Kenmare Resources plc (“Kenmare” or “the Company” or “the Group”)
16 October 2019
Q3 2019 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 third quarter ending 30 September 2019 (“Q3 2019”).
Statement from Michael Carvill, Managing Director:
“Production and operating costs continued to track well against our guidance in the third quarter and we remain in line on both metrics. With the dredge and major components of the Wet Concentrator Plant for the WCP C development now on site, our growth projects to deliver 1.2 million tonnes per annum of ilmenite continue to advance. We are on track to commence commissioning of WCP C later this year.
The ilmenite market remained tight in Q3 2019, with strong demand for ilmenite suitable for upgrading to slag driving higher prices, despite softer pigment market conditions. We have secured higher prices for ilmenite spot shipments in Q4 2019. Although the zircon market has experienced some weakness in 2019, we believe the fundamentals for all of our products remain positive due to emerging supply constraints.
We are delighted to be paying our maiden dividend on 25 October 2019, delivering on our strategy to provide shareholder returns, in addition to growth and margin expansion.”
Q3 2019 overview
- Lost time injury frequency rate (“LTIFR”) of 0.20 per 200,000 man-hours worked for the 12-months to 30 September 2019 (30 September 2018: 0.29)
- 9% increase in Heavy Mineral Concentrate (“HMC”) production to 304,100 tonnes compared to Q3 2018, as a result of a 10% increase in tonnes of excavated ore
- Ore grades in line with Q3 2018 at 3.63% (Q3 2018: 3.62%), but representing an increase of 18% compared to Q2 2019 at 3.07%, as expected
- Ilmenite production of 230,800 tonnes, in line with Q3 2018 (233,900 tonnes)
- 27% increase in primary zircon production to 12,900 tonnes (Q3 2018: 10,200 tonnes) and 26% increase in rutile production to 2,100 tonnes (Q3 2018: 1,700 tonnes) mainly due to spillage retreatment during Q3 2019
- 78% increase in concentrates production to 10,700 tonnes (Q3 2018: 6,000 tonnes), benefitting from the introduction of a mineral sands concentrate product
- 3% decrease in total shipments of finished products to 192,900 tonnes (Q3 2018: 198,900 tonnes) - 2019 total shipment volumes are expected to be in excess of 1 million tonnes (2018: 1,074,400 tonnes)
- The Wet Concentrator Plant (“WCP”) C development project remains on track to commence commissioning in Q4 2019
- Ilmenite market conditions remained tight in Q3 2019, with higher prices achieved than in Q2 2019 and further spot price increases agreed with customers for Q4 2019
- Zircon prices weakened in Q3 2019 due to slower global growth concerns, however long-term fundamentals remain strong due to supply constraints, despite short-term oversupply
Production
Production from the Moma Mine in Q3 2019 was as follows:
| Q3 2019 | Q3 2018 | Q2 2019 | |||
| tonnes | tonnes | % variance | tonnes | % variance | |
| Excavated ore1 | 9,219,500 | 8,411,000 | 10% | 9,907,000 | -7% |
| Grade1 | 3.63% | 3.62% | 0% | 3.07% | 18% |
| Production | |||||
| HMC production | 304,100 | 279,900 | 9% | 274,700 | 11% |
| HMC consumption | 318,800 | 313,100 | 2% | 285,600 | 12% |
| Ilmenite | 230,800 | 233,900 | -1% | 220,100 | 5% |
| Primary zircon | 12,900 | 10,200 | 26% | 11,000 | 18% |
| Rutile | 2,100 | 1,700 | 24% | 2,200 | -5% |
| Concentrates2 | 10,700 | 6,000 | 78% | 9,400 | 14% |
| Shipments | 192,900 | 198,900 | -3% | 307,000 | -37% |
- Excavated ore and grade prior to any floor losses.
- Concentrates include secondary zircon and mineral sands concentrate.
Kenmare recorded a LTIFR of 0.20 per 200,000 man-hours worked for the 12 months to 30 September 2019, due to two lost time injuries in Q3 2019 (30 September 2018: 0.29). After a strong safety performance in the first half of the year, with a LTIFR of 0.12 for the 12 months to 30 June 2019, the Company has increased its focus on risk assessment and personal accountability.
At the end of the third quarter, Kenmare remains on track to achieve its 2019 production and cost guidance.
During Q3 2019, Kenmare mined 9.2 million tonnes of ore at an average grade of 3.63%, producing 304,100 tonnes of HMC. This represents a 9% increase compared to Q3 2018 (279,900 tonnes), benefitting from the 20% capacity increase at WCP B, which was commissioned in Q4 2018, the WCP B dredge automation project and continued utilisation improvements. However, as anticipated in the mine plan, excavated ore decreased by 7% compared to Q2 2019 primarily as a result of more challenging mining conditions.
Ore grades in Q3 2019 were in line with Q3 2018 (3.62%) but increased by 18% compared to Q2 2019 (3.07%). As previously stated, Q2 2019 was expected to be the lowest grade quarter of the year and consequently stronger ore grades were mined in Q3 2019, in line with the mine plan.
Ilmenite production in Q3 2019 was in line with Q3 2018 (233,900 tonnes) at 230,800 tonnes. Ilmenite production remained flat as increased HMC consumption in Q3 2019 was offset by higher processed volumes of intermediate magnetic concentrate in Q3 2018 (and Q2 2019).
Kenmare delivered stronger production of all other products in Q3 2019 compared to the corresponding quarter in 2018. The Company recorded a 26% increase in primary zircon production to 12,900 tonnes (Q3 2018: 10,200 tonnes) and a 24% increase in rutile production to 2,100 tonnes (Q3 2018: 1,700 tonnes), as a result of stable operating conditions and spillage retreatment in Q3 2019.
Concentrates production increased by 78% in Q3 2019 to 10,700 tonnes, benefitting from the introduction of a mineral sands concentrate product in Q4 2018.
Kenmare shipped 192,900 tonnes of finished products during the period (Q3 2018: 198,900 tonnes), which comprised 174,000 tonnes of ilmenite, 8,500 tonnes of primary zircon, 3,800 tonnes of rutile and 6,600 tonnes of concentrates.
Shipments in Q3 2019 were lower than expected due to poor weather conditions impacting loading rates. In late Q3 2019 approximately 35,000 tonnes of a larger shipment were loaded onto a customer vessel and will be reported with shipments in Q4 2019. If the 35,000 tonnes had been recorded in Q3, the Company’s shipments for the period would have increased by 15% compared to Q3 2018. The Company expects shipments to increase significantly in Q4 2019, due to strong customer demand and seasonally improved weather conditions. Total shipments of finished products for the full year 2019 are expected to be in excess of 1 million tonnes (2018: 1,074,400 tonnes).
Closing stock of HMC at the end of Q3 2019 was 10,900 tonnes, compared with 25,600 tonnes at the end of Q2 2019. Closing stock of finished products at the end of Q3 2019 was 286,400 tonnes (Q2 2019: 222,800 tonnes).
Capital projects update
Kenmare previously announced three development projects that together have the objective of increasing ilmenite production to 1.2 million tonnes (plus co-products) per annum on a sustainable basis from 2021. The first development project, a 20% expansion of WCP B, was commissioned in late 2018.
During Q3 2019 project execution for the second development project, the construction of WCP C, continued to advance on time and within budget. The dredge was commissioned at the shipbuilder’s yard in the Netherlands and shipped to Nacala in Mozambique, which is the closest major port to the Moma Mine. The dredge arrived in Nacala on 1 October 2019 and is in the process of being transported by road to the Moma Mine. Parts of the wet concentrator plant, which is being fabricated in South Africa, are also arriving at the mine. The project remains on track to commence commissioning in Q4 2019.
Project execution is also underway for the third development project, the relocation of WCP B to the high grade Pilivili ore zone. The contract for civil engineering work, including the construction of the purpose-built road and other key contracts, was awarded during Q3 2019. Kenmare expected the environmental, social and health impact assessment (“ESHIA”) for the road to be approved during Q3 2019 but the timing was impacted by administrative delays. The ESHIA approval is now expected during Q4 2019, however work has commenced on the purpose-built road within the existing Namalope and Pilivili licence areas. The relocation of WCP B is scheduled to be completed in Q3 2020, with commissioning in Q4 2020.
Market update
Demand for pigment, the main consumer of titanium feedstocks, remains subdued due to global economic uncertainties affecting purchasing behaviour in key regions. However, market conditions for titanium feedstocks were tight in Q3 2019 as a result of constrained titanium feedstock supply. The Company believes that demand for products of a comparable quality to Kenmare’s ilmenite exceeds the available supply. As a result, higher prices were achieved in Q3 2019 compared to Q2 2019 and further spot price increases have been agreed with customers for Q4 2019.
The increase in demand for Kenmare’s ilmenite is being driven by purchases for upgrading into high grade feedstocks, for which Chinese domestic ilmenite is unsuitable. Coupled with this, supply remains constrained from historically large ilmenite producers, such as India and Vietnam. These supply constraints have been partially offset by increased domestic ilmenite production in China, supported by strong iron ore and vanadium prices.
The zircon market weakened in Q3 2019, primarily due to slower global growth and disruption to downstream industries in China. This resulted in some price softening in Q3 2019, primarily in the Chinese market. Kenmare expects global zircon supply constraints to emerge as existing mines deplete and production reduces in the coming years, which should aid pricing levels in the medium term.
Kenmare believes that the long-term fundamentals for all of the Company’s products remain strong.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton
Investor Relations
ir@kenmareresources.com
Tel: +353 1 671 0411
Mob: + 353 87 943 0367 / + 353 87 663 0875
Murray (PR advisor)
Joe Heron
Tel: +353 1 498 0300
Mob: +353 87 690 9735
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.
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.