2023 Preliminary Results
20/03/2024 07:00
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Kenmare Resources plc
(“Kenmare” or “the Company” or “the Group”)
20 March 2024
2023 PRELIMINARY RESULTS
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 announces its
preliminary results for the twelve months to 31 December 2023.
Statement from Michael Carvill, Managing Director:
“In 2023, Kenmare delivered $220 million of EBITDA, the second strongest in
its history and representing a 50% EBITDA margin. The Board is proposing a
full year dividend of USc56.04 per share for 2023, up 3% on 2022, and bringing
shareholder returns to over $250 million since 2019.
This sound financial performance was delivered against a backdrop of
operational challenges and a weaker product market. With 2024 well underway,
Kenmare is on track to achieve its annual production guidance, although
production is still expected to be second half weighted. The markets for our
products have been stronger than anticipated in 2024 to date, driven by
improving demand for titanium pigment.
As previously announced, I will be stepping down as MD later this year. I am
very proud of what Kenmare has achieved over the past 38 years and I am
confident that the Company will continue to create value for all
stakeholders.”
2023 overview
Financial
* Recommended 2023 dividend of $50.0 million or USc56.04 per share, a 3%
increase compared to 2022 (USc54.31), comprising an interim dividend of
USc17.50 per share (paid in October 2023) and a final dividend of USc38.54 per
share (payable in May 2024)
* Mineral product revenue of $437.1 million, a 12% decrease compared to 2022
($498.3 million), driven by a 10% lower average price received for Kenmare’s
products, due to weaker markets and a 3% reduction in shipments
* Total cash operating costs of $228.1 million, up 4% on 2022 ($218.7
million), due to increased heavy mobile equipment rental, higher fuel costs,
and costs associated with a severe lightning strike in Q1 2023
* Cash operating costs per tonne of $209, a 15% increase compared to 2022
($182 per tonne), due to higher total cash operating costs and a 9% decrease
in production of finished products
* EBITDA of $220.3 million, representing a strong EBITDA margin of 50% (2022:
60%), despite weaker product pricing driving a 26% decrease on 2022 ($298.0
million)
* Profit after tax of $131.0 million, down 36% on 2022 ($206.0 million)
* Diluted earnings per share of $1.37 per share, a 35% decrease on 2022 ($2.12
per share)
* Net cash of $20.7 million at year-end 2023 (2022: $25.7 million), with cash
and cash equivalents of $71.0 million (2022: $108.3 million)
* Share buy-back of 5.9% of Kenmare’s issued share capital for £23.6
million ($30.0 million) completed in September 2023
* Post-period end, new debt facilities agreed for a $200 million Revolving
Credit Facility to enhance financial flexibility and support Kenmare’s
planned capital programmes
Operational and corporate
* As announced on 15 March 2024, Managing Director Michael Carvill will step
down from his executive role and Board position later this year – the
Nomination Committee has commenced a process to find his successor
* Strong safety performance achieved in Q4 2023 has continued in Q1 2024, with
the milestone of three million hours without a Lost Time Injury (“LTI”)
passed in late February
* 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 2023
* Ilmenite production of 986,300 tonnes in 2023, a 9% decrease on 2022
(1,088,300 tonnes), broadly in line with a 9% reduction in HMC processed
* Shipments of finished products of 1,045,200 tonnes in 2023, a 3% decrease on
2022 (1,075,600 tonnes), due to weaker product markets and poor weather
conditions in Q4 2023
* Ilmenite production guidance for 2024 is 950,000 to 1,050,000 tonnes
* Production in 2024 will be second half weighted, with Q1 2024 production
expected to be in line with Q1 2023 – material uplift in production expected
in Q2 2024.
Dividend timetable
Kenmare confirms the dates for the proposed 2023 final dividend are as
follows:
Ex-dividend date 11 April 2024
Record date 12 April 2024
Currency election date 16 April 2024 at 12:00 noon (IST)
AGM date for shareholder approval 10 May 2024
Payment date 17 May 2024
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 Kenmare’s Registrar.
Analyst and investor conference call and webcast
Kenmare will host a conference call and webcast for analysts, institutional
investors, lenders and media today at 09:00 UK time. Participant dial-in
numbers for the conference call are as follows (a pin code is not required to
access the call):
UK: +44 20 3481 4247
Ireland: +353 1 582 2023
US: +1 (646) 307 1963
Conference ID: 9962365
To register for the webcast click here
(https://www.globenewswire.com/Tracker?data=rj2nS3tra43OSHWe3PwVMDR-TZcicGZCUJcPpskldc5DzH-8xuhswr_7fvWMqRbzFsq86lD0b81HmWzw5rZPnLGMeo9BlWyEmmCAZDi6MfA=).
A playback of the webcast will be available at www.kenmareresources.com.
Private investor webinar
There will also be a separate webinar for private investors on 26 March 2024
at 12:30pm UK time. To access the webinar, please register in advance by
clicking here
(https://www.globenewswire.com/Tracker?data=rj2nS3tra43OSHWe3PwVMAvltKxyzMndjKV8eHTZN0ILai25Bw9G7zGdlihfU6YI2XZ9iNiAAD4p0XBQBKsB466rBDCamojk-x1tW5dYxx-vviJ0HcPnflQtlhKSKAL3vgwNjfPkXCtF5fU99ATmMQ==).
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 Group (PR advisor)
Paul O’Kane
pokane@murraygroup.ie
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.
CHAIRMAN’S STATEMENT
Dear shareholders,
Introduction
Kenmare faced a number of challenges in 2023, both internal and external. For
some of these challenges, such as a weaker product market, the resilience we
have built into the Company over the past few years has enabled us to continue
to operate profitably. For others, such as the severe lightning strike close
to the Moma Mine in February, we have since built in additional protective
measures to minimise future interruptions to production. I am proud that,
against this backdrop, we delivered another year of robust financial results
and strong shareholder distributions.
In 2024, we are embarking on a capital programme to unlock the value from the
Nataka ore zone, which represents over 70% of Moma’s Mineral Resources. I
am confident that we have the skills and experience to navigate the challenges
that come with large projects: we have strong relationships with our partners
in Mozambique, our customers, and other stakeholders, supported by a team with
17 years of operational experience and more than 30 years in country.
I would like to recognise Michael Carvill’s role in developing the Company
to this point and in preparing the way for the Nataka development. The Moma
deposit was developed and Kenmare exists only because of Michael’s focus,
determination, and ability to build enduring relationships. I am very grateful
to him for agreeing to continue to provide the Company with his insights as a
senior advisor on the Nataka transition and our relationship with the
Government of Mozambique.
Transition to Nataka
In 2023, we completed a Definitive Feasibility Study (“DFS”) for the main
elements of the upgrade of Wet Concentrator Plant (“WCP”) A and its
transition to Nataka. Nataka is the largest ore zone within Moma’s portfolio
and WCP A is expected to mine there for the remainder of its economic life.
Our detailed studies have confirmed the optimal method to mine Nataka and
upgrade the mining plant, with the objective of retaining our first quartile
position on the industry revenue to cost curve.
The capital cost for the Nataka transition to the end of 2027 is estimated to
be up to $341 million. This includes costs for additional WCP A
infrastructure, with the DFS for this work due to be completed in Q2 2024.
Your Directors are very conscious that this represents a significant increase
to the cost estimates announced following the Pre-Feasibility Study
(“PFS”) and the Board and executive team are focused on detailed oversight
and effective delivery of the project, supporting successful mining in the new
orebody for many years to come.
In order to maintain maximum financial flexibility during this short period of
increased capital spend, the Board took the decision in late 2023 to defer the
upgrade of WCP B. While we continue to study ways of enhancing production at
WCP B, which is likely to represent an attractive investment, in the
short-term we are prioritising the WCP A investment.
Delivering value for our shareholders
During the year, I was pleased to get the opportunity to meet with a number of
Kenmare’s shareholders as it is vital for the Board and management to
understand their perspectives, priorities and concerns. In early 2024, we
undertook an investor perception study to allow a wider group of existing
shareholders, potential investors and sell-side analysts to share their views
on all aspects of the Company. One of the key pieces of feedback was the
importance of maintaining a sound balance sheet, particularly while
undertaking the Nataka transition. My fellow Directors and I will continue to
foster open dialogue with our shareholders and we remain focused on maximising
shareholder value.
The Board is recommending a final dividend of USc38.54 per share (2022:
USc43.33). This amounts to a total dividend in respect of 2023 of USc56.04 per
share, up 3% (2022: USc54.31). We also completed a second share buy-back in
September 2023, when Kenmare repurchased 5.9% of its issued share capital for
a total consideration of $30.0 million. Including the 2023 dividend, over $250
million will have been returned to shareholders through a combination of
dividends and share buy-backs since 2019.
The majority of the capital investment to support the Nataka transition will
be incurred in 2024 and 2025. We recently announced a new $200 million debt
facility with our lenders, which is an important element of our capital
structure and financial planning. To the extent possible during this period,
we will aim to pay dividends towards the top of our stated payout range of
20-40% of underlying Profit After Tax. However, additional shareholder returns
will need to be balanced with a requirement to maintain a strong balance sheet
to fund the programme.
Sustainability
Sustainability has always been central to Kenmare and from speaking to
employees at Moma, I know it is one of the areas of our business that inspires
the most passion and pride in our workforce. I am encouraged to see a return
to strong safety performance, with no Lost Time Injuries in Q4 and three
million hours worked without a Lost Time Injury achieved by late February
2024. The health, safety and wellbeing of our team at the Moma Mine remain our
top priorities.
Female representation in Kenmare’s workforce increased again in 2023 – by
the end of the year, 16% of Mine employees were women, up from 14.5% in 2022.
This represents a fourfold increase over the last eight years, and we are
making good progress towards our target of 20% by the end of 2025.
Importantly, an even higher proportion of the senior management at the Mine is
female (40% compared to 25% in 2022) and we are pleased to see their positive
impact being delivered through improved leadership and collaboration.
Turning to the environment, we take seriously our responsibility to maintain
biodiversity at the Moma Mine. In June 2023, our Sustainability Committee
participated in a strategic discussion centred on the conservation goals of
both the Global Biodiversity Framework and the Mozambican Government. Work is
underway on our strategies for “No Net Loss” and “15% Net Gain”, which
will be delivered through Moma’s Biodiversity Offset Management Plan.
Executive and Board development
As Michael Carvill is stepping down later this year, Kenmare’s Nomination
Committee has initiated a process to find Michael’s successor and will
consider both internal and external candidates. Michael will step down ahead
of the Company’s 2024 Interim Results.
As I mentioned in my last statement, we were delighted to welcome Issa Al
Balushi to the Board in early 2023. He became a Director in January as the
Board nominee of our largest investor, the Oman Investment Authority.
We are committed to increasing female representation on Kenmare’s Board and,
following a review by the Nomination Committee, we have initiated a search for
an additional female Non-Executive Director. This will be co-ordinated with
the search for a new Managing Director in order to ensure that the Board has
the appropriate mix of skills. It is also our intention to appoint one of our
female Directors as Senior Independent Director when Graham Martin retires
next year. This will allow us to benefit from increased diversity, whilst also
meeting Listing Rules for female Directors and their roles in senior Board
positions. Following this, women will represent at least 40% of Kenmare’s
Board.
During the year, I conducted an internal Board performance review. Similarly
to 2022, the review indicated a high level of satisfaction and found that
there is good communication both within the Board and its Committees, and with
management. However, there is always room for improvement, and we have
identified a number of focus areas to improve Board effectiveness in 2024.
These include strengthening the processes by which the Board oversees
budgeting and capital allocation planning, and how we evaluate internal and
external investment opportunities.
Outlook
2023 was a year of on-going global volatility: the Chinese economy slowed, and
major conflicts erupted or continued in several parts of the world. The
potential for instability is likely to extend into 2024, with both the USA and
Russia holding elections during the year, in addition to approximately 70
other countries, including Mozambique.
However, despite the prospect of on-going macroeconomic uncertainty, Kenmare
continues to occupy a market-leading position: we produce products that the
world needs, we can operate profitably throughout the commodity price cycle,
and the Nataka transition will ensure this continues for future generations.
Nevertheless, we recognise there is a lot of work to be done, including
continuing to strengthen our safety culture, improving the consistency of our
operational performance, and ensuring we capture strategic opportunities
whenever value can be created for all of our stakeholders. We recognise that
Kenmare’s share price has experienced significant weakness during the past
year, and we are focused on delivery in order to improve our valuation in 2024
and beyond.
Acknowledgements
On behalf of the Board, I would like to thank Michael Carvill for his
outstanding commitment and service to Kenmare over almost forty years. Having
worked with him personally for 25 years, I have seen first-hand his dedication
to the highest personal and corporate values in every facet of our operations,
the inspirational quality of his leadership, and the beneficial impact of his
commitment to the communities in which we work. We are very grateful for
Michael’s tremendous contribution to Kenmare and he has our very best wishes
for the future.
We appreciate the support of everyone who has contributed to the Company over
the past year, and I’d like to finish by thanking my colleagues on the
Board, Kenmare’s employees, our host communities, shareholders, and other
valued stakeholders.
Andrew Webb
CHAIRMAN
MANAGING DIRECTOR’S STATEMENT
Dear shareholders,
Introduction
In March 2024, I announced that I will be stepping down as Managing Director
later this year. Subject to my re-election at our Annual General Meeting in
May, I will continue in my executive role and on Kenmare’s Board until the
Interim Results in mid-August, and in a consultancy capacity until at least
the end of 2024. The 38 years I will have served as Managing Director have
been both fascinating and rewarding, and each year has brought its own
challenges and achievements.
Looking back on 2023 in particular, we advanced a number of major projects,
critical for the long-term success of the business. Preparations began for the
transition of WCP A to Nataka, which will secure production for decades to
come. The refinancing of our debt facilities, which we announced in early
2024, enhanced our financial flexibility and will allow us to maintain
shareholder distributions, while funding our capital requirements. The
contract was also signed for the construction of a new district hospital by
the Kenmare Moma Development Association (“KMAD”), which will
substantially improve the healthcare provision for communities living close to
the Moma Mine.
However, 2023 also presented a number of operational challenges, principally
an unusually severe lightning strike, that led to a downward revision of our
ilmenite production guidance for the year. I am proud that, despite these
issues and weaker product markets, we delivered a robust financial
performance, with the second strongest EBITDA in Kenmare’s history and
representing a 50% EBITDA margin. We also maintained a net cash position at
year-end. The Board is recommending a dividend per share of USc56.04 in
respect of 2023, up 3% on 2022, and benefitting from Kenmare’s reduced
issued share capital following our second share buy-back in 2023.
Safety
In late February 2024, we passed the milestone of three million hours worked
without a LTI, which is a credit to our team at Moma. This built on our strong
safety performance in Q4 2023, when we achieved zero LTIs.
While this was encouraging, our Lost Time Injury Frequency Rate for the 12
months to 31 December 2023 increased to 0.15 incidents per 200,000 hours
worked, due to the five LTIs earlier in the year, compared to 0.09 in 2022.
As part of our focus on reversing this negative trend, we strengthened our
safety leadership with the appointment of a new Health & Safety Manager, Babra
Mudzanapabwe. She is managing the implementation of additional training and
new safety protocols, including “safety-led down times”, to reinforce that
safety must always be prioritised above production.
For an eighth consecutive year, Moma retained its maximum five-star rating by
the National Occupational Safety Association (NOSA).
Operational performance
Operations at the Moma Mine had a difficult start to 2023, due to an unusually
severe lightning strike hitting power lines close to the Mine in February.
Power infrastructure and electronic devices within our three WCPs were damaged
by the strike, impacting HMC production. We continued to experience power
reliability issues throughout H1, leading us to revise down our ilmenite
production guidance in July. In the months following the lightning strike, our
technical team conducted a thorough investigation and additional protective
measures have since been put in place, providing an additional line of defence
to the grid’s own safeguards.
To improve future regional power reliability, Kenmare part-funded the
refurbishment of the Nampula STATCOM on the Electricidade de Moꞔambique
(“EdM”) grid and this was commissioned in Q4 2023. In addition, a new
regional 400kV power line is due to be commissioned by EdM in the coming
months. Both of these projects are expected to enhance power stability at the
Mine.
HMC production was also impacted by lower grades in 2023 than expected.
Against this backdrop, we were pleased to achieve revised ilmenite production
guidance for the year, while meeting or exceeding original production guidance
for our other products, and we are focused on improving operational
performance in 2024.
Shipments in 2023 were down 3% compared to 2022, due to slightly weaker demand
and more cautious buying from our customers. However, we saw our strongest
shipments in Q4 and volumes would have been higher still had poor weather not
impacted loading time.
In an independent report, TZMI, a mineral sands industry analyst, declared
that Kenmare is in the first quartile on the industry revenue to cost curve in
respect of 2021. It was pleasing to receive this independent verification of
our own analysis and we are focused on maintaining this leading position,
which will be facilitated through our programme of capital investment.
In late 2022, Kenmare initiated the renewal process for the Implementation
Agreement, which covers elements of the fiscal regime governing Moma’s
operation. The original agreement was signed in 2004 with a 20-year term and
the Company has materially exceeded all the undertakings agreed at that time.
This process is continuing and Kenmare is confident the renewal will be
concluded in an orderly manner.
Sustainability
Since the Company’s formation, we have had a commitment to being a trusted
corporate citizen, particularly with respect to our stakeholders in
Mozambique.
In 2004, we established KMAD and I am very proud of the transformational
change it has delivered for people living close to the Mine. During the past
20 years, over $20 million has been invested into community development
initiatives, including $4.7 million in 2023. In addition to the agreement to
construct a new district hospital, some of KMAD’s highlights for the year
included the construction of a third community health centre and the first
students graduating from the KMAD-constructed Topuito Technical College,
including 23 female students sponsored by KMAD.
2023 has been confirmed as the hottest year on record and climate change is no
longer a future threat but a current reality for our business. With this in
mind, we are working to set 2030 interim targets for operational emissions to
demonstrate a clear route to decarbonisation and our 2040 Net Zero target. In
2023, we reduced our Scope 1 emissions by 14%, due primarily to investments in
the Rotary Uninterruptible Power Supply and operational efficiencies at the
Mineral Separation Plant.
Product markets
The Moma Mine is a globally significant titanium minerals deposit, with over
100 years of Mineral Resources at the current production rate. Titanium
minerals are listed as critical minerals for a number of regions, including
the US and in Europe. They are essential in the production of titanium
pigment, which is used in everyday items such as paint, plastic and paper, as
well as in the fast-growing titanium metal market, which is primarily consumed
by the aerospace industry.
Following a year of record pricing in 2022, markets softened in 2023 due to
increasing global economic uncertainty. It was nonetheless pleasing to see
that demand from our customers remained relatively robust despite these
macroeconomic pressures and demand for ilmenite has been stronger in early
2024 than we expected.
Downstream demand for titanium pigment was subdued in 2023, although it
improved through the second half of the year. The challenges faced by the
pigment market prompted producers to sustain lower-than-normal inventories
throughout 2023. We believe 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 we also benefit from our
first quartile margin position, allowing us to generate positive cash flow
throughout the commodity price cycle.
The zircon market was also softer in 2023 as reduced global economic activity
decreased demand for products like ceramics. Prices for zircon in Europe
remained weaker in early 2024 but Kenmare has seen a stabilisation in the
Chinese spot market in recent months, which we expect will provide some
support to the global market.
Despite these short-term pressures, Kenmare believes that the market
fundamentals for our products are strong, due primarily to medium- and
long-term supply constraints within the titanium feedstocks and zircon
industries.
Capital projects
During 2023, we completed the DFS for the core elements of WCP A’s upgrade
and transition to Nataka in late 2025. Nataka is the largest of Moma’s ore
zones and WCP A will mine there for the rest of its economic life.
The upgrade of WCP A will significantly increase the plant’s capacity and
allow it to more effectively manage slimes, which are ultra fine particles
that negatively impact production. This will ensure consistent future
production, while maintaining low operating costs. The DFS for additional
infrastructure is continuing and scheduled to be completed in Q2 2024.
Total capital expenditure for the project is estimated to be up to $341
million to the end of 2027, including the costs for additional infrastructure.
Most of this capital expenditure is expected to be incurred in 2024 and 2025,
with $179 million budgeted for 2024.
The DFS capital cost estimate is higher than the PFS estimate, which was
released in April. This was due to changes in scope and design, reflecting
opportunities to safeguard Kenmare’s first quartile position on the revenue
to cost curve; additional indirect costs to deliver effective schedule risk
minimisation; increased contingency costs; and capital cost inflation during
the period.
We will be funding this capital investment through operational cash flows and
debt facilities, while continuing to make shareholder returns. We announced a
new $200 million Revolving Credit Facility with our existing lender group in
February 2024, with improved terms that reflect our position as an established
mineral sands producer.
Outlook
With 2024 well underway, our focus is firmly on delivery. Our team at the Moma
Mine are working hard to achieve our guidance for the year, while maintaining
the strong safety performance we returned to in Q4 2023. Our projects team is
advancing the preparations for the transition to Nataka, while actively
looking for ways to optimise the scope, design, and execution of the project.
While product markets were impacted in 2023 by the weaker global economy,
ilmenite prices are holding up well in early 2024. Our first quartile position
on the industry revenue to cost curve supports our ability to generate strong
cash flow, even during periods of weaker pricing, and we are focused on
optimising mining at Nataka to ensure we retain this position.
Finally, I would like to thank all my friends and colleagues within the
Company, as well as our customers, shareholders, and other partners in
Mozambique for their continued support. It has been a privilege to lead
Kenmare for almost four decades and I am pleased to leave the Company in a
position of strength, with a tier one asset, and as the largest supplier of
ilmenite in the world. I am very proud of all that Kenmare has achieved to
date and confident in our team's ability to continue to execute on the
Company’s strategy to create value for all stakeholders.
Michael Carvill
MANAGING DIRECTOR
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
Notes Unaudited 2023 $’000 2022 $’000
Revenue 2 458,477 525,988
Cost of sales 4 (294,927) (282,694)
Gross profit 163,550 243,294
Administration expenses 4 (8,426) (9,862)
Operating profit 155,124 233,432
Finance income 5 5,904 1,147
Finance costs 5 (11,118) (12,472)
Profit before tax 149,910 222,107
Income tax expense 6 (18,928) (16,073)
Profit for the financial year and total comprehensive income for the financial year 130,982 206,034
Attributable to equity holders 130,982 206,034
$ per share $ per share
Basic earnings per share 7 1.41 2.17
Diluted earnings per share 7 1.37 2.12
The accompanying notes form part of these financial statements.
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
Notes Unaudited 2023 $’000 2022 $’000
Revenue 2 458,477 525,988
Cost of sales 4 (294,927) (282,694)
Gross profit 163,550 243,294
Administration expenses 4 (8,426) (9,862)
Operating profit 155,124 233,432
Finance income 5 5,904 1,147
Finance costs 5 (11,118) (12,472)
Profit before tax 149,910 222,107
Income tax expense 6 (18,928) (16,073)
Profit for the financial year and total comprehensive income for the financial year 130,982 206,034
Attributable to equity holders 130,982 206,034
$ per share $ per share
Basic earnings per share 7 1.41 2.17
Diluted earnings per share 7 1.37 2.12
The accompanying notes form part of these financial statements.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
Notes Unaudited 2023 $’000 2022 $’000
Assets
Non-current assets
Property, plant and equipment 8 935,848 930,759
Right-of-use assets 9 1,368 1,608
937,216 932,367
Current assets
Inventories 10 99,257 84,171
Trade and other receivables 11 153,650 124,018
Cash and cash equivalents 12 71,048 108,271
323,955 316,460
Total assets 1,261,171 1,248,827
Equity
Capital and reserves attributable to the
Company’s equity holders
Called-up share capital 13 97 104
Share premium 545,950 545,950
Other reserves 229,740 232,759
Retained earnings 367,504 324,721
Total equity 1,143,291 1,103,534
Liabilities
Non-current liabilities
Bank loans 14 15,502 46,180
Lease liabilities 9 1,256 1,540
Provisions 15 20,877 19,746
37,635 67,466
Current liabilities
Bank loans 14 32,371 32,398
Lease liabilities 9 264 245
Trade and other payables 16 38,564 35,293
Current tax liabilities 17 6,921 8,893
Provisions 15 2,125 998
80,245 77,827
Total liabilities 117,880 145,293
Total equity and liabilities 1,261,171 1,248,827
The accompanying notes form part of these financial statements.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
Unaudited Called-Up Share Capital $’000 Unaudited Share Premium $’000 Unaudited Other Reserves $’000 Unaudited Retained Earnings $’000 Unaudited Total $’000
Balance at 1 January 2022 104 545,950 230,539 154,050 930,643
Total comprehensive income for the year
Profit for the financial year - - - 206,034 206,034
Total comprehensive income for the year - - - 206,034 206,034
Transactions with owners of the Company – contributions and distributions - - 5,601 - 5,601
Recognition of share-based payment expense
Exercise of share-based payment awards - - (3,363) - (3,363)
Shares acquired by the Kenmare Employee Benefit Trust - - (1,797) - (1,797)
Shares distributed by the Kenmare Employee Benefit Trust - - 1,779 - 1,779
Odd lot offer share buy back - - 515 (515) -
Odd lot offer share buy back transaction costs - - - (122) (122)
Cancellation of treasury shares - - (515) - (515)
Dividends paid - - - (34,726) (34,726)
Total contributions and distributions - - 2,220 (35,363) (33,143)
Balance at 1 January 2023 104 545,950 232,759 324,721 1,103,534
Total comprehensive income for the year
Profit for the financial year - - - 130,982 130,982
Total comprehensive income for the year - - - 130,982 130,982
Transactions with owners of the Company – contributions and distributions
Recognition of share-based payment expense - - 3,278 - 3,278
Exercise of share-based payment awards - - (3,512) (2,197) (5,709)
Shares acquired by the Kenmare Employee Benefit Trust - - (6,182) - (6,182)
Shares distributed by the Kenmare Employee Benefit Trust - - 3,390 - 3,390
Tender offer share buy back (7) - 7 (29,963) (29,963)
Share buy back transaction costs - - - 572 572
Dividends paid - - - (56,611) (56,611)
Total contributions and distributions (7) - (3,019) (88,199) (91,225)
Balance at 31 December 2023 97 545,950 229,740 367,504 1,143,291
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
Notes Unaudited 2023 $’000 2022 $’000
Cash flows from operating activities
Profit for the financial year after tax 130,982 206,034
Adjustment for:
Foreign exchange movement included in operating costs - 1,123
Expected credit losses 18 46 1,110
Share-based payments 3,278 5,601
Finance income 5 (5,904) (1,147)
Finance costs 5 11,118 12,472
Income tax expense 6 18,928 16,073
Depreciation 8, 9 65,122 64,596
223,570 305,862
Change in:
Provisions 1,341 (2,141)
Inventories (15,086) (23,952)
Trade and other receivables (29,529) (47,627)
Trade and other payables 299 (1,680)
Exercise of share-based payment awards (2,319) (1,566)
Cash generated from operating activities 178,276 228,896
Income tax paid (21,119) (10,461)
Interest received 5,756 657
Interest paid 9 (7,323) (7,068)
Factoring and other trade facility fees 5 (1,467) (2,218)
Debt commitment fees paid and other fees 5 (928) (534)
Net cash from operating activities 153,195 209,272
Investing activities
Additions to property, plant and equipment 8 (66,540) (59,867)
Net cash used in investing activities (66,540) (59,867)
Financing activities
Dividends paid (56,611) (34,726)
Odd lot offer share buy back - (515)
Odd lot offer share buy back transaction costs - (122)
Tender offer share buy back (29,963) -
Tender offer share buy back transaction costs 572 -
Market purchase of equity under Kenmare Restricted Share Plan (6,182) (1,797)
Drawdown of debt 14 - 20,000
Repayment of debt 14 (31,429) (91,429)
Payment of lease liabilities (265) (995)
Net cash used in financing activities (123,878) (109,584)
Net (decrease) / increase in cash and cash equivalents (37,223) 39,821
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 - (607)
Cash and cash equivalents at the end of the financial year 12 71,048 108,271
UNAUDITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023
1. Statement of accounting policies
Kenmare Resources plc (the “Company”) is domiciled in the Republic of
Ireland. The Company’s registered address is Styne House, Hatch Street
Upper, Dublin 2. The Company has a premium listing on the Main Market of the
London Stock Exchange and a secondary listing on Euronext Dublin. These
consolidated financial statements comprise the Company and its subsidiaries
(the “Group”). The principal activity of the Group is the operation and
further development of the Moma Titanium Minerals Mine in Mozambique.
On 19 March 2024, the Directors approved the preliminary results for
publication. While the consolidated financial statements for the year ended 31
December 2023, from which the preliminary results have been extracted, are
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union, these preliminary results do not contain
sufficient information to comply with IFRS. The Directors expect to publish on
4 April 2024 the full financial statements that comply with IFRS as adopted by
the European Union.
The auditor, KPMG, has not yet issued their audit opinion on the financial
statements in respect of the year ended 31 December 2023. The financial
information included within this unaudited preliminary results statement for
the year ended 31 December 2023 does not constitute the statutory financial
statements of the Group within the meaning of section 293 of the Companies Act
2014. The Group financial information in this preliminary statement for the
year ended 31 December 2023 is unaudited. A copy of the statutory financial
statements in respect of the year ended 31 December 2023 will be annexed to
the next annual return and filed with the Registrar of Companies.
The Group financial information for the year ended 31 December 2022 included
in this preliminary statement represents an abbreviated version of the
Group’s financial statements for that year. The statutory financial
statements for the Group for the year ended 31 December 2022, upon which the
auditor, KPMG, has issued an unqualified opinion, were annexed to the annual
return of the Company and filed with the Registrar of Companies.
None of the new and revised standards and interpretations which are effective
for accounting periods beginning on or after 1 January 2023, have a material
effect on the Group’s financial statements.
Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) issued by the
International Accounting Standards Board (IASB) and interpretations issued by
the IFR Interpretations Committee (IFRIC) as adopted by the EU and those parts
of the Companies Act 2014 applicable to companies reporting under IFRS and
Article 4 of the IAS Regulation.
Going concern
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and the Group have or will have
adequate resources to continue in operational existence for the foreseeable
future. Based on the Group’s cash flow forecast, liquidity, solvency
position and available finance facilities, 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.
Management plans assume that all agreements, licences, concessions and
approvals relating to the Group’s mining and processing activities are in
place or will be renewed over the 12 month period, including the
Implementation Agreement, from the date of authorisation of these 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 as will be set out in the Annual Report’s unaudited mineral
reserves and resources table. 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 1.1
million tonnes per annum 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 2024, taking into
account the current 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. The 2024 operating costs and forecast capital
costs take into account the current inflationary environment. The 2% inflation
rate used from 2025 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 changes in market prices, shipments
and operating and capital cost assumptions. 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 12 month period from the date of authorisation of these financial
statements.
2. Revenue
Unaudited 2023 $’000 2022 $’000
Revenue from contracts with customers
Revenue derived from the sale of mineral products 437,091 498,339
Revenue derived from freight services 21,386 27,649
Total Revenue 458,477 525,988
Revenue by mineral product
The principal categories for disaggregating mineral products revenue are by
product type and by country of the customer’s location. The mineral product
types are ilmenite, zircon, rutile and concentrates. Concentrates includes
secondary zircon and mineral sands concentrates.
During the financial year, the Group sold 1,045,200 tonnes (2022: 1,075,600
tonnes) of finished products to customers at a sales value of $437.1 million
(2022: $498.3 million). The Group earned revenue derived from freight services
of $21.4 million (2022: $27.6 million).
Unaudited 2023 $’000 2022 $’000
Revenue derived from sales of mineral products by primary product
Ilmenite 315,138 347,446
Primary zircon 79,628 99,152
Concentrates 31,046 33,057
Rutile 11,279 18,684
Total revenue from mineral products 437,091 498,339
Revenue derived from freight services 21,386 27,649
Total Revenue 458,477 525,988
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. Where total disclosed revenue
disaggregated by country constitutes less than 75% of total Group revenue,
additional disclosures are made on a regional basis until at least 75% of the
Group’s disaggregated revenue is disclosed. There were no individual
countries within Europe, Asia (excluding China) or the Rest of the World with
revenues representing 10% or more of the Group’s total revenue during the
year.
Unaudited 2023 $’000 2022 $’000
Revenue derived from sales of mineral product by destination China 177,511 154,704
Europe 86,238 130,440
Asia (excluding China) 76,535 108,487
USA 52,826 51,600
Rest of the World 43,981 53,108
Total revenue from mineral products 437,091 498,339
Revenue derived from freight services 21,386 27,649
Total Revenue 458,477 525,988
Revenue by major customers
The Group evaluates the concentration of mineral product revenue by major
customer. The following table disaggregates mineral product revenue from the
Group’s four largest customers.
Unaudited 2023 $’000 2022 $’000
Revenue from external customers
Largest customer 69,023 74,671
Second largest customer 41,616 62,791
Third largest customer 32,999 58,413
Fourth largest customer 31,844 41,015
Total 175,482 236,890
All Group revenues from external customers are generated by the Moma Titanium
Minerals Mine in Mozambique. Further details on this operating segment can be
found in Note 3. Sales to and from Ireland were $nil (2022: $nil) in the year.
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 2023 2022
Corporate Mozambique Total Corporate Mozambique Total
$’000 $’000 $’000 $’000 $’000 $’000
Revenue & Results
Revenue* - 458,477 458,477 - 525,988 525,988
Cost of sales - (294,927) (294,927) - (282,694) (282,694)
Gross profit - 163,550 163,550 - 243,294 243,294
Administrative expenses (6,867) (1,559) (8,426) (7,848) (2,014) (9,862)
Segment operating profit (6,867) 161,991 155,124 (7,848) 241,280 233,432
Finance income 2,585 3,319 5,904 23 1,124 1,147
Finance expenses (40) (11,078) (11,118) (83) (12,389) (12,472)
Profit before tax (4,322) 154,232 149,910 (7,908) 230,015 222,107
Income tax expense (7,156) (11,772) (18,928) (1,601) (14,472) (16,073)
Profit for the financial year (11,478) 142,460 130,982 (9,509) 215,543 206,034
Segment assets & Liabilities
Segment Assets 40,918 1,220,253 1,261,171 12,583 1,236,244 1,248,827
Segment Liabilities 10,392 107,488 117,880 4,722 140,571 145,293
Additions to non-current assets
Segment Additions to non-current assets - 69,730 69,730 - 59,867 59,867
*Revenue excludes inter-segment revenue of $22.7 million (2022: $24.2 million)
earned by the corporate segment relating to marketing and management services
fee income. Inter-segment revenue is not regularly reviewed by the Chief
Operating Decision Maker.
Corporate assets consist of the Company’s 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
at the reporting date.
4. Cost and income analysis
Unaudited 2023 $’000 2022 $’000
Expenses by function
Cost of sales 294,927 282,694
Administrative expenses 8,426 9,862
Total 303,353 292,556
Expenses by nature can be analysed as follows:
Unaudited 2023 $’000 2022 $’000
Expenses by nature
Staff costs 58,252 55,907
Repairs and maintenance 42,278 43,151
Power and fuel 47,791 43,960
Freight 21,386 27,649
Other production and operating costs 83,274 78,921
Movement of mineral products inventory (14,750) (21,628)
Depreciation of property, plant and equipment and right-of-use assets 65,122 64,596
Total 303,353 292,556
Mineral products consist of finished products and heavy mineral concentrate as
detailed in Note 10. Mineral stock movement in the year was an increase of
$14.7 million (2022: $21.6 million increase). Freight costs of $21.4 million
(2022: $27.7 million) arise from sales to customers on a CIF or CFR basis.
There were no exceptional items within operating profit in 2023 (2022: $nil).
5. Net finance costs
Unaudited 2023 $’000 2022 $’000
Finance costs
Interest on bank borrowings (7,935) (8,829)
Interest on lease liabilities (112) (147)
Factoring and other trade facility fees (1,467) (2,218)
Commitment and other fees (928) (534)
Unwinding of discount on mine closure provision (676) (744)
Total finance costs (11,118) (12,472)
Interest earned on bank deposits 5,904 657
Foreign exchange gain - 490
Total finance income 5,904 1,147
Net finance costs recognised in profit or loss (5,214) (11,325)
All interest has been expensed in the financial year. The Group has classified
factoring and other trade facility fees in net cash from operating activities
in the Consolidated Statement of Cashflows.
6. Income tax expense
Unaudited 2023 $’000 2022 $’000
Corporation tax 18,928 16,073
Deferred tax - -
Total 18,928 16,073
Reconciliation of effective tax rate
Profit before tax 149,910 222,107
Profit before tax multiplied by the applicable tax rate (12.5%) 18,739 27,763
(Over)/under provision in respect of prior years (219) 546
Non-taxable income (9,434) (18,120)
Non-deductible expenses 1,204 483
Differences in effective tax rates on overseas earnings 8,638 5,401
Total 18,928 16,073
During the year, Kenmare Moma Mining Limited Mozambique Branch had taxable
profits of $34.1 million (2022: $39.9 million), resulting in an income tax
expense of $11.7 million (2022: $14.5 million) being recognised. The income
tax rate applicable to taxable profits of KMML Mozambique Branch is 35% (2022:
35%).
Kenmare Moma Mining Limited 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 31 December 2023.
Kenmare Moma Processing (Mauritius) Limited Mozambique Branch has Industrial
Free Zone (IFZ) status. As an IFZ Branch, it is exempted from corporation
taxes and hence its income is non-taxable.
During the year, Kenmare Resources plc had taxable profits of $89.2 million
(2022: $13.3 million) as a result of management and marketing service fee
income earned on services provided to subsidiary undertakings and dividend
income earned from subsidiary undertakings, resulting in a corporate tax
expense of $7.2 million (2022: $1.6 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 2023 $’000 2022 $’000
Profit for the financial year attributable to equity holders of the Company 130,982 206,034
Unaudited 2023 Number of shares 2022 Number of shares
Weighted average number of issued ordinary shares for
the purpose of basic earnings per share 93,126,115 94,919,944
Effect of dilutive potential ordinary shares:
Share awards 2,437,495 2,361,819
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 95,563,610 97,281,763
$ per share $ per share
Basic earnings per share 1.41 2.17
Diluted earnings per share 1.37 2.12
The denominator for the purposes of calculating both basic and diluted
earnings per share has been adjusted to reflect shares acquired during the
year.
8. Property, plant and equipment
Plant and Equipment $’000 Development Expenditure $’000 Construction In Progress $’000 Other Assets $’000 Total $’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 year - - 69,703 27 69,730
Transfer from construction in progress 20,144 13,095 (40,391) 7,152 -
Disposals (415) - - (9,429) (9,844)
Adjustment to mine closure cost 241 - - - 241
At 31 December 2023 1,055,574 273,146 80,085 75,140 1,483,945
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 year 44,928 8,952 - 11,002 64,882
Disposals (415) - - (9,429) (9,844)
At 31 December 2023 348,831 156,820 - 42,446 548,097
Carrying amount
At 31 December 2023 706,743 116,326 80,085 32,694 935,848
At 31 December 2022 731,286 112,183 50,773 36,517 930,759
An adjustment to the mine closure cost of $0.2 million (2022: $20.1 million)
was made during the year as a result of an update in the mine closure cost
estimate as detailed in Note 15.
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 31 December 2023,
the market capitalisation of the Group was below the book value of net assets,
which is considered an indicator of impairment. The Group carried out an
impairment review of property, plant and equipment as at 31 December 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 year. No
impairment was recognised in the prior financial year. Given the historic
volatility in mineral product pricing and sensitivity of the forecast to
mineral product pricing, 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 12% (2022: 14%).
Key assumptions 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 making
up the cost of equity and cost of debt have changed from the prior year
review, resulting in a discount rate of 12% (2022: 14%). 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 the specific
circumstances of the Moma Mine. Hence, country risk premium applicable to the
calculation of the cost of equity has been adjusted accordingly. Forecast
income tax on intercompany dividends from subsidiary undertakings is assumed
to be exempt from 2025, by way of change to tax legislation or alternatively
group restructuring. Using a discount rate of 12.0%, the recoverable amount is
greater than the carrying amount by $374.0 million (2022: $86.9 million). The
discount rate is a significant factor in determining the recoverable amount. A
3.5% increase in the discount rate to 15.5% reduces the recoverable amount by
$374.0 million to $nil, assuming all other inputs
remain unchanged. The increase in the recoverable amount from the prior year
is a result of increased cash flows over the life of mine as a result of
increased forecast revenue net of increased capital costs and a decrease in
the discount rate from 14% to 12%.
• The forecast assumes that all agreements, licences, concessions and
approvals relating to the Group’s mining and processing activities including
the Implementation Agreement are in place or will be renewed. 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 prior year review. Average
annual production is approximately 1.3 million tonnes (2022: 1.2 million
tonnes) of ilmenite and co-products zircon, rutile and concentrates over the
life of the Mine. Medium term production over the next three years is
approximately 1.1 million tonnes. This 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 forecast 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 prior year-end review as a result of revised forecast
pricing. A 9.0% reduction in average sales prices over the life of mine
reduces the recoverable amount by $374.0 million to $nil, assuming all other
inputs remain unchanged.
• Operating costs are based on approved budget costs for 2024 taking into
account the current running costs of the Mine and estimated forecast inflation
for 2024. From 2025 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 has decreased from the prior year-end
review as a result of a reduction in the estimated future power costs and
further optimisation of unit price for mining in Nataka. A 6.5% increase in
operating costs over the life of mine reduces the recoverable amount by $374.0
million to $nil, assuming all other inputs remain unchanged.
Whilst the Group has set ambitions to be net zero by 2040, the full financial
impact of the transition plan is still being assessed as the Group considers
how it will work towards meeting this target. The mine financial model
includes the cost of using bio-diesel in its forecast operating costs. The
cost of studies on plant electrification and other sustainable methods of
operating are also included in forecast operating and capital cost. No savings
associated with the Company’s ambition to become net zero have been factored
into the forecast.
• Capital costs are based on a life of mine capital plan including
inflation at 2% per annum from 2025. Average forecast capital costs have
increased and their scheduling has changed from the prior year-end review
based on updated sustaining and development capital plans required to maintain
the existing plant over the life of mine. A 47% increase in capital costs over
the life of mine reduces the recoverable amount by $374.0 million to $nil,
assuming all other inputs remain unchanged.
9. Right-of-use assets and lease liabilities
Plant and Equipment $’000 Land and Buildings $’000 Total $’000
Cost
At 1 January 2023 3,319 2,590 5,909
Additions - - -
Disposals (3,319) - (3,319)
At 31 December 2023 - 2,590 2,590
Accumulated Depreciation
At 1 January 2023 3,319 982 4,301
Depreciation expense - 240 240
Disposals (3,319) - (3,319)
At 31 December 2023 - 1,222 1,222
Carrying amount
At 31 December 2023 - 1,368 1,368
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 to the end of the
lease term. This lease obligation is denominated in Euros.
In February 2019, the Group recognised a lease liability of $0.4 million in
respect of its Mozambican country office in Maputo. The lease has a seven-year
term commencing February 2019 and rental payments are fixed for seven years.
This lease obligation is denominated in US Dollars. The Branch has discounted
lease payments using its incremental borrowing rates. The weighted average
rate applied is 7%.
In December 2022, the Maputo Office lease was modified and remeasured. The
lease term was extended to 10 years commencing 1 December 2022. In addition,
additional floor space of 250 square meters was leased as an addendum to the
existing lease. The Group has determined that the lease modification should
not be accounted for as a separate lease because the lease payments for the
new office space are not considered commensurate with market rentals for
office space of that size and characteristic. The incremental borrowing rate
applied to the remeasured lease is 10.2%.
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 31 December 2023 or 31 December 2022.
The Group has recognised a rental expense of $12.4 million (2022: $3.9
million) in relation to short term leases of machinery and vehicles which have
not been recognised as a right-of-use asset.
Set out below are the carrying amounts of lease liabilities at each reporting
date:
Unaudited 2023 $’000 2022 $’000
Current 264 245
Non-current 1,256 1,540
Total 1,520 1,785
The consolidated income statement includes the following amounts relating to
leases:
Unaudited 2023 $’000 2022 $’000
Depreciation expense 240 1,010
Interest expense on lease liabilities 112 147
Total 352 1,157
Reconciliation of movements of lease liabilities to cash flows arising from financing activities Unaudited 2023 $’000 2022 $’000
Lease liabilities
Balance at 1 January 1,785 2,178
Cash movements
Lease interest paid (112) (147)
Principal paid (265) (1,142)
Non-cash movements
Lease modification - 749
Lease interest accrued 112 147
Balance at 31 December 1,520 1,785
10. Inventories
Unaudited 2023 $’000 2022 $’000
Mineral products 58,405 43,655
Consumable spares 40,852 40,516
99,257 84,171
At 31 December 2023, total final product stock was 259,100 tonnes (2022:
213,500 tonnes). Closing stock of heavy mineral concentrate was 16,700 tonnes
(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 year, there was a write-down of $nil (2022: nil) to
mineral products charged to cost of sales to value mineral products at net
realisable value.
11. Trade and other receivables
Unaudited 2023 $’000 2022 $’000
Trade receivables 127,442 104,970
VAT receivable 6,377 4,527
Prepayments 19,831 14,521
153,650 124,018
Further details on trade receivables can be found in Note 18.
12. Cash and cash equivalents
Unaudited 2023 $’000 2022 $’000
Bank balances 71,048 108,271
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. Called-up share capital
Unaudited 2023 €’000 2022 €’000
Authorised share capital
181,000,000 ordinary shares of €0.001 each 181 181
181 181
Unaudited 2023 $’000 2022 $’000
Allotted, called-up and fully paid
Opening balance
94,829,551 (2022: 94,921,970) ordinary shares of €0.001 each 104 104
Acquired and cancelled 5,601,390 (2022: 92,419) ordinary shares of €0.001 each (7) -
Closing balance
89,228,161 (2022: 94,829,551) ordinary shares of €0.001 each 97 104
Total called-up share capital 97 104
No ordinary shares were issued during the year (2022: $nil).
On 11 September 2023, a total of 5,601,390 shares were purchased under the
Tender Offer, representing 5.9% of the Company’s issued ordinary share
capital. The shares were purchased at the Tender Price of £4.22 per share
and, at this price, the total value of all shares purchased was £23.6 million
(circa $30 million). Transaction costs associated with the transaction
amounted to US$0.6 million and were accounted for as a deduction from retained
earnings.
On 3 October 2022, under the authority granted at the Company’s Annual
General Meeting held on 26 May 2022, and in accordance with Section 1075 of
the Companies Act 2014 and article 147 of the Articles of Association, the
Company completed an odd lot offer which involved the acquisition of 92,419
ordinary shares of €0.001 each in the capital of the Company representing
0.1% of the then called-up share capital of the Company for a total cash
consideration of $0.5 million. The odd lot offer buy back was funded from
distributable reserves and all ordinary shares acquired by the Company were
subsequently cancelled. Transaction costs associated with the transaction
amounted to $0.1 million and were accounted for as a deduction from retained
earnings.
14. Bank loans
Unaudited 2023 $’000 2022 $’000
Borrowings 47,873 78,578
The borrowings are repayable as follows:
Less than one year 33,087 33,653
Between two and five years 15,712 47,142
48,799 80,795
Transaction costs (926) (2,217)
Total carrying amount 47,873 78,578
Borrowings
On 11 December 2019, the Group entered into debt facilities 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 accommodates 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 transaction costs for arrangement of the debt
facilities amounted to $6.5 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, beginning 11 March 2022.
On 11 November 2023 the Revolving Credit Facility was extended by 12 months
and has a final maturity date of 11 December 2024. 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 $70.9
million as at 31 December 2023 (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.
At 31 December 2023, total debt of $47.9 million (2022: $78.6 million) was
recognised by the Group after $31.4 million of principal repayments were made
against the term loan over the course of the year. Unamortised transaction
costs of $0.9 million (2022: $2.2 million) plus interest amortised of $1.7
million (2022: $2.2 million) were recognised by the Group at 31 December 2023.
Reconciliation of movements of debt to cash flows arising from financing activities Unaudited 2023 $’000 2022 $’000
Bank loans
Balance at 1 January 78,578 148,099
Cash movements
Loan interest paid (7,211) (6,921)
Principal paid (31,429) (91,429)
Loan drawn down - 20,000
Non-cash movements
Loan interest accrued 7,935 8,829
Balance at 31 December 47,873 78,578
Covenants
The finance documents contain a number of representations, covenants and
events of default on customary terms, the breach of which could lead to the
secured parties under the finance documentation accelerating the outstanding
loans and taking other enforcement steps, such as the enforcement of some or
all of the security interests, which could lead to, in extremis, the Group
losing its interest in the Mine. The most salient of the relevant terms that
could lead to acceleration of the loans and/or enforcement of security are the
financial covenants.
All covenants have been complied with during the year. The key financial
covenants are detailed below:
As at 31 December 2023 As at 31 December 2022 Covenant
Interest Coverage Ratio 65.35:1 34.96:1 Not less than 4.00:1
Net Debt to EBITDA (0.09):1 (0.09):1 Not greater than 2.00:1
Debt Service Coverage Ratio 4.88:1 3.11:1 Not less than 1.20:1
Liquidity $111,048,000 $148,271,000 Not less than $15,000,000
Reserve Tail Ratio 81% 81% Not less than 30%
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. Provisions
Unaudited 2023 $’000 2022 $’000
Mine closure provision 17,540 16,623
Mine rehabilitation provision 5,462 4,121
Other provisions - -
23,002 20,744
Current 2,125 998
Non-current 20,877 19,746
23,002 20,744
Mine Closure Provision $’000 Mine Rehabilitation Provision $’000 Other Provisions Total $’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 year - (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 241 1,720 - 1,961
Provision utilised during the financial year - (379) - (379)
Unwinding of the discount 676 - - 676
At 31 December 2023 17,540 5,462 - 23,002
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
$0.7 million (2022: $0.7 million) has been recognised in the statement of
comprehensive income for the financial year.
The main assumptions used in the calculation of the estimated future costs
include:
• a discount rate of 4.0% (2022: 4.0%);
• an inflation rate of 2% (2022: 2%);
• an estimated life of mine of 40 years (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 $36.8 million (2022: $34.1 million) and an
estimated post-closure monitoring provision of $2.6 million (2022: $3.9
million).
The life of mine plan is based on the Namalope, Nataka, Pilivili and Mualadi
reserves and resources as set out in the reserve and resources table. Specific
resource material is included only where there is a high degree of confidence
in its economic extraction. The Mine closure provision has increased by $0.2
million as a result of a change in the estimated closure cost.
The discount rate is a significant factor in determining the Mine closure
provision. The Branch uses rates as provided by the US Treasury. 30-year US
Treasury yields are the longest period for which yields are quoted. This
discount rate is deemed to provide the best estimate of the current market
assessment of the time value of money. Risks specific to the liability are
included in the cost estimate. A 1% increase in the estimated discount rate
results in the Mine closure provision decreasing by $2.5 million (2022: $5.6
million). A 1% decrease in the estimated discount rate results in the Mine
closure provision increasing by $4.3 million (2022: $12.4 million).
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 12 months after the area has been
disturbed. During the financial year, there was a release of $0.4 million
(2022: $4.0 million) to reflect the actual mine rehabilitation costs incurred,
and an addition to the provision of $1.7 million (2022: $4.1 million) for
areas newly disturbed.
Other provisions comprise an amount of $nil (2022: $nil) in relation to a
potential indirect tax liability. The matter was resolved in 2022 following a
final settlement of $3.2 million agreed with the Mozambican Tax Authority.
16. Trade and other payables
Unaudited 2023 $’000 2022 $’000
Trade payables 6,510 7,305
Deferred income 2,752 2,740
Accruals 29,302 25,248
38,564 35,293
Included in accruals at the financial year end is an amount of $1.4 million
(2022: $1.6 million) for payroll and social insurance taxes.
Deferred income relates to sales contracts which contain separate performance
obligations for the sale of mineral products and the provision of freight
services. The portion of the revenue representing the obligation to perform
the freight service is deferred and recognised over time as the obligation is
fulfilled, along with the associated costs.
17. Current tax liabilities
Unaudited 2023 $’000 2022 $’000
Current tax liabilities 6,921 8,893
Refer to Note 6 for further information on the Group’s tax expense.
18. Financial instruments
Unaudited 2023 2022
Carrying amount $’000 Fair value $’000 Carrying amount $’000 Fair value $’000
Financial assets at fair value through profit and loss Trade receivables (1) - - 31,188 31,188 Level 2
Financial assets at fair value through OCI
Trade receivables (2) 110,534 110,534 43,065 43,065 Level 2
Financial assets not measured at fair value
Trade receivables (3) 16,908 16,908 30,717 30,717 Level 2
Cash and cash equivalents 71,048 71,048 108,271 108,271 Level 2
198,490 198,490 213,241 213,241
Financial liabilities not measured at fair value
Bank loans 47,873 48,799 78,578 80,795 Level 2
(1 )Relates to trade receivables which will be discounted through the
Barclay’s Bank facility.
(2 )Relates to trade receivables which may be factored through the ABSA
facility or discounted through the Barclays’s Bank facility.
(3 )Relates to trade receivables which will not be discounted or factored.
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 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). Trade receivables which will not be
factored and for which balances will be recovered under the sale contract
credit terms are initially measured at fair value and subsequently measured at
amortised cost.
In the case of factored receivables, the Group derecognises the discounted
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 for the
purposes of the consolidated statement of cashflows.
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.
The Group has exposure to credit risk, liquidity risk and market risk arising
from financial instruments.
Risk management framework
The Board is ultimately responsible for risk management within the Group. It
has delegated responsibility for the monitoring of the effectiveness of the
Group’s risk management and internal control systems to the Audit and Risk
Committee. The Board and Audit and Risk Committee receive reports from
executive management on the key risks to the business and the steps being
taken to mitigate such risks. The Audit and Risk Committee is assisted in its
role by internal audit. Internal audit undertakes both regular and ad hoc
reviews of risk management controls and procedures, the results of which are
reported to the Audit and Risk Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s trade receivables from
customers. The carrying amount of financial assets represents the maximum
credit exposure.
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. The credit quality of customers is reviewed regularly during the year
and where appropriate credit limits or limits to the number of shipments which
can be outstanding at any point are imposed.
The Group’s customers have been transacting with the Group for a significant
number of years, and no customers’ balances have been written off or are
credit impaired at the financial year 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.
The gross exposure to credit risk for trade receivables by geographic region
was as follows:
Unaudited 2023 $’000 2022 $’000
China 38,693 19,009
Asia (excluding China) 24,905 17,243
Europe 34,150 45,806
USA 29,597 22,776
Africa 97 136
Total 127,442 104,970
At 31 December 2023, $63.8 million (2022: $35.4 million) is due from the
Group’s three largest customers.
A summary of the Group’s exposure to credit risk for trade receivables is as
follows:
Unaudited 2023 $’000 2022 $’000
External credit ratings at least Baa3 (Moody’s) 65,266 31,188
Other 63,756 75,316
Total gross carrying amount 129,022 106,504
Loss allowance (1,580) (1,534)
Total 127,442 104,970
The following table provides ageing information relevant to the exposure to
credit risk for trade receivables from individual customers. No balances were
considered credit impaired at 31 December 2023 or 31 December 2022.
Current $’000 More than 30 days past due $’000 More than 60 days past due $’000 More than 90 days past due $’000 Total $’000
2023 127,383 - - 59 127,442
2022 104,962 - - 8 104,970
Expected credit loss assessment 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 following table provides information about the exposure to credit risk and
expected credit losses as at 31 December 2023.
Equivalent to Moody’s credit rating Weight average loss rate Gross carrying amount $’000 Impairment loss allowance $’000 Credit impaired
Other 2.0% 63,756 1,580 No
The following table provides information about the exposure to credit risk and
expected credit losses as at 31 December 2022.
Equivalent to Moody’s credit rating Weight average loss rate Gross carrying amount $’000 Impairment loss allowance $’000 Credit impaired
Other 2.0% 75,316 1,534 No
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 year was as follows:
Unaudited 2023 $’000 2022 $’000
Balance at 1 January 1,534 424
Net remeasurement of loss allowance 46 1,110
Balance at 31 December 1,580 1,534
The credit risk on cash and cash equivalents is limited because funds are
deposited with banks with high credit ratings assigned by international credit
rating agencies. For deposits in excess of $75 million the Group requires that
the institution has an A- (S&P)/A3 (Moody’s) long-term rating. For deposits
in excess of $50 million, the Group requires that the institution has a BB-
(S&P)/Ba3 (Moody’s) long-term rating.
At 31 December 2023 and 2022 cash was deposited with the following banks:
2023 2022
Long-term credit rating Long-term credit rating
$ million S&P Moody’s $ million S&P Moody’s
Nedbank Ltd 25.8 BB- Ba2 - - -
Barclays Bank plc 23.2 A/+ Stable A1/ Stable 81.4 A + A1/ Stable
FirstRand Bank Limited 10.1 BB- Ba2 - BBB - Ba2/ Stable
HSBC Bank plc - - - 1.0 AA / Stable A1/ Stable
Absa Bank Mauritius Limited 4.9 - Ba 20.5 Ba2/ Negative
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled in
cash payments. The Group’s objective when managing liquidity is to ensure
that it will have sufficient liquidity to meet its liabilities when they are
due.
The Group monitors Mine payment forecasts, both operating and capital, which
assist it in monitoring cash flow requirements and optimising its cash return
on investments. The Group aims to maintain the level of its cash and cash
equivalents at an amount in excess of expected cash outflows on financial
liabilities. The Group monitors the level of expected cash inflows on trade
receivables together with expected cash outflows on trade and other payables.
The Group has a trade finance facility with Absa Bank for three of the
Group’s largest customers. In accordance with this facility, the bank
purchases 80% of the receivable without recourse. The facility is for a
maximum amount of $30.0 million with limits on the maximum amount that can be
factored for each of the customers named in the facility. During the period,
no trade receivables were factored under this agreement. At the year end,
trade receivables amounting to $45.3 million (2022: $43.1 million) may be
factored under this facility and are therefore included in trade receivables
measured at fair value through OCI as at 31 December 2023. The cost of this
facility for the period, which amounted to $nil million (2022: $0.2 million),
is included in finance costs in the statement of comprehensive income and in
net cash from operating activities in the statement of consolidated cash
flows.
The Group has a trade facility with Barclays Bank for customers which it sells
to under letter of credit terms. Under this facility, Barclays Bank confirms
the letter of credit from the issuing bank and therefore assumes the credit
risk. Barclays Bank can also discount these letters of credit thereby
providing early payment of receivables to the Group. There is no limit under
the Barclays Bank facility. During the period, trade receivables of $10.9
million (2022: $201.4 million) were discounted under this facility. At the
year end, there were $65.2 million (2022: $31.2 million) of trade receivables
which can be discounted under this facility. The cost of this facility for the
period, which amounted to $1.5 million (2022: $2.0 million), is included in
finance costs in the statement of comprehensive income and in net cash from
operating activities in the statement of consolidated cash flows.
The table below summarises the maturity profile of the Group’s financial
liabilities at 31 December 2023 based on the gross contractual undiscounted
payments:
Financial liabilities Total $’000 Less than one year $’000 Between two and five years $’000 More than five years $’000
Bank loans 48,799 33,087 15,712 -
Lease liabilities 2,019 390 1,173 456
Trade and other payables 38,564 38,564 - -
89,382 72,041 16,885 456
The table below summarises the maturity profile of the Group’s financial
liabilities at 31 December 2022 based on the gross contractual undiscounted
payments:
Financial liabilities Total $’000 Less than one year $’000 Between two and five years $’000 More than five years $’000
Bank loans 80,795 33,653 47,142 -
Lease liabilities 2,409 390 1,447 572
Trade and other payables 35,293 35,293 - -
118,497 69,336 48,589 572
As disclosed in Note 14, the Group has bank loans that contain loan covenants.
A future breach of covenant may require the Group to repay the loan earlier
than indicated in the above table. Under the loan agreement, the covenants are
monitored on a regular basis by Group finance and regularly reported to
management and the lenders to ensure compliance with the agreement.
Furthermore, the group has authorised and committed expenditure on
operations-related capital projects amounting to $93,7 million (2022: $11.5
million).
Risk concentration
Concentrations arise when a number of counterparties are engaged in similar
business activities, or activities in the same geographical region, or have
economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic, political or
other conditions. Concentrations indicate the relative sensitivity of the
Group’s performance to developments affecting a particular industry.
The Group evaluates the concentration of risk with respect to trade
receivables as low, as its customers are located in several jurisdictions and
industries and operate in largely independent markets. Details of
concentration of revenue are included in Note 2.
Market risk
Market risk is risk that changes in market prices, foreign exchange rates and
interest rates will affect the Group’s income statement. The objective of
market risk management is to manage and control market risk exposures while
optimising returns.
Currency risk
The Group is exposed to transactional foreign currency risk to the extent that
there is a mismatch between the currencies in which sales, purchases,
receivables and borrowings are denominated and the respective functional
currencies of Group companies. The functional currency of all Group entities
is US Dollars. The presentational currency of the Group is US Dollars. Sales
and bank loans are denominated in US Dollars, which significantly reduces the
exposure of the Group to foreign currency risk. Payable transactions are
denominated in Mozambican Metical, South African Rand, Euro, Sterling,
Australian Dollar and Renminbi.
During the year the Group entered into an agreement with Absa Bank Mauritius
Ltd for the purchase and sale of US Dollars and South African Rand and the
purchase of Mozambican Metical. The limit on the facility is $24 million and
the maximum tenor is 3 months. The Group also entered into an agreement with
Standard Bank Mauritius Ltd for the purchase of South African Rand. The limit
on the facility is approximately $12.0 million and the maximum tenor is 3
months. There were no forward contracts in place at the period end.
Exposure to currency risk
The Group’s gross exposure to currency risk as at 31 December 2023 is as
follows.
Mozambican Metical $’000 South African Rand $’000 Euro $’000 Sterling $’000 Australian Dollar $’000 Renminbi $’000
Trade and other receivables 12,956 1,712 338 395 156 -
Cash and cash equivalents 5,371 9,296 571 499 3 17
Bank loans - - - - - -
Leases - - (1,255) - - -
Trade and other payables (12,919) (1,741) (296) - - -
Net exposure 5,408 9,267 (642) 894 159 17
The Group’s exposure to currency risk as at 31 December 2022 is as follows.
Mozambican Metical $’000 South African Rand $’000 Euro $’000 Sterling $’000 Australian Dollar $’000 Renminbi $’000
Trade and other receivables 12,172 756 489 72 88 -
Cash and cash equivalents 1,397 12,894 892 1,129 17 34
Bank loans - - - - - -
Leases - - (1,255) - - -
Trade and other payables (20,367) (2,178) (502) (10) - -
Net exposure (6,798) 11,472 (376) 1,191 105 34
Sensitivity analysis
A reasonably possible strengthening or weakening of the Mozambique Metical,
South African Rand, Euro, Sterling, Australian Dollar and Renminbi by 10%
against the US Dollar would have affected profit or loss by the amounts shown
below. The analysis assumes that all other variables remain constant.
Profit or loss Mozambican Metical $’000 South African Rand $’000 Euro $’000 Sterling $’000 Australian Dollar $’000 Renminbi $’000
31 December 2023
Strengthening 540 927 (64) 89 16 2
Weakening (540) (927) 64 (89) (16) (2)
31 December 2022
Strengthening (680) 1,147 (38) 119 11 3
Weakening 680 (1,147) 38 (119) (11) (3)
Interest rate risk
The loan facilities are arranged at variable rates and expose the Group to
cash flow interest rate risk. Variable rates are based on six-month SOFR. The
borrowing rate at financial year end was 11.3% (2022: 9.2%). The interest rate
profile of the Group’s loan balances at the financial year end was as
follows:
Unaudited 2023 $’000 2022 $’000
Variable rate debt 48,799 80,795 -
Under the assumption that all other variables remain constant, a reasonable
possible change of 1% in the six-month SOFR rate results in a $0.5 million
(2022: $0.8 million) change in finance costs for the financial year.
The above sensitivity analyses are estimates of the impact of market risks
assuming the specified change occurs. Actual results in the future may differ
materially from these results due to developments in the global financial
markets, which may cause fluctuations in interest rates to vary from the
assumptions made above and therefore should not be considered a projection of
likely future events.
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 was amended with effect from 11
March 2023. As a result of the amendment, interest rates for interest periods
commencing from 11 March 2023 onwards were 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 Group has concluded that the new basis for determining cashflows is
economically equivalent to the previous basis.
19. Events after the statement of financial position date
New Debt Facility
On 4 March 2024, the Group entered into a $200 million Revolving Credit
Facility (“RCF”) provided by Absa Bank Limited (acting through its
Corporate and Investment Banking Division), Nedbank Limited (acting through
its Nedbank Corporate and Investment Banking division) (“Nedbank”), Rand
Merchant Bank and Standard Bank Group (“Standard Bank”). The Mandated Lead
Arranger in respect of the Facility was Rand Merchant Bank.
The interest rate is 4.85% plus SOFR with a term of five years. The facility
replaces the existing corporate debt facilities that were put in place in
2019. The facility envisages the debt sharing of security with mine closure
guarantee facility of up to $50 million (an increase from the $40 million
facility under the existing facilities).
Proposed dividend
On 19 March 2024, the Board proposed a final dividend of USc38.54 per share.
This proposed dividend is subject to approval by the shareholders at the
Annual General Meeting. These financial statements do not reflect this
dividend.
GLOSSARY – ALTERNATIVE PERFORMANCE MEASURES
Certain financial measures set out in the Annual Report to 31 December 2023
are not defined under International Financial Reporting Standards (IFRS), 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 IFRS. 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 Product Revenue Provides a group margin for the earnings and performance of the Group
Capital costs Additions to property, plant and equipment in the period Provides the amount spent by the Company on additions to property, plant and equipment in the period
Cash operating cost per tonne of finished product produced Total costs less freight and other non-cash costs, including depreciation and inventory movements divided by final product production (tonnes) Eliminates the non-cash impact on costs to identify the actual cash outlay for production and, as production 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 co-products Cash operating costs less revenue of zircon, rutile and mineral sands concentrates, divided by ilmenite production (tonnes) Eliminates the non-cash impact on costs to identify the actual cash outlay for production and, as production 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 fees and expenses plus lease liabilities net of cash and cash equivalents Measures the amount the Group would have to raise through refinancing, asset sale or equity issue if 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 its portfolio of assets.
Shareholder returns Dividends and share buy backs Shareholder returns comprise the interim dividend, the proposed final dividend to be approved by shareholders at the AGM and any share buy backs
EBITDA
2019 $m 2020 $m 2021 $m 2022 $m 2023 $m
Operating profit 57.3 33.4 151.1 233.4 155.1
Depreciation 33.4 42.3 63.1 64.6 65.2
EBITDA 90.7 75.7 214.2 298.0 220.3
EBITDA margin
2019 $m 2020 $m 2021 $m 2022 $’m 2023 $’m
EBITDA 90.7 75.7 214.2 298.0 220.3
Mineral Product Revenue 255.5 231.5 420.5 498.4 437.1
EBITDA margin (%) 35% 33% 51% 60% 50%
Cash operating cost per tonne of finished product
2019 $m 2020 $m 2021 $m 2022 $m 2023 $m
Cost of sales 195.7 192.3 295.0 282.7 294.9
Administrative expenses 17.9 18.1 9.8 9.9 8.4
Total operating costs 213.6 210.4 304.8 292.6 303.3
Freight (15.4) (12.2) (35.4) (27.6) (21.4)
Total operating costs less freight 198.2 198.2 267.5 265.0 281.9
Non-cash costs
Depreciation and amortisation (33.4) (42.3) (63.1) (64.6) (65.2)
Expected credit losses - - (0.2) (1.1) -
Share-based payments (1.8) (0.5) (1.1) (2.2) (3.3)
Mineral product inventory movements (4.5) 4.9 (9.3) 21.6 14.7
Total cash operating costs 158.5 160.3 195.7 218.7 228.1
Final product production tonnes 988,300 840,500 1,228,500 1,200,800 1,091,500
Cash operating cost per tonne of finished product $160 $191 $159 $182 $209
Cash operating cost per tonne of ilmenite
2019 $m 2020 $m 2021 $m 2022 $’m 2023 $’m
Total cash operating costs 158.5 160.3 195.7 218.7 228.1
Less revenue from co-products zircon, rutile and mineral sands concentrate (84.5) (63.2) (85.8) (150.9) (122.0)
Total cash costs less co-product revenue 74.0 97.1 109.9 67.8 106.1
Ilmenite product production tonnes 892,900 756,000 1,119,400 1,088,300 986,300
Cash operating cost per tonne of ilmenite $83 $128 $98 $62 $108
Net cash/debt
2019 $’m 2020 $’m 2021 $’m 2022 $’m 2023 $’m
Bank debt (60.9) (145.8) (148.1) (78.6) (47.9)
Transaction costs (6.6) (5.4) (3.8) (2.2) (0.9)
Gross debt (67.5) (151.2) (151.9) (80.8) (48.8)
Lease liabilities (4.5) (3.4) (2.2) (1.8) (1.5)
Cash and cash equivalents 81.2 87.2 69.1 108.3 71.0
Net cash/(debt) 9.2 (67.4) (85.0) 25.7 20.7
Return on Capital Employed
Restated $m Restated $m Restated $m 2022 $’m 2023 $’m
Operating profit 57.3 33.4 151.1 233.4 155.1
Total Equity and Non-Current Liabilities 984.0 1,087.5 1,045.4 1,170.4 1,180.9
ROCE 6% 3% 15% 20% 13%
GLOSSARY – TERMS
Term Description
AIFR All injuries frequency rate. Provides the number of injuries at the Mine in the year, per 200,000 hours worked.
AGM Annual general meeting
CIF The seller delivers when the goods pass the ship’s rail in the port of shipment. Seller must 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. This term can only be used for sea transport.
CFR This term means the seller delivers when the goods pass the ship’s rail in port of shipment. Seller must 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. This term can only be used for sea transport.
The Company or Parent Company Kenmare Resources plc.
DFS Definitive feasibility studies are the most detailed and will determine definitively whether to proceed with the project. A definitive feasibility study will be the basis for capital appropriation, and will provide the budget figures for the project. Detailed feasibility studies require a significant amount of formal engineering work and are accurate to within approximately 10–15%.
EdM Electricidade de Moçambique.
EGM Extraordinary General Meeting
EPCM Engineering, Procurement and Construction Management.
FOB Free on Board means that the seller delivers when the goods pass the ship’s rail at the named port of shipment. This means the buyer has to bear all costs and risks to the goods from that point. The seller must clear the goods for export. This term can only be used for sea transport.
Free Cash Flow Free Cash Flow is the cash generated by the Group in a reporting period before distributions to shareholders.
Gender diversity Percentage of females in the workforce at the Moma Mine. The Group recognise the benefits to our business of supporting diversity, equity, and inclusion for long-term sustainable success.
GHG emissions Scope 1 & 2 Greenhouse Gas emissions. The Group acknowledges the human contribution to climate change and aim to reduce emissions its already low carbon intensity operations.
GISTM Global Industry Standard of Tailings Management
Group or Kenmare Kenmare Resources plc and its subsidiary undertakings.
HMC Heavy mineral concentrate extracted from mineral sands deposits and which include ilmenite, zircon, rutile and other heavy minerals and silica.
Implementation Agreement The agreement for the Moma Heavy Mineral Sands Industrial Free Zone Project between Kenmare Moma Processing Limited (a company incorporated in Jersey whose rights and interests were transferred to KMPL in November 2002), a wholly owned subsidiary of Kenmare, and Mozambique dated 21 January 2002.
KMAD Kenmare Moma Development Association
KMML Mozambique Branch Mozambique branch of Kenmare Moma Mining (Mauritius) Limited (KMML).
KMPL Mozambique Branch Mozambique branch of Kenmare Moma Processing (Mauritius) Limited (KMPL).
KRSP Kenmare Resources plc Restricted Share Plan
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”).
LTI Lost time injury. Measures the number of injuries at the mine that result in time lost from work.
LTIFR Lost time injury frequency rate. Measures the number of injuries causing lost time per 200,000 man hours worked on site
Marketing – finished products shipped Finished products shipped to customers during the period. Provides a measure of finished products shipped to customers
Mining – HMC produced Heavy mineral concentrate extracted from mineral sands deposits and which includes ilmenite, zircon, rutile, concentrates and other heavy minerals and silica. Provides a measure of heavy mineral concentrate extracted from the Mine
Moma, Moma Mine or the Mine The Moma Titanium Minerals Mine consisting of a heavy mineral sands mine, processing facilities and associated infrastructure, which is located in the north east coast of Mozambique under licence to the Project Companies.
Mine Closure Guarantee Facility $40 million debt facility dated 11 December 2019 between the Lenders and KMML Mozambique Branch and KMPL Mozambique Branch.
MTA Mozambique Ministry of Land and Environment.
MSP Mineral Separation Plant.
Mtpa Million tonnes per annum.
NOSA National Occupational Safety Association
OIA Oman Investment Authority formerly the State General Reserve Fund of the Sultanate of Oman.
Odd lot offer The offer made by the Company to members in the UK and Ireland who held certificated holdings of less than 200 ordinary shares as described in the circular to shareholders dated 21 April 2022.
Ordinary Shares Ordinary shares of €0.001 each in the capital of the Company.
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 detailed 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.
Processing – finished products produced Finished products produced by the mineral separation process. Provides a measure of finished products produced from the processing plants
Project Companies Kenmare Moma Mining (Mauritius) Limited and Kenmare Moma Processing (Mauritius) Limited, wholly owned subsidiary undertakings of Kenmare Resources plc, which are incorporated in Mauritius.
Revolving Credit Facility $200 million debt facility which was executed 11 March 2024 between the Lenders and KMML Mozambique Branch and KMPL Mozambique Branch.
RUPS Rotary Uninterruptible Power Supply
TCFD Task Force on Climate Related Financial Disclosures
Tender Offer The invitation by the Company to eligible shareholders to tender Ordinary Shares for purchase on-market by Peel Hunt LLP on the terms and subject to the conditions set out in the circular dated 15 August 2023.
Term Loan Facility $110 million debt facility dated 11 December 2019 between the Lenders and KMML Mozambique Branch and KMPL Mozambique Branch.
THM Total heavy minerals in the ore of which ilmenite (typically 82%), rutile (typically 2.0%) and zircon (typically 5.5%) total approximately 90%.
UK United Kingdom
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.
WHIMS Wet High Intensity Magnetic Separation Plant