TIDMKMR
Kenmare Resources plc
("Kenmare" or the "Company" or "the Group")
17 January 2024
Q4 2023 Production Report and 2024 Guidance
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 full
year 2023 and the fourth quarter ending 31 December 2023 ("Q4
2023") and production and operating cost guidance for 2024.
Statement from Michael Carvill, Managing Director:
"Kenmare achieved two million hours worked without a Lost Time
Injury in December 2023. It is encouraging to see a return to
strong safety performance as the health and wellbeing of our team
at the Moma Mine is our highest priority.
Ilmenite production was 986,300 tonnes in 2023, within our
revised guidance range for the year, and production of our other
products met or exceeded our original guidance.
Markets for our products were challenging in 2023 due to global
economic uncertainty, resulting in lower pricing. However strong
pigment production in China and the thriving titanium metal market
drove demand for our high-quality ilmenite, relative to other
titanium feedstocks.
In 2023, we made $31 million of debt repayments, paid $58
million in dividends, bought back $30 million in shares, began the
capital investment for the transition to Nataka, and finished the
year with $21 million net cash. We expect total 2023 dividends to
be approximately $50 million."
Overview
-- Lost Time Injury Frequency Rate ("LTIFR") of 0.15 per 200,000 hours
worked to 31 December 2023 (31 December 2022: 0.09), with zero Lost Time
Injuries ("LTIs") in Q4 2023
-- 2023 revised production guidance achieved for ilmenite; original
production guidance achieved for primary zircon and rutile and materially
exceeded for concentrates
-- Heavy Mineral Concentrate ("HMC") production of 1,448,300 tonnes in 2023,
a 9% decrease compared to 2022 (1,586,200 tonnes), due to lower ore
grades and mining rates impacted by power interruptions and a severe
lightning strike in Q1
-- Ilmenite production of 986,300 tonnes in 2023, a 9% decrease on 2022
(1,088,300 tonnes), and broadly in line with the reduction in HMC
processed
-- Shipments of finished products of 1,045,200 tonnes in 2023, a 3% decrease
on 2022 (1,075,600 tonnes). Q4 2023 was the strongest quarter of the year,
with 324,900 tonnes shipped
-- Share buy-back of 5.9% of Kenmare's issued share capital for GBP23.6
million ($30.0 million) completed in September 2023
-- Interim 2023 dividend of USc17.5 per share paid in October 2023, an
increase of 59% compared to H1 2022 (USc10.98)
-- Net cash of $20.7 million at year-end 2023 (2022: $27.5 million net cash),
with cash and cash equivalents of $71.0 million (year-end 2022: $108.3
million)
-- Weakness in the global economy led to lower average prices for all of
Kenmare's products in 2023
-- Ilmenite production guidance for 2024 is 950,000 to 1,050,000 tonnes
Operations update
Operational results for the Moma Mine in Q4 and full year 2023
were as follows:
Q4
2023 vs Q4 2022 vs Q3 2023 2023 vs 2022
----------------- --------- ---------- ---------- ---------- --------
tonnes % change % change tonnes % change
----------------- --------- ---------- ---------- ---------- --------
Excavated ore(1) 9,348,000 -8% -14% 38,549,000 -4%
----------------- --------- ---------- ---------- ---------- --------
Grade(1) 4.83% 2% 12% 4.38% -5%
----------------- --------- ---------- ---------- ---------- --------
Production
----------------- --------- ---------- ---------- ---------- --------
HMC produced 399,800 -1% -4% 1,448,300 -9%
----------------- --------- ---------- ---------- ---------- --------
HMC processed 399,800 0% -3% 1,450,400 -8%
----------------- --------- ---------- ---------- ---------- --------
Ilmenite 269,600 -5% -7% 986,300 -9%
----------------- --------- ---------- ---------- ---------- --------
Primary zircon 14,000 -4% -1% 51,100 -13%
----------------- --------- ---------- ---------- ---------- --------
Rutile 2,100 -5% -22% 8,400 -6%
----------------- --------- ---------- ---------- ---------- --------
Concentrates(2) 10,500 -10% -29% 45,700 1%
----------------- --------- ---------- ---------- ---------- --------
Shipments 324,900 -11% 99% 1,045,200 -3%
----------------- --------- ---------- ---------- ---------- --------
1. Excavated ore and grade prior to any floor losses.
2. Concentrates include secondary zircon and mineral sands concentrate.
In December 2023, Kenmare achieved two million hours without an
LTI. Five LTIs were recorded in the 12 months to 31 December 2023,
resulting in a rolling 12-month LTIFR of 0.15 per 200,000 hours
worked (31 December 2022: 0.09).
HMC production in Q4 2023 was 399,800 tonnes, a 1% decrease
compared to Q4 2022 (404,000 tonnes).
HMC production in 2023 was 1,448,300 tonnes, down 9% compared to
2022 (1,586,200 tonnes), although with significantly improved
production in H2 (814,400 tonnes versus 633,900 tonnes in H1 2023).
The 9% annual reduction was a product of a 4% decrease in excavated
ore volumes to 38,549,000 tonnes (2022: 40,029,000 tonnes) and a 5%
decrease in ore grades to 4.38% (2022: 4.61%). Ore volumes were
impacted primarily by the effects of the severe lightning strike in
Q1 and power supply interruptions, which affected operations
throughout the year. Ore grades were down principally due to Wet
Concentrator Plant ("WCP") B mining in wetlands, where grades were
lower than expected, and WCP A mining lower grade ore as it
approaches the end of its mine path in Namalope.
Production of all finished products decreased in Q4 2023
compared to Q4 2022, although HMC processed was in line with the
prior period. Ilmenite production was 269,600 tonnes in Q4 2023,
down 5% compared to Q4 2022 (283,900 tonnes), due to lower
recoveries, as a result of a shortage of HMC and some unplanned
stoppages. Similarly, primary zircon and rutile production were
down 4% and 5%, while concentrates production was down 10%.
For 2023, ilmenite production was 986,300 tonnes and within the
revised guidance range of 980,000 to 1,040,000 tonnes. Production
of primary zircon and rutile was within original guidance and
concentrates production exceeded original guidance.
Ilmenite production in 2023 was down 9% compared to 2022
(1,088,300 tonnes), broadly in line with the 8% reduction in HMC
processed.
Primary zircon production was 51,100 tonnes in 2023, a 13%
decrease compared to 2022 (58,400 tonnes). This was the product of
reduced HMC processed and lower recoveries.
Rutile production was 8,400 tonnes in 2023, a 6% decrease
compared to 2022 (8,900 tonnes). This reflects the reduction in HMC
processed, partially offset by higher rutile content in the HMC and
the drawdown of intermediate stock.
Concentrates production was 45,700 tonnes in 2023, up 1%
compared to 2022 (45,200 tonnes), performing better relative to
other products as a result of lower recoveries in primary zircon
and the processing of intermediate stockpiles.
Q4 2023 was the strongest quarter of the year for shipments,
with 324,900 tonnes shipped, despite poor weather conditions.
Although volumes were down 11% compared to Q4 2022 (365,700
tonnes), which was a near record quarter, they were up 99% compared
to Q3 2023. Shipments in Q4 2023 comprised 278,700 tonnes of
ilmenite, 22,300 tonnes of primary zircon, 4,500 tonnes of rutile
and 19,500 tonnes of concentrates.
Shipment volumes in 2023 were 1,045,200 tonnes, a 3% decrease
compared to 2022 (1,075,600 tonnes). This was impacted by more
cautious buying from customers during this period of weaker demand,
compounded by destocking. Shipments during the year comprised
939,000 tonnes of ilmenite, 51,300 tonnes of primary zircon, 7,900
tonnes of rutile and 47,000 tonnes of concentrates.
Closing stock of HMC at the end of 2023 was 16,700 tonnes,
compared with 18,800 tonnes at the start of the year. Closing stock
of finished products at the end of 2023 was 259,100 tonnes,
compared with 213,500 tonnes at the end of 2022. Shipments are
expected to exceed production in Q1 2024, partly as a result of
shipments deferred from Q4 2023 due to weather.
Capital projects update
As previously announced, WCP A will complete mining at Namalope
in late 2025 and commence its transition to the Nataka ore zone.
Nataka is the largest of Moma's ore zones, representing 75% of
Kenmare's Mineral Resources. WCP A is expected to mine Nataka for
the remainder of its economic life, which exceeds 20 years.
The development capital expenditure profile for the transition
to Nataka was announced in April 2023 at Kenmare's Capital Markets
Day ("CMD") and updated in December 2023 in the Projects
Update.
Although orders for important long lead time items, such as the
two new dredges, were placed in 2023, the capital incurred was
lower than forecast, increasing the capital to be spent in
subsequent years.
The table below compares the two estimated spending
profiles:
Capital cost schedule
($m) 2023 2024 2025 2026 2027 Total
---------------------- ---- ---- ---- ---- ---- -----
April 2023 (CMD) 29 130 88 23 270
---------------------- ---- ---- ---- ---- ---- -----
December 2023 11 179 121 20 10 341
---------------------- ---- ---- ---- ---- ---- -----
As previously outlined in December 2023, the $341 million
capital expenditure represents the upper end of the $316-331
million range, plus the $10 million of additional infrastructure in
2027. The range relates to the WCP A Infrastructure Definitive
Feasibility Study ("DFS"), which is still underway and scheduled to
be completed in Q2 2024. The costs of which are currently estimated
to be $91-106 million.
The increase of $71m in the project cost estimates are
principally related to:
-- Changes in scope/design (approximately 60%): The scope amendments reflect
opportunities to mitigate execution risk of the project and enhance
long-term operational capacity.
-- Additional indirect costs (approximately 25%): Engineering, Procurement
and Construction Management (EPCM) and Owners costs were comprehensively
updated as part of the DFS process to include increased project
governance for schedule risk minimisation.
-- Contingency additions (approximately 15%): A quantitative risk assessment
of the project components has been completed for the WCP A upgrade and
Tailings Storage Facility. This process, which included comparison
against multiple international projects with similar characteristics,
recommended the inclusion of additional contingency to manage the
potential for schedule overrun and reflect the remote location.
Finance update
On 13 October 2023, Kenmare paid its interim 2023 dividend of
USc17.5 per share, an increase of 59% compared to the interim 2022
dividend (USc10.98 per share). This represented a total interim
distribution of $16.6 million.
The Company expects total dividends in respect of 2023 to be
approximately $50 million, subject to prevailing product market and
other conditions. This in line with Kenmare's dividend policy
payout ratio of 20% to 40% of underlying Profit After Tax.
In September 2023 Kenmare completed a share buy-back. The
Company repurchased approximately 5.6 million shares, representing
5.9% of the Company's issued share capital, for a total
consideration of GBP23.6 million ($30.0 million).
The Company's debt refinancing process, initiated in September
2023 to support the capital programme, is well-advanced and
expected to complete in Q1 2024.
At 31 December 2023, Kenmare had net cash of $20.7 million
(2022: $27.5 million net cash). Cash and cash equivalents were
$71.0 million (2022: $108.3 million) and gross bank loans,
including accrued interest, were $50.3 million (2022: $80.8
million).
Market update
Demand for Kenmare's products remained relatively robust in
2023, although prices decreased through the year due to weaker
global economic activity. Despite this short-term pressure, the
Company believes the fundamentals for its products are strong, due
primarily to medium- and long-term supply constraints within the
titanium feedstocks industry.
In 2023, feedstock supply remained flat. Several large western
feedstock producers have depleting Mineral Resources and production
disruptions were experienced at several major operations outside
China, reducing global supply. However, this was balanced by
increased volumes of ilmenite concentrates entering China in 2023,
the largest source of new supply.
Downstream demand for titanium pigment remained soft in 2023,
although improving as H2 progressed. While western pigment
producers reduced production, this was partially offset by
significantly increased pigment production in China. Consequently,
Kenmare experienced elevated demand from Chinese pigment producers,
who prefer to purchase ilmenite for beneficiation over high-grade
feedstocks.
The challenges faced by the pigment market prompted producers to
sustain lower-than-normal inventories throughout 2023 and the
rebuilding of these inventories through increased utilisation rates
in 2024 will support demand for ilmenite. Market dynamics continue
to favour Kenmare's ilmenite and the Company has a strong order
book for Q1 2024, whilst also benefiting from its first quartile
cost position. Nonetheless, the Company is experiencing lower
pricing in Q1 2024 than it achieved in Q4 2023.
Demand for zircon remained sluggish in Q4 2023, as global
economic uncertainty continues to weigh on demand for products such
as ceramic tiles. Prices for zircon in Europe remain under pressure
in early 2024 but Kenmare has seen a stabilisation in the Chinese
spot market in recent months, which should provide some support to
the global market.
2024 guidance
2024 guidance for production and operating costs is as
follows:
Unit 2024 Guidance 2023 Actual
--------------------------------- ------- ----------------- -----------
Production
--------------------------------- ------- ----------------- -----------
Ilmenite tonnes 950,000-1,050,000 986,300
--------------------------------- ------- ----------------- -----------
Primary zircon tonnes 45,000-50,000 51,100
--------------------------------- ------- ----------------- -----------
Rutile tonnes 8,000-9,000 8,400
--------------------------------- ------- ----------------- -----------
Concentrates(1) tonnes 37,000-41,000 45,700
--------------------------------- ------- ----------------- -----------
Costs
------------------------------------------ ----------------- -----------
Total cash operating costs $m 219-243 N/R(2)
--------------------------------- ------- ----------------- -----------
Cash costs per tonne of finished $/t 198-218 N/R(2)
product
--------------------------------- ------- ----------------- -----------
1. Concentrates include secondary zircon and mineral sands concentrate.
2. To be reported in full year financial statements.
Ilmenite production in 2024 is expected to be between 950,000
and 1,050,000 tonnes. Excavated ore volumes are expected to
increase relative to 2023, although a conservative view of WCP B
ore grades in the wetlands and lower grades from dry mining result
in production of HMC and final products being in line with 2023.
Production is anticipated to be weighted towards H2 due to the
grade profile and planned maintenance on WCP B in Q1.
Following poor electrical reliability in 2023, Kenmare has
intervened and funded the refurbishment of the Nampula statcom in
the Electricidade de Moçambique ("EdM") network. This was
commissioned in Q4 2023 and is expected to provide increased
stability in the regional power grid. In addition, a new 400kw line
is under construction by EdM and expected to connect to Nampula in
H1 2024, further enhancing network stability.
Closing product inventories at the end of 2023 were above normal
levels, providing the opportunity to maintain sales volumes with
lower production in H1 2024.
Total cash operating costs are anticipated to increase to
$219-243 million in 2024, largely due to cost increases in
production overheads and power. Total cash operating costs for 2023
are anticipated to be towards the upper end of guidance ($208-228
million). Full details of 2023 costs will be provided with the 2023
Preliminary Results.
Expenditure on development projects and studies is expected to
be approximately $189 million in 2024. These costs primarily relate
to the transition of WCP A to Nataka and feasibility studies for
the upgrade works to WCP B.
Improvement projects are expected to cost $6 million in 2024 and
relate primarily to upgrades to the Mineral Separation Plant.
Sustaining capital costs in 2024 are expected to be
approximately $29 million.
Notice of 2023 Preliminary Results
Kenmare plans to release its 2023 Preliminary Results on
Wednesday, 20 March 2024.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton / Michael Starke
Investor Relations
ir@kenmareresources.com
Tel: +353 1 671 0411
Mob: +353 87 943 0367 / +353 87 663 0875
Murray (PR advisor)
Paul O'Kane
pokane@murraygroup.ie
https://www.globenewswire.com/Tracker?data=XJbkz5MfE-Nzy0ZYXaI4podPNyKQyCP30NwqirjCSl9qk0j_95xzjVtYu6sSJ0UeNauGsJt1Un-bkhkyLH2bZllcEAQCeMqyRIOdMWE_YmA=
Tel: +353 1 498 0300
Mob: +353 86 609 0221
About Kenmare Resources
Kenmare Resources plc is one of the world's largest producers of
mineral sands products. Listed on the London Stock Exchange and the
Euronext Dublin, Kenmare operates the Moma Titanium Minerals Mine
in Mozambique. Moma's production accounts for approximately 7% of
global titanium feedstocks and the Company supplies to customers
operating in more than 15 countries. Kenmare produces raw materials
that are ultimately consumed in everyday quality-of life items such
as paints, plastics and ceramic tiles.
All monetary amounts refer to United States dollars unless
otherwise indicated.
Forward Looking Statements
This announcement contains some forward-looking statements that
represent Kenmare's expectations for its business, based on current
expectations about future events, which by their nature involve
risks and uncertainties. Kenmare believes that its expectations and
assumptions with respect to these forward-looking statements are
reasonable. However, because they involve risk and uncertainty,
which are in some cases beyond Kenmare's control, actual results or
performance may differ materially from those expressed or implied
by such forward-looking information.
(END) Dow Jones Newswires
January 17, 2024 02:00 ET (07:00 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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