Q2 and H1 2023 Production Report
Kenmare Resources plc (“Kenmare”
or “the Company” or “the Group”)
13 July 2023
Q2 and H1 2023
Production Report
Kenmare Resources plc (LSE:KMR, ISE:KMR), one of
the leading global producers of titanium minerals and zircon, which
operates the Moma Titanium Minerals Mine (the "Mine" or "Moma") in
northern Mozambique, is pleased to provide a trading update for the
quarter and half year ending 30 June 2023 (“Q2 2023” and “H1
2023”).
Statement from Michael Carvill, Managing
Director:
“Production in H1 2023 has unfortunately been
lower than our expectations as mining experienced lingering effects
of the severe lightning strike in Q1 and power reliability impacts
in Q2. We are therefore updating guidance for ilmenite production
for the full year. However, guidance for other products remains
unchanged. We anticipate significantly stronger production in H2
2023, supported by higher grades and increased tonnes mined.
Cash generation has remained strong, supported
by product pricing and shipments. In addition to paying record
dividends and scheduled debt repayments, the business has continued
to build cash. In line with our capital allocation policy, we are
considering a share buyback of approximately $30 million. A further
update will be provided with our H1 2023 results in
mid-August.”
Q2 2023 overview
- Lost Time Injury Frequency Rate
(“LTIFR”) of 0.18 per 200,000 hours worked for the 12 months to 30
June 2023 (30 June 2022: 0.0)
- Heavy Mineral Concentrate (“HMC”)
production of 318,900 tonnes in Q2 2023, a 10% decrease compared to
Q2 2022 (353,600 tonnes), due to lower grades and mining rates
impacted by power interruptions
- Ilmenite production of 221,300
tonnes in Q2 2023, a 9% decrease compared to Q2 2022 (242,900
tonnes), although better than the 12% reduction in HMC processed,
benefitting from the processing of stockpiled magnetic
concentrate
- Primary zircon production of 11,600
tonnes, a 15% decrease compared to Q2 2022 (13,600 tonnes), due to
the processing of stockpiles in the prior period
- Total shipments of finished
products of 285,100 tonnes, a 48% increase compared to Q2 2022
(192,800 tonnes) supported by the drawdown of finished product
stockpiles
- Updated 2023 ilmenite production
guidance range of 980,000 tonnes to 1,040,000 tonnes; no changes to
guidance for zircon, rutile or concentrates or total cash operating
costs
- Ilmenite prices were stable in Q2
2023, although a weaker titanium pigment market is feeding into
lower ilmenite prices in Q3 2023
- Global macroeconomic conditions are
also affecting demand for zircon with spot prices moving below
contracted prices
- At the end of H1 2023, net cash
increased to $42.2 million (31 December 2022: $25.7 million),
supported by a drawdown of finished products and robust
pricing
- Kenmare continues to generate
strong free cashflow and in line with its capital allocation
policy, the Company is considering a share buyback of approximately
$30 million, subject to trading conditions, business performance
and necessary approvals. A further update to be provided at the H1
2023 results in mid-August
Operations update
Production from the Moma Mine in Q2 2023 and H1
2023 was as follows:
|
Q2 2023 |
Q2 2022 |
Q1 2023 |
H1 2023 |
H1 2022 |
tonnes |
% variance |
% variance |
tonnes |
% variance |
Excavated ore1,2 |
9,606,000 |
-5% |
9% |
18,380,000 |
-3% |
Grade1,2 |
4.03% |
-5% |
-8% |
4.19% |
-4% |
Production |
|
|
|
|
|
HMC production |
318,900 |
-10% |
1% |
633,900 |
-14% |
HMC processed |
322,900 |
-12% |
3% |
637,600 |
-14% |
Ilmenite |
221,300 |
-9% |
8% |
425,500 |
-15% |
Primary zircon |
11,600 |
-15% |
2% |
23,000 |
-13% |
Rutile |
1,900 |
-10% |
12% |
3,600 |
-10% |
Concentrates3 |
10,400 |
6% |
3% |
20,500 |
0% |
Shipments |
285,100 |
48% |
5% |
556,800 |
31% |
1. Excavated ore
tonnage and grade prior to any floor
losses.2. Excavated
ore volumes and grade for Q1 2023 are restated as 8,774,000 tonnes
and 4.36% from 9,258,000 tonnes and 4.13% to exclude tailings
excavated by WCP C.3.
Concentrates
include secondary zircon and mineral sands concentrate.
Kenmare’s rolling 12-month LTIFR to 30 June 2023
was 0.18 per 200,000 hours worked (Q2 2022: 0.0), with one Lost
Time Injury recorded during Q2 2023. Kenmare is committed to
building a strong, employee-led safety culture at Moma and is
focused on improving safety leadership and ensuring best practices
for identifying, assessing and mitigating risks at Moma are fully
implemented.
HMC production was 318,900 tonnes in Q2 2023,
representing a 10% decrease compared to Q2 2022 (353,600 tonnes).
This was a product of a 5% decrease in ore grades to 4.03% (Q2
2022: 4.23%) and a 5% decrease in excavated ore volumes to 9.6
million tonnes (Q2 2022: 10.1 million tonnes).
HMC production in Q2 was impacted by:
- Poor power quality as interruptions
from the grid and unplanned maintenance by Electricidade
de Moçambique reduced mining operating hours.
- Lower recoveries at WCP A due to
high slimes levels; recoveries have improved since June due to the
introduction of supplementary clean water to the spirals, aiding
separation efficiency.
- WCP B was unable to operate in a
fully automated mode in Q2 because of a shortage of spares
following the lightning strike in Q1. This impacted recoveries from
mining, as did lower-than-expected grades. WCP B is now operating
on a fully automated basis. Mining rates and recoveries were also
impacted by buried root matter; while these conditions are not
expected to recur in 2023, screening improvements have been
implemented and successfully addressed this issue.
- WCP C undertook a planned
transition through a tailings area from March 2023 to reach a new
mining zone: this took longer than expected but was completed in
June.
Kenmare expects higher HMC production in H2 2023
benefitting from higher grades at WCP A, full production at WCP C
and the resolution of the issues detailed above.
All transportation of HMC from WCP B to the
Mineral Separation Plant (“MSP”) is now being undertaken by the
positive displacement pumps. H1 2023 has seen a significant
improvement in the performance of the pumps which have consistently
run at design throughputs and utilisations, eliminating the need
for trucking of HMC.
Ilmenite production was 221,300 tonnes, a 9%
decrease compared to Q2 2022 (242,900 tonnes), benefitting from
drawdown of magnetic intermediate stocks compared to the 12%
reduction in HMC processed.
The Mine has experienced an under-recovery of
ilmenite in the HMC at WCP B. The higher-grade fraction of ilmenite
in an area of Pilivili appears more weathered, reducing the
apparent density and magnetism of the material, impacting
recoveries to final product. Further test work and calibration of
equipment is ongoing to maximise the recoveries of this high TiO2
ilmenite.
Primary zircon production was 11,600 tonnes in
Q2 2023, a 15% decrease compared to Q2 2022 (Q2 2022: 13,600
tonnes). Despite higher zircon grades in feed, particularly from
WCP B, zircon production was affected by lower HMC availability.
There was also a build of non-magnetic intermediate stocks,
reducing zircon production, which is expected to unwind in H2
2023.
The Rotary Uninterruptible Power Supply (“RUPS”)
has not been operational in Q2, due to the failure of some
electrical equipment. This has meant that grid power instability
has impacted recoveries in the MSP. Design corrections have been
identified and the RUPS is expected to fully resume operations in
July.
Rutile production was 1,900 tonnes, down 10% (Q2
2022: 2,100 tonnes). As with zircon, this reflects lower HMC
processed, offset by increased rutile in feed.
Concentrates production was 10,400 tonnes, up 6%
(Q2 2022: 9,800 tonnes), with higher content of monazite. Higher
recoveries were also achieved in the secondary zircon circuit.
Total shipments in Q2 2023 were 285,100 tonnes,
a 48% increase compared to Q2 2022 (192,800 tonnes), benefitting
from increased shipping capacity in the period. Shipments comprised
258,100 tonnes of ilmenite, 11,200 tonnes of primary zircon, 3,500
tonnes of rutile, and 12,300 tonnes of concentrates. Shipments for
H1 2023 were up 31% on the prior year to 556,800 tonnes (H1 2022:
424,300 tonnes).
Closing stock of HMC at the end of Q2 2023 was
15,000 tonnes, compared to 19,000 tonnes at the end of Q1 2023.
Closing stock of finished products at the end of Q2 2023 was
129,000 tonnes, compared to 169,300 tonnes at the end of Q1 2023,
reflecting a drawdown of finished product inventories in Q2
2023.
2023
guidanceIn the Q1 2023 Production Report, Kenmare
indicated that it expected ilmenite production to be at the bottom
of the original guidance. However, due to lower-than-expected
production in Q2 2023, ilmenite guidance for 2023 is now updated as
follows:
|
Unit |
Updated 2023 Guidance |
Original 2023 Guidance |
Production |
|
|
|
Ilmenite |
tonnes |
980,000 – 1,040,000 |
1,050,000 – 1,150,000 |
Primary zircon |
tonnes |
No change |
51,000 – 57,000 |
Rutile |
tonnes |
No change |
8,000 – 9,000 |
Concentrates1 |
tonnes |
No change |
37,000 – 41,000 |
Costs |
|
|
|
Total cash operating costs |
$m |
No change |
208 – 228 |
- Concentrates include secondary zircon and mineral sands
concentrate.
H2 2023 is anticipated to be a much stronger
period of production, benefitting from increased grades and tonnes
mined.
It is expected that the shortfall in ilmenite
will be partially offset by the increased content of zircon and
rutile in feed, particularly from WCP B. The lower end of the
revised ilmenite guidance range includes a conservative allowance
for unexpected impacts on production.
Total cash operating costs are anticipated to be
in line with original guidance. Cash operating costs per tonne will
be a function of lower production volumes and total cash operating
costs.
Market update
Ilmenite prices and sales volumes remained
stable in H1 2023.
Downstream titanium pigment demand was subdued
in Q2, as higher interest rates globally affected industrial
activity and the housing markets in many regions. Underlying demand
in China has not rebounded as quickly as expected, but domestic
pigment production remains robust. As a result, pigment producers
outside China are facing increased competition from Chinese pigment
exports.
Sustained production of pigment in China has
supported the ilmenite market in Q2 2023. However, slower pigment
market conditions reduced demand for high-grade feedstocks, due to
lower chloride pigment utilisations. There has been continued
disruption to and depletion of titanium feedstock mine supply
globally; however, an increase in concentrates for processing in
China has kept the market in balance.
Lower demand for titanium pigment is likely to
continue in the short term; however, Kenmare has contracted a high
proportion of ilmenite sales in Q3 2023.
Challenging macroeconomic conditions have
softened demand for zircon. Ceramics producers are operating at
reduced utilisation levels, leading to higher inventories. Reported
zircon sand prices have remained stable, although spot prices for
shipments to China and India softened in Q2 2023 and remain below
contracted prices moving into Q3.
Finance update
On 19 May 2023, Kenmare paid its record 2022
final dividend of USc43.33 per share. This was the balancing
payment of a 2022 full year dividend of USc54.31 per share,
representing a dividend payout ratio of 25% of profit after tax,
and up 66% from 2021.
Following the 2022 final dividend distribution
of $44.1 million and debt principal repayments of $15.7 million,
cash and cash equivalents were $108.8 million as at 30 June 2023
(31 December 2022: $108.3 million), while gross bank loans and
lease obligations, including accrued interest, were $66.6 million
(31 December 2022: $82.6 million).
Accordingly, as at 30 June 2023, Kenmare’s net
cash increased by $16.5 million to $42.2 million, compared to $25.7
million net cash at 31 December 2022.
Kenmare continues to generate strong free
cashflow and in line with its capital allocation policy, the
Company is considering a share buyback of approximately $30
million, subject to trading conditions, business performance and
Board and other necessary approvals. A further update will be
provided on 15 August 2023 with the interim results for the six
months ended 30 June 2023.
For further information, please contact:
Kenmare Resources plcJeremy Dibb / Michael
StarkeInvestor Relationsir@kenmareresouces.comTel: +353 1 671
0411Mob: +353 87 943 0367
Murray (PR advisor)Paul
O’Kanepokane@murraygroup.ieTel: +353 1 498 0300Mob: +353 86 609
0221
About Kenmare Resources
Kenmare Resources plc is one of the world's
largest producers of mineral sands products. Listed on the London
Stock Exchange and the Euronext Dublin, Kenmare operates the Moma
Titanium Minerals Mine in Mozambique. Moma's production accounts
for approximately 7% of global titanium feedstocks and the Company
supplies to customers operating in more than 15 countries. Kenmare
produces raw materials that are ultimately consumed in everyday
quality-of-life items such as paints, plastics and ceramic
tiles.
All monetary amounts refer to United States
dollars unless otherwise indicated.
Forward Looking Statements
This announcement contains some forward-looking
statements that represent Kenmare's expectations for its business,
based on current expectations about future events, which by their
nature involve risks and uncertainties. Kenmare believes that its
expectations and assumptions with respect to these forward-looking
statements are reasonable. However, because they involve risk and
uncertainty, which are in some cases beyond Kenmare's control,
actual results or performance may differ materially from those
expressed or implied by such forward-looking information.
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