KMR Kenmare Resources Plc

 
TIDMKMR 
 
Kenmare Resources plc ("Kenmare" or "the Company") 
 
                          Interim Management Statement 
 
                                 (LSE/ISE: KMR) 
 
 17 November 2010 
 
Kenmare Resources plc, issues the following Interim Management Statement in 
accordance with reporting requirements of the EU Transparency Directive. 
 
Third Quarter Operations Update 
 
Mining production of heavy mineral concentrate increased in the third quarter by 
31% to 297,000 tonnes. 
 
Over the same period, the mineral separation plant produced 206,000 tonnes of 
ilmenite, a 22% increase on the second quarter's production. Zircon output was 
11,000 tonnes, a 25% increase and 2,000 tonnes of rutile was produced, a 158% 
increase. Although some rutile specification issues are still being addressed, 
the Company is pleased to report that the first bulk shipment of 3,800 tonnes of 
rutile was made in October. 
 
The Company shipped 199,000 tonnes of finished products in the third quarter, 
bringing total year to date shipments to the end of September 2010 to 566,000 
tonnes, an increase of 106% compared with the first three quarters of 2009. 
 
The second transshipment vessel acquired by the Group is currently en route to 
Mozambique and is expected to arrive in early 2011. Following planned 
modifications, this vessel will increase the operation's load-out capacity and 
flexibility covering future expansion requirements. 
 
In October, work commenced upgrading the jetty which will enhance operational 
flexibility by allowing berthing and loading of the transshipment vessels on 
both sides of the jetty. This project is expected to be completed in the second 
quarter of 2011. 
 
Settling Pond Breach 
 
As previously reported, on 8 October a settling pond at the Moma Titanium 
Minerals Mine in Mozambique breached a retaining wall resulting in the release 
of water, sand and clay which flowed through part of the nearby village, 
Topuito. Kenmare has provided help and support to those affected by the breach 
including the family of a four year old girl who was lost during the incident. 
It is expected that by the end of November all affected families will be settled 
back in their homes and compensated. Improvements to the settling pond berm 
complex have been completed and following a review by the Mozambican authorities 
mining operations resumed on the 9 November. Mining output has returned to full 
capacity levels.  The mineral separation plant continued operation during this 
period utilising stockpiled heavy mineral concentrate and stockpiled material 
produced during early plant commissioning. Use of the commissioning stockpiled 
material has resulted in lower mineral recoveries. This is not expected to have 
a material impact on annual production output. 
 
Market developments 
 
Titanium feedstocks are currently in tight supply and this situation is expected 
to become more acute in 2011 as end-use demand continues to grow and limited new 
supply enters the market. A number of titanium feedstock producers closed or 
permanently curtailed production during the global economic crisis in 2009 and 
the industry has been unprepared by the speed and strength of the recovery in 
the pigment market. A recovery in the titanium metal market, which has just 
recently commenced, and increasing demand for feedstocks for the welding 
electrode market, are also adding to market demand pressures. 
 
Demand for Kenmare's main product, ilmenite, remains robust and is driven by 
growing Chinese demand and recovering demand by European pigment producers. 
Kenmare is presently negotiating a number of new contracts for 2011 and expects 
to achieve significant price increases for uncommitted ilmenite sales over 2010 
levels. 
 
Following the sharp contraction during 2009, zircon demand has also rebounded 
very strongly in 2010, particularly in China, and the market remains in tight 
supply with both producers and end-users holding minimal inventories. Zircon 
prices have increased by circa 30% during 2010 over year end 2009 levels and 
further price increases are expected in 2011 as the gap between increasing 
global demand and limited supply widens. 
 
Progress on Expansion Plans 
 
During the third quarter, a project implementation schedule and execution plan 
for a 50% expansion of output were completed. The Engineering, Procurement and 
Construction Management (EPCM) contract for the execution of the expansion was 
awarded to Engineering and Projects Company Limited (E+PC). E+PC is a wholly 
owned subsidiary of Aveng (Africa) Ltd. The Kenmare owner's team is fully 
established and based in the offices of E+PC in Centurion, Pretoria. Kenmare has 
entered into contracts for critical long lead time items, including the third 
dredge and equipment for the existing wet concentrator plant. Mechanical 
completion is scheduled for the end of 2011. Kenmare will continue to monitor 
the capital costs of the expansion project as the remaining contracts are 
tendered. 
 
Financial 
 
The average revenue per tonne of ilmenite and zircon increased in the third 
quarter, and is expected to continue on this trend for the remainder of the year 
as zircon prices continue to strengthen and the level of lower priced legacy 
ilmenite contract sales volumes reduces as a percentage of overall ilmenite 
sales volumes. Likewise the average production cost per tonne of final products 
declined in the third quarter as production volumes increased. The Company has 
progressed with technical completion tests as set out in the loan agreements. 
The production target tests were passed at the start of October. Further work is 
required to pass the remaining environmental tests. The Company expects all 
technical completion tests will be passed in early 2011, following which 
interest margins on the subordinated loans will decrease by 2% per annum, 
reducing future financing charges by approximately US$3 million per annum. The 
net debt position as at the 30 September 2010 was US$80.5million (30 June 2010: 
US$78.6 million). 
 
For more information: 
 
Kenmare Resources plc 
 
Japie Deysel, Operations Director 
 
Tel: +353 1 6710411 
 
Mob: + 353 87 6139609 
 
 
 
Murray Consultants 
 
Joe Heron 
 
Tel: +353 1 498 0300 
 
Mob: + 353 87 690 9735 
 
 
 
Conduit PR Ltd 
 
Charlie Geller/Paul  Youens 
 
Tel: +44 207 429 6604 
 
Mob: +44 752 823 3383 
 
 
 
                            www.kenmareresources.com 
 
 
 
 
 
[HUG#1463119] 
 
 
 
 
 
 
 
 
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Thomson Reuters clients. The owner of this announcement warrants that: 
(i) the releases contained herein are protected by copyright and 
    other applicable laws; and 
(ii) they are solely responsible for the content, accuracy and 
     originality of the information contained therein. 
 
Source: Kenmare Resources via Thomson Reuters ONE 
 

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