Kenmare Resources - Final Results
June 25 1999 - 12:45PM
UK Regulatory
RNS No 4402e
KENMARE RESOURCES PLC
25 June 1999
Chairman's Statement & Results
for Year Ended 31st December 1998
CHAIRMAN'S STATEMENT
I am pleased to present the Kenmare 1998 Annual Report. There have been
significant changes at Kenmare over the year since our last Annual Report.
Moma-Congolone can now arguably be described as the world's best undeveloped
titanium resource. Furthermore, with the closing of BHP's Beenup mine, the
market for titanium feedstocks is now clearly entering long term undersupply.
As a consequence of its wider problems, BHP has withdrawn from the project.
The licence is in good standing, and all associated data and project assets
have reverted to Kenmare. The way is now open for us to enter negotiations
with others based on the vastly expanded resource base. This is a major
opportunity for Kenmare to benefit from the value that has been added to the
project over the last several years.
Superior Graphite Company has injected US$1.2 million into the graphite
project company. The mine consistently operated at a level which produced
cash for Kenmare during most of the latter half of 1998. However, in
December, northern Mozambique was struck by a drought, which was unequalled in
thirty years of records. This reduced output. LTA/Bechtel, a large
international engineering group, has been reviewing the operation of the plant
and is developing a plan to increase output.
Our gold exploration programme in Guinea commenced and yielded positive
results.
TITANIUM
On April 14, 1999, BHP retired from the Moma-Congolone Joint Venture. As per
the Joint Venture Agreement it ceded to us all information which it had
generated on the project and all joint venture assets. Whilst final accounts
have yet to be supplied, BHP informs us that it has spent approximately US$10
million on Moma-Congolone, more than half of it in the last year of its
involvement. During the last year testwork included studies which would
identify if there were any fatal flaws which could preclude development. None
were identified.
In late May BHP delivered 92 separate reports on the project to Kenmare. This
data illustrates for the first time:
1. BHP's classification of the Namalope resource of 13 million tonnes of
ilmenite as an Indicated Resource.
2. The inclusion of the adjoining Tupuito and Tebani areas into BHP's
resource category.
3. The development of a mine plan demonstrating the mineability of these
three contiguous resource areas by low cost dredge mining as a single
mine containing more than 30 million tonnes of ilmenite.
4. The existence of a new high grade zone at Pilivili, containing large
volumes of titanium minerals with a grade of circa 8% ilmenite plus
associated rutile and zircon (more than twice the average grade for the
rest of the deposit).
5. Metallurgical testwork which demonstrates that the mine would generate
products which fit within the specifications of the major consumers.
Kenmare has independently had discussions with most of the major end users of
titanium feedstock. Strong interest has been expressed in purchasing the
proposed products.
We have commenced discussions with several companies which have expressed
interest in developing the deposit and are hopeful of a successful early
conclusion to these discussions.
GRAPHITE
Superior Graphite injected US$1.2 million into Grafites de Ancuabe S.A.R.L.
("GDAS"), the project company which owns the Ancuabe Mine, to gain a 12%
interest in the outstanding common stock of that company. GDAS has a
significant number of outstanding preference shares. When these are taken
into account, Superior's investment gives it 3.2% of the total GDAS equity.
I stated in last year's Annual Report that the lenders had agreed to convert
the GDAS project debt into preference shares. This transaction, together with
the investment by Superior, makes the Balance Sheet significantly stronger.
Despite continued efforts by management, production from the Ancuabe mine has
been disappointing and has resulted in losses for the year under review. As a
consequence we have asked LTA/Bechtel to review the operation of the existing
plant and to develop a plan to improve production to rated capacity.
Furthermore, LTA/Bechtel is to generate a study detailing changes necessary to
raise capacity to circa 1,400 saleable tonnes of graphite per month.
The Ancuabe Graphite Mine is constrained by production, not market. Any
expansion will be based upon clear indications from our major consumers of
their desire to acquire additional product.
EXPLORATION
We commenced exploration in Guinea during February 1999 and have completed our
initial programme. This has identified gold mineralisation in laterite soils
in several areas. The next stage is to conduct a programme of reverse air
blast drilling over the anomalous zones. We plan to commence this programme
in the latter part of this year.
We have continued to discuss the possible joint venturing of our Niassa
exploration area (northern Mozambique) with other mining companies. The
present low price of gold has reduced the ability of most companies in the
industry to embrace such an extensive exploration project. Nonetheless we
continue to receive enquiries and hope to make early progress.
CORPORATE
Kenmare has launched a website to provide investors with information on our
company. It includes current developments, as well as stockbroker reports and
press releases. The address for our website is www.kenmareresources.com
I would like to thank Paul Power and the Marquis of Waterford, who stepped
down from the Board after many years service to Kenmare Resources, and wish
them well for the future. I would also like to welcome Ian Egan, Alastair
Brown and Tony McCluskey to the Board of Kenmare. Ian has been a senior
executive in the titanium industry for over 25 years. We are delighted that
he is making his experience and knowledge of the industry available to us.
Alastair and Tony have been working at a senior level in the company for many
years.
Finally, I would like to thank our shareholders for their support during a
period when the mining industry is going through a difficult time. I remain
optimistic that the commodities cycle will turn in our favour and am confident
that the dedicated work by all concerned will allow our projects to progress
strongly during the coming year.
Charles Carvill
Chairman
For further information, please contact Mr. Michael Carvill at
+353-1-6710411 or 087-6740110.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31st DECEMBER 1998
1998 1997
IR# IR#
Turnover 3,089,900 2,267,357
Cost of Sales (2,588,186) (2,627,417)
---------------------------
Gross Profit/(Loss) 501,714 (360,060)
Other Operating Expenses (1,868,267) (1,206,598)
Other Operating Income 202,990 193,531
---------------------------
Operating Loss (1,163,563) (1,373,127)
Interest Receivable 12,585 18,383
Interest Payable (98,065) (478,377)
---------------------------
Loss On Ordinary Activities Before Taxation (1,249,043) (1,833,121)
Taxation - -
---------------------------
Loss On Ordinary Activities After Taxation (1,249,043) (1,833,121)
Loss Attributable To Minority Interests - 37,414
---------------------------
Loss Attributable to Ordinary Shareholders (1,249,043) (1,795,707)
Opening Balance - Profit and Loss
Account (deficit) (14,524,113) (12,728,406)
---------------------------
Closing Balance - Profit and Loss
Account (deficit) (15,773,156) (14,524,113)
===========================
Loss and Fully Diluted Loss per Share (1.14p) (1.77p)
===========================
All amounts dealt with above relate to continuing operations.
END
FR FAMFBLLBTBRL
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