RNS Number:7298P
Kenmare Resources PLC
12 September 2003
KENMARE RESOURCES PLC ("Kenmare")
Chairman's Statement and Results
for Six Months Ended 30 June, 2003
Since I last reported to you, a project definition phase has been completed on
the Moma Titanium Mineral Sands project. This comprised the development of
project designs to the level where sub contractors could bid for elements of the
overall project. This is now complete and Kenmare has received outline proposals
from two main contractors to build the project on a basis where the maximum
price is fixed. One of these proposals will be expanded into a full development
contract for the building, commissioning and transfer of facilities at Moma
which, subject to detailed agreement, is expected to be presented to the group
of potential lenders to the project for their approval within the next month.
The amount of zircon which the project expects to produce has been increased
significantly during the definition phase. This change in predicted output is
the result of extensive research on further bulk samples taken from various
points in the orebody, with results confirmed by independent laboratory
analyses. Zircon, which commands high prices, is in strong demand and this has
allowed us to readily place the extra production in the market.
During the definition phase, there were several changes to the scope of the
project in order to increase its operational robustness. These changes include a
switch from one large mining dredge to two smaller units. One of the dredges
will be used to recover material from the pond which is not captured by the
leading dredge, a process which is expected to increase recoveries. In addition,
the change ensures that, in the event of a breakdown of one dredge, mining
operations can continue. We have also changed the slimes thickening process from
a capital and energy intensive method of mechanical thickening to in-pond
thickening. This will result in a reduction in capital costs, lower energy costs
and less operational complexity. Further design work on the self-propelled
load-out barge has shown that a barge can be designed with the same deadweight
capacity of 4,000 tonnes, but with a shallower draft. This has allowed us to
reduce the length of the jetty by circa 50% while maintaining the same under
hull clearance for the barge.
As was announced on 1 July, 2003, Kenmare has signed a further multi-year
off-take contract for the sale of ilmenite and rutile production from Moma. This
is the second major ilmenite sale under contract and brings total annual
ilmenite sales to over 50% of planned ilmenite production. The rutile portion of
the contract brings the annual rutile sales to 100% of planned rutile
production. Kenmare believes that it has now entered into off-take contracts
covering a sufficient amount of product to satisfy the lenders' proposed
marketing requirement for initial drawdown of debt finance.
In May 2003, Kenmare received notification of Board level loan approvals from
both the European Investment Bank and the African Development Bank for Euro55
million and US$40 million respectively. These loan approvals, which represent a
substantial component of the Moma debt funding requirement, are subject to
completion of full loan documentation and certain outstanding conditions,
including their being satisfied with the development contract which Kenmare
expects to negotiate during the next few weeks. In addition, the Multilateral
Investment Guarantee Agency (MIGA), a member of the World Bank Group, has issued
guarantees of US$20.8 million in aggregate to Kenmare and Kreditanstalt fur
Wiederaufbau (KfW) for proposed equity and loan investments in the Moma Titanium
Minerals Project in Mozambique. The other members of the Moma Project Lender
Group are expected to complete their internal loan approval processes when
satisfactory development contract terms have been agreed.
The Minerals Separation Plant acquired by Kenmare in 2001 is scheduled to be
dismantled and removed from its site at Beenup in Western Australia by 30
November, 2003. We have contracted Ryad Engineering to perform this task under
Kenmare supervision and the cost of this dismantling, which is included in the
overall project capital cost, will be funded from the proceeds of the placing of
US$6.4 million, separately announced today. The balance of the placing proceeds
will be used to meet ongoing administrative and operating costs associated with
advancing the Moma Project.
The next step is the presentation of the negotiated development contract to the
Lender Group for approval and a decision to move forward. This is an important
step. We are hopeful of a positive decision which will allow us to secure the
outstanding lender approvals, complete the detailed loan agreements, raise the
equity component of project financing and commence construction.
During the six months ended 30 June, 2003 we have reported a loss of US$221,766.
This loss arises primarily from a foreign exchange loss on Australian dollar
denominated commitments and Kenmare's corporate operating costs, net of interest
earned.
CHARLES CARVILL
Chairman
12 September, 2003
INDEPENDENT AUDITORS' REVIEW REPORT
TO THE BOARD OF DIRECTORS OF KENMARE RESOURCES PLC
Interim Financial Information - Six months ended 30 June, 2003
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June, 2003 which comprises the Consolidated Profit and
Loss Account, the Consolidated Balance Sheet, the Group Cash Flow Statement, the
Statement of Total Recognised Gains and Losses and Reconciliation of Movement in
Shareholders' Funds and related notes 1 to 6. 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 the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Irish Stock Exchange and of the UK Listing Authority. Our review
has been undertaken so that we might state to the company those matters we are
required to state to it in this 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 Listing Authority which require
that the accounting policies and presentation applied to the interim figures
should be 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. 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 Auditing
Standards 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, 2003.
Deloitte & Touche
Chartered Accountants
and Registered Auditors
Deloitte & Touche House
Earlsfort Terrace
Dublin 2
12 September, 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE, 2003
6 Months 6 Months 12 Months
30/06/2003 30/06/2002 31/12/2002
Unaudited Unaudited Audited
US$ US$ US$
Turnover - - -
Operating (Expenses)/Income (323,647) 470,825 707,037
Operating (Loss)/Profit (323,647) 470,825 707,037
Interest Receivable 101,881 71,733 261,483
(Loss)/Profit On Ordinary Activities
Before Taxation (221,766) 542,558 968,520
Taxation - - -
(Loss)/Profit On Ordinary Activities
After Taxation (221,766) 542,558 968,520
(Loss)/Earnings per share: Basic (0.85)c 0.25c 0.41c
(Loss)/Earnings per share: Diluted (0.85)c 0.22c 0.36c
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE, 2003
6 Months 6 Months 12 Months
30/06/2003 30/06/2002 31/12/2002
Unaudited Unaudited Audited
US$ US$ US$
Fixed Assets
Mineral Interests 24,468,280 13,317,651 18,618,309
Tangible Assets 41,626,625 41,634,992 41,630,810
66,094,905 54,952,643 60,249,119
Current Assets
Debtors 132,400 84,879 95,473
Investment in Shares 158,505 - -
Cash at Bank and In Hand 3,442,389 12,615,452 8,040,751
3,733,294 12,700,331 8,136,224
Creditors: Amounts falling
due within one year (2,493,995) (1,171,149) (1,453,021)
Net Current Assets 1,239,299 11,529,182 6,683,203
Total Assets Less Current Liabilities 67,334,204 66,481,825 66,932,322
Creditors: Amounts falling
due after one year (1,543,551) (1,408,720) (1,431,903)
Provision for liabilities and charges (3,338,000) (2,817,500) (2,826,000)
62,452,653 62,255,605 62,674,419
Capital and Reserves
Called Up Share Capital 24,556,528 24,556,528 24,556,528
Share Premium Account 25,592,896 25,600,044 25,592,896
Profit and Loss Account - (Deficit) (22,234,044) (22,438,240) (22,012,278)
Revaluation Reserve 30,141,002 30,141,002 30,141,002
Other Reserve 3,642,080 3,642,080 3,642,080
Capital Conversion Reserve Fund 754,191 754,191 754,191
Shareholders' Funds 62,452,653 62,255,605 62,674,419
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE, 2003
6 Months 6 Months 12 Months
30/06/2003 30/06/2002 31/12/2002
Unaudited Unaudited Audited
US$ US$ US$
Net cash inflow from operating activities 1,038,113 1,316,303 3,357,291
Returns on investment and servicing of
finance Interest received 101,881 71,733 261,483
Net cash inflow from returns on
investment & servicing of finance 101,881 71,733 261,483
Capital expenditure & financial investment
Addition of Mineral Interests (5,849,971) (2,180,522) (7,583,927)
Addition of Tangible Assets - - (1,408,750)
Net cash outflow from capital
expenditure & financial investment (5,849,971) (2,180,522) (8,992,677)
Net cash outflow before use of
liquid resources & financing (4,709,977) (792,486) 5,373,903
Financing:
Issue of Ordinary Share Capital - 14,530,720 14,530,686
Cost of share issue - (1,362,274) (1,369,388)
Finance Lease (2,254) (7,296) (15,690)
Increase/(Decrease) in debt due within a year 2,221 (1,027,020) (1,027,945)
Increase in debt due beyond a year 111,648 34,278 57,461
Net cash inflow from financing 111,615 12,168,408 12,175,124
(Decrease)/Increase in cash (4,598,362) 11,375,922 6,801,221
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE SIX MONTHS ENDED 30 JUNE, 2003
6 Months 6 Months 12 Months
30/06/2003 30/06/2002 31/12/2002
Unaudited Unaudited Audited
US$ US$ US$
(Loss)/Income attributable to
Group shareholders (221,766) 542,558 968,520
Movement in Revaluation Reserve - (1,408,750) (1,408,750)
Total Recognised (Losses) for the period (221,766) (866,192) (440,230)
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
FOR THE SIX MONTHS ENDED 30 JUNE, 2003
6 Months 6 Months 12 Months
30/06/2003 30/06/2002 31/12/2002
Unaudited Unaudited Audited
US$ US$ US$
Total Recognised (Losses) for the period (221,766) (866,192) (440,230)
Issue of Shares - at par - 3,872,024 3,872,024
Share Premium, net of costs - 9,296,422 9,289,274
Net Change in Shareholders' funds (221,766) 12,302,254 12,721,068
Opening Shareholders' funds 62,674,419 49,953,351 49,953,351
Closing Shareholders' funds 62,452,653 62,255,605 62,674,419
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE, 2003
1. Basis of Preparation of Interim Financial Statements
The Interim Statement has been prepared on the going concern basis applying the
accounting policies set out on page 23 of the 2002 Annual Report and Accounts.
The unaudited interim financial information in this statement has been reviewed
by the auditors in respect of the six months ended 30 June, 2003 only and their
Report to the Directors is set out on page 4.
2. Loss and Fully Diluted Loss per Share
The calculation of the loss and fully diluted loss per share is based on the
loss after taxation of US$221,766 (2002: Profit US$542,558) and the weighted
average number of shares in issue during the six months ended 30 June, 2003 of
262,209,123 shares (2002: 214,728,068 shares).
The calculation of fully diluted earnings per share for 2002 is based on the
profit for the period after taxation as for basic earnings per share. The number
of shares is adjusted to show the potential dilution if share options and share
warrants are converted into ordinary shares. The weighted average number of
shares in issue is increased to 243,306,384.
3. Mineral Interests
The recovery of deferred development expenditure is dependent upon the
successful development of economic ore reserves, which in turn depends on the
availability of adequate funding from financial institutions, a joint venture
party or other source.
The Directors are satisfied that deferred expenditure is worth not less than
cost less any amounts written off and that the exploration projects have the
potential to achieve mine production and positive cash flows.
4. Tangible Assets
Tangible Assets are stated at cost or valuation less accumulated depreciation.
GRD Minproc Limited, an independent Australian engineering group, has appraised
the Mining and Processing Plant on a depreciated replacement cost basis of
valuation as at 30 June, 2000. An inspection of the Mining and Processing Plant
was carried out by GRD Minproc Limited in March 2002 concluding that no material
alteration to the plants had taken place. Confirmation of the existence of the
Processing Plant and the Mining Plant at the year end was provided by Aker
Kvaerner, an international engineering group.
The recovery of this amount is dependent upon the successful development of the
Moma Titanium Minerals Project, which in turn depends on the availability of
adequate funding from financial institutions, a joint venture party or other
source. The historical cost net book value of these assets at 30 June, 2003 is
US$11,473,067. The surplus arising on revaluation amounts to US$30,141,002.
5. Non-Consolidation of Subsidiary Undertaking
As set out in detail in Note 7 of 2002 Annual Report, Grafites de Ancuabe,
S.A.R.L., a subsidiary company, has been excluded from consolidation from 31st
December 1999.
6. Approval of Interim Financial Statements
The interim financial statements were approved by the Board on 12 September,
2003.
12 September, 2003
This information is provided by RNS
The company news service from the London Stock Exchange
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