KMR Kenmare Resources Plc

 
TIDMKMR 
 
Kenmare Resources plc ("Kenmare" or "the Company") 
 
27 October, 2011 
 
Interim Management Statement 
 
Kenmare today issues this interim management report in respect of the period 
since 1 July, 2011 to date in accordance with the requirements of the 
Transparency Regulations 2007. 
 
Third Quarter Operations Update 
 
Mining activities operated at a higher rate during the third quarter, producing 
196,000 tonnes of Heavy Mineral Concentrate ("HMC") compared with 154,000 tonnes 
in the second quarter. Ilmenite production for the quarter was 147,000 tonnes, a 
5% improvement from the second quarter.  Zircon production, including 1,800 
tonnes of a zircon concentrate product produced from a zircon rejects stockpile, 
was 11,200 tonnes for the quarter, a 17% increase on the previous quarter. 
188,000 tonnes of product was shipped during quarter three, a 28% increase on 
the previous quarter. 
 
While the 27% increase in HMC production is a welcome improvement, it is still 
below capacity.  As previously indicated in the half year results, HMC 
production was inhibited during the quarter by the last part of a clay-rich zone 
and by some teething problems associated with new equipment fitted to upgrade 
Wet Concentrator Plant ("WCP") A in September. We are very pleased to have left 
the difficult clay-rich ore zone behind us and to be moving into an area with 
high mining faces with free flowing sand, which provide the most productive 
mining conditions.  Power fluctuations have hampered production during October 
as a result of faulty voltage stabilisation equipment on the main grid. EDM, the 
national power company, has identified the fault and repairs are expected to be 
completed in early November. The Company has invested in a supplementary mining 
operation, which is now fully commissioned.  This supplementary mining operation 
is intended to ensure that WCP A can be run at capacity across a wider range of 
mining conditions. 
 
We have also completed the upgrade of our jetty. This included the replacement 
of some damaged piles on the northern wharf with new larger piles and the 
creation of a new wharf on the southern side of the jetty.  The two wharf 
structures are linked together with cross braces, increasing the robustness of 
the structure.  The second wharf, already in operation, greatly increases the 
flexibility and availability of the loading operation. 
 
A study to evaluate the production of monazite is ongoing. We are in the process 
of seeking the environmental and other regulatory approvals required for the 
handling and export of a monazite concentrate. 
 
Marketing 
 
2011 has been characterised by continued upward movement in titanium feedstock 
and zircon prices, driven by strong demand and a growing supply deficit. The 
nature of ilmenite and other titanium feedstock supply contracts has also been 
changing, with general acceptance by customers of shorter duration of pricing on 
contracts, moving from 12 months to 6 months.  Industry commentators believe 
that the present supply deficit will continue for some time due to the 
significant lag associated with the development of new mineral sands mines. 
 
China has been significantly increasing its imports of ilmenite in recent years. 
Recently there has been a slowdown in the real estate market due to lending 
restrictions imposed by the Central Bank of China in order to curb the rapid 
rise in real estate inflation.  This slowdown could cause a temporary reduction 
in offtake of TiO(2) pigment in China, with associated price fluctuations as 
end-user demand for paints and other coatings reduces.  However, it does not 
represent a fundamental change in the overall picture of constrained supply and 
is expected to be temporary. China's social housing program planned over the 
next five years, with 10 million units targeted in 2012, is expected to provide 
a major boost to the sector and drive demand for TiO(2 )pigment and zircon 
products. 
 
Expansion 
 
The Phase II 50% expansion of capacity at Moma is ongoing.  The expanded 
facility when operating at full capacity will produce 10% of the global demand 
for TiO(2 )pigment. The principal mining tool, a new dredge, has been completed; 
it has passed factory acceptance tests and has been shipped from the United 
States.  It is expected to arrive at Moma by the end of November. Expansion 
engineering is well advanced, with structural design now complete, and only 
final detail design and as-built drawings outstanding. Equipment procurement is 
83% complete. Handover is expected mid-2012 with ramp-up of production occurring 
through the rest of the year. 
 
After extensive reviews of forecast costs to completion, the Phase II expansion 
capital cost is assessed as $300 million. Kenmare has proposed to lenders that, 
in addition to cash available in the group, funds generated from operational 
cashflow may be applied to meet these expansion costs. Following a meeting in 
September, this proposal is being documented and lenders are proceeding with 
their approval processes. 
 
The pre-feasibility study for a Phase III expansion of the Moma Mine is due to 
be completed by the end of the second quarter of 2012. 
 
Financial 
 
Revenue during the third quarter increased strongly compared with the second 
quarter, primarily due to increased sales volumes, but also due to increased 
prices. Average prices will rise significantly as annual fixed price contracts 
expire at the end of the year. Operating costs also increased during the period 
and continue to be carefully monitored and managed. As at 30 September the net 
debt position was US$227.5 million. 
 
Technical Completion, which is a requirement under our loan documents, was 
achieved in September after passing a comprehensive set of tests.  This is a 
major milestone that has triggered a 2% reduction in the subordinated debt 
interest rate.  Achievement of Non-Technical Completion is the next objective in 
relation to these loan documents, at which point Kenmare's project loans 
guarantee is released. This is expected to be achieved by the end of 2013. 
 
Corporate Governance 
 
In February 2011, Lord Davies published the report "Women on Boards" and the 
Financial Reporting Council has recently published its consequent amendments to 
the UK Corporate Governance Code which will come into effect in October 2012. 
The Davies report provides a number of recommendations to address the balance of 
women on the boards, including a recommendation for listed companies to set out 
their targets for the proportion of women who serve on their board. We are 
supportive of the Davies recommendations and are not in favour of the 
implementation of quotas. The benefits of greater board diversity, not just 
gender specific, are clear and this is a positive step forward. It is, 
therefore, our intention to meet or exceed the Davies Review targets. However 
all appointments will continue to be made on merit and with the objectives of 
ensuring the right balance of skills, knowledge and experience is retained on 
our Board enabling us to maximise our corporate potential. Currently Kenmare's 
Board comprises 17% women, with women directors making up 25% of the non- 
executives on the Board. 
 
 
 
 
For further information, please contact: 
 
Kenmare Resources plc. 
 
Tony McCluskey, Financial Director        Michael Carvill, Managing Director 
 
Tel: +353 1 671 0411        Tel: +353 1 671 0411 
 
Mob: + 353 87 674 0346        Mob: + 353 87 674 0110 
 
Murray Consultants 
 
Joe Heron 
 
Tel: +353 1 498 0300 
 
Mob: +353 87 690 9735 
 
Tavistock Communications 
 
Paul Youens / Jos Simson 
 
Tel: +44 207 920 3150 
 
Mob: +44 7843 260 623 
 
 
 
 
 
 
 
 
 
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     originality of the information contained therein. 
 
Source: Kenmare Resources via Thomson Reuters ONE 
 
[HUG#1558246] 
 

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