Kenmare Interim Results
For the period ended 30 June 2006
Chairman's Statement
Dear Shareholder,
The Moma Titanium Minerals Project is over 90% complete. Our power
line and the accompanying substations are finished and ready to be
energised. The start up mine pond is ready to be filled with water
as soon as the power is energised. The mineral separation plant has
made good progress. The Project has recently passed through 2.4
million man hours worked without a lost time accident, which compares
favourably to international safety standards.
The latest information from the contractor has indicated some
slippage in the programme. However, we continue to expect to be
mining with the dredges and producing a heavy mineral concentrate
stockpile during the last quarter of 2006. This is based on an
agreement to hand over the Project works in sections which is
currently being negotiated with the contractor. When the mineral
separation plant is released, we can immediately start processing the
stockpiled heavy mineral concentrate. The contractor in its latest
report has indicated that the mineral separation plant will be
complete by its due date of 5 January 2007. However, due to delays
in delivering equipment to site, there is no slack in the
contractor's programme. The roaster, which is used for upgrading a
portion of the product stream, is behind timetable but this will not
affect the operation and will not impact on sales.
We are progressing well with our plans for starting up the mine and
ramping up to full production. Our operations management team has
grown and now consists of 28 members, the majority of whom have
experience in minerals sands mining. The operations team has moved
from Johannesburg to Nampula, the closest town to the Project. This
allows the team to visit the mine regularly and facilitates their
move to site over the coming months as the contractor vacates the
camp housing.
We have also started to recruit the more junior grades according to a
protocol where we seek to hire initially from the local villages,
then from the general Moma area, then the province of Nampula, then
Mozambique and finally, in the event that the position cannot be
satisfied from these sources, we will look internationally.
Recruitment starts with health screening and aptitude testing, with
interviews for those who pass these assessments.
The Kenmare Moma Development Association, a not-for-profit
organisation focused on ensuring that the lives of the local people
are uplifted by the Project, has been continuing its work. It has
signed a protocol with the World Wildlife Fund whereby both
organisations will work together and jointly fund initiatives aimed
at improving food security and improving the economic situation of
the local population.
Since the further development of the Moma orebody has been passed to
the operations team, Kenmare's exploration department has been freed
up. This has allowed us to look at some exploration projects in
Mozambique, as a result of which we have taken out some uranium
leases in Tete and Niassa provinces, and an exploration team is on
the ground.
During the six months ended 30 June 2006 we report a loss of US$3.5
million. This loss arises primarily from foreign exchange losses on
Euro-denominated debt plus Kenmare's corporate operating costs net of
interest income earned. During the six months there was capital
expenditure of US$42.2 million on the construction of the Project.
Mineral exploration and project development costs of US$14.5 million
were capitalised in deferred development expenditure. Capital
commitments at 30 June 2006 amounted to US$80.4 million and a limited
number of scope changes, which are for the account of Kenmare, are
also under consideration. The existing financing facilities are
sufficient to cover these capital commitments. Additional amounts
drawn from lenders plus interest capitalised during the period
amounted to US$51.3 million.
I am delighted to welcome Tony Lowrie onto the Board of Directors.
Tony commands great respect in the equity market of which he has a
long and wide experience, especially in Asia. He brings a wealth of
experience which will assist Kenmare to continue to grow.
We are delighted with the development of the Project and the way the
operations team has grasped the challenges associated with opening a
large mine in such a remote location. I look forward to reporting on
production numbers as we move into 2007.
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
INDEPENDENT AUDITORS' REVIEW REPORT
TO THE DIRECTORS OF KENMARE RESOURCES PLC
Interim Financial Information - Six months ended 30 June 2006
Introduction
We have been instructed by the Company to review the financial
information for the six months ended 30 June 2006 which comprises the
Group Income Statement, the Group Balance Sheet, the Group Cash Flow
Statement, Group Statement of Changes in Equity and related notes 1
to 10. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin
1999/4 'Review of Interim Financial Information' issued by the
Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to
them in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work,
for this report or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained
therein, is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the interim
report in accordance with the Listing Rules of the Irish Stock
Exchange and of the UK Financial Services Authority which require
that the accounting policies and presentation applied to the interim
figures are consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for them,
are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in
Bulletin 1999/4 issued by the Auditing Practices Board for use in the
United Kingdom and Ireland. A review consists principally of making
enquiries of management and applying analytical procedures to the
financial information and underlying financial data and based
thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review
excludes audit procedures such as tests of controls and verification
of assets, liabilities and transactions. It is substantially less in
scope than an audit performed in accordance with International
Standards on Auditing (UK and Ireland) and therefore provides a lower
level of assurance than an audit. Accordingly, we do not express an
audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material
modifications that should be made to the financial information as
presented for the six months ended 30 June 2006.
Deloitte & Touche
Chartered Accountants
Deloitte & Touche House
Earlsfort Terrace
Dublin 2
27 September 2006
KENMARE RESOURCES PLC
GROUP INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2006
6 Months 6 Months 12 Months
30/06/2006 30/06/2005 31/12/2005
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Revenue - - -
Operating (Expenses)/Gains (4,952) 2,853 2,861
Operating (Loss)/Profit (4,952) 2,853 2,861
Finance Income 1,500 897 1,838
(Loss)/Profit before tax (3,452) 3,750 4,699
Income tax expense - - -
(Loss)/Profit for the period (3,452) 3,750 4,699
Attributable to Equity holders (3,452) 3,750 4,699
Loss per share: Basic (0.51c) 0.58c 0.72c
Loss per share: Diluted (0.51c) 0.48c 0.61c
KENMARE RESOURCES PLC
GROUP BALANCE SHEET
AS AT 30 JUNE 2006
30/06/2006 30/06/2005 31/12/2005
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
ASSETS
Non-Current Assets
Deferred Development Expenditure 118,731 91,730 104,228
Construction in Progress 229,907 128,326 187,721
348,638 220,056 291,949
Current Assets
Receivables 3,091 7,770 1,787
Cash and cash equivalents 66,413 80,527 75,520
69,504 88,297 77,307
Total Assets 418,142 308,353 369,256
EQUITY
Capital and reserves attributable to
the
Company's equity holders
Share Capital 55,317 53,426 54,847
Share Premium 106,695 100,987 105,713
Retained Earnings (20,626) (18,123) (17,174)
Other Reserves 36,493 36,373 36,373
Total Equity 177,879 172,663 179,759
LIABILITIES
Non-current Liabilities
Bank loans 216,059 119,523 164,725
Accrued liabilities and other loans 10,679 5,781 8,616
226,738 125,304 173,341
Current Liabilities
Accruals 13,525 10,386 16,156
Total Liabilities 240,263 135,690 189,497
Total Equity and Liabilities 418,142 308,353 369,256
KENMARE RESOURCES PLC
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2006
6 Months 6 Months 12 Months
30/06/2006 30/06/2005 31/12/2005
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Operating activities
(Loss)/profit for the period (4,952) 2,853 2,861
Adjustment for:
Foreign exchange movement 671 2,049 2,095
Share-based payment 12 166 166
expense
Operating cashflows (4,269) 5,068 5,122
(Increase) in receivables (1,304) (6,213) (230)
Decrease in accrued liabilities
and other loans (568) 6,476 15,045
Net cash from operating activities (6,141) 5,331 19,937
Investing activities
Interest received 1,500 897 1,838
Addition to Deferred Development (14,503) (30,069) (42,566)
Expenditure
Addition to Construction in Progress (42,186) (54,343) (113,738)
Net cash used in investing activities (55,189) (83,515) (154,466)
Financing activities
Issue of Share Capital 1,452 1,900 8,047
Share Option Reserve 108 1,495 1,495
Increase in debt 51,334
64,513 109,751
Net cash from financing activities 52,894 67,908 119,293
Net decrease in cash and cash (8,436) (10,276) (15,236)
equivalents
Cash and cash equivalents at beginning 75,520 92,851 92,851
of period
Effect of exchange rate changes on cash
and
cash equivalents (671) (2,049) (2,095)
Cash and cash equivalents at end of 66,413 80,526 75,520
period
KENMARE RESOURCES PLC
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2006
Share Share Retained Other Total
Capital Premium Earnings Reserves
US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2006 54,847 105,713 (17,174) 36,373 179,759
Loss for the period - - (3,452) - (3,452)
Share based payment - - - 120 120
Issue of share capital 470 982 1,452
- -
Balance at 30 June 2006 55,317 106,695 (20,626) 36,493 177,879
KENMARE RESOURCES PLC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2006
1. BASIS OF PREPARATION
The interim financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) by applying
the accounting policies set out in the 2005 Annual Report and
Accounts.
The interim financial statements have also been prepared in
accordance with Irish statute comprising the Companies Acts, 1963 to
2005, the European Communities (Companies: Group Accounts)
Regulations, 1992 and the Listing Rules of the Irish and London Stock
Exchanges.
The unaudited interim financial information in this statement has
been reviewed by the auditors in respect of the six month ended 30
June 2006 only as set out in their Report to the Directors.
2. EARNINGS PER SHARE
The calculation of the loss and fully diluted loss per share is based
on the loss after taxation of US$3,452,000 (2005 profit of
US$3,750,000) and the weighted average number of shares in issue
during 2006 of 673,986,570 (2005 : 649,779,786). The loss per share
and the fully diluted loss per share are the same, as the effect of
the outstanding share options is anti-dilutive.
3. DEFERRED DEVELOPMENT EXPENDITURE
Analysed by
Geographical
Area
Mozambique Ireland Mozambique Total
Moma Tete/Niassa
Titanium
Uranium
Project
US$'000 US$'000 US$'000 US$'000
Cost
Opening 104,192 36 - 104,228
Balance
Additions 14,454 - 49 14,503
Balance at 118,646 36 49 118,731
30 June 2006
Additions include loan interest capitalised of US$8,524,000 (2005:
US$2,699,000). Loan interest is net of deposit interest earned on the
temporary deposit of loan balances.
The recovery of deferred development expenditure is dependent upon
the successful development of the Moma Titanium Minerals Project,
which in turn is dependent on the continued availability of adequate
funding of the Project. The Directors are satisfied that deferred
expenditure is worth not less than cost less any amounts written off
and that the Moma Titanium Minerals Project has the potential to
achieve mine production and positive cash flows.
4. CONSTRUCTION IN PROGRESS
2006 2005
US$'000 US$'000
Cost
Opening Balance 187,721 128,326
Additions 42,186 59,395
Closing Balance 229,907 187,721
Construction in Progress represents expenditure under a construction
contract for the engineering, procurement, building, commissioning
and transfer of facilities at the Moma Project in Mozambique. This
contract was entered into on 7 April 2004. The Contractor is a joint
venture formed for this project, between Multiplex Ltd. and Bateman
B.V. Multiplex is a large contracting group based in Australia with
operations stretching around the globe and specialises in large
complex construction projects. Bateman is an international
engineering group with specific mineral sands experience and
experience of working in Mozambique.
The recovery of Construction in Progress is dependent upon the
successful development of the Moma Titanium Minerals Project, which
in turn is dependent on the continued availability of adequate
funding of the project. The Directors are satisfied that Construction
in Progress is worth not less than cost less any amounts written off
and that the Moma Titanium Minerals Project has the potential to
achieve mine production and positive cash flows.
5. CAPITAL COMMITMENTS
2006 2005
US$'000 US$'000
Construction contract 80,392 107,428
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$1.50,
ZAR8.00 and �0.86. The Moma Titanium Minerals Project debt
commitments are sufficient to cover this potential cost increase, if
required.
6. CASH AND CASH EQUIVALENTS
2006 2005
US$'000 US$'000
Immediately available without restriction 9,201 8,151
On Fixed Term Deposit:
Contingency Reserve Account 30,125 30,000
Shareholder Funding Account 24,581 23,535
Other Term Deposit 2,506 13,834
66,413 75,520
The Contingency Reserve Account and Shareholder Funding Account on
fixed term deposit are amounts held in support of conditions required
for Senior and Subordinated Loans as shown in note 7.
7. BANK LOANS
2006 2005
US$'000 US$'000
Senior Loans 135,487 92,857
Subordinated Loans 80,572 71,868
216,059 164,725
Bank loans are secured by substantially all rights and assets of the
Company and the Moma Titanium Minerals Project; security agreements
over shares in the Company; and a Contingency Reserve and Shareholder
Funding Account as shown in Note 6.
There are seven Senior Loan credit facilities available for financing
the Moma Titanium Minerals Project. The aggregate maximum amount of
the Senior Loan credit facilities is US$185 million plus �15 million
of which $125,350,000 and �7,687,500 had been drawn at the period
end, and US$59,650,000 and �7,312,500 was undrawn and available. The
facilities incur commitment fees ranging from 0.25% to 0.75% on the
undrawn available amounts.
Senior Loans are repayable in semi-annual installments commencing, in
the case of six of the seven Senior Loan facilities, on the earlier
of (a) the first February 1 or August 1 falling at least 6 months
after the date of acceptance of the assets being constructed under
the construction contract, and (b) 1 February 2008, and in the case
of the seventh Senior Loan facility, 12 months thereafter. The
maximum Senior Loan tenors range from 11 years to 13 years from 31
December 2005. Two of the Senior Loans bear interest at fixed rates,
one bears interest at a rate which is floating for each drawdown but
is fixed thereafter, and four bear interest at floating rates.
The Subordinated Loan credit facilities of �47.1 million plus US$10
million are fully drawn down. Subordinated Loans are repayable in 21
semi-annual installments commencing on 1 August 2009. The final
installments are due on 1 August 2019. The Subordinated Loans
denominated in Euro bear interest at a fixed rate of 10% per annum,
while the Subordinated Loans denominated in US Dollars bear interest
at floating rates.
Loan facilities arranged at fixed interest rates expose the Group to
fair value interest rate risk. Loan facilities arranged at floating
rates expose the Group to cashflow interest rate risk.
7. BANK LOANS CONTINUED
In addition to the above commitments, two Standby Subordinated Loan
credit facilities are available for financing of the Moma Titanium
Minerals Project. The aggregate maximum Standby Subordinated Loan
credit facilities of �2.8 million and US$4 million are available and
incur commitment fees of 1% on the undrawn available amount. Standby
Subordinated Loans bear interest at fixed rates in respect of �2.8
million and US$1.5 million and at variable rates in respect of US$2.5
million. Standby Subordinated Loans are repayable on the same terms
as the Subordinated Loans. As at 30 June 2006, no debt was drawn down
under the Standby Subordinated Loan facilities.
8. SHARE BASED PAYMENTS
The Company has a share option scheme for certain Directors,
employees and consultants. Options are exercisable at a price equal
to the quoted market price of the Company's shares on the date of
grant. The options generally vest over a three to five year period,
in equal annual amounts. If options remain unexercised after a period
of 7 years from the date of grant, the options expire. The option
expiry period may be extended at the decision of the Board of
Directors.
During the period the Group recognised a share-based payment cost of
US$120,000.
9. NON-CONSOLIDATION OF SUBSIDIARY UNDERTAKING
As set out in detail in Note 26 of the 2005 Annual Report , Grafites
de Ancuabe, S.A.R.L., a subsidiary company , has been excluded from
consolidation in accordance with International Accounting Standard
27.
10. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Board on 27 September
2006.
- ---END OF MESSAGE---
Copyright � Hugin ASA 2006. All rights reserved.
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