Kenmare Resources Plc · LSE:KMR
Kenmare Resources — FY2019 Earnings Presentation
41 slides from Kenmare Resources's earnings presentation, Mar 19, 2020
Slide 1: 2019 Results Presentation
2019 Results Presentation 19 March 2020
Slide 2: Disclaimer
Disclaimer This Presentation (the “Presentation”) has been or oral information made available in connection estimates and projections made. These prepared and issued by Kenmare Resources plc with the Company. assumptions and judgments may or may not (the “Company” or “Kenmare”). While this prove to
Slide 3: Agenda
Agenda Introduction Michael Carvill, Managing Director Financial review Tony McCluskey, Finance Director Operational review Ben Baxter, Chief Operations Officer Market update Michael Carvill, Managing Director Outlook Michael Carvill, Managing Director Q&A Kenmare Resources – 2019 Results Presentati
Slide 4: COVID-19
COVID-19 Safety and well-being of our employees and our host communities are Kenmare’s highest priorities No material impact to date Currently no confirmed cases of COVID-19 in Mozambique Impact on employees and supplies has been manageable Ilmenite market remains strong – no negative impact o
Slide 5: Kenmare: Investment case
Kenmare: Investment case Kenmare’s three strategic pillars From 2021 Kenmare will be producing GROWTH 35% 1.2 Mtpa of ilmenite (plus associated co-products) Final development project on track for completion in Q3 2020 to deliver a 35% production increase Kenmare is targeting a first quartile MARGIN
Slide 6: 2019 overview
2019 overview Sustained financial and operational performance Other financial highlights Growth projects advanced Shipments (Mt) Sales price (FOB) (US$/t) Maiden dividend WCP C development 1.03 248 1.02 1.04 1.07 1.03 229 248 USc8.18 per share1 February 2020 196 0.9 178 133 2019 full year dividend F
Slide 7: Financial review
Financial review Tony McCluskey, Finance Director
Slide 8: Sustained financial performance
Sustained financial performance Full year 2019 dividend of USc8.18 per share declared1 Revenue Sales price (FOB)2,3 Total cash costs4 Net ilmenite unit cost US$270.9m US$248/t US$158/t US$81/t +3% +8% +9% +3% 2018: US$262.2m 2018: US$229/t 2018: US$145/t 2018: US$79/t EBITDA Profit after tax Net cas
Slide 9: Increased average sales price
Increased average sales price 2019 product price and shipping (FOB) review Ilmenite and zircon price movement (US$/t, FOB)1,2 Mixed pricing in 2019 $250 $1,500 8% increase in average sales price (FOB) to US$248/t in $200 $1,250 Primary zircon ($/t) 2019 (2018: US$229/t) $1,000 $150 Ilmenite ($/t)
Slide 10: 36% EBITDA margin
36% EBITDA margin 2019 Income Statement review 2019 2018 Revenue by product (%) US$ million US$ million Rutile Concentrates Revenue 270.9 262.2 3% 7% Freight costs (15.4) (16.3) Revenue (FOB) 255.5 245.9 Primary zircon 22% Ilmenite Cost of sales & other operating costs (211.7) (199.3) 68% Operating
Slide 11: Net ilmenite unit costs largely in line with 2018
Net ilmenite unit costs largely in line with 2018 2019 cash operating costs reconciliation Unit 2019 2018 Cost of sales US$m 178.4 168.3 Decrease in product stock movements due to sales from inventory (159kt at year-end 2019 Other operating costs excluding freight US$m 17.9 14.7 compared to 200kt
Slide 12: Targeting further unit cost reductions from 2021
Targeting further unit cost reductions from 2021 Production and cash operating cost per tonne profile 1,600 240 Finished product production 1,400 210 1,200 180 (US$/tonne) Unit costs (000’s tonnes) 1,000 150 800 120 600 90 400 60 200 30 - - 2014 2015 2016 2017 2018 2019 2020 2021 Production Producti
Slide 13: Sustained robust cash flow from operations
Sustained robust cash flow from operations Operating cash flow per share 0.80 65p/share 65p/share 0.60 43p/share Operating cash flow (£/share) 0.40 0.20 4p/share - (0.20) (0.40) (0.60) -62p/share (0.80) 2015 2016 2017 2018 2019 Increased operating cash flow generation expected from 2021 Kenmare Reso
Slide 14: Strong and flexible balance sheet
Strong and flexible balance sheet Balance sheet review 31-Dec-2019 31-Dec-2018 PPE additions of US$68.5m (2018: US$40.1m) include US$ million US$ million development capex of US$44.3m, primarily relating to WCP C (US$26.8m) and preparation for the WCP B Property, plant & equipment 852.0 806.0 move
Slide 15: New debt facilities
New debt facilities Initial disbursement of US$67.3m made on 18 December 2019 New facilities agreed in December 2019 Term Loan Revolving Credit Facility New facilities provided by a syndicate of existing and new lenders with strong experience in mining and southern Africa US$110m US$40m Proceeds
Slide 16: Dividend policy in action
Dividend policy in action Maiden interim dividend paid in October 2019 and balancing final dividend expected to be paid in May 2020 Dividend policy delivery 2019 profit after tax Total dividend distribution Dividend policy is to pay a minimum of 20% of profit after tax, giving a total full year 20
Slide 17: Operational review
Operational review Ben Baxter, Chief Operations Officer
Slide 18: Focused on responsible business practices
Focused on responsible business practices Our guiding principles: We Care, We Grow, We Excel Health and Safety Continuous commitment to safety LTIFR of 0.27 per 200k man-hours worked to 31 Dec 2019 0.6 Frequency Rate (LTIFR) Five star rating achieved from NOSA safety audit in Q4 2019 for Lost Ti
Slide 19: Optimisation of operations progressing well
Optimisation of operations progressing well Record excavated ore and recoveries Increased excavated ore mitigating lower grades (Mt) 8% increase in excavated ore tonnes to 36.8Mt in 2019 40 36.8Mt compared to 2018, setting a new annual record 33.5Mt 34.0Mt 30.0Mt 5% increase in throughputs to 4,
Slide 20: 2019 production update
2019 production update Operational performance maintained as growth projects advanced HMC production Ilmenite HMC production impacted by anticipated lower grades Ilmenite production was within 1% of original 2019 guidance 1,202,100t 892,900t range and original guidance was achieved for all other p
Slide 21: Pathway to 1.2 Mtpa ilmenite production
Pathway to 1.2 Mtpa ilmenite production Development projects progressing well WCP B upgrade WCP C development WCP B move 20% capacity upgrade of WCP B First HMC production delivered Project execution commenced to complete and delivering to from WCP C in February 2020 move WCP B to Pilivili in scope
Slide 22: WCP C development: Production commenced
WCP C development: Production commenced First HMC production delivered in February 2020 High grade ore zone WCP C in operation WCP C is mining a high grade area of the Namalope ore zone that is inaccessible to the larger WCPs Forecasted average grade of 4.69% THM during first 5 years At a mini
Slide 23: WCP B move: Project execution on track
WCP B move: Project execution on track Relocation scheduled to take up to 12 weeks Infrastructure construction at Pilivili Accessing higher grade ore Highest grade ore zone in Moma’s portfolio – Mineral Reserves of 180Mt (2018: 220Mt) at 4.4% THM, delivering an 8 year mine life Other favourable
Slide 24: Focused on delivery
Focused on delivery On track to deliver 1.2 Mtpa ilmenite production from 2021 with expanded margins Growth Margin expansion WCP B capacity upgrade completed within budget Mineral sands concentrate product stream monetising WCP C commenced production in February 2020 former tailings stockpiles
Slide 25: Market update
Market update Michael Carvill, Managing Director
Slide 26: Global TiO2 feedstock inventories are low
Global TiO2 feedstock inventories are low Forecast supply/demand market balance 10,000 TiO2 units (kt) 8,000 6,000 4,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Existing Supply Increased Moma Supply Potential New Supply Total Feedstock Demand Source: Company Strong
Slide 27: Chinese supply deficit
Chinese supply deficit Reduced availability of imported titanium ores and strong demand from pigment producers Chinese titanium ore imports1 Pigment production strong in China (000’s tonnes)2 350 300 84 000’s tonnes 300 80 000’s tonnes 250 US$/tonne 200 200 76 150 100 72 50 - 100 68 Jan-18 Mar-18 Ma
Slide 28: Positive long-term outlook for all products
Positive long-term outlook for all products 2019 markets update and 2020 outlook Ilmenite Kenmare achieved higher average selling prices sequentially in Q2, Q3 and Q4 Strong market momentum has continued in Q1 2020 Zircon Zircon demand in 2019 was hampered by downstream inventories, thrifting
Slide 29: Outlook
Outlook Michael Carvill, Managing Director
Slide 30: Becoming a first quartile margin producer
Becoming a first quartile margin producer Kenmare is well-positioned to deliver strong free cash flow Industry revenue to cash cost curves 4 Revenue to Cash Cost Ratio 3 2 KMR KMR 1 2023 KMR 2018 Q1 2013 Q2 Q4 0 0% 25% 50% 75% 100% 2013 2018 2023 Kenmare is on track to become a first quartile marg
Slide 31: Strong free cash flow expected from 2021
Strong free cash flow expected from 2021 Development capital expenditure profile (US$m) 140 120 100 US$119.5m (E) US$44.3m 80 US$20.3m 60 40 US$4.2m 20 0 2017 2018 2019 2020 2021 2022 2023 Minimal development capital expected 2021-2023 Third of three development projects expected to be completed i
Slide 32: Conclusion: Building on our strategy
Conclusion: Building on our strategy Strategy 2019 Focus 2020 Focus Growth: targeting 1.2 Mtpa ilmenite production from 2021, representing a 35% increase compared to 2019 Low capital intensity growth to fully WCP B delivering 20% increase in First HMC production delivered from utilise existing
Slide 33: Appendices
‘Appendices | |
Slide 34: Mineral sands: essential to modern life
Mineral sands: essential to modern life Two core product streams of minerals sands World GDP vs TiO2 pigment consumption Titanium feedstocks (ilmenite and rutile) TiO2 pigment imparts whiteness and opacity in the manufacture of 6 450 Global GDP Index Millions tonnes paints, plastics and paper 300
Slide 35: US$92.6m EBITDA in 2019
US$92.6m EBITDA in 2019 EBITDA bridge 2018 to 2019 120 100 93.3 4.5 92.6 4.4 -5.4 -11.0 6.6 80 US$ millions 60 40 20 0 2018 EBITDA Sales Volume Sales Price Sales Mix Stock Costs 2019 EBITDA Movements EBITDA in 2019 in line with 2018 Lower sales volume impact on earnings offset by an increase in
Slide 36: US$13.7m net cash at period-end
US$13.7m net cash at period-end Net cash bridge 31 Dec 2018 to 31 Dec 2019 120 100 80 US$ millions -64.8 60 90.6 40 -10.3 -3.0 20 12.3 13.5 13.7 0 Net cash Dec-18 Operating Property, Plant & Working capital Dividends Interest & Net cash Dec-19 cashflow Equipment changes Financing fees payment 2019
Slide 37: Total cash operating costs largely in line with 2018
Total cash operating costs largely in line with 2018 Total cash operating costs breakdown Logistics & Logistics & Travel Other Travel Other 8% 10% Labour 8% 11% Labour payroll Distribution payroll Distribution 24% Costs 26% Costs 4% 4% 2019: Production 2018: Production US$156.6m Overheads US$151.3m
Slide 38: 2020 guidance
2020 guidance Provided on 9 January 2020 Production 2020 Guidance 2019 Actual Ilmenite tonnes 800,000-900,000 892,900 Primary zircon tonnes 44,500-50,100 46,900 Rutile tonnes 7,700-8,700 8,300 Concentrates1 tonnes 34,700-39,000 40,200 Costs Total cash operating costs US$ m 153-172 157 Cash costs per
Slide 39: KMAD: 2019 Highlights
KMAD: 2019 Highlights Focused on leaving a positive and sustainable legacy >40 small businesses New ambulance provided to Construction of a primary supported by KMAD by year- community health centre school in Cabula village end 2019 57.9% Second phase of technical Nurses sponsored to Mozambican NGO
Slide 40: Follow Kenmare on social media
Follow Kenmare on social media Facebook, Twitter and LinkedIn Kenmare has gone social Kenmare has profiles on Facebook, Twitter and LinkedIn, which feature regular updates on our corporate social responsibility initiatives, operational and development milestones, news flow and more Click the nam
Slide 41: Contact Us
Contact Us Jeremy Dibb / Katharine Sutton +353 1 671 0411 ir@kenmareresources.com Follow Us