Slide 1: Kenmare Resources plc 2013 Preliminary Results
Kenmare Resources plc 2013 Preliminary Results London | 12 March 2014
Slide 2: Disclaimer
Disclaimer This Presentation (the “Presentation”) has been prepared and issued by Kenmare Resources plc (the “Company” or “Kenmare”). While this Presentation has been prepared in good faith, the Company and its respective officers, employees, agents and representatives expressly disclaim any and all
Slide 3: Kenmare Resources 2013 Overview
Kenmare Resources 2013 Overview Phase II expansion complete & in production Ore mined up 22% to 23,951,200 tonnes (2012: 19,588,800 tonnes) Production of Heavy Mineral Concentrate (“HMC”) up 47% to 1,137,200 tonnes (2012: 772,300 tonnes) Production of Ilmenite up 25% to 720,100 tonnes (2012:
Slide 4: Summary Results
1 Summary Results 4
Slide 5: Key Performance Indicators
Key Performance Indicators Production 2012 & 2013 (Half-Yearly) 000t Revenue & EBITDA 2009 – 2013 US$m 450,000 250 120 Ilmenite Sales-Capitalised 400,000 Zircon Sales 100 350,000 200 EBITDA 300,000 80 150 EBITDA US$m Revenue US$m 250,000 60 200,000 100 150,000 40 100,000 50 20 50,000 0 0 0 H1 2012 H
Slide 6: Expansion Revenue & Cost Capitalisation
Expansion Revenue & Cost Capitalisation 2013 2013 US$m US$m H2 2013 Revenue (pre-capitalisation) 161.5 Revenue capitalised (23.6) Reported revenue in income statement 137.9 Cost of sales (pre-capitalisation) (136.4) Cost of sales capitalised 22.7 Reported cost of sales in the income statement (113.7
Slide 7: 2013 Income Statement Review
2013 Income Statement Review 2013 2012 Comment on 2013 & movement US$m US$m Revenue 137.9 234.6 Sales down 41% (down 31% excl. capitalisation) Cost of Sales & Opex (133.2) (154.2) Costs down 14% (up 2% excl. capitalisation) Operating profit 4.7 80.4 Net finance costs (40.3) (27.0) Warrant charge; Pr
Slide 8: 2013 Revenue Review
2013 Revenue Review Volume/Mix Movement Pricing Movement 700,000 Rutile Volume Secondary Zircon Volume $300 $2,000 Primary Zircon Volume Ilmenite Volume 690,000 $1,800 Zircon price /t (US$) + 10% $250 680,000 $1,600 Shipments (Tonnes) Ilmenite price /t (US$) 670,000 - 21% $1,400 - 54% $200 660,000 $
Slide 9: 2013 Cash Operating Costs Review
2013 Cash Operating Costs Review 2013 2013 2012 2012 US$m US$m US$m US$m Cost of sales 113.7 134.5 Other operating costs 19.5 133.2 19.7 154.2 Freight (CIF charged to customers) (3.4) (3.2) Total costs less freight 129.8 151.0 Non-cash costs Depreciation 24.4 18.5 Share-based payments 0.6 (25.0) 3.2
Slide 10: 2011 – 2013 Cash Operating Costs
2011 – 2013 Cash Operating Costs $250.0 800 Final Product Production (Kt) - Right Axis Ongoing Cash Operating Cost per Tonne (US$/t) - Left Axis 700 $200.0 600 500 $150.0 400 $100.0 300 200 $50.0 100 $- 0 2011 2012 2013 Cost per tonne peak in 2013, expected to drop in 2014 due to: Increasing pro
Slide 11: 2013 Cash Operating Costs
2013 Cash Operating Costs Logistics & Other Logistics & Other Travel 8% Travel 9% 7% Distribution 9% Costs Distribution Production 7% Production Costs Overheads Overheads 6% 14% 12% Fuel 2012 9% Fuel Labour Power payroll 8% 2% 2013 29% (23% Payroll & 6% Repairs & associated costs) Maintenance 23% Po
Slide 12: 2013 Balance Sheet Review
2013 Balance Sheet Review 2013 2012 Comment on 2013 & movement US$m US$m Property, plant & equipment 967.1 887.5 Phase II expansion capital additions Deferred tax asset 0.1 2.2 Write-off deterred tax asset Inventories 44.2 22.4 Increased product stocks & expansion spares Trade & other receivables 19
Slide 13: Group Debt
Group Debt Group Debt at 31 Dec. 2013: US$355.2m (2012: US$324.4m) Lenders: Project - Absa, KfW, FMO, EIB, EAIF & AfDB; Group - Absa/Barclays Guarantors: ECIC (of Absa), MIGA & Hermes (of KfW) Average project interest rate at Dec. 2013 was 8.8% Senior: US$94m, floating @ LIBOR + 3.5% to 5.
Slide 14: Group Lenders at December 2013
Group Lenders at 31 December 2013 Loan Balance Maturity US$m Senior Project Loans AFDB 23.2 2018 Absa (ECIC) 29.9 2015 EAIF 2.8 2018 EIB 11.8 2018 FMO 10.0 2016 KfW IPEX-Bank (Hermes) 8.4 2015 KfW IPEX-Bank (MIGA) 8.5 2018 94.6 Subordinated Project Loans EIB 151.7 2019 EAIF 50.9 2019 FMO 44.7 2019 2
Slide 15: The Moma Titanium Minerals Mine
2 The Moma Titanium Minerals Mine 15
Slide 16: Moma Ore Body 100+ Year Life
Moma Ore Body 100+ Year Life Reserves and resources (Mt) Reserves Ilm enite Rutile Zircon Proved 8.4 0.2 0.6 Probable 15.8 0.3 1.1 Total P&P 24.2 0.5 1.7 Resources Ilm enite Rutile Zircon Measured 6.7 0.2 0.6 Indicated 3.4 0.1 0.2 Total M&I 10.1 0.3 0.8 Inferred 160.3 3.6 11.1 Total M,I&I 170.4 3.9
Slide 17: WCP A
WCP A Dredges & WCP A 17
Slide 18: Expansion: WCP B Plant Performance
Expansion: WCP B Plant Performance WCP B - HMC Production 2013 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec WCP B - 2013 WCP Spiral tph WCP Utilisation 1600 70% 1400 60% 1200 50% 1000 40% 800 30% 600 20% 400 3rd dredge & WCP B 200
Slide 19: Expanded Processing
Expanded Processing Extended Storage New Storage New Whims New Aux Ilmenite Existing MSP New Belt filter 19
Slide 20: Expansion: WHIMS Plant
Expansion: WHIMS Plant WHIMS - 2013 WHIMS Feed Rate t/hr WHIMS Utilisation 200 100% 180 90% 160 80% 140 70% 120 60% 100 50% 80 40% 60 30% 40 20% 20 10% 0 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Linear screen WHIMS machines 20
Slide 21: Expansion: Ilmenite A Plant
Expansion: Ilmenite A Plant Ilmenite A - 2013 160 1.2 140 1 120 0.8 100 80 0.6 60 0.4 40 Ilmenite A feed rate tph Ilmenite A utilisation 0.2 20 Ilmenite A recovery 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ilmenite A - Production 2013 80,000 70,000 60,000 50,000 Aux Ilmenite plant produc
Slide 22: Expansion: Ilmenite B Plant
Expansion: Ilmenite B Plant Ilmenite B - 2013 80 100% 70 90% 80% 60 Aux Ilmenite Feed Rate 70% 50 t/hr 60% AuxIlmenite Utilisation 40 50% Aux Ilmenite Recovery 40% 30 30% 20 20% 10 10% 0 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ilmenite B - Production 2013 30,000 25,000 20,000 15,000 10,00
Slide 23: Zircon
Zircon Zircon Tonnes Zircon Recovery 3500 60% 3000 50% 2500 40% 2000 30% 1500 20% 1000 500 10% 0 0% Wet circuits – double deck shaking tables Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Production in November & December severely affected by power outages due to complex nature of zircon circu
Slide 24: Power Reliability
Power Reliability Previous initiatives by Kenmare to enhance transmission capacity & power stability: Installation of capacitor banks at Nampula & Alto Molocue; upgrade of Alto Molocue SVC Voltage stabilisation equipment (Dip Doctor) installed at Moma Capacitor banks installation at Moma Imp
Slide 25: Power Reliability
Power Reliability Projects being advanced by EdM: Load management program to prevent peak time load rising above stability limit of 118MW at Nampula Program currently contributing to improvements in network stability Installation of series capacitors in northern network & Static VAR Compensato
Slide 26: Health & Safety and Environmental Performance
Health & Safety and Environmental Performance Health and Safety Safety of employees is top priority for management LTIFR of 0.50 at 31 December 2013 Kenmare striving for zero harm at Moma 2014 goal is 20% improvement in safety metrics Environment Compliance with Mozambique Law, MIGA & AfDB
Slide 27: KMAD
KMAD 2013 – 2015 Strategic Plan Agreed Current Projects Health post started operating in March 2013 & ambulance allocated for community service Nataka school completed & 2 new schools under construction Water supply to the Natuco vegetable project finalised 2 new community projects started
Slide 28: Market Overview
3 Market Overview 28
Slide 29: TiO2 End Use Sectors
TiO2 End Use Sectors Feedstock demand is driven by: Pigment (90%) Titanium Metal (6%) Welding Electrode Industry (4%) Good pigment demand growth expected in 2014 Titanium metal has entered a slowdown & not expected to recover until 2015 – destocking of feedstock (Rutile/SR/UGS) in 2014
Slide 30: Future Pigment Demand Expected to Grow at Above Historical Growth Rate
Future Pigment Demand Expected to Grow at Above Historical Growth Rate Global Pigment Demand 1990-2020 ('000 tonnes) 8,000 BASE DOWN UPSIDE ACTUAL 3.0% trend 7,000 6,000 5,000 Growth 2011 to 2020 4,000 UPSIDE CASE 3.4% CAGR BASE CASE 3.1% CAGR 3,000 DOWNSIDE CASE 2.8% CAGR Historical 3.0% CAGR from
Slide 31: Pigment Demand Growth Drivers
Pigment Demand Growth Drivers Pigment Consumption Intensity of TiO2 in 20121 60 Canada Demand growth drivers in developing USA 50 Japan W. Europe economies: Pigment intensity of use at early stage of GDP US$ '000 per capita 40 growth curve Increasing per capita GDP 30 Urbanisation trends Tai
Slide 32: TiO2 Feedstock Supply/Demand
TiO2 Feedstock Supply/Demand TOTAL TiO2 Feedstock Supply/Demand (with committed Supply Projects) 12,000 Existing Supply NEW Supply Total Feedstock Demand 10,000 8,000 '000 TiO2 units 6,000 4,000 2,000 - 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Kenmare March 2014 32
Slide 33: TiO2 Market Review 2013
TiO2 Market Review 2013 Pigment demand: Solid growth of ~9% in 2013 following ~12% contraction in 2012 However, growth was met from the drawdown of significant producer inventories Reduced pigment plant operating rates throughout 2013 to enable inventory drawdown Pigment demand at end of 2013
Slide 34: TiO2 Market Outlook 2014
TiO2 Market Outlook 2014 Improving economic data in US & Europe should support stronger pigment demand in 2014 Major pigment producers report strong Q4 2013 pigment sales volume growth vs. Q4 2012 DuPont +18% Huntsman +15% Tronox +23% Above trendline growth rate expected in period 2014 t
Slide 35: TiO2 Market Outlook 2014 (cont’d)
TiO2 Market Outlook 2014 (cont’d) Normalisation of pigment inventories is expected to lead to higher plant operating rates in 2014 Should lead to higher feedstock demand Normalisation of feedstock demand should support higher feedstock prices Moderate supply surplus in 2014; assuming timely
Slide 36: Zircon Market Review
Zircon Market Review Prices appeared to bottom by end of Q1 2013 following sharp correction during the previous 8 months Signs of demand recovery in H1 2013 disappointed in H2 2013 Resulted in some moderate weakening of prices in Q4 2013 – reversing Q3 2013 gains Demand outlook is improving
Slide 37: Summary & Outlook
Summary & Outlook Leading titanium feedstock producer Dredge mineable, direct export, low cost mine Life of mine over 100+ years 50% expansion completed & in production 8% of global TiO2 minerals feedstock supply in 2014 Projected above trendline pigment demand growth 2014 focus on inc
Slide 38: Kenmare Resources plc contact details
Kenmare Resources plc Chatham House │ Chatham Street │ Dublin 2 │ Ireland www.kenmareresources.com
Slide 39: Appendix
4 Appendix 39
Slide 40: Kenmare Resources at a Glance
Kenmare Resources at a Glance Kenmare quick facts Location of mine Moma Mine, North-east Coast Mozambique Products (market share)(1) Titanium feedstock (approximately 8% global supply) One of the world’s largest known titanium minerals Mine life deposits with 100+ years at expanded production levels
Slide 41: Reserves & Resources
Reserves & Resources Reserves & resources table as at 31 December 2013 % % % Ore % % Rutile THM Ilmenite Rutile Zircon Ore Reserve Zone Category Ilmenite Ilmenite Zircon (Mt) THM* in ore (Mt) (Mt) (Mt) (Mt) in THM in ore in ore Reserves Namalope Proved 241 4.3 82 3.5 0.077 0.25 10 8.4 0.18 0.60 Nama
Slide 42: Operations Review
Operations Review The Moma Mine Operating Characteristics Kenmare's expanded operating capacity is 1.2mtpa of >3mt have been shipped to date ilmenite, plus co-products zircon & rutile Coastal location; no overland transport Mining performed by three dredges floating in two artificial Surfa
Slide 43: Titanium Industry Flowchart
Titanium Industry Flowchart HARD ROCK MINING BEACH SAND MINING (open pit mining) (dredge & dry mining) MINING PROCESSING (wet & dry concentration) & PROCESSING ILMENITE LEUCOXENE RUTILE ZIRCON TITANIUM SLAG SYNTHETIC RUTILE UPGRADING PIG IRON Titanium Tetrachloride TITANIUM SPONGE (TiCl4) Production
Slide 44: History
History 1986: Kenmare start-up 1992: Enters BHP 2001: Feasibility studies 2010: Phase II Mineral Sands Joint on the Moma Mine were Expansion funding & Venture completed in February commence 2001 development 1980’s 1990’s 2000’s 2010’s 1987: Exploration in 1992 – 1999: 1999: BHP exits 2004 – 2010: 20