Kenmare Preliminary Results
For the year ended 31 December 2005
25 April 2006
Chairman's Statement
Dear Shareholder,
I am very pleased to report that during 2005 Kenmare has achieved
excellent progress in the development of the Moma Titanium Minerals
Project in Mozambique. Construction activity is over 80% complete and
the Project Contractor, a joint venture between Multiplex Limited and
Bateman BV, indicates that by the end of 2006 the plant will be ready
for handover to Kenmare.
We achieved several significant milestones during the year, including
the successful shipping of the wet concentrator and minerals
separation plants from Western Australia to Mozambique using a number
of specialised, ocean-going barges. The landing and off-loading of
these plants at Moma was also completed without incident and they are
currently being reassembled with good progress to date. The permanent
accommodation village is complete and currently houses a large number
of construction workers. Later this year, as the number of
construction workers decreases, the housing will become available to
Kenmare's own operations staff. The air strip is busy with an air
charter twice weekly transporting workers in and out of Moma.
Two suction cutter dredges, our principal mining equipment, arrived
in Durban ahead of schedule. One has been delivered to Moma and is
being assembled and the other is currently being transported to site.
Construction of the product transportation barge is underway in
Singapore. The jetty, for export of product, is ahead of schedule.
The start-up mining pond containing the re-assembled concentrator
plant and dredges is scheduled to be filled during the third quarter
of 2006 using fresh water from nearby Lake Mavele. This will be
supplemented, if necessary, by water from boreholes which have also
been drilled. The 170 km overhead power transmission line linking the
Mozambican grid at Nampula to the Moma site is almost complete and
will be energised in June 2006.
We have already hired the core management team for the ongoing
operation of the mine. We are delighted by the calibre of people that
have joined us and injected their enthusiasm and experience into
making Moma a great success. All of the operations team have specific
experience relevant to our task.
The key objective for Kenmare in the coming months is the successful
delivery of the mine within the existing envelope of project
financing. Everyone in the Company is focused on this demanding task.
We are looking forward to taking charge of the mine and the moving
into production.
I was delighted to announce recently the results from our resumed
exploration drilling programme. Total resources at Moma have
increased from 72 million tonnes to 101 million tonnes of ilmenite
plus valuable co-products zircon and rutile, which have also
increased to 7.8 million and 2.7 million tonnes respectively. This
increase makes Moma one of the largest exploitable titanium feedstock
and zircon deposits in the world.
We continue to make progress on the marketing of Moma production and
are pleased to report that we concluded further ilmenite sales during
the past year. Discussions are also ongoing with a number of other
customers for the uncommitted production and we anticipate entering
further sales agreements in the run-up to mine commissioning. The
market outlook for titanium minerals, ilmenite and rutile, is
positive, buoyed by strong growth in all end use sectors. The pigment
sector, which is by far the largest component of demand, is forecast
to grow at an average compound annual rate of 3% until at least 2015.
A principal driver of this growth is China, which currently relies
almost exclusively on sulphate-route technology utilising sulphate
grade ilmenite as its feedstock. This strong demand is putting upward
pressure on ilmenite prices and is expected to continue due to
limited new supply.
The titanium metal sector is also growing strongly due to the
resurgence in demand from the aerospace industry, as is the welding
electrode sector due to the recent shipbuilding boom.
Demand for zircon continues to be very robust with price increases of
20% expected in 2006, following on from similar increases in 2005.
The continuing strong demand from the ceramics sector, most notably
from China, coupled with limited new supply, is expected to see these
tight market conditions for zircon sand prevail in the coming years.
The financial results for 2005 have been prepared in accordance with
the Group's policies under International Financial Reporting
Standards (IFRS). Construction costs capitalised during the year
amounted to US$113.7 million while mineral exploration and project
development costs deferred amounted to US$42.6 million. To fund the
expenditure, loan disbursements amounted to US$164.7 million at the
year end.
Kenmare is committed to a programme of ongoing improvement in all
areas of its corporate responsibility. In line with our view of the
importance of these issues, Kenmare's safety performance is a key
Board meeting agenda item, together with the progress of the social
initiatives being undertaken by the Moma Development Association.
In July 2005, I was pleased to announce that Dr Chris Gilchrist,
Kenmare's Chief Operations Director, was elected as an Executive
Director of the Board.
I look forward to taking over the plant from the Contractor and,
while realising that it is a huge task, also look forward to a smooth
ramp-up of production to our anticipated steady state levels and
subject, inter alia, to market demand, targeting subsequent expansion
of the Moma Project.
Charles Carvill
Chairman
For more information:
Kenmare Resources plc
Michael Carvill, Managing Director Tel: + 353 1 671 0411
Mob: + 353 87 674 0110
Conduit PR Ltd
Leesa Peters Tel: +44 (0) 207 429 6600
Mob: + 44 (0) 781 215 9885
Murray Consultants Ltd
Elizabeth Headon Tel: + 353 1 498 0300
Mob: +353 87 989 7234
www.kenmareresources.com
KENMARE RESOURCES PLC
PRELIMINARY UNAUDITED RESULTS
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2005
2005 2004
US$'000 US$'000
Revenue - -
Operating gains/ (expenses) 2,861 (588)
Operating profit/ (loss) 2,861 (588)
Finance income 1,838 611
Profit before tax 4,699 23
Income tax expense - -
Profit for the year 4,699 23
Attributable to Equity holders 4,699 23
Earnings per share: Basic 0.72c 0.01c
Earnings per share: Diluted 0.61c 0.01c
KENMARE RESOURCES PLC
PRELIMINARY UNAUDITED RESULTS
GROUP BALANCE SHEET
AS AT 31 DECEMBER 2005
2005 2004
US$'000 US$'000
Assets
Non-Current Assets
Deferred Development Expenditure 104,228 61,662
Construction in Progress 187,721 73,983
291,949 135,645
Current Assets
Receivables 1,787 1,557
Cash and cash equivalents 75,520 92,851
77,307 94,408
Total Assets 369,256 230,053
Equity
Capital and reserves attributable to the
Company's equity holders
Called Up Share Capital 54,847 52,923
Share Premium 105,713 99,590
Retained Earnings (17,174) (21,873)
Other Reserves 36,373 34,713
Total Equity 179,759 165,353
Liabilities
Non-Current Liabilities
Bank loans 164,725 54,974
Accrued liabilities and other loans 8,616 1,568
173,341 56,542
Current Liabilities
Accrued liabilities 16,156 8,158
Total Liabilities 189,497 64,700
Total Equity and Liabilities 369,256 230,053
KENMARE RESOURCES PLC
PRELIMINARY UNAUDITED RESULTS
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2005
2005 2004
US$'000 US$'000
Operating Activities
Profit/ (loss) for the year 2,861 (588)
Adjustment for:
Depreciation - 8
Foreign exchange movement 2,095 2,992
Share-based payment expense 166 13
Operating cashflows 5,122 2,425
Increase in receivables (230) (1,467)
Increase in accrued liabilities and other 15,045 5,043
loans
Net cash from operating activities 19,937 6,001
Investing Activities
Interest received 1,838 612
Addition to Deferred Development Expenditure (42,566) (34,192)
Addition to Construction in Progress (113,738) (32,369)
Net cash used in investing activities (154,466) (65,949)
Financing Activities
Issue of Ordinary Share Capital 8,047 96,395
Share option reserve 1,495 119
Increase in debt 109,751 54,703
Net cash from financing activities 119,293 151,217
Net (decrease)/increase in cash and cash (15,236) 91,269
equivalents
Cash and cash equivalents at beginning of the 92,851 4,574
year
Effect of exchange rate changes on cash and (2,095) (2,992)
cash equivalents
Cash and cash equivalents at the end of the 75,520 92,851
year
Additions to Deferred Development Expenditure include loan interest
capitalised of US$8,118,000 (2004: US$183,000).
NOTES TO THE PRELIMINARY RESULTS
Note 1 Basis of Accounting and Preparation of Financial Information
The preliminary results have been prepared in US Dollar under the
historical cost convention. This is the first year in which the Group
has prepared its financial statements under International Financial
Reporting Standards (IFRS) and the comparatives have been restated
from Irish Generally Accepted Accounting Principles (Irish GAAP) to
comply with IFRS.
The adoption of Share-based Payments (IFRS 2) has affected the
amounts reported for the current and prior year. For the year ended
31 December 2004, the change in accounting policy has resulted in a
decrease in profit for the year of US$13,000. The Balance Sheet at 31
December 2004 has been restated to reflect share-based payment
capitalised of US$119,000 and the share option reserve movement
amounted to US$132,000.
For the year ended 31 December 2005, the share-based payment expense
was US$166,000 and the share-based payment capitalised was
US$1,494,000, resulting in a movement in the share option reserve for
the year of US$1,660,000
The financial information presented above does not constitute
statutory accounts within the meaning of the Companies Acts, 1963 to
2005. An audit report has not yet been issued on the accounts for the
year ended 31 December 2005, nor have they been delivered to the
Registrar of Companies. The statutory accounts for the year ended 31
December 2004 prepared under Irish GAAP upon which the auditors have
issued an unqualified opinion, have been filed with the Registrar of
Companies.
Note 2 Earnings per share
The calculation of the earnings and fully diluted earnings per share
is based on the profit after taxation of US$4,699,000 (2003:
US$23,000) and the weighted average number of shares in issue during
2005 of 656,428,548 (2004: 443,783,213 shares).
The calculation of fully diluted earnings per share is based on the
profit for the year after taxation as for basic earnings per share.
The number of shares is adjusted to show the potential dilution if
share options and share warrants are converted into ordinary shares.
The weighted average number of shares in issue is increased to
776,731,696 (2004:580,005,907).
Note 3 Deferred Development Expenditure
The recovery of deferred development expenditure is dependent upon
the successful development of the Moma Titanium Minerals Project,
which in turn is dependent on the continued availability of adequate
funding for the project. The Directors are satisfied that deferred
expenditure is worth not less than cost, less any amounts written off
and that the Moma Titanium Minerals Project has the potential to
achieve mine production and positive cash flows.
Note 4 Construction in Progress
Construction in Progress represents expenditure under a construction
contract for the engineering, procurement, building, commissioning
and transfer of facilities at the Moma Titanium Minerals Project in
Mozambique.
Included in Construction in Progress is property, plant and
equipment, acquired for the Moma Titantium Minerals Project,
comprising of the Processing and Mining Plant valued at
US$41,614,000. Under the transition to IFRS, the Group has elected to
use this valuation as the deemed cost as and from 1 January 2005.
The recovery of Construction in Progress is dependent upon the
successful development of the Moma Titanium Minerals Project, which
in turn is dependent on the continued availability of adequate
funding for the project. The Directors are satisfied that
Construction in Progress is worth not less than cost, less any
amounts written off and that the Moma Titanium Minerals Project has
the potential to achieve mine production and positive cash flows.
Note 5 Capital Commitments
The construction contract provides for the possibility of potential
cost increases within a limited number of defined cost categories
where it is not practicable to establish the costs in advance. The
maximum amount payable, other than changes in project scope and
provisional sum items, in relation to potential cost increases
associated with the defined cost category is US$16.75 million, with
any additional amount being for the account of the Contractor.
US$16.75 million is arrived at by converting amounts incurred in
Euros, Australian Dollars and South African Rand (to the extent that
the limit of the Exchange Risk Cover Policy is exceeded) to US
Dollars at the following exchange rates: US$1 is equal to A$1.50,
ZAR8.00, and Euro 0.86. The Moma Titanium Minerals Project debt
commitments are sufficient to cover this potential cost increase, if
required.
Note 6 2005 Annual Report and Accounts
The Annual Report and Accounts will be posted to shareholders in due
course.
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Copyright � Hugin ASA 2006. All rights reserved.
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