Q4 2023 Production Report and 2024 Guidance
17/01/2024 07:00
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Kenmare Resources plc
(“Kenmare” or the “Company” or “the Group”)
17 January 2024
Q4 2023 Production Report and 2024 Guidance
Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global producers
of titanium minerals and zircon, which operates the Moma Titanium Minerals
Mine (the "Mine" or "Moma") in northern Mozambique, is pleased to provide a
trading update for the full year 2023 and the fourth quarter ending 31
December 2023 (“Q4 2023”) and production and operating cost guidance for
2024.
Statement from Michael Carvill, Managing Director:
“Kenmare achieved two million hours worked without a Lost Time Injury in
December 2023. It is encouraging to see a return to strong safety performance
as the health and wellbeing of our team at the Moma Mine is our highest
priority.
Ilmenite production was 986,300 tonnes in 2023, within our revised guidance
range for the year, and production of our other products met or exceeded our
original guidance.
Markets for our products were challenging in 2023 due to global economic
uncertainty, resulting in lower pricing. However strong pigment production in
China and the thriving titanium metal market drove demand for our high-quality
ilmenite, relative to other titanium feedstocks.
In 2023, we made $31 million of debt repayments, paid $58 million in
dividends, bought back $30 million in shares, began the capital investment for
the transition to Nataka, and finished the year with $21 million net cash. We
expect total 2023 dividends to be approximately $50 million.”
Overview
* Lost Time Injury Frequency Rate (“LTIFR”) of 0.15 per 200,000 hours
worked to 31 December 2023 (31 December 2022: 0.09), with zero Lost Time
Injuries (“LTIs”) in Q4 2023
* 2023 revised production guidance achieved for ilmenite; original production
guidance achieved for primary zircon and rutile and materially exceeded for
concentrates
* Heavy Mineral Concentrate (“HMC”) production of 1,448,300 tonnes in
2023, a 9% decrease compared to 2022 (1,586,200 tonnes), due to lower ore
grades and mining rates impacted by power interruptions and a severe lightning
strike in Q1
* Ilmenite production of 986,300 tonnes in 2023, a 9% decrease on 2022
(1,088,300 tonnes), and broadly in line with the reduction in HMC processed
* Shipments of finished products of 1,045,200 tonnes in 2023, a 3% decrease on
2022 (1,075,600 tonnes). Q4 2023 was the strongest quarter of the year, with
324,900 tonnes shipped
* Share buy-back of 5.9% of Kenmare’s issued share capital for £23.6
million ($30.0 million) completed in September 2023
* Interim 2023 dividend of USc17.5 per share paid in October 2023, an increase
of 59% compared to H1 2022 (USc10.98)
* Net cash of $20.7 million at year-end 2023 (2022: $27.5 million net cash),
with cash and cash equivalents of $71.0 million (year-end 2022: $108.3
million)
* Weakness in the global economy led to lower average prices for all of
Kenmare’s products in 2023
* Ilmenite production guidance for 2024 is 950,000 to 1,050,000 tonnes
Operations update
Operational results for the Moma Mine in Q4 and full year 2023 were as
follows:
Q4 2023 vs Q4 2022 vs Q3 2023 2023 vs 2022
tonnes % change % change tonnes % change
Excavated ore (1) 9,348,000 -8% -14% 38,549,000 -4%
Grade (1) 4.83% 2% 12% 4.38% -5%
Production
HMC produced 399,800 -1% -4% 1,448,300 -9%
HMC processed 399,800 0% -3% 1,450,400 -8%
Ilmenite 269,600 -5% -7% 986,300 -9%
Primary zircon 14,000 -4% -1% 51,100 -13%
Rutile 2,100 -5% -22% 8,400 -6%
Concentrates (2) 10,500 -10% -29% 45,700 1%
Shipments 324,900 -11% 99% 1,045,200 -3%
1. Excavated ore and grade prior to any floor losses.
2. Concentrates include secondary zircon and mineral sands concentrate.
In December 2023, Kenmare achieved two million hours without an LTI. Five LTIs
were recorded in the 12 months to 31 December 2023, resulting in a rolling
12-month LTIFR of 0.15 per 200,000 hours worked (31 December 2022: 0.09).
HMC production in Q4 2023 was 399,800 tonnes, a 1% decrease compared to Q4
2022 (404,000 tonnes).
HMC production in 2023 was 1,448,300 tonnes, down 9% compared to 2022
(1,586,200 tonnes), although with significantly improved production in H2
(814,400 tonnes versus 633,900 tonnes in H1 2023). The 9% annual reduction was
a product of a 4% decrease in excavated ore volumes to 38,549,000 tonnes
(2022: 40,029,000 tonnes) and a 5% decrease in ore grades to 4.38% (2022:
4.61%). Ore volumes were impacted primarily by the effects of the severe
lightning strike in Q1 and power supply interruptions, which affected
operations throughout the year. Ore grades were down principally due to Wet
Concentrator Plant (“WCP”) B mining in wetlands, where grades were lower
than expected, and WCP A mining lower grade ore as it approaches the end of
its mine path in Namalope.
Production of all finished products decreased in Q4 2023 compared to Q4 2022,
although HMC processed was in line with the prior period. Ilmenite production
was 269,600 tonnes in Q4 2023, down 5% compared to Q4 2022 (283,900 tonnes),
due to lower recoveries, as a result of a shortage of HMC and some unplanned
stoppages. Similarly, primary zircon and rutile production were down 4% and
5%, while concentrates production was down 10%.
For 2023, ilmenite production was 986,300 tonnes and within the revised
guidance range of 980,000 to 1,040,000 tonnes. Production of primary zircon
and rutile was within original guidance and concentrates production exceeded
original guidance.
Ilmenite production in 2023 was down 9% compared to 2022 (1,088,300 tonnes),
broadly in line with the 8% reduction in HMC processed.
Primary zircon production was 51,100 tonnes in 2023, a 13% decrease compared
to 2022 (58,400 tonnes). This was the product of reduced HMC processed and
lower recoveries.
Rutile production was 8,400 tonnes in 2023, a 6% decrease compared to 2022
(8,900 tonnes). This reflects the reduction in HMC processed, partially offset
by higher rutile content in the HMC and the drawdown of intermediate stock.
Concentrates production was 45,700 tonnes in 2023, up 1% compared to 2022
(45,200 tonnes), performing better relative to other products as a result of
lower recoveries in primary zircon and the processing of intermediate
stockpiles.
Q4 2023 was the strongest quarter of the year for shipments, with 324,900
tonnes shipped, despite poor weather conditions. Although volumes were down
11% compared to Q4 2022 (365,700 tonnes), which was a near record quarter,
they were up 99% compared to Q3 2023. Shipments in Q4 2023 comprised 278,700
tonnes of ilmenite, 22,300 tonnes of primary zircon, 4,500 tonnes of rutile
and 19,500 tonnes of concentrates.
Shipment volumes in 2023 were 1,045,200 tonnes, a 3% decrease compared to 2022
(1,075,600 tonnes). This was impacted by more cautious buying from customers
during this period of weaker demand, compounded by destocking. Shipments
during the year comprised 939,000 tonnes of ilmenite, 51,300 tonnes of primary
zircon, 7,900 tonnes of rutile and 47,000 tonnes of concentrates.
Closing stock of HMC at the end of 2023 was 16,700 tonnes, compared with
18,800 tonnes at the start of the year. Closing stock of finished products at
the end of 2023 was 259,100 tonnes, compared with 213,500 tonnes at the end of
2022. Shipments are expected to exceed production in Q1 2024, partly as a
result of shipments deferred from Q4 2023 due to weather.
Capital projects update
As previously announced, WCP A will complete mining at Namalope in late 2025
and commence its transition to the Nataka ore zone. Nataka is the largest of
Moma’s ore zones, representing 75% of Kenmare’s Mineral Resources. WCP A
is expected to mine Nataka for the remainder of its economic life, which
exceeds 20 years.
The development capital expenditure profile for the transition to Nataka was
announced in April 2023 at Kenmare’s Capital Markets Day (“CMD”) and
updated in December 2023 in the Projects Update.
Although orders for important long lead time items, such as the two new
dredges, were placed in 2023, the capital incurred was lower than forecast,
increasing the capital to be spent in subsequent years.
The table below compares the two estimated spending profiles:
Capital cost schedule ($m) 2023 2024 2025 2026 2027 Total
April 2023 (CMD) 29 130 88 23 270
December 2023 11 179 121 20 10 341
As previously outlined in December 2023, the $341 million capital expenditure
represents the upper end of the $316-331 million range, plus the $10 million
of additional infrastructure in 2027. The range relates to the WCP A
Infrastructure Definitive Feasibility Study (“DFS”), which is still
underway and scheduled to be completed in Q2 2024. The costs of which are
currently estimated to be $91-106 million.
The increase of $71m in the project cost estimates are principally related to:
* Changes in scope/design (approximately 60%): The scope amendments reflect
opportunities to mitigate execution risk of the project and enhance long-term
operational capacity.
* Additional indirect costs (approximately 25%): Engineering, Procurement and
Construction Management (EPCM) and Owners costs were comprehensively updated
as part of the DFS process to include increased project governance for
schedule risk minimisation.
* Contingency additions (approximately 15%): A quantitative risk assessment of
the project components has been completed for the WCP A upgrade and Tailings
Storage Facility. This process, which included comparison against multiple
international projects with similar characteristics, recommended the inclusion
of additional contingency to manage the potential for schedule overrun and
reflect the remote location.
Finance update
On 13 October 2023, Kenmare paid its interim 2023 dividend of USc17.5 per
share, an increase of 59% compared to the interim 2022 dividend (USc10.98 per
share). This represented a total interim distribution of $16.6 million.
The Company expects total dividends in respect of 2023 to be approximately $50
million, subject to prevailing product market and other conditions. This in
line with Kenmare’s dividend policy payout ratio of 20% to 40% of underlying
Profit After Tax.
In September 2023 Kenmare completed a share buy-back. The Company repurchased
approximately 5.6 million shares, representing 5.9% of the Company’s issued
share capital, for a total consideration of £23.6 million ($30.0 million).
The Company’s debt refinancing process, initiated in September 2023 to
support the capital programme, is well-advanced and expected to complete in Q1
2024.
At 31 December 2023, Kenmare had net cash of $20.7 million (2022: $27.5
million net cash). Cash and cash equivalents were $71.0 million (2022: $108.3
million) and gross bank loans, including accrued interest, were $50.3 million
(2022: $80.8 million).
Market update
Demand for Kenmare’s products remained relatively robust in 2023, although
prices decreased through the year due to weaker global economic activity.
Despite this short-term pressure, the Company believes the fundamentals for
its products are strong, due primarily to medium- and long-term supply
constraints within the titanium feedstocks industry.
In 2023, feedstock supply remained flat. Several large western feedstock
producers have depleting Mineral Resources and production disruptions were
experienced at several major operations outside China, reducing global supply.
However, this was balanced by increased volumes of ilmenite concentrates
entering China in 2023, the largest source of new supply.
Downstream demand for titanium pigment remained soft in 2023, although
improving as H2 progressed. While western pigment producers reduced
production, this was partially offset by significantly increased pigment
production in China. Consequently, Kenmare experienced elevated demand from
Chinese pigment producers, who prefer to purchase ilmenite for beneficiation
over high-grade feedstocks.
The challenges faced by the pigment market prompted producers to sustain
lower-than-normal inventories throughout 2023 and the rebuilding of these
inventories through increased utilisation rates in 2024 will support demand
for ilmenite. Market dynamics continue to favour Kenmare’s ilmenite and the
Company has a strong order book for Q1 2024, whilst also benefiting from its
first quartile cost position. Nonetheless, the Company is experiencing lower
pricing in Q1 2024 than it achieved in Q4 2023.
Demand for zircon remained sluggish in Q4 2023, as global economic uncertainty
continues to weigh on demand for products such as ceramic tiles. Prices for
zircon in Europe remain under pressure in early 2024 but Kenmare has seen a
stabilisation in the Chinese spot market in recent months, which should
provide some support to the global market.
2024 guidance
2024 guidance for production and operating costs is as follows:
Unit 2024 Guidance 2023 Actual
Production
Ilmenite tonnes 950,000-1,050,000 986,300
Primary zircon tonnes 45,000-50,000 51,100
Rutile tonnes 8,000-9,000 8,400
Concentrates (1) tonnes 37,000-41,000 45,700
Costs
Total cash operating costs $m 219-243 N/R (2)
Cash costs per tonne of finished product $/t 198-218 N/R (2)
1. Concentrates include secondary zircon and mineral sands concentrate.
2. To be reported in full year financial statements.
Ilmenite production in 2024 is expected to be between 950,000 and 1,050,000
tonnes. Excavated ore volumes are expected to increase relative to 2023,
although a conservative view of WCP B ore grades in the wetlands and lower
grades from dry mining result in production of HMC and final products being in
line with 2023. Production is anticipated to be weighted towards H2 due to the
grade profile and planned maintenance on WCP B in Q1.
Following poor electrical reliability in 2023, Kenmare has intervened and
funded the refurbishment of the Nampula statcom in the Electricidade de
Moçambique (“EdM”) network. This was commissioned in Q4 2023 and is
expected to provide increased stability in the regional power grid. In
addition, a new 400kw line is under construction by EdM and expected to
connect to Nampula in H1 2024, further enhancing network stability.
Closing product inventories at the end of 2023 were above normal levels,
providing the opportunity to maintain sales volumes with lower production in
H1 2024.
Total cash operating costs are anticipated to increase to $219-243 million in
2024, largely due to cost increases in production overheads and power. Total
cash operating costs for 2023 are anticipated to be towards the upper end of
guidance ($208-228 million). Full details of 2023 costs will be provided with
the 2023 Preliminary Results.
Expenditure on development projects and studies is expected to be
approximately $189 million in 2024. These costs primarily relate to the
transition of WCP A to Nataka and feasibility studies for the upgrade works to
WCP B.
Improvement projects are expected to cost $6 million in 2024 and relate
primarily to upgrades to the Mineral Separation Plant.
Sustaining capital costs in 2024 are expected to be approximately $29 million.
Notice of 2023 Preliminary Results
Kenmare plans to release its 2023 Preliminary Results on Wednesday, 20 March
2024.
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb / Katharine Sutton / Michael Starke
Investor Relations
ir@kenmareresources.com
Tel: +353 1 671 0411
Mob: +353 87 943 0367 / +353 87 663 0875
Murray (PR advisor)
Paul O’Kane
pokane@murraygroup.ie
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