TIDMKMR
Kenmare Resources plc
("Kenmare" or "the Company" or "the Group")
15 August 2023
Half-Yearly Financial Report for the six months to 30 June 2023
and interim dividend
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 publishes its Half-Yearly Financial Report for
the six month period ended 30 June 2023 ("H1 2023") and announces
its interim dividend for 2023.
Statement from Michael Carvill, Managing Director:
"Production in early H2 2023 has been strong, supported by
higher grades, better HMC recoveries and increased tonnes mined.
Production in H1 2023 was unfortunately lower than our
expectations, primarily due to a severe lightning strike in Q1 and
its lingering impact.
However, good product pricing and strong shipment volumes in H1
drove record revenues. EBITDA was up 6%, while profit after tax
increased to $67.8 million. We are increasing our interim dividend
by 59% to USc17.5 per share, in line with our policy to maintain
dividend payments of approximately $50 million per annum.
Separately, this morning we have also announced a share buyback
of $30 million via a tender offer, in line with our policy of
returning additional capital to shareholders when appropriate."
H1 2023 overview
Financials and markets
-- Launch of a Tender Offer, announced separately
-- Interim dividend of USc17.5 per share, a 59% increase (H1 2022: USc10.98
per share)
-- Revenue from mineral products of $229.7 million in H1 2023, a 26%
increase compared to H1 2022 ($182.1 million), due to a 31% increase in
shipment volumes supported by the drawdown of finished product stockpiles
offsetting a 4% decrease in average realised prices
-- EBITDA of $110.4 million, a 6% increase (H1 2022: $104.5 million)
-- Profit after tax of $67.8 million, an 8% increase (H1 2022: $62.5
million)
-- Cash operating cost of $230 per tonne of finished product, a 24% increase
compared to H1 2022 ($185 per tonne), due to lower production volumes and
cost inflation
-- Cash operating cost of $137 per tonne of ilmenite (net of co-products), a
28% increase compared to H1 2022 ($107 per tonne)
-- At the end of H1 2023, net cash increased to $42.3 million (31 December
2022: $25.7 million), supported by a drawdown of finished products and
strong revenues
-- Ilmenite prices were stable in H1 2023, although the titanium pigment
market is slower in H2 2023
-- Global macroeconomic conditions are also affecting demand for zircon with
spot prices moving below contracted prices
Operations
-- 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: 0.00)
-- Heavy Mineral Concentrate ("HMC") production of 633,900 tonnes in H1
2023, a 14% decrease compared to H1 2022 (738,300 tonnes), due primarily
to the impacts of a severe lightning strike and lower grades
-- Total finished product production of 472,600 tonnes, a 10% decrease (H1
2022: 550,700 tonnes), as a result of the lower HMC produced
-- Total shipments of 556,800 tonnes, a 31% increase (H1 2022: 424,300
tonnes) supported by the drawdown of finished product stockpiles
Additional information in relation to Alternative Performance
Measures ("APMs") is disclosed in the Glossary.
Analyst and investor conference call and webcast
Kenmare will host a conference call and webcast for analysts,
institutional investors, and media today at 9:00am UK time.
Participant dial-in numbers for the conference call are as
follows:
UK: +44 20 3481 4247
Ireland: +353 1 582 2023
US +1 (646) 307 1963
Conference ID 995 94 36
The webcast will be available at www.kenmareresources.com and
playback of the webcast will be available at:
www.kenmareresources.com/investors/reports-and-presentations.
Private investor webinar
There will also be a separate webinar for private investors on
Thursday, 17 August 2023, at 12:00pm UK time. To access the
webinar, please register in advance by clicking here
https://www.globenewswire.com/Tracker?data=tNVHBEOW_bshiDzq_-lTzOM38DUYeJZ2C6oHSibDODaJd8j9EJfKwd_ztTjIlZgBIiXQRXgu_1lFJiPmZ7VGJjIbIq-wLA2MeJjRzNS1ZvCIuN84S91yxbjnpYHFSKIcquSfgi__IVqnEt22eZTAeQ==
.
The Half-Yearly Financial Report for the period ended 30 June
2023 is also available at
www.kenmareresources.com/investors/reports-and-presentations.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Michael Starke
Investor Relations
Tel: +353 1 671 0411
Mob: + 353 87 943 0367
Murray (PR advisor)
Paul O'Kane
Tel: +353 1 498 0300
Mob: +353 86 037 4163
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 Group supplies to customers 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.
INTERIM MANAGEMENT REPORT
Group results
Operational and financial results for H1 2023 were as
follows:
H1 Restated H1
2023 2022(1) % Change
-------------------------------------------------- ------- ----------- ---------
Production (tonnes)
-------------------------------------------------- ------- ----------- ---------
HMC produced 633,900 738,300 -14%
-------------------------------------------------- ------- ----------- ---------
HMC processed 637,600 740,600 -14%
-------------------------------------------------- ------- ----------- ---------
Finished products production
-------------------------------------------------- ------- ----------- ---------
Ilmenite 425,500 499,700 -15%
-------------------------------------------------- ------- ----------- ---------
Primary zircon 23,000 26,500 -13%
-------------------------------------------------- ------- ----------- ---------
Rutile 3,600 4,000 -10%
-------------------------------------------------- ------- ----------- ---------
Concentrates(3) 20,500 20,500 -0%
-------------------------------------------------- ------- ----------- ---------
Total finished products 472,600 550,700 -14%
-------------------------------------------------- ------- ----------- ---------
Financials
-------------------------------------------------- ------- ----------- ---------
Revenue ($ million) 242.9 197.3 23%
-------------------------------------------------- ------- ----------- ---------
Freight ($ million) 13.2 15.2 -13%
-------------------------------------------------- ------- ----------- ---------
Mineral Products Revenue ($ million) 229.7 182.1 26%
-------------------------------------------------- ------- ----------- ---------
Finished products shipped (tonnes) 556,800 424,300 31%
-------------------------------------------------- ------- ----------- ---------
Average price received per tonne ($/t) 413 429 -4%
-------------------------------------------------- ------- ----------- ---------
Total operating costs ($ million)(4) 162.6 123.3 32%
-------------------------------------------------- ------- ----------- ---------
Total cash operating costs ($ million)(5) 108.8 102.0 7%
-------------------------------------------------- ------- ----------- ---------
Cash operating cost per tonne of finished product
($/t) 230 185 24%
-------------------------------------------------- ------- ----------- ---------
Cash operating cost per tonne of ilmenite (net of
co-products) ($/t) 137 107 28%
-------------------------------------------------- ------- ----------- ---------
EBITDA ($ million)(1) 110.4 104.5 6%
-------------------------------------------------- ------- ----------- ---------
Profit before tax ($ million) 77.5 68.6 13%
-------------------------------------------------- ------- ----------- ---------
Profit after tax ($ million) 67.8 62.5 8%
-------------------------------------------------- ------- ----------- ---------
Notes
1. The results for H1 2022 have been restated in order to change the
classification of freight costs, distribution costs and foreign exchange.
This presentational change had no impact on underlying earnings. Further
details are set out in Note 4 to the Financial Statements.
2. Additional information in relation to Alternative Performance Measures
("APMs") is disclosed in the Glossary.
3. Concentrates includes secondary zircon and mineral sands concentrate.
4. Total operating costs consists of cost of sales and administration costs
as reported in the income statement. Included in operating costs are
depreciation and amortisation.
5. Total cash costs consists of total operating costs less freight and
non-cash costs, including inventory movements.
Operations
Kenmare's rolling 12-month LTIFR to 30 June 2023 was 0.18 per
200,000 hours worked (H12022: 0.0), with one Lost Time Injury
recorded during Q2 2023. Kenmare is committed to continuing to
build 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 are fully
implemented.
HMC production was 633,900 tonnes in H1 2023, representing a 14%
decrease compared to H1 2022 (738,300 tonnes). This was a product
of a 4% decrease in ore grades to 4.19% (H1 2022: 4.35%) and a 6%
decrease in excavated ore volumes to 18.4 million tonnes (H1 2022:
19.5 million tonnes).
HMC production in H1 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 to aid the efficiency of separation processes.
-- 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.
H1 2023 has seen a significant improvement in the performance of
the positive displacement pumps used to transport HMC from WCP B to
the Mineral Separation Plant ("MSP"), which have consistently run
at design throughputs and utilisations. As a result, all
transportation of HMC from WCP B to the Mineral Separation Plant
("MSP") is now being undertaken by pumping, eliminating the need
for trucking of HMC and benefitting operating efficiencies and
costs.
Ilmenite production was 425,500 tonnes, a 15% decrease compared
to H1 2022 (499,700 tonnes), as a result of the 14% 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 titanium grade ilmenite.
Primary zircon production was 23,000 tonnes in H1 2023, a 13%
decrease compared to H1 2022 (26,500 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") was not
operational in Q2, due to the failure of some of its electrical
components. Design corrections have been implemented and the RUPS
has resumed full operations.
Rutile production was 3,600 tonnes, down 10% (H1 2022: 4,000
tonnes). As with zircon, this reflects lower HMC processed, offset
by increased rutile in feed.
Concentrates production was 20,500 tonnes, in line with H1 2022
(20,500 tonnes), with higher content of monazite. Higher recoveries
were also achieved in the secondary zircon circuit.
Total shipments in H1 2023 were 556,800 tonnes, a 31% increase
compared to H1 2022 (424,300 tonnes), benefitting from increased
shipping capacity in the period and the drawdown of finished
product stocks. Shipments comprised 517,100 tonnes of ilmenite,
19,800 tonnes of primary zircon, 3,400 tonnes of rutile, and 16,500
tonnes of concentrates.
Closing stock of HMC at the end of H1 2023 was 15,000 tonnes,
compared to 18,800 tonnes at the end of 2022. Closing stock of
finished products at the end of H1 2023 was 129,000 tonnes,
compared to 213,500 tonnes at the end of 2022, reflecting a
drawdown of finished product inventories to meet shipment
requirements, satisfy customer demand and maintain strong operating
cashflows in the period.
Capital projects
The transition of WCP A to Nataka is expected to commence in
2025. Over an 18-month period, WCP A will mine its way to the
Nataka ore zone. Following this, WCP A will continue to mine in
Nataka for the remainder of its economic life.
Capital expenditure for the transition of WCP A to Nataka is
estimated at $247 million, including a $37 million contingency.
This capital is expected to be phased over a three-year period from
2023 to 2025, with the majority of the expenditure incurred in 2024
and 2025. A significant proportion of the expenditure covers the
cost of replacing WCP A's two existing dredges, the addition of a
desliming circuit and the implementation of a Tailings Storage
Facility. During 2026 and 2027, a further $23 million of capital
expenditure will be required for additional pumping infrastructure
along with up to $25 million on potential power infrastructure
upgrades, the latter subject to ongoing studies.
Kenmare has also identified an opportunity to upgrade WCP B by
redeploying one of the current dredges from WCP A and increasing
the processing capacity of the wet concentrator plant from 2,400
tph to 3,400 tph. This provides sufficient HMC for constant
production at 1.2 million tonnes per annum ilmenite as WCP A is
transitioning to Nataka from 2025. Based on prefeasibility studies,
the capital cost is estimated at $41 million, with a Definitive
Feasibility Study underway.
The Company plans to fund capital expenditure requirements from
existing resources and operating cash flows whilst maintaining
conservative gearing levels. In addition, Kenmare is considering
potential refinancing options to optimise its debt facilities in
order to maintain financial flexibility.
Market update
Demand for Kenmare's products remained strong in H1 2023 with
higher sales volumes compared with H1 2022. While ilmenite prices
were broadly flat, slightly higher prices were achieved for zircon
and rutile products compared with H1 2022. However, Kenmare's
average price for all products decreased in H1 2023, compared to H1
2022, due to a higher proportion of ilmenite shipments.
Downstream titanium pigment demand was subdued in H1 2023, 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. Lower
global demand for titanium pigment is likely to continue in the
short term; however, Kenmare has contracted a high proportion of Q3
2023 ilmenite sales.
Demand for ilmenite in China has benefitted from the sustained
production of pigment, particularly given record chloride pigment
production in H1 2023. However, outside China slower pigment market
conditions reduced demand for high-grade feedstocks. While the
feedstock market has been kept in balance by increasing
concentrates production for processing in China, continued
disruption to and depletion of supply means that underlying market
fundamentals remain supportive.
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 in H1 2023, although spot prices for shipments
to China and India softened in H1 2023 and remain below contracted
prices moving into Q3 2023.
Financial review
In H1 2023, Kenmare delivered a strong financial performance,
generating a 26% increase in mineral products revenue to $229.7
million (H1 2022: $182.1 million) and a 6% increase in EBITDA to
$110.4 million (H1 2022: $104.5 million). Record first half
revenues and profits were supported by stable markets for all
finished products.
Kenmare's balance sheet strengthened during the period, with net
cash increasing by $16.6 million to $42.3 million (31 December
2022: $25.7 million), after paying the $41.1 million 2022 final
dividend. The Company is targeting a full year dividend of
approximately $50 million for 2023, subject to prevailing product
market and other conditions, and is pleased to announce a 2023
interim dividend of USc17.5 (H1 2022: USc10.98) per share. This
represents a 59% increase compared to the 2022 interim
dividend.
Revenue
Mineral products revenue increased by 26% in H1 2023 to $229.7
million (H1 2022: $182.1 million), driven by a 31% increase in
volumes shipped offset by a decrease of 4% in the average received
price to $413 per tonne (H1 2022: $429 per tonne).
Freight revenue in H1 2023 decreased to $13.2 million (H1 2022:
$15.2 million), despite the higher volumes shipped reflecting a
more favourable freight market in the period.
Ilmenite revenue increased by 34% to $179.2 million in H1 2023
(H1 2022: $133.5 million), as a result of a 35% increase in
ilmenite shipment volumes. Average ilmenite pricing remained robust
at $347 per tonne (H1 2022: $349 per tonne). Primary zircon revenue
increased by 2% to $33.1 million (H1 2022: $32.5 million) due to a
5% price increase offset by a 3% decrease in volumes shipped.
Operating costs
Total operating costs in H1 2023 were $162.6 million, a 32%
increase compared to H1 2022 ($123.3 million). Increased costs
reflect higher staff, fuel and power costs. Included in total
operating costs is $1.7 million in relation to property damage as a
result of the lightning strike on the power transmission line at
the Mine in February 2023.
Total cash operating costs were $108.8 million, a 7% increase
compared to H1 2022 ($102.0 million). This was due primarily to the
inflationary increases noted net of the drawdown of finished
product inventory. Combined with a 10% decrease in production of
finished products, this resulted in a 24% increase in cash
operating costs per tonne of finished product to $230 in H1 2023
(H1 2022: $185 per tonne). Cash operating cost per tonne of
ilmenite increased by 28% to $137 as a result of a 15% reduction in
ilmenite production net of slightly higher co-product revenues.
Finance income and costs
Kenmare recognised finance income of $3.6 million in H1 2023 (H1
2022: $0.3 million), primarily consisting of interest on bank
deposits. Finance costs were $6.3 million in H1 2023 (H1 2022: $5.7
million), including loan interest of $4.2 million (H1 2022: $4.4
million). The decrease in principal outstanding has been offset by
higher interest rates in the period. Letter of credit and other
fees were $0.8 million in the period (H1 2022: $0.6 million) and
the unwinding of the mine closure provision amounted to $0.3
million (H1 2022: $0.4 million). Commitment fees under the debt
facilities were $0.3 million (H1 2022: $0.2 million) and lease
interest was $0.05 million (H1 2022: $0.1 million).
Tax
The tax charge for H1 2023 amounted to $9.7 million (H1 2022:
$6.1 million). Kenmare's subsidiary, Kenmare Moma Mining
(Mauritius) Limited, had taxable profits of $16.3 million (H1 2022:
$16.1 million), resulting in an income tax charge of $5.6 million
(H1 2022: $5.6 million). During the period Kenmare Resources plc
had taxable profits of $58.6 million (H1 2022: $3.8 million)
resulting in an income tax expense of $4.1 million (H1 2022: $0.5
million) being recognised. $60 million (H1 2022: $nil) of the
taxable income relates to dividend income received from the
subsidiary undertaking Kenmare Moma Mining (Mauritius) Limited with
the balance relating to trading losses net of deposit income of
$1.4 million (H1 2022: $3.8 million).
Cash flows
Net cash from operations in H1 2023 was $82.6 million (H1 2022:
$68.6 million), reflecting higher profitability. Working capital
outflow of $14.6 million (H1 2022: $29.5 million) reflects
primarily increased trade receivables as a result of shipments
during the period coupled with the fact that trade receivables were
not discounted in the period.
Investing activities of $20.2 million (H1 2022: $24.2 million)
represented additions to property, plant and equipment. $15.7
million of debt repayments were made (H1 2022: $55.7 million) and a
final dividend for 2022 of $41.1 million (2021: $24.1 million) was
paid in May 2023. Lease repayments of $0.08 million (H1 2022: $0.6
million) were also made in the period.
Consequently, Kenmare finished H1 2023 with $108.8 million of
cash and cash equivalents, representing a slight increase of $0.5
million compared to year-end 2022 ($108.3 million).
Balance sheet
In H1 2023 there were additions to property, plant and equipment
of $20.2 million (H1 2022: $24.2 million). Additions consisted of
$7.4 million development expenditure mainly in relation to
preparing for the relocation of WCP A to the Nataka ore zone and
$12.8 million in relation to sustaining capital.
As stated above, depreciation of $30.2 million, was in line with
the prior period (H1 2022: $30.5 million). The mine closure
provision asset was increased by $0.8 million in H1 2023 (H1 2022:
$13.5 million). This was due to a decrease in the discount rate
used to estimate the closure cost provision from 4.0% to 3.85%.
The Group conducted an impairment review of property, plant and
equipment at the period-end and the key assumptions of this review
are set out in Note 8 of the financial statements. No impairment
provision is required as a result of this review.
Inventory at period-end amounted to $73.3 million (31 December
2022: $84.2 million), consisting of intermediate and finished
mineral products of $34.1 million (31 December 2022: $43.7 million)
and consumables and spares of $39.3 million (31 December 2022:
$40.5 million).
Trade and other receivables amounted to $141.1 million (31
December 2022: $124.0 million). This was comprised of $114.6
million (31 December 2022: $105.0 million) of trade receivables
from the sale of mineral products, $20.1 million (31 December 2022:
$14.5 million) of supplier prepayments and other miscellaneous
debtors, and $6.4 million (31 December 2022: $4.5 million) of VAT
receivable. Trade receivables are a function of shipments made
before period-end and credit terms specific to the relevant
customer. There have been no credit impairments during the period.
The expected credit loss was reduced by $0.6 million (H1 2022:
increased $0.2 million) during the period.
Cash and cash equivalents increased by $0.5 million in the
period and at 30 June 2023 amounted to $108.8 million (31 December
2022: $108.3 million).
Lease liabilities amounted to $1.6 million (31 December 2022:
$1.7 million) at period-end.
Tax liabilities amounted to $5.5 million (31 December 2022: $8.9
million) and trade and other payables amounted to $27.7 million at
period-end (31 December 2022: $35.3 million).
Debt facilities
At period-end, reported debt amounted to $63.4 million (31
December 2022: $78.6 million). This consists of the Term Loan
Facility of $62.9 million and accrued interest of $2.1 million, net
of transaction costs of $1.5 million. The Group is in compliance
with all debt covenants as at 30 June 2023. A semi-annual principal
repayment ($15.7 million) under the Term Loan Facility was paid in
March 2023. The RCF was repaid in full during 2022 and remains
available to be redrawn by the Group until December 2023.
Kenmare's financial position, credit risk profile and operating
performance have materially improved since the refinancing in
December 2019. To reflect this, Kenmare is considering potential
refinancing options to optimise its debt facilities.
Financial outlook
Kenmare's strategic priorities are to operate responsibly,
deliver long-life, low-cost production, and to allocate capital
efficiently, including developing accretive growth opportunities.
The Group is focused on maintaining a robust and flexible balance
sheet to enable it to deliver all these goals, particularly to fund
its capital investment requirements and shareholder returns.
Kenmare will continue to manage its operating cost base in a
conservative and sustainable manner, cognisant of inflationary
pressures and other risks that face its business, in order to
minimise unit costs.
While market demand remains slightly muted, we expect strong
financial performance in H2, with cash flows continuing to support
all expected expenditures and shareholder returns.
Interim dividend
Kenmare generated record first half profit after tax of $67.8
million in H1 2023 (H1 2022: $62.5 million). The Board has
therefore approved an interim 2023 dividend of USc17.5 per share
(H1 2022: USc10.98). The financial statements do not reflect this
interim dividend.
The Company will pay the interim dividend on 13 October 2023 to
shareholders of record at the close of business on 22 September
2023; shares purchased by the Company under the proposed Tender
Offer announced today will thus not qualify for the interim
dividend. 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.
The dividend timetable is as follows:
Announcement of interim dividend 15 August 2023
Ex-Dividend Date 21 September 2023
Record Date 22 September 2023
Currency election cut-off 26 September 2023 at 12:00 noon
date (IST)
Payment Date 13 October 2023
Principal risks and uncertainties
There are a number of potential risks and uncertainties that
could have a material impact on Kenmare's performance over the
remaining six months of the 2023 financial year and which could
cause actual results to differ materially from expected and
historic results.
These principal risks and uncertainties are disclosed in
Kenmare's Annual Report for the year ended 31 December 2022. A
detailed explanation of these principal risks and uncertainties and
how Kenmare seeks to mitigate these risks, can be found on pages 70
to 79 of the 2022 Annual Report under the following headings:
grant, maintenance renewal and extension of agreements and
licences, country risk, geotechnical risk, severe weather events,
uncertainty over and/or changes in physical characteristics of the
orebody, power supply and transmission risk, asset damage or loss,
health, safety and environment, mineral resource statement risk, IT
security risk, development project risk, industry cyclicality,
customer concentration, foreign currency risk and cost
inflation.
The Group's climate risks disclosure is set out on pages 60 to
65 of the 2022 Annual Report. These have not changed in the first
half of the year and outline the Group's objectives in relation to
climate risk. We have continued with these objectives in H1 of 2023
and will provide an update in the 2023 Annual Report.
Related party transactions
There have been no material changes in the related party
transactions affecting the financial position or the performance of
the Group in the period since publication of the 2022 Annual Report
other than those disclosed in Note 20 to the condensed consolidated
financial statements.
Going concern
As stated in Note 1 to the condensed consolidated financial
statements, based on the Group's forecasts and projections, the
Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not
less than 12 months from the date of this report. Accordingly, they
continue to adopt the going concern basis in preparing the
condensed consolidated financial statements.
Events after the Statement of Financial Position Date
Share buy back
On 14 August 2023, the Board approved a Tender Offer. Details of
the offer are set out in a separate announcement which the Company
is making today.
Interim dividend
An interim dividend for the period ended 30 June 2023 of USc17.5
per share was approved by the Board on 14 August 2023. The dividend
payable has not been included as a liability in these financial
statements. The interim dividend is payable to all shareholders on
the Register of Members on 22 September 2023.
There have been no other significant events since 30 June 2023
that would have a significant impact on the financial statements of
the Group.
Forward-looking statements
This report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the
information available to them up to the time of their approval of
this report, and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
On behalf of the Board,
Managing Director Financial Director
Michael Carvill Tom Hickey
14 August 2023 14 August 2023
Independent Review Report to Kenmare Resources plc ("the
Entity")
Conclusion
We have been engaged by the Entity to review the Entity's
condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2023
which comprises the condensed consolidated interim income
statement, the condensed consolidated interim statement of other
comprehensive income, the condensed consolidated interim statement
of financial position, the condensed consolidated interim statement
of cash flows, the condensed consolidated interim statement of
changes in equity, a summary of significant accounting policies and
other explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2023 is not prepared, in all material
respects in accordance with International Accounting Standard 34
Interim Financial Reporting ("IAS 34") as adopted by the EU and the
Transparency (Directive 2004/109/EC) Regulations 2007
("Transparency Directive"), and the Central Bank (Investment Market
Conduct) Rules 2019 ("Transparency Rules of the Central Bank of
Ireland").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (Ireland) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (Ireland) 2410") issued for use in Ireland. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (Ireland)
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies, we consider the implications for our report.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention that causes us to believe that the directors have
inappropriately adopted the going concern basis of accounting, or
that the directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (Ireland) 2410. However, future events or
conditions may cause the Entity to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Entity will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Transparency Directive and the Transparency Rules of the
Central Bank of Ireland.
The Directors are responsible for preparing the condensed set of
consolidated financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
As disclosed in Note 1, the annual financial statements of the
Entity for the year ended 31 December 2022 are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU.
In preparing the condensed set of consolidated financial
statements, the Directors are responsible for assessing the
Entity's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to
liquidate the Entity or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the Entity a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Our conclusion, including our conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion section of
this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Entity in accordance with the
terms of our engagement to assist the Entity in meeting the
requirements of the Transparency Directive and the Transparency
Rules of the Central Bank of Ireland. Our review has been
undertaken so that we might state to the Entity those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Entity for our
review work, for this report, or for the conclusions we have
reached.
Keith Watt 14 August 2023
KPMG
Chartered Accountants
1 Stokes Place
St. Stephen's Green
Dublin 2
Group condensed consolidated statement of comprehensive
income
For the financial period ended 30 June 2023
Restated*
Unaudited
Unaudited 6 Months
6 Months 30 June
30 June 2023 2022
Notes $'000 $'000
Revenue 2 242,879 197,294
Cost of sales 4 (157,200) (117,854)
Gross profit 85,679 79,440
Administration Expenses 4 (5,440) (5,421)
Operating profit 80,239 74,019
Finance income 3,589 324
Finance costs 5 (6,324) (5,706)
Profit before tax 77,504 68,637
Income tax expense 6 (9,727) (6,098)
Profit for the financial period and total comprehensive
income for the financial period 67,777 62,539
-------------------------------------------------------- ----- ------------- ----------
Attributable to equity holders 67,777 62,539
-------------------------------------------------------- ----- ------------- ----------
$ per
$ per share share
Profit per share: Basic 7 0.71 0.66
-------------------------------------------------------- ----- ------------- ----------
Profit per share: Diluted 7 0.70 0.65
-------------------------------------------------------- ----- ------------- ----------
*Refer to Note 4 for further details on the 2022
restatement.
The accompanying notes form part of these financial
statements.
Group condensed consolidated statement of financial position
As at 30 June 2023
Unaudited Audited
30 June 2023 31 Dec 2022
Notes $'000 $'000
Assets
Non-current assets
Property, plant and equipment 8 921,749 930,759
Right-of-use assets 9 1,505 1,608
923,254 932,367
----------------------------------------- ----- ------------- ------------
Current assets
Inventories 10 73,350 84,171
Trade and other receivables 11 141,127 124,018
Cash and cash equivalents 12 108,819 108,271
323,296 316,460
----------------------------------------- ----- ------------- ------------
Total assets 1,246,550 1,248,827
----------------------------------------- ----- ------------- ------------
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 230,600 232,759
Retained earnings 348,934 324,721
Total equity 1,125,588 1,103,534
----------------------------------------- ----- ------------- ------------
Liabilities
Non-current liabilities
Bank loans 14 30,885 46,180
Lease liabilities 9 1,389 1,540
Provisions 16 21,909 19,746
54,183 67,466
----------------------------------------- ----- ------------- ------------
Current liabilities
Bank loans 14 32,561 32,398
Lease liabilities 9 255 245
Trade and other payables 15 27,668 35,293
Current tax liabilities 17 5,483 8,893
Provisions 16 812 998
66,779 77,827
----------------------------------------- ----- ------------- ------------
Total liabilities 120,962 145,293
----------------------------------------- ----- ------------- ------------
Total equity and liabilities 1,246,550 1,248,827
----------------------------------------- ----- ------------- ------------
The accompanying notes form part of these financial
statements.
On behalf of the Board:
M. CARVILL
Director
14 August 2023
T. HICKEY
Director
14 August 2023
Group condensed consolidated statement of changes in equity
Called-Up
Share Share Retained Other
Capital Premium Earnings Reserves Total
$'000 $'000 $'000 $'000 $'000
Unaudited
Balance at 1 January 2023 104 545,950 324,721 232,759 1,103,534
Profit for the financial
period - - 67,777 - 67,777
Transactions with owners
of the Company
Recognition of share-based
payment expense - - - 1,354 1,354
Exercise of share-based
payments - - (2,511) (3,274) (5,785)
Shares acquired by the Kenmare
Employee Benefit Trust - - - (3,625) (3,625)
Shares distributed by the
Kenmare Employee Benefit
Trust - - - 3,386 3,386
Dividends paid - - (41,053) - (41,053)
Balance at 30 June 2023 104 545,950 348,934 230,600 1,125,588
------------------------------- --------- -------- --------- --------- ---------
Unaudited
Balance at 1 January 2022 104 545,950 154,050 4,261 930,643
Profit for the financial
period - - 62,539 - 62,539
Transactions with owners
of the Company
Recognition of share-based
payment expense - - - 3,183 3,183
Exercise of share-based
payments - - - (3,363) (3,363)
Shares acquired by the Kenmare
Employee Benefit Trust - - - (1,779) (1,779)
Shares distributed by the
Kenmare Employee Benefit
Trust - - - 1,779 1,779
Dividends - - (24,129) - (24,129)
Balance at 30 June 2022 104 545,950 192,460 4,081 968,873
------------------------------- --------- -------- --------- --------- ---------
For the financial period ended 30 June 2023
Group condensed consolidated statement of cash flows
For the financial period ended 30 June 2023
Restated*
Unaudited Unaudited
30 June 30 June
2023 2022
Notes $'000 $'000
Cash flows from operating activities
Profit for the period after tax 67,777 62,539
Adjustment for:
Foreign exchange movement 1,018 957
Share-based payments 19 1,354 3,183
Finance income 5 (3,589) (324)
Movement in expected credit losses (601) 199
Finance costs 5 6,324 5,706
Income tax expense 6 9,727 6,098
Depreciation 8/9 30,150 30,544
112,160 108,902
------------------------------------------- ----- --------- ----------
Change in:
Provisions 16 819 652
Inventories 10 10,822 (31,014)
Trade and other receivables 11 (16,151) 6,795
Trade and other payables 15 (7,968) (4,347)
Exercise of share-based payment awards 19 (2,160) (1,584)
Cash generated from operating activities 97,522 79,404
Income tax paid (13,137) (6,481)
Interest received 2,562 89
Interest paid 14 (3,646) (3,491)
Factoring and other fees 5 (807) (682)
Debt commitments fees paid 5 (294) (222)
Net cash from operating activities 82,200 68,617
------------------------------------------- ----- --------- ----------
Investing activities
Additions to property, plant and equipment 8 (20,212) (24,201)
Net cash used in investing activities (20,212) (24,201)
------------------------------------------- ----- --------- ----------
Financing activities
Dividends paid 13 (41,053) (24,129)
Market purchase of equity under Kenmare
Restricted Share Plan 19 (3,625) (1,779)
Repayment of debt 14 (15,715) (55,715)
Payment of lease liabilities 9 (85) (562)
Net cash used in financing activities (60,478) (82,185)
------------------------------------------- ----- --------- ----------
Net increase/(decrease) in cash and cash
equivalents 1,510 (37,769)
Cash and cash equivalents at the beginning
of the financial year 108,271 69,057
Effect of exchange rate changes on cash
and cash equivalents (962) (591)
Cash and cash equivalents at the end of
the period 108,819 30,697
*Refer to Note 4 for further details on the 2022
restatement.
Notes to the group condensed consolidated financial
statements
For the financial period ended 30 June 2023
1. Basis of preparation and going concern
Basis of preparation
The annual financial statements of Kenmare Resources plc ('the
Group') are prepared in accordance with IFRS as adopted by the
European Union. The Group Condensed Consolidated Financial
Statements for the six months ended 30 June 2023 have been prepared
in accordance with the Transparency (Directive 2004/109/EC)
Regulations 2007, as amended, the Transparency Rules of the Central
Bank of Ireland, Disclosure and Transparency Rule 4.2 of the UK
Financial Conduct Authority's Disclosure Guidance and Transparency
Rules and IAS 34 'Interim Financial Reporting', as adopted by the
European Union.
The financial information presented in this document does not
constitute statutory financial statements. The amounts presented in
the half-yearly financial statements for the six months ended 30
June 2023 and the corresponding amounts for the six months ended 30
June 2022 have been reviewed but not audited. The independent
review report is on pages 11 and 12.
The financial information for the year ended 31 December 2022,
presented herein, is an abbreviated version of the annual financial
statements for the Group in respect of the year ended 31 December
2022. The Group's annual financial statements in respect of the
year ended 31 December 2022 have been filed in the Companies
Registration Office and the independent auditor issued an
unqualified audit report thereon. The annual report is available on
the Company's website at www.kenmareresources.com.
Use of Judgements and Estimates
The preparation of the half-yearly financial statements requires
the Directors to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of certain
assets, liabilities, revenues and expenses together with disclosure
of assets and liabilities. Estimates and underlying assumptions
relevant to these financial statements are the same as those
described in the last annual financial statements.
Going Concern
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Group has or will
have adequate resources to continue in operational existence for
the foreseeable future. Based on the Group's cash flow forecast,
liquidity and solvency position the Directors have a reasonable
expectation that the Group has adequate resources for the
foreseeable future and, therefore, they continue to adopt the going
concern basis of accounting in preparing the financial
statements.
The Group forecast has been prepared by management with best
estimates of production, pricing and cost assumptions over the
period. Key assumptions upon which the Group forecast is based
include a mine plan covering production using the Namalope, Nataka,
Pilivili and Mualadi reserves and resources. Specific resource
material is included only where there is a high degree of
confidence in its economic extraction. Production levels for the
purpose of the forecast are approximately 1.2 million tonnes of
ilmenite plus co-products, zircon, concentrates and rutile, over
the next twelve months. Assumptions for product sales prices are
based on contract prices as stipulated in marketing agreements with
customers or, where contract prices are based on market prices or
production is not presently contracted, prices are forecast taking
into account independent titanium mineral sands expertise and
management expectations. Operating costs are based on approved
budget costs for 2023, taking into account the current and future
running costs of the Mine and escalated by 2% per annum thereafter.
Capital costs are based on the capital plans and include escalation
at 2% per annum. Current operating costs and forecast capital costs
take into account the current inflationary environment. The 2%
inflation rate used to escalate these costs over the life of mine
is an estimated long-term inflation rate.
Sensitivity analysis is applied to the assumptions above to test
the robustness of the cash flow forecasts for reductions in market
prices, reductions in production, increases in operating costs and
a combined case of the aforementioned factors. 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. As a result of this assessment, the Board has a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the next
12 months.
Changes in accounting policies
The accounting policies applied in the half-yearly financial
statements are those set out in the annual financial statements for
the year ended 31 December 2022.
The following new and revised standards, all of which are
effective for accounting periods beginning on or after 1 January
2023, have been adopted in the current financial period;
-- IFRS 17 Insurance Contracts and Amendments to IFRS 17 effective 1 January 2023
-- Disclosure of Accounting Policies -- Amendments to IAS 1 and IFRS Practice Statement 2 effective 1 January 2023
-- Definition of Accounting Estimate -- Amendments to IAS 8 effective 1 January 2023
-- Deferred Tax related to Assets and Liabilities arising from a Single Transaction -- Amendments to IAS 12 effective 1 January 2023
None of the new and revised standards have a material effect on
the Group's condensed consolidated financial statements.
2. Revenue
Unaudited Unaudited
30 June 2023 30 June 2022
$'000 $'000
Revenue derived from the sale of mineral
products 229,668 182,072
Revenue derived from freight services 13,211 15,222
Total revenue 242,879 197,294
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 period, the Group sold 556,800 tonnes (H1
2022: 424,300 tonnes) of finished products at a sales value of
$229.7 million (H1 2022: $182.1 million). The Group earned revenue
derived from freight services of $13.2 million (H1 2022: $15.2
million).
Unaudited Unaudited
30 June 2023 30 June 2022
$'000 $'000
Revenue derived from sales of mineral products by
primary product
Ilmenite 179,228 133,452
Zircon 33,080 32,471
Concentrates 12,214 10,574
Rutile 5,146 5,575
Total revenue from mineral products 229,668 182,072
Revenue derived from freight services 13,211 15,222
Total 242,879 197,294
-------------------------------------------------- ------------- -------------
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. Thereafter, where total disclosed revenue disaggregated by
country constitutes less than 75% of total Group revenue,
additional disclosures are made until at least 75% of the Group's
disaggregated revenue is disclosed. This treatment results in the
amendment of comparatives.
Unaudited Unaudited
30 June 2023 30 June 2022
$'000 $'000
Revenue from external customers
China 109,166 59,830
Europe 47,035 56,801
Asia (excluding China) 24,169 29,384
Rest of the world 49,298 36,057
Total revenue from mineral products 229,668 182,072
------------------------------------ ------------- -------------
Revenue derived from freight 13,211 15,222
------------------------------------ ------------- -------------
Total revenue 242,879 197,294
------------------------------------ ------------- -------------
All revenues are generated by the Moma Titanium Minerals Mine.
Sales of the Group's mineral products are not seasonal in
nature.
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.
Unaudited Restated Unaudited
30 June 2023 30 June 2022
Corporate Mozambique Total Corporate Mozambique Total
$'000 $'000 $'000 $'000 $'000 $'000
--------------- --------- ---------- --------- --------- ------------------ ---------
Revenue &
Results
Revenue* - 242,879 242,879 - 197,294 197,294
Cost of sales - (157,200) (157,200) - (117,854) (117,854)
Gross profit - 85,679 85,679 - 79,440 79,440
Administrative
expenses (3,313) (2,127) (5,440) (5,237) (184) (5,421)
Segment
operating
profit/(loss) (3,313) 83,552 80,239 (5,237) 79,256 74,019
Finance income 1,814 1,775 3,589 20 304 324
Finance
expenses (9) (6,315) (6,324) (40) (5,666) (5,706)
Profit/(loss)
before tax (1,508) 79,012 77,50 (5,257) 73,894 68,637
Income tax
expense (4,144) (5,583) (9,727) (470) (5,628) (6,098)
Profit/(loss)
for the
financial
period (5,652) 73,429 67,777 (5,727) 68,266 62,539
--------------- --------- ---------- --------- --------- ------------------ ---------
Segment Assets
& Liabilities
--------------- --------- ---------- --------- --------- ------------------ ---------
Segment Assets 66,830 1,179,719 1,246,549 10,534 1,116,027 1,126,561
Segment
Liabilities (7,030) (113,931) (120,961) (8,908) (136,386) (145,294)
Additions to
non-current
assets
Segment
Additions to
non-current
assets - 20,212 20,212 - 24,201 24,201
* Revenue excludes inter-segment revenue of $11.6 million earned
by the corporate segment relating to marketing and management
services fee income. Inter-segment revenue is not regularly
reviewed by the Board.
Corporate assets consist of the Company's and other subsidiary
undertakings' 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,
lease and current tax liabilities at the reporting date. See Note 4
for further details on the 2022 restatement.
4. Cost and income analysis
Restated
Unaudited Unaudited
30 June 2023 30 June 2022
$'000 $'000
Expenses by function
Cost of sales 157,200 117,854
Administrative expenses 5,440 5,421
Total 162,640 123,275
-------------------------------------------------- ------------- -------------
Expenses by nature can be analysed as follows:
Restated
Unaudited Unaudited
30 June 2023 30 June 2022
$'000 $'000
Expenses by nature
Staff costs 32,045 28,239
Repairs and maintenance 20,467 21,958
Power and fuel 23,985 19,207
Freight 13,211 15,222
Distribution costs 2,899 2,874
Other production and operating costs 27,656 32,127
Property damage as result of lightning strike 1,651 -
Movement of mineral products inventory 9,558 (27,834)
Depreciation of property, plant and equipment and
right-of-use assets 30,150 30,525
Foreign exchange loss 1,018 957
Total 162,640 123,275
-------------------------------------------------- ------------- -------------
Mineral products consist of finished products and heavy mineral
concentrate as detailed in Note 10. Mineral stock movement in the
period was a decrease of $9.6 million (H1 2022: $27.8 million
increase). Distribution costs of $2.9 million (H1 2022: $2.9
million) represent the cost of running the Mine's finished product
storage, jetty and marine fleet. Freight costs of $13.2 million (H1
2022: $15.2 million) arise from sales to customers on a Cost,
Insurance and Freight (CIF) or Cost and Freight (CFR) basis. There
were no exceptional items within operating profit in H1 2023 (H1
2022 restated: $nil). The H1 2022 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 cost of
sales and administrative costs and are no longer presented
separately on the face of the income statement. Management believes
these presentational changes more appropriately reflect the nature
of each category of expense.
As
previously As
reported Adjustment restated
30 June 30 June
2022 2022
------------------------------------------------------ ---------- ----------- ---------
$'000 $'000 $'000
------------------------------------------------------ ---------- ----------- ---------
Revenue 197,294 - 197,294
Cost of sales (95,236) (22,618) (117,854)
Other operating costs/Administrative expenses (27,082) 21,661 (5,421)
Net Finance costs (5,635) 253 (5,382)
Foreign exchange (704) 704 -
Taxation (6,098) - (6,098)
Profit for the financial year and total comprehensive
income for the financial year 62,539 - 62,539
------------------------------------------------------ ---------- ----------- ---------
5 Net finance costs
Restated
Unaudited 30 June 2023 Unaudited 30 June 2022
$'000 $'000
Finance costs
Interest on bank borrowings (4,229) (4,350)
Interest on lease liabilities (46) (77)
Factoring and other trade
facility fees (807) (681)
Commitment and other fees (294) (222)
Unwinding of discount on mine
closure provision (334) (376)
Foreign exchange loss (614) -
Total Finance Costs (6,324) (5,706)
----------------------------- ---------------------- -----------------------
Finance income
Interest earned on bank
deposits 2,919 89
Foreign exchange gain 670 235
Total Finance Income 3,589 324
----------------------------- ---------------------- -----------------------
Net finance costs recognised
in profit or loss (2,735) (5,382)
----------------------------- ---------------------- -----------------------
All interest has been expensed in the financial period. The
Group has classified factoring and other trade facility fees in net
cashflows from operating activities in the Consolidated Statement
of Cashflows. See Note 4 for further details on the 2022
restatement.
6. Income tax expense
Unaudited Unaudited
30 June 2023 30 June 2022
$'000 $'000
Corporation tax 9,727 6,098
---------------- ------------- -------------
During the period the KMML Mozambique Branch had taxable profits
of $16.3 million (H1 2022: $16.1 million) resulting in an income
tax expense of $5.6 million (H1 2022: $5.6 million) being
recognised. The income tax rate applicable to taxable profits of
KMML Mozambique Branch is 35% (H1 2022: 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 30 June 2023.
During the period Kenmare Resources plc had taxable profits of
$58.6 million (H1 2022: $3.8 million) resulting in an income tax
expense of $4.9 million (H1 2022: $0.5 million) being recognised.
Tax adjustments of $0.8 million were recognised in relation to
prior year estimates and returns and have the effect of reducing
the charge in the period. $60 million (H1 2022: $nil) of the
taxable income relates to dividend income received from the
subsidiary undertaking Kenmare Moma Mining (Mauritius) Limited with
the balance relating to trading losses net of deposit income of
$1.4 million (H1 2022: $3.8 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:
Unaudited Unaudited
30 June 2023 30 June 2022
$'000 $'000
Profit for the financial period attributable to equity
holders of the Company 67,777 62,539
2023 2022
Number of shares Number of shares
Weighted average number of issued ordinary shares
for
the purpose of basic earnings per share 94,829,551 94,921,970
Effect of dilutive potential ordinary shares:
Share awards 2,479,902 1,125,633
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 97,309,453 96,047,603
$ per share $ per share
Earnings per share: basic 0.71 0.66
Earnings per share: diluted 0.70 0.65
------------------------------------------------------- ----------------- -----------------
8. Property, plant and equipment
Plant
& Development Construction Other
Equipment Expenditure In Progress Assets Total
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2022 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
Additions during the financial
period - - 20,212 - 20,212
Transfer from construction
in progress 10,082 6,244 (16,444) 118 -
Disposals - - - (3,265) (3,265)
Adjustment to mine closure
cost 825 - - - 825
At 30 June 2023 1,046,511 266,295 54,541 74,243 1,441,590
------------------------------- ---------- ------------ ------------ ------- ---------
Accumulated Depreciation
At 1 January 2022 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
Charge for the financial
period 20,396 3,833 - 5,818 30,047
Disposals - - - (3,265) (3,265)
At 30 June 2023 324,714 151,701 - 43,426 519,841
------------------------------- ---------- ------------ ------------ ------- ---------
Carrying Amount
At 30 June 2023 721,797 114,594 54,541 30,817 921,749
At 31 December 2022 731,286 112,183 50,773 36,517 930,759
An adjustment to the mine closure cost of $0.8 million (2022:
$20.1 million) was made during the period as a result of an update
in the discount rate as detailed in Note 16.
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 30 June 2023, the market
capitalisation of the Group was below the book value of net assets,
which is considered an indicator of impairment of assets.
The Group carried out an impairment review of property, plant
and equipment as at 30 June 2023. As a result of the review, and
given the performance and outlook of the Group, no impairment
provision was recognised in the current financial period. No
impairment was recognised in the prior financial year. Given the
historic volatility in product pricing and sensitivities of the
forecast to 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 13.0% (31 December 2022:
14.0%).
Key assumptions in the value in use calculation 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
comprising the cost of equity and cost of debt have changed from the
year-end review, in particular the equity risk premium which has
decreased, resulting in a discount rate of 13.0% (31 December 2022:
14.0%). 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 Kenmare's operations. Hence, country risk premium
applicable to the calculation of the cost of equity has been adjusted
accordingly. Using a discount rate of 13.0%, the recoverable amount is
greater than the carrying amount by $346.0 million (31 December 2022:
$86.9 million). The discount rate is a significant factor in determining
the recoverable amount. A 4.0% increase in the discount rate to 17.0%
reduces the recoverable amount by $346.0 million to $nil, assuming all
other inputs remain unchanged. The increase in the recoverable amount
from the year-end review is a result of increased cash flows over the
life of mine as a result of updated forecast sales prices and a decrease
in the discount rate from 14.0% to 13.0%.
-- The 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
year-end review. Average annual production is approximately 1.2 million
tonnes (31 December 2022: 1.2 million tonnes) of ilmenite and co-products
zircon, rutile and concentrates over the life of the Mine and remains
unchanged from the year-end review. The 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
forecasted 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 year-end review as a result
of revised forecast pricing. A 9% reduction in average sales prices over
the life of mine reduces the recoverable amount by $346.0 million,
assuming all other inputs remain unchanged.
-- Operating costs are based on approved budget costs for 2023 taking into
account the current running costs of the Mine and estimated inflation 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 decreased slightly
from the year-end review. Increased costs associated with estimated
future power consumption and price for the mining in Nataka have been
included in the forecast cashflows in the period. A 17.5% increase in
operating costs over the life of mine reduces the recoverable amount by
$346.0 million, 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 changed from the year-end review based on
updated capital plans required to maintain the existing plants over the
life of mine. A 39% increase in capital costs over the life of mine
reduces the recoverable amount by $346.0 million, assuming all other
inputs remain unchanged.
9. Right-of-use assets
Plant & Other
Equipment Assets Total
$'000 $'000 $'000
Cost
At 1 January 2023 3,319 2,590 5,909
Disposal (3,319) - (3,319)
At 30 June 2023 - 2,590 2,590
--------------------------- ---------- ------- -------
Accumulated Depreciation
At 1 January 2023 3,319 982 4,301
Disposal (3,319) - (3,319)
Depreciation expense - 103 103
At 30 June 2023 - 1,085 1,085
--------------------------- ---------- ------- -------
Carrying amount
At 30 June 2023 - 1,505 1,505
--------------------------- ---------- ------- -------
At 31 December 2022 - 1,608 1,608
--------------------------- ---------- ------- -------
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 the remainder of this term. This lease
obligation is denominated in Euros.
In December 2022, the lease in respect of the Group's Mozambican
country office in Maputo was amended. The lease term was extended
to 10 years commencing 1 December 2022. This lease obligation is
denominated in US Dollars.
The weighted average rate applied to the leases is 8.4%.
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 30 June 2023 or 31
December 2022.
Set out below are the carrying amounts of lease liabilities at
each reporting date:
Unaudited Audited
30 June 2023 31 Dec 2022
$'000 $'000
Current 255 245
Non-Current 1,389 1,540
1,644 1,785
------------ ------------- ------------
10. Inventories
Unaudited Audited
30 June 2023 31 Dec 2022
$'000 $'000
Mineral products 34,097 43,655
Consumable spares 39,253 40,516
73,350 84,171
------------------ ------------- ------------
At 30 June 2023, total final product stocks were 129,000 tonnes
(31 December 2022: 213,500 tonnes). Closing stock of heavy mineral
concentrate was 15,000 tonnes (31 December 2022: 18,800
tonnes).
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 period
there was a write-down of $nil (31 December 2022: $nil) to mineral
products to value them at net realisable value.
11. Trade and other receivables
Audited
Unaudited 30 June 2023 31 Dec 2022
$'000 $'000
Trade receivables 114,645 104,970
VAT receivable 6,395 4,527
Prepayments 20,087 14,521
141,127 124,018
------------------ ---------------------- ------------
12. Cash and cash equivalents
Audited
Unaudited 30 June 2023 31 Dec 2022
$'000 $'000
Cash and cash equivalents 108,819 108,271
-------------------------- ---------------------- ------------
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. Share capital and dividends
Share capital as at 30 June 2023 amounted to $0.1 million (31
December 2022: $0.1 million).
In May 2023, the Company paid a final 2022 dividend of $41.1
million (2021 final dividend: $24.1 million) representing USc43.33
(2021 final dividend: (USc25.42) per share.
14. Bank loans
Unaudited Audited
30 June 2023 31 Dec 2022
$'000 $'000
Borrowings 63,446 78,578
The borrowings are repayable as follows:
Less than one year 33,564 33,653
Between two and five years 31,427 47,142
64,991 80,795
Transaction costs (1,545) (2,217)
Total carrying amount 63,446 78,578
----------------------------------------- ------------- ------------
Borrowings
On 11 December 2019, the Group entered into secured debt
facilities ("Senior Facility Agreement") 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
provides 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 Term Loan Facility has a final maturity date of 11 March
2025. Interest is at SOFR plus 5.40% per annum. Repayment is in
seven equal semi-annual instalments and the first repayment was
made on 11 March 2022.
The Revolving Credit Facility has a maturity date of 11 December
2023, which is extendable by a further 12 months at the lenders'
discretion. Interest is at SOFR plus 4.25% per annum.
The Group entered into a mine closure guarantee facility with
Absa Bank Moçambique SA effective from 1 July 2023 for an amount of
$26.6 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 $102.0 million as at 30 June 2023 (31 December 2022: $102.9
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.
During the period $15.7 million of the Term Loan Facility was
repaid. At the period-end, reported debt amounted to $63.4 million
(31 December 2022: $78.6 million). This consists of the Term Loan
Facility of $62.9 million (31 December 2022: $78.9 million) and
accrued loan interest of $2.1 million (31 December 2022: $1.9
million), net of transaction costs of $1.5 million (31 December
2022: $2.2 million).
Unaudited Audited
Reconciliation of movements of debt to cashflows arising 30 June 2023 31 Dec 2022
from financing activities $'000 $'000
Bank Loans
Balance at 1 January 78,578 148,099
Cash movements
Loan interest paid (3,646) (6,921)
Principal repaid (15,715) (91,429)
Loan drawn down - 20,000
Non-cash movements
Loan interest accrued 4,229 8,829
Balance at 30 June/31 December 63,446 78,578
--------------------------------------------------------- ------------- ------------
Financial Covenants
As at As at
30 June 2023 31 December 2022 Covenant
Interest
Coverage Ratio 56.17:1 34.96:1 Not less than 4.00:1
Net Debt to
EBITDA (0.15):1 (0.09):1 Not greater than 2.00:1
Debt Service
Coverage Ratio 6.71:1 3.11:1 Not less than 1.20:1
Liquidity
(million) $148.8 $148.3 Not less than $15.0
Reserve Tail
Ratio 81% 81% Not less than 30%
All financial covenants under the Senior Facilities Agreement
have been complied with during the period. The key financial
covenants as at 30 June 2023 are detailed below:
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. Trade and other payables
Audited
31 Dec
Unaudited 30 June 2023 2022
$'000 $'000
Trade payables 8,269 7,305
Deferred income 456 2,740
Accruals 18,943 25,248
27,668 35,293
---------------- ---------------------- -------
16. Provisions
Unaudited Audited
30 June 2023 31 Dec 2022
$'000 $'000
Mine closure provision 17,781 16,623
Mine rehabilitation provision 4,940 4,121
22,721 20,744
------------------------------ ------------- ------------
Current 812 998
Non-current 21,909 19,746
22,721 20,744
------------------------------ ------------- ------------
Mine Closure Provision Mine Rehabilitation Provision Other Provisions Total
$'000 $'000 $'000 $'000
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 period - (4,008) (3,212) (7,220)
Unwinding of the discount 744 - - 744
At 1 January 2023 16,623 4,121 - 20,744
Increase in provision during the financial year 824 1,275 - 2,099
Provision utilised during the financial period - (456) - (456)
Unwinding of the discount 334 - - 334
At 30 June 2023 17,781 4,940 - 22,721
------------------------------------------------------ ---------------------- ----------------------------- ----------------- --------
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 $0.3 million (H1 2022: $0.4 million) has been recognised in the
statement of comprehensive income for the financial period.
The main assumptions used in the calculation of the estimated
future costs include:
-- a discount rate of 3.85% (31 December 2022: 4.0%);
-- an inflation rate of 2% (31 December 2022: 2%);
-- an estimated life of mine of 40 years (31 December 2022: 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 (31 December 2022:
$34.1 million) and an estimated post-closure monitoring provision
of $3.9 million (31 December 2022: $3.9 million).
The life of mine plan is based on the Namalope, Nataka, Pilivili
and Mualadi reserves and resources. Specific resource material is
included only where there is a high degree of confidence in its
economic extraction. The Mine closure provision has been increased
by $0.8 million from 31 December 2022 to reflect a change in the
discount rate from 4.0% at 31 December 2022 to 3.85% at 30 June
2023.
The discount rate is a significant factor in determining the
Mine closure provision. The Group uses a Thirty-year US Treasury
yield as this is the longest period for which yields are quoted.
This discount rate is deemed to provide the best estimate of the
current market assessment of risk-free time value of money. Risks
specific to the liability are included in the cost estimate.
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 twelve months after the area has been
disturbed. During the financial period there was a release of $0.5
million (H1 2022: $0.3 million) to reflect the actual mine
rehabilitation costs incurred, and an addition to the provision of
$1.3 million (H1 2022: $1.0 million) for areas newly disturbed.
17. Current tax liabilities
Audited
Unaudited 30 June 2023 31 Dec 2022
$'000 $'000
Current tax liabilities 5,483 8,893
------------------------ ---------------------- ------------
Further details on the Group's tax expense are detailed in Note
6.
18. Financial Instruments
Unaudited 30 June 2023 Audited 31 Dec 2022
Carrying amount Fair value Carrying amount Fair value
$'000 $'000 $'000 $'000
Financial assets at fair value through profit and
loss
Trade receivables - - Level 2 31,188 31,188 Level 2
Financial assets at fair value through OCI
Trade receivables 95,418 95,418 Level 2 43,065 43,065 Level 2
Financial assets not measured at fair value
Trade receivables 19,227 19,227 Level 2 30,717 30,717 Level 2
Cash and cash equivalents 108,819 108,819 Level 2 108,271 108,271 Level 2
223,464 223,464 213,241 213,241
-------------------------------------------------- --------------- ---------- ------- --------------- ---------- -------
Financial liabilities not measured at fair value
Bank loans 63,446 64,991 Level 2 78,578 80,795 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 always confirmed and 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). The Group
derecognises the original 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. Trade
receivables not measured at fair value are receivables whose
payment is received under the sale contract credit terms.
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.
Credit risk
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.
Before entering into sales contracts with new customers, the
Group uses an external credit scoring system to assess the
potential customer's credit quality and defines credit limits by
customer. Limits attributed to customers are reviewed regularly
during the year.
The Group's customers have been transacting with the Group for a
significant number of years, and no customer's balances have been
written off or are credit impaired at the financial period end. In
monitoring customer credit risk, customers are 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.
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 movement in expected credit losses in respect of trade
receivables were measured at amortised cost or fair value through
other comprehensive income during the period was as follows:
Unaudited Audited
30 June 2023 31 Dec 2022
$'000 $'000
Opening balance 1,534 424
Net remeasurement of loss allowance (601) 1,110
Closing 933 1,534
------------------------------------ ------------- ------------
The increase in the loss allowance is mainly attributable to
increases in industry specific externally published forward looking
default rates which are used as the basis of estimating the Group's
expected credit losses. The methodology for the calculation of
expected credit losses is the same as described in the last annual
statements.
Interest rate benchmark 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).
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 six-month SOFR rate set on 11 March 2023 relating to 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.
19. Share-based payments
Kenmare Restricted Share Plan (KRSP)
During the financial period, 864,481 (H1 2022: 653,174) shares
were granted to employees under the 2023 KRSP award. The estimated
fair value of the shares awarded is $5.0 million (H1 2022: $3.7
million). These share awards vest, subject to continued employment
on the third anniversary or, in the case of Executive Directors and
certain other staff, subject to continued employment and to the
Remuneration Committee's assessment against a discretionary
underpin, on the third anniversary of grant.
During the financial period, the Group recognised a share-based
payment expense of $1.4 million (H1 2022: $3.2 million).
During the period, awards in respect of 1,073,896 shares were
exercised at a cost of $5.8 million.
20. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Apart from existing remuneration arrangements there were no
material transactions or balances between the Group and its key
management personnel or members of their close families during the
period under review.
21. Events after the statement of financial position date
Share buy back
On 14 August 2023, the Board approved a Tender Offer. Details of
the offer are set out in a separate announcement which the Company
is making today. Shares bought back pursuant to the Tender Offer
will not qualify for the interim dividend.
Interim dividend
An interim dividend for the period ended 30 June 2023 of USc17.5
(H1 2022: USc10.98) per share was approved by the Board on 14
August 2023. The dividend payable has not been included as a
liability in these financial statements. The interim dividend is
payable to all shareholders on the Register of Members on 22
September 2023.
There have been no other significant events since 30 June 2023
which would have a significant impact on the financial statements
of the Group.
22. Information
The half-yearly financial report was approved by the Board on 14
August 2023.
Copies are available from the Company's registered office at 4th
Floor, Styne House, Hatch Street Upper, Dublin 2, D02 DY27,
Ireland.
The report is also available on the Company's website at
https://www.globenewswire.com/Tracker?data=iuYkkul5QyUwqDfUpxB2FKcPhxn0V2OkQ_xbKcbgAURAZoNGC0NAPQEj8MrjQ8nUj5axJVCEHStvaJ1WKmlEE-6J-fpsktAYMcN1RKl5xQE3ji1oMO-9nD7YVRLBo3DQ
www.kenmareresources.com.
STATEMENT OF DIRECTORS RESPONSIBILITIES
For the half year ended 30 June 2023
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007 ("Transparency Directive"), the
Transparency Rules of the Central Bank of Ireland and Transparency
Rule 4.2 of the Disclosure Guidance and Transparency Rules of the
UK Financial Conduct Authority.
In preparing the condensed set of consolidated financial
statements included within the half-yearly financial report, the
Directors are required to:
-- prepare and present the condensed set of consolidated financial
statements in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU, the Transparency Directive and the Transparency Rules
of the Central Bank of Ireland;
-- ensure the condensed set of consolidated financial statements has
adequate disclosures;
-- select and apply appropriate accounting policies;
-- make accounting estimates that are reasonable in the circumstances; and
-- assess the Entity's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to
liquidate the Entity or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the condensed set of consolidated
financial statements that is free from material misstatement
whether due to fraud or error.
We confirm that to the best of our knowledge:
(1) the condensed set of consolidated financial statements included within the half-yearly financial report of Kenmare Resources plc for the six months ended 30 June 2023 ("the interim financial information") which comprises the condensed consolidated interim income statement, the condensed consolidated interim statement of other comprehensive income, the condensed consolidated interim statement of financial position, the condensed consolidated interim statement of cash flows, the condensed consolidated interim statement of changes in equity and the related explanatory notes, have been presented and prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the Transparency Directive and Transparency Rules of the Central Bank of Ireland.
(1) The interim financial information presented, as required by the Transparency Directive and Transparency Rule 4.2 of the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority, includes:
1. an indication of important events that have occurred during the first 6
months of the financial year, and their impact on the condensed set of
consolidated financial statements;
2. a description of the principal risks and uncertainties for the remaining
6 months of the financial year;
3. related parties' transactions that have taken place in the first 6 months
of the current financial year and that have materially affected the
financial position or the performance of the enterprise during that
period; and
4. any changes in the related parties' transactions described in the last
annual report that could have a material effect on the financial position
or performance of the enterprise in the first 6 months of the current
financial year.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Entity's
website. Legislation in the Republic of Ireland governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
On behalf of the Board:
M. CARVILL T. HICKEY
Director Director
14 August 2023 14 August 2023
Glossary - Alternative Performance Measures
Certain financial measures set out in the half-yearly financial
report to 30 June 2023 are not defined under International
Financial Reporting Standards (IFRSs), 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 before depreciation and amortisation Eliminates the effects of financing, tax and depreciation
to allow assessment of the earnings and performance
of the Group
------------------------------------------------- ----------------------------------------------------------- ---------------------------------------------------------
EBITDA margin Percentage of EBITDA to Mineral Products Revenue Provides a group margin for the earnings and performance
of the Group
------------------------------------------------- ----------------------------------------------------------- ---------------------------------------------------------
Capital costs Additions to property, plant and equipment in the Provides the amount spent by the Company on additions
period to property, plant and equipment in the period
------------------------------------------------- ----------------------------------------------------------- ---------------------------------------------------------
Cash operating cost per tonne of finished product Total costs less freight and other non-cash costs, Eliminates the non-cash impact on costs to identify
produced including depreciation and inventory movements divided the actual cash outlay for production and, as production
by final product production (tonnes) levels increase or decrease, highlights operational
performance by providing a comparable cash cost per
tonne of product produced over time
------------------------------------------------- ----------------------------------------------------------- ---------------------------------------------------------
Cash operating cost per tonne of ilmenite net of Cash operating costs less zircon, rutile and mineral Eliminates the non-cash impact on costs to identify
co-products sands concentrates revenue, divided by ilmenite production the actual cash outlay for production and, as production
(tonnes) levels increase or decrease, highlights operational
performance by providing a comparable cash cost per
tonne of ilmenite produced over time
------------------------------------------------- ----------------------------------------------------------- ---------------------------------------------------------
Net cash/debt Bank loans before transaction costs, loan amendment Measures the amount the Group would have to raise
fees and expenses, plus lease liabilities net of cash through refinancing, asset sale or equity issue if
and cash equivalents its 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 the Group generates
profits from investment in assets
------------------------------------------------- ----------------------------------------------------------- ---------------------------------------------------------
EBITDA
H1 2023 H1 2022 H1 2021 H1 2020 H1 2019
Restated Restated Restated Restated
$m $m $m $m $m
----------------------------- ------- -------- -------- -------- --------
Operating profit 80.2 74.0 56.8 20.6 25.6
Depreciation and amortisation 30.2 30.5 23.5 17.3 16.7
EBITDA 110.4 104.5 80.3 37.9 42.3
----------------------------- ------- -------- -------- -------- --------
EBITDA margin
H1 2022 H1 2021 H1 2020 H1 2019
H1 2023 Restated Restated Restated Restated
$m $m $m $m $m
------------------------- ------- -------- -------- -------- --------
EBITDA 110.4 104.5 80.3 37.9 42.3
Mineral Products Revenue 229.7 182.1 167.8 111.2 115.4
EBITDA margin (%) 48% 57% 48% 34% 37%
------------------------- ------- -------- -------- -------- --------
Cash operating cost per tonne of finished product
H1 2022 H1 2021 H1 2020 H1 2019
H1 2023 Restated Restated Restated Restated
$m $m $m $m $m
----------------------------- ------- -------- -------- -------- --------
Cost of sales 157.2 117.9 100.3 82.7 79.6
Administration costs 5.4 5.4 19.2 14.2 17.0
Total operating costs 162.6 123.3 119.5 96.9 96.6
Freight charges (13.2) (15.2) (10.4) (5.6) (7.3)
Total operating costs less
freight 149.4 108.1 109.1 91.3 89.3
Adjustments
Depreciation and amortisation (30.2) (30.5) (23.5) (17.3) (16.7)
Expected credit loss 0.6 (0.2) - - -
Share-based payments (1.4) (3.2) (2.1) (1.0) (0.9)
Mineral product inventory
movements (9.6) 27.8 3.8 2.2 5.2
Total cash operating costs 108.8 102.0 87.3 75.2 76.9
Final product production
tonnes 472,600 550,700 612,100 410,600 505,200
Cash operating cost per tonne
of finished product $230 $185 $143 $183 $152
----------------------------- ------- -------- -------- -------- --------
Cash operating cost per tonne of ilmenite
H1 2022 H1 2021 H1 2020 H1 2019
H1 2023 Restated Restated Restated Restated
$m $m $m $m $m
---------------------------------------------- ------- -------- -------- -------- --------
Total cash operating costs 108.8 102.0 87.3 75.2 76.9
Less co-products zircon,
rutile and mineral sands concentrate revenue (50.4) (48.6) (24.0) (31.3) (41.2)
Total cash costs less co-product revenue 58.4 53.4 63.3 43.9 35.7
Ilmenite product production tonnes 425,500 499,700 559,000 368,900 458,200
Cash operating cost per tonne of ilmenite $137 $107 $113 $119 $78
---------------------------------------------- ------- -------- -------- -------- --------
Net debt/cash
H1 2023 H1 2022 H1 2021 H1 2020 H1 2019
$m $m $m $m $m
-------------------------- ------- ------- ------- ------- -------
Bank debt (63.4) (93.2) (128.0) (145.2) (73.5)
Transaction costs (1.5) (3.0) (4.7) (6.1) --
Gross debt (64.9) (96.2) (132.7) (151.3) (73.5)
Lease liabilities (1.6) (1.7) (2.8) (3.9) (5.0)
Cash and cash equivalents 108.8 30.7 56.5 98.6 77.0
Net (debt)/cash 42.3 (67.2) (79.0) (56.6) (1.5)
-------------------------- ------- ------- ------- ------- -------
ROCE
H1 2022 H1 2021 H1 2020 H1 2019
H1 2023 Restated Restated Restated Restated
$m $m $m $m $m
----------------------------- ------- -------- -------- -------- --------
Operating profit 80.2 74.0 58.8 19.9 26.1
Total Equity and Non-Current
Liabilities 1,180 1,058 1,087 1,085 954
ROCE % 7% 7% 5% 2% 3%
----------------------------- ------- -------- -------- -------- --------
Glossary -- Terms
Term Description
CIF Shipment term under an agreement for the sale of final
product to a customer, providing for the seller to
deliver the goods on board the vessel in the port
of shipment and to 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.
CFR Shipment term under an agreement for the sale of final
product to a customer, providing for the seller to
deliver the goods on board the vessel in port of shipment
and to 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.
------------- ---------------------------------------------------------------
The Company Kenmare Resources plc
------------- ---------------------------------------------------------------
Group or Kenmare Resources plc and its subsidiary undertakings
Kenmare
------------- ---------------------------------------------------------------
HMC Heavy mineral concentrate extracted from mineral sands
deposits, and which include ilmenite, zircon, rutile
and other heavy minerals and silica.
------------- ---------------------------------------------------------------
KMML Mozambique branch of Kenmare Moma Mining (Mauritius)
Mozambique Limited (KMML)
Branch
------------- ---------------------------------------------------------------
KMPL Mozambique branch of Kenmare Moma Processing (Mauritius)
Mozambique Limited (KMPL)
Branch
------------- ---------------------------------------------------------------
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").
------------- ---------------------------------------------------------------
Moma, Moma The Moma Titanium Minerals Mine consisting of a heavy
Mine or the mineral sands, processing facilities and associated
Mine infrastructure, which mine is located in the north
east coast of Mozambique under licence to the Project
Companies.
------------- ---------------------------------------------------------------
MSP Mineral Separation Plant
------------- ---------------------------------------------------------------
Mtpa Million tonnes per annum
------------- ---------------------------------------------------------------
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 Definitive
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.
------------- ---------------------------------------------------------------
Project Kenmare Moma Mining (Mauritius) Limited and Kenmare
Companies Moma Processing (Mauritius) Limited, wholly owned
subsidiary undertakings of Kenmare Resources plc,
that are incorporated in Mauritius.
------------- ---------------------------------------------------------------
Revolving $40 million revolving credit facility pursuant to
Credit the Senior Facilities Agreement dated 11 December
Facility 2019 between, amongst others, the Lenders and KMML
Mozambique Branch and KMPL Mozambique Branch as borrowers.
------------- ---------------------------------------------------------------
Term Loan $110 million term loan facility pursuant to the Senior
Facility Facilities Agreement dated 11 December 2019 between,
amongst others, the Lenders and KMML Mozambique Branch
and KMPL Mozambique Branch.
------------- ---------------------------------------------------------------
TiO(2) Titanium dioxide is a titanium oxide with the formula
TiO(2) . A naturally occurring oxide sourced from
ilmenite, rutile and anatase, it has a wide range
of applications.
------------- ---------------------------------------------------------------
THM Total heavy minerals in the ore of which ilmenite
(typically 82%), rutile (typically 2.0%) and zircon
(typically 5.5%) total approximately 90%.
------------- ---------------------------------------------------------------
tph Tonnes per hour
------------- ---------------------------------------------------------------
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
------------- ---------------------------------------------------------------
(END) Dow Jones Newswires
August 15, 2023 02:00 ET (06:00 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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