoveries to final product.
Further test work and calibration of equipment is ongoing to
maximise the recoveries of this high TiO(2) ilmenite.
Primary zircon production was 11,600 tonnes in Q2 2023, a 15%
decrease compared to Q2 2022 (Q2 2022: 13,600 tonnes). Despite
higher zircon grades in feed, particularly from WCP B, zircon
production was affected by lower HMC availability. There was also a
build of non-magnetic intermediate stocks, reducing zircon
production, which is expected to unwind in H2 2023.
The Rotary Uninterruptible Power Supply ("RUPS") has not been
operational in Q2, due to the failure of some electrical equipment.
This has meant that grid power instability has impacted recoveries
in the MSP. Design corrections have been identified and the RUPS is
expected to fully resume operations in July.
Rutile production was 1,900 tonnes, down 10% (Q2 2022: 2,100
tonnes). As with zircon, this reflects lower HMC processed, offset
by increased rutile in feed.
Concentrates production was 10,400 tonnes, up 6% (Q2 2022: 9,800
tonnes), with higher content of monazite. Higher recoveries were
also achieved in the secondary zircon circuit.
Total shipments in Q2 2023 were 285,100 tonnes, a 48% increase
compared to Q2 2022 (192,800 tonnes), benefitting from increased
shipping capacity in the period. Shipments comprised 258,100 tonnes
of ilmenite, 11,200 tonnes of primary zircon, 3,500 tonnes of
rutile, and 12,300 tonnes of concentrates. Shipments for H1 2023
were up 31% on the prior year to 556,800 tonnes (H1 2022: 424,300
tonnes).
Closing stock of HMC at the end of Q2 2023 was 15,000 tonnes,
compared to 19,000 tonnes at the end of Q1 2023. Closing stock of
finished products at the end of Q2 2023 was 129,000 tonnes,
compared to 169,300 tonnes at the end of Q1 2023, reflecting a
drawdown of finished product inventories in Q2 2023.
2023 guidance
In the Q1 2023 Production Report, Kenmare indicated that it
expected ilmenite production to be at the bottom of the original
guidance. However, due to lower-than-expected production in Q2
2023, ilmenite guidance for 2023 is now updated as follows:
Unit Updated 2023 Guidance Original 2023 Guidance
---------------------- ------- --------------------- ----------------------
Production
---------------------- ------- --------------------- ----------------------
Ilmenite tonnes 980,000 -- 1,040,000 1,050,000 -- 1,150,000
---------------------- ------- --------------------- ----------------------
Primary zircon tonnes No change 51,000 -- 57,000
---------------------- ------- --------------------- ----------------------
Rutile tonnes No change 8,000 -- 9,000
---------------------- ------- --------------------- ----------------------
Concentrates(1) tonnes No change 37,000 -- 41,000
---------------------- ------- --------------------- ----------------------
Costs
---------------------- ------- --------------------- ----------------------
Total cash operating
costs $m No change 208 -- 228
---------------------- ------- --------------------- ----------------------
1. Concentrates include secondary zircon and mineral sands concentrate.
H2 2023 is anticipated to be a much stronger period of
production, benefitting from increased grades and tonnes mined.
It is expected that the shortfall in ilmenite will be partially
offset by the increased content of zircon and rutile in feed,
particularly from WCP B. The lower end of the revised ilmenite
guidance range includes a conservative allowance for unexpected
impacts on production.
Total cash operating costs are anticipated to be in line with
original guidance. Cash operating costs per tonne will be a
function of lower production volumes and total cash operating
costs.
Market update
Ilmenite prices and sales volumes remained stable in H1
2023.
Downstream titanium pigment demand was subdued in Q2, as higher
interest rates globally affected industrial activity and the
housing markets in many regions. Underlying demand in China has not
rebounded as quickly as expected, but domestic pigment production
remains robust. As a result, pigment producers outside China are
facing increased competition from Chinese pigment exports.
Sustained production of pigment in China has supported the
ilmenite market in Q2 2023. However, slower pigment market
conditions reduced demand for high-grade feedstocks, due to lower
chloride pigment utilisations. There has been continued disruption
to and depletion of titanium feedstock mine supply globally;
however, an increase in concentrates for processing in China has
kept the market in balance.
Lower demand for titanium pigment is likely to continue in the
short term; however, Kenmare has contracted a high proportion of
ilmenite sales in Q3 2023.
Challenging macroeconomic conditions have softened demand for
zircon. Ceramics producers are operating at reduced utilisation
levels, leading to higher inventories. Reported zircon sand prices
have remained stable, although spot prices for shipments to China
and India softened in Q2 2023 and remain below contracted prices
moving into Q3.
Finance update
On 19 May 2023, Kenmare paid its record 2022 final dividend of
USc43.33 per share. This was the balancing payment of a 2022 full
year dividend of USc54.31 per share, representing a dividend payout
ratio of 25% of profit after tax, and up 66% from 2021.
Following the 2022 final dividend distribution of $44.1 million
and debt principal repayments of $15.7 million, cash and cash
equivalents were $108.8 million as at 30 June 2023 (31 December
2022: $108.3 million), while gross bank loans and lease
obligations, including accrued interest, were $66.6 million (31
December 2022: $82.6 million).
Accordingly, as at 30 June 2023, Kenmare's net cash increased by
$16.5 million to $42.2 million, compared to $25.7 million net cash
at 31 December 2022.
Kenmare continues to generate strong free cashflow and in line
with its capital allocation policy, the Company is considering a
share buyback of approximately $30 million, subject to trading
conditions, business performance and Board and other necessary
approvals. A further update will be provided on 15 August 2023 with
the interim results for the six months ended 30 June 2023.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Michael Starke
Investor Relations
ir@kenmareresouces.com
Tel: +353 1 671 0411
Mob: +353 87 943 0367
Murray (PR advisor)
Paul O'Kane
pokane@murraygroup.ie
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.
(END) Dow Jones Newswires
July 13, 2023 02:00 ET (06:00 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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