Kenmare Resources Report On Payments To Governments 2020
May 17 2021 - 11:09AM
UK Regulatory
TIDMKMR
Kenmare Resources plc ("Kenmare" or "the Company")
17 May 2021
Report on payments to governments 2020
Introduction
This report details payments to governments made by Kenmare Resources
plc (the "Company") and its subsidiary undertakings (the "Group") for
the financial year ended 31 December 2020.
This report has been prepared in accordance with the requirements of
Part 2A of the Transparency (Directive 2004/109/EC) Regulations, 2007
(as amended) ("Part 2A"), Part 26 of the Companies Act 2014 ("Part 26")
and rule DTR 4.3A of the UK Financial Conduct Authority's Disclosure
Guidance and Transparency Rules ("DTR 4.3A"). Part 2A and Part 26 enact
in Ireland domestic rules in line with Directive 2013/34/EU (the "EU
Accounting Directive (2013)) and apply to large Irish incorporated
companies, like the Company, that are involved in the exploration,
discovery, development, and extraction of minerals. DTR 4.3A imposes
equivalent requirements on issuers, like the Company, admitted to
trading on the London Stock Exchange that are similarly involved in the
exploration, development and extraction of minerals.
This report is available for download at
https://www.kenmareresources.com/investors/reports-and-presentations
Kenmare Resources plc
Kenmare Resources plc is an Irish incorporated company with a premium
listing on the London Stock Exchange and a secondary listing on Euronext
Dublin. The principal activity of the Group is the operation of the Moma
Titanium Minerals Mine (the "Moma Mine"). The Moma Mine is located on
the northern coast of Mozambique and is one of the world's largest
producers of minerals sands products, accounting for production of
approximately 5% of the global titanium feedstocks, and supplying to
customers operating in over 15 countries across the globe. The products
the Group produces are key raw materials, ultimately consumed in
everyday "quality-of-life" products such as paints, plastics and ceramic
tiles.
The Group consists of the parent company (Kenmare Resources plc) and its
subsidiary undertakings. The mining operations at the Moma Mine are
carried out by the Mozambique branch of Kenmare Moma Mining (Mauritius)
Limited ("KMML") and downstream processing is undertaken by the
Mozambique branch of Kenmare Moma Processing (Mauritius) Limited
("KMPL"), both of which are wholly-owned subsidiary undertakings of the
Company. KMML and KMPL account for 100% of the Group's turnover and 96%
of the Group's total assets. Therefore, all revenues and operating costs
of the Group's mining and processing operations are recorded by KMML and
KMPL within the same tax jurisdiction, namely Mozambique.
The parent company, Kenmare Resources plc, conducts no direct
exploration or mining activities. The Group's corporate costs are
recorded by the parent company.
Scope of report
Disclosure of payments to governments is required in respect of payments
arising from the exploration, discovery, development and extraction of
minerals; the payments included within this report therefore relate to
the Group's mining and processing activities at the Moma Project in
Mozambique.
Groups are required to prepare a consolidated report disclosing payments
made by the parent company and its subsidiary undertakings. Accordingly,
this report reflects payments made by the Group companies conducting
mining and processing activities, namely KMML and KMPL. The Group owns
100% of these entities and the amounts reflect 100% of the payments made
by these subsidiary undertakings.
Payments
The payments disclosed in this report are on a cash basis.
The payments made to governments are required to be analysed into the
following categories:
-- Production entitlements
-- Taxes - taxes levied on the income, production or profits of companies,
excluding taxes levied on consumption, value added taxes, personal income
taxes, sales taxes, property taxes or municipal charges.
KMML is subject to a corporation tax rate of 35% of the taxable profits
of its Mozambique branch. Taxable profits of the branch are calculated
by reference to the cash costs of producing heavy mineral concentrate
("HMC") net of allowable tax deductions and increased by a defined
margin.
KMML's Mozambique branch produces one product from its mining activities,
namely HMC. This HMC is sold to KMPL which processes it into finished
products (ilmenite, zircon, rutile and mineral sands concentrate), which
are exported worldwide to third party customers. The cash costs of
mining include the costs of mine face preparation, dredging and dry
mining operations, wet contractor plant operations, rehabilitation and
support services.
The margin applied to the cash costs of mining is stipulated in the
Mineral Licensing Contract, dated 21 January 2002. The contract is
between KMML and the Ministry of Mineral Resources and Energy (MIREME)
of the Republic of Mozambique, acting for and on behalf of the
Government of the Republic of Mozambique, which details the terms and
conditions for the exploration, development and production of heavy
minerals in the areas of Moma, Congolone and Quinga. The margin is
determined by dividing the prices for sale of finished products to third
party customers earned by KMPL in the year by the prices earned in the
prior year, adjusted for inflation and applying this factor to the prior
year margin. For the fiscal year ending 31 December 2020 the margin was
48.1%.
KMPL has the benefit of operating within an Industrial Free Zone ("IFZ")
and as an IFZ company, it is exempted from corporation tax.
-- Royalties -- typically amounts levied based on production levels or
revenues.
KMML is subject to a mining royalty of 3% based on HMC sold to KMPL. The
royalty is calculated by multiplying the cash costs of producing HMC,
plus the margin as detailed above, by 3%.
KMPL is subject to a revenue royalty of 1% on revenue recognised.
-- Dividends
-- Bonuses - signature, discovery and production bonuses.
-- Fees - licence fees, rental fees, entry fees and other considerations for
mining licences or concessions.
-- Infrastructure improvements - payments to governments for infrastructure
other than in circumstances where the infrastructure is expected to be
primarily dedicated to operational activities throughout its useful life.
Payments that form part of the Group's social investment activities
(which are primarily organised and administered by Kenmare Moma
Development Association) are excluded. Such payments would include
contributions in respect of local schools, healthcare or community
facilities, or improvements to the general environment of local
communities.
Government
"Government" means any national, regional or local authority of a
country, and includes a department, agency or undertaking that is a
subsidiary undertaking where the authority is the parent undertaking.
All payments referred to this report are made to the Government of
Mozambique or its agencies; in particular, they are made to Autoridade
Tributária Unidade dos Grandes Contribuintes--Nampula, a department
of the Mozambican tax authority.
Materiality
Under Part 2A and Part 26, a payment need not be disclosed if it is a
single payment of less than the equivalent of EUR100,000 or a series of
related payments in a single year whose total is less than the
equivalent of EUR100,000.
Analysis by project/entity
An analysis of payments by project is required where payments are
attributable to specific projects. Projects are defined as operational
activities which are governed by a single contract, licence, lease,
concession or similar legal agreement, and form the basis for payment
liabilities with a government. Where agreements are substantially
interconnected in operating and geographical terms, with substantially
similar terms, those agreements should be treated as a single project.
Payments may be disclosed at an entity level where payments are made in
respect of obligations imposed at that entity level rather than at a
project level. Payments below are disclosed at the entity level for KMML
and KMPL, which between them operate the Moma Mine, which is treated as
one project for purposes of this Report.
Rounding
The amounts shown in this report have been rounded to the nearest
US$1,000.
PAYMENTS TO GOVERNMENTS -- 2020
Production Infrastructure
entitlements Taxes Royalties Dividends Bonuses Fees improvements Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Country summary
Government
of
Mozambique - 5,748 6,064 - - - - 11,812
Total - 5,748 6,064 - - - - 11,812
------------ ------- --------- --------- ------- ------- -------------- ---------
Entity report
KMML - 5,748 3,627 - - - - 9,375
KMPL - - 2,437 - - - - 2,437
Total - 5,748 6,064 - - - - 11,812
------------ ------- --------- --------- ------- ------- -------------- ---------
This report for Kenmare Resources plc (registered number 37550) was
approved by the Directors of the Company on 11 May 2021 and signed on
their behalf by
Michael Carvill, Director
Tony McCluskey, Director
For further information, please contact:
Kenmare Resources plc
Jeremy Dibb
Investor Relations
Tel: +353 1 671 0411
Mob: + 353 87 943 0367
Murray (PR advisor)
Joe Heron
Tel: +353 1 498 0300
Mob: +353 87 690 9735
About Kenmare Resources
Kenmare Resources plc is one of the world's largest producers of mineral
sands products. Listed on the London Stock Exchange and the Euronext
Dublin, Kenmare operates the Moma Titanium Minerals Mine in Mozambique.
Moma's production accounts for approximately 7% of global titanium
feedstocks and the Company supplies to customers operating in more than
15 countries. Kenmare produces raw materials that are ultimately
consumed in everyday "quality-of life" items such as paints, plastics
and ceramic tiles.
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