RNS No 5097u
KENMARE RESOURCES PLC
26th June 1998
KENMARE RESOURCES PLC ("Kenmare")
- 1997 Preliminary Announcement of Results & Chairman's Statement -
CHAIRMAN'S STATEMENT
Kenmare has made important progress over the past year.
Our titanium project is now entering the feasibility stage. BHP has announced
that bulk samples are undergoing metallurgical and engineering testwork.
Titanium feedstock prices continue to rise - in contrast to commodities
generally. The underlying economics of this project are excellent and
improving.
In graphite, several of the most influential companies in the industry are
negotiating to acquire a shareholding in the project company. The senior debt
lenders have agreed to convert their debt to equity. Hence, after the
conclusion of our negotiations, the graphite mine should have one of the
strongest companies in the industry as a shareholder, cash in the bank and be
free of bank debt.
We are continuing to review exploration projects and acquisition
opportunities.
Titanium
Kenmare's principal asset is the Mozambique titanium project (Congolone/Moma).
Several factors have enhanced the outlook for, and value of, this project over
the last year. The titanium feedstock market has been buoyant with good prices
and strong demand. BHP has received excellent results from the extensive work
performed. Mozambique is now considered one of the best investment locations
in Africa. Demand growth and slower than expected supply additions have
improved the supply/demand balance. This should lead to a more rapid market
entry for Kenmare's project.
The focus of BHP's work on Congolone has matured from defining additional
mineralisation to the detailed drilling, metallurgical work, engineering
studies and environmental studies that are necessary for the development of a
mine. The growing value of Congolone is reflected in independent brokers'
valuation of Kenmare's worth as multiples of the current share price.
BHP has indicated an aggressive programme for the coming year with budget
expenditure of over $4 million on a wide range of different tasks orientated
towards development as soon as possible. Kenmare is closely involved in this
process.
Graphite
Last year we expected the Ancuabe graphite mine to emerge as a cash
contributor to Kenmare. This expectation was based on capital improvements to
the plant to debottleneck certain areas and improve the overall capacity.
However, generator and other process problems have delayed the achievement of
production targets.
Kenmare is the only significant graphite producer to generate its own power.
This is a temporary measure until mains power is available. Graphite dust is
electrically conductive, and airborne dust has caused generator failures.
Kenmare has now developed an air filtering system to solve this problem.
Meanwhile, the government is fast tracking the supply of reliable, cheap mains
power which should be connected next year. These difficulties, together with a
temporary need to recycle 99% C graphite, contributed to a cash deficiency and
an overall loss from Ancuabe.
Ancuabe graphite has continued to enjoy strong market success. We have raised
prices across the board, without loss of business. As expected, we are
steadily moving from supplying commodity to serving niche applications. After
5 years of detailed testwork we have penetrated the key battery market - a new
and rapidly expanding market for natural graphite. Almost all customers now
require more product than we can supply. This opens the possibility of
expanding Ancuabe.
Expansion requires new funds and restructuring of historic project debt. The
project lenders have agreed to convert their project debt into equity. This
means that the project company is no longer obliged to make interest or
capital repayments. We also sought new investment from strategic partners.
There is considerable industry interest, reflecting Ancuabe's product quality
and market potential. The company has received approaches from three companies
who wish to acquire an interest in the equity of the graphite project company.
We have advanced discussions with one of the prospective investors, with a
view to that company purchasing 20% of the Ordinary Share Capital of Ancuabe,
by way of a fresh issue. The terms of these discussions are reflected in a
formal Letter of Intent, which was signed on 5th May 1998.
The new shareholder will provide technical support. Reserves have
substantially increased. Production issues remain, but the key generator
problem seems solved and will be superseded when mains power is connected. We
have penetrated new and existing markets. For Kenmare Flake at least, price
erosion has halted and customers have accepted price increases.
Exploration
During 1997 Kenmare pursued gold exploration targets in Yugoslavia. Despite
encouraging results, we decided to cease spending in late 1997 in anticipation
of the political difficulties which have since transpired. Our interests are
in good standing and we are well positioned to move as the political
environment improves.
Work continued in the Niassa gold province of northern Mozambique. A
geophysical exploration programme indicated continuation of the OD1
mineralised zone beyond our drilling area. To preserve cash we are seeking a
larger joint venture partner for the further exploration of this and other
gold targets.
We continue to examine a wide range of projects worldwide with the potential
to add substantial value to Kenmare.
Corporate
Michael Nossal, who has served on the board for 11 years, is retiring at the
Annual General Meeting. I would like to thank him for his sterling service to
Kenmare and wish him well for the future.
Finally, I share the frustration of many shareholders with our recent share
price performance. The commodities slump has made this one of the worst
recessions ever for small mining companies. This has been accentuated by
Ancuabe's disappointing production and by joint venture confidentiality
restrictions on releasing details of the titanium project's progress.
However, the underlying position of Kenmare is solid. The titanium project
will be a major mine in which we will have a significant stake. Ancuabe is now
on the mend. We continue to seek new projects and look forward to a better
year.
C. Carvill
Chairman
For further detail telephone
Michael Carvill, Managing Director, at +353-1-6710411
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER, 1997
1997 1996
IR# IR#
Turnover 2,267,357 1,400,701
Cost of Sales (2,627,417) (1,698,352)
------------------------
Gross (Loss) (360,060) (297,651)
Other Operating Expenses (1,206,598) (1,654,641)
Other Operating Income 193,531 64,751
------------------------
Operating Loss (1,373,127) (1,887,541)
Interest Receivable 18,383 29,674
Interest Payable (478,377) (343,896)
------------------------
Loss On Ordinary Activities Before Taxation (1,833,121) (2,201,763)
Taxation - -
------------------------
Loss On Ordinary Activities After Taxation (1,833,121) (2,201,763)
Loss Attributable To Minority Interests 37,414 778,043
------------------------
Loss Attributable to Ordinary Shareholders (1,795,707) (1,423,720)
Opening Balance-Profit and Loss Account-(deficit) (12,728,406)(11,304,686)
------------------------
Closing Balance-Profit and Loss Account-(deficit) (14,524,113) (12,728,406)
========================
Loss Per Share (1.77p) (1.52p)
========================
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER, 1997
1997 1996
IR# IR#
FIXED ASSETS
Mineral Interests 4,244,351 3,206,643
Tangible Assets 9,384,138 7,810,223
Financial Assets - 112
------------------------
13,628,489 11,016,978
------------------------
CURRENT ASSETS
Stocks 487,720 754,336
Debtors 883,937 817,141
Cast at Bank and in Hand 843,718 752,966
------------------------
2,215,375 2,324,443
CREDITORS: Amounts falling due within one year (1,006,810) (457,249)
------------------------
NET CURRENT ASSETS 1,208,565 1,867,194
------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 14,837,054 12,884,172
CREDITORS: Amounts falling due after one year (7,082,540) (6,116,840)
------------------------
7,754,514 6,767,332
========================
CAPITAL AND RESERVES
Called Up Share Capital 15,063,273 14,553,255
Share Premium Account 6,721,647 5,357,522
Profit & Loss Account - (deficit) (14,524,113) (12,728,406)
Other Reserve 493,707 (452,453)
------------------------
Shareholders' Funds 7,754,514 6,729,918
Minority Interest - 37,414
------------------------
7,754,514 6,767,332
========================
END
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