Q2 and H1 2022 Production Report
Kenmare Resources plc (“Kenmare”
or “the Company” or “the Group”)
14 July 2022
Q2 and H1
2022 Production
Report
Kenmare Resources plc (LSE:KMR, ISE:KMR), one of
the leading global producers of titanium minerals and zircon, which
operates the Moma Titanium Minerals Mine (the "Mine" or "Moma") in
northern Mozambique, is pleased to provide a trading update for the
quarter and half year ending 30 June 2022 (“Q2 2022” and “H1
2022”).
Statement from Michael Carvill, Managing
Director:
“During Q2, we achieved the milestone of 10
million hours worked without a Lost Time Injury. This is a new
Company record and testament to the commitment of our team at site
to risk management and strong employee engagement on safety.
The market for all of Kenmare’s products
continued to improve, with realised ilmenite prices increasing for
the seventh consecutive quarter. Although global growth
expectations have reduced for H2 2022, inventories remain low
throughout the value chain and demand for Kenmare’s ilmenite is
anticipated to be robust.
Q2 production was weaker than anticipated due to
higher slimes recirculation, impacting excavated ore volumes and
grades. As a result, we now expect production to be at the bottom
of 2022 guidance. Increased pricing has more than offset production
and supported revenues.
Our balance sheet continued to strengthen, with
a $17.3 million reduction in net debt at the end of the first half,
after paying the $24.1 million 2021 final dividend. We are
targeting a dividend payout ratio of 25% profit after tax for
2022.”
Q2 2022
overview
- Record Lost Time Injury Frequency
Rate (“LTIFR”) of 0.00 per 200,000 hours worked for the 12 months
to 30 June 2022 (30 June 2021: 0.14), with zero Lost Time Injuries
recorded during the quarter
- Heavy Mineral Concentrate (“HMC”)
production of 353,600 tonnes in Q2 2022, a 19% decrease compared to
Q2 2021 (436,600 tonnes), due to higher slimes levels, leading to a
10% reduction in ore grades and an 8% reduction in excavated ore
tonnes
- Ilmenite production of 242,900
tonnes in Q2 2022, a 14% decrease compared to Q2 2021 (283,900
tonnes), broadly in line with the reduction in HMC processed
- Primary zircon production of 13,600
tonnes, a 9% decrease compared to Q2 2021 (14,900 tonnes), also due
to reduced HMC processed but partially offset by increased
recoveries
- Total shipments of finished
products of 192,800 tonnes, a 23% decrease compared to Q2 2021
(249,700 tonnes) due to reduced transshipment capacity, as one of
Kenmare’s two vessels began its five-yearly dry dock in May 2022,
exacerbated by poor weather conditions
- Kenmare expects production of all
finished products to be at the bottom of its 2022 guidance
ranges
- Strong ilmenite pricing in Q2 2022
and demand looks to remain robust in Q3, supported by low
inventories and continued supply constraints
- Global zircon market tightened
further in Q2 2022, as global inventories were drawn down in 2021,
and the market is expected to remain tight in Q3
- Rotary Uninterruptible Power Supply
(“RUPS”) project became fully operational in May 2022 and has
proved successful at mitigating a number of electrical supply
disruptions
- At the end of H1
2022, net debt reduced to $65.5 million (31 December 2021: $82.8
million), as a result of continuing strong free-cashflow generation
reflecting higher prices, which more than offset lower sales
volumes
Operations update
Production from the Moma Mine in Q2 and H1 2022
was as follows:
|
Q2 2022 |
Q2 2021 |
Q1 2022 |
H1 2022 |
H1 2021 |
tonnes |
% variance |
% variance |
tonnes |
% variance |
Excavated ore1 |
10,070,000 |
-8% |
7% |
19,461,000 |
-2% |
Grade1 |
4.23% |
-10% |
-6% |
4.35% |
-7% |
Production |
|
|
|
|
|
HMC production |
353,600 |
-19% |
-8% |
738,300 |
-8% |
HMC processed |
367,300 |
-13% |
-2% |
740,600 |
-9% |
Ilmenite |
242,900 |
-14% |
-5% |
499,700 |
-11% |
Primary zircon |
13,600 |
-9% |
5% |
26,500 |
-6% |
Rutile |
2,100 |
-5% |
5% |
4,000 |
-5% |
Concentrates2 |
9,800 |
-17% |
-8% |
20,500 |
-1% |
Shipments |
192,800 |
-23% |
-17% |
424,300 |
-29% |
- Excavated ore tonnage and grade
prior to any floor losses.
- Concentrates include secondary
zircon and mineral sands concentrate.
Kenmare’s rolling 12-month LTIFR to 30 June 2022
was 0.00 per 200,000 hours worked (Q2 2021: 0.14), with zero Lost
Time Injuries recorded during the quarter. In late June 2022,
Kenmare achieved the milestone of 10 million hours worked without a
Lost Time Injury and the Company remains focused on maintaining its
strongest ever safety performance.
HMC production was 353,600 tonnes in Q2 2022,
representing a 19% decrease compared to Q2 2021 (436,600 tonnes).
This was a result of a 10% decrease in ore grades to 4.23% (Q2
2021: 4.70%) and an 8% decrease in excavated ore volumes to 10.1
million tonnes (Q2 2021: 10.9 million tonnes).
HMC production was impacted by increased slimes
levels during the quarter, primarily at Wet Concentrator Plant
(“WCP”) A. WCP capacity was limited due to higher levels of slimes
recirculation from the mining pond, which necessitated a reduction
in supplemental dry mining, lowering the grade mined. Higher slimes
also led to poorer recoveries and reduced HMC quality. Kenmare
expects slimes in the ore to remain at similar levels in H2 2022,
but slimes management controls have been improved during the
quarter, reducing recirculation. This should allow for increased
excavated ore and improved recoveries, leading to higher levels of
production in H2 2022. Ilmenite production was 242,900 tonnes, a
14% decrease compared to Q2 2021 (283,900 tonnes), falling broadly
in line with decreased HMC processed, however also impacted
slightly by the lower HMC quality.
Primary zircon production was 13,600 tonnes in
Q2 2022, a 9% decrease compared to Q2 2021 (Q2 2021: 14,900
tonnes), and rutile production was 2,100 tonnes, down 5% (Q2 2021:
2,200 tonnes), reflecting lower HMC processed (and lower HMC
quality) but partially offset by increased recoveries. Concentrates
production was 9,800 tonnes, down 17% (Q2 2021: 11,800 tonnes) due
to reduced HMC processed and quality, and stronger primary zircon
recoveries reducing zircon available for concentrates.
As a result of the reduced production in H1
2022, Kenmare expects production of all finished products to be at
the bottom of its 2022 guidance ranges, as published on 13 January
2022.
As previously announced, one of Kenmare’s two
transshipment vessels, the Bronagh J, left site in early May 2022
for its five-yearly dry dock maintenance work, reducing Kenmare’s
shipping capacity significantly for the quarter. This reduction
will continue during Q3 until the Bronagh J returns to site, which
is expected in mid-August. However, there will be sufficient
capacity to catch up when both vessels are operating, with finished
product inventories expected to return to normal levels during H1
2023.
Total shipments in Q2 2022 were 192,800 tonnes,
a 23% decrease compared to Q2 2021 (249,600 tonnes), due to reduced
shipping capacity and compounded by poor weather conditions and the
arrival of some customer-chartered vessels being delayed. Shipments
comprised 179,300 tonnes of ilmenite, 8,700 tonnes of primary
zircon, and 4,800 tonnes of concentrates. No rutile was shipped
during the period.
Closing stock of HMC at the end of Q2 2022 was
9,200 tonnes, compared to 22,900 tonnes at the end of Q1 2022, due
to a drawdown of HMC stockpiles during the period to compensate for
reduced HMC production. Closing stock of finished products at the
end of Q2 2022 was 214,900 tonnes, compared to 139,300 tonnes at
the end of Q1 2022, reflecting the lower shipping capacity.
Capital projects update
In May 2022, the Rotary Uninterruptible Power
Supply project became fully operational. The objective of the RUPS
is to improve power stability at the Mineral Separation Plant and
make a significant contribution to Kenmare’s goal of further
reducing its greenhouse gas emissions. Since becoming operational,
the RUPS has proved successful at mitigating a number of electrical
supply disruptions in accordance with this objective.
Work is continuing on the Pre-Feasibility Study
(“PFS”) for Nataka, where WCP A is expected to commence mining in
2025. Kenmare intends to provide an update on the progress of the
PFS with its results for the six months ended 30 June 2022. As part
of the PFS, WCP A is expected to have a desliming circuit installed
to more efficiently mine the Nataka ore zone. A cost-benefit
analysis is being conducted to investigate the acceleration of the
installation of the desliming circuit ahead of the move. This has
the potential to increase the effective WCP capacity and better
mitigate against the slimes levels at the end of the Namalope mine
path.
Market update
Kenmare achieved higher prices for its ilmenite
and zircon products in Q2 2022 and this represented the seventh
consecutive quarter of ilmenite price increases.
Global demand for ilmenite grew further during
the quarter due to robust downstream demand for titanium pigment,
with pigment producers continuing to operate at high utilisation
rates, particularly outside of China. Economic activity in China
has been impacted by several city-wide COVID-19 related lockdowns,
which reduced demand for titanium pigment and therefore ilmenite.
Despite this, chloride pigment production continues to increase in
China, resulting in growing demand for ilmenite of Kenmare’s
quality.
Production of ilmenite concentrates from Chinese
companies in Mozambique continued to expand in Q2, while ilmenite
production also increased from the United States, Malaysia, and
Indonesia. However, global supply of titanium feedstocks remained
insufficient to meet demand and pigment production was therefore
constrained by feedstock availability and low inventories.
Moving into Q3 2022, lower anticipated global
growth is expected to reduce demand for titanium pigment. Despite
this, Kenmare continues to experience demand for its ilmenite in
excess of its ability to supply, as high-quality ilmenite remains
in short supply.
The zircon market tightened further in Q2 2022
as inventories in the global supply chain were largely drawn down
in 2021. Demand has been strong in all major regions except China,
which was also impacted by severe COVID-19-related lockdowns. With
no significant new supply entering the market, zircon remains in
short supply and prices increased throughout H1 2022. The positive
fundamentals for zircon are expected to continue into Q3 2022.
Finance update
On 1 June 2022, Kenmare paid its 2021 final
dividend of USc25.42 per share. This was the balancing payment of a
2021 full year dividend of USc32.71 per share, representing a
dividend payout ratio of 25% of profit after tax and up 227% from
2020. For 2022, Kenmare is targeting the same dividend payout
ratio.
Following the 2021 final dividend distribution
of $24.1 million and debt principal repayments of $55.7 million,
cash and cash equivalents were $30.7 million as at 30 June 2022 (31
December 2021: $69.1 million), while gross bank loans, including
accrued interest, were $96.2 million (31 December 2021: $151.9
million). Gross debt has reduced following the commencement of
semi-annual repayments of the Term Loan in March 2022 and the
repayment in full of the $40 million Revolving Credit Facility
(“RCF”). The RCF continues to be available for redraw.
Accordingly, as at 30 June 2022, Kenmare’s net
debt had reduced by $17.3 million to $65.5 million, compared to
$82.8 million net debt at 31 December 2021.
Kenmare will announce its results for the six
months ended 30 June 2022 on 17 August 2022.
For further information, please contact:
Kenmare Resources plcJeremy
Dibb / Katharine SuttonInvestor
Relationsir@kenmareresources.comTel: +353 1 671 0411Mob: +353 87
943 0367 / +353 87 663 0875
Murray (PR advisor)Doug
Keatingedkeatinge@murraygroup.ieTel: +353 1 498 0300Mob: +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 8% of global titanium feedstocks and the Company
supplies to customers operating in more than 15 countries. Kenmare
produces raw materials that are ultimately consumed in everyday
quality-of life items such as paints, plastics and ceramic
tiles.
All monetary amounts refer to United States
dollars unless otherwise indicated.
Forward Looking Statements
This announcement contains some forward-looking
statements that represent Kenmare's expectations for its business,
based on current expectations about future events, which by their
nature involve risks and uncertainties. Kenmare believes that its
expectations and assumptions with respect to these forward-looking
statements are reasonable. However, because they involve risk and
uncertainty, which are in some cases beyond Kenmare's control,
actual results or performance may differ materially from those
expressed or implied by such forward-looking information.
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