Announcements - 30th April 2007
2006 Preliminary Results Chairman's Statement
- Moma Titanium Minerals Mine now in production
- Strong market demand and price growth for minerals
- Expansion to annual production of 1.2 million tonnes of ilmenite plus co-products by end 2009
- Active uranium exploration programme in Mozambique
Dear Shareholder,
I was delighted to announce on 25th April 2007 that Kenmare had commenced mining operations at its Moma Titanium Minerals Mine and had begun to stockpile heavy minerals concentrate for further processing. While we have only been operating for a short while, the plant has been performing well and we are now looking forward to a successful ramp-up of the mine and processing plant to full production over the coming months. Demand for our products is buoyant and the Company is already developing plans for a phased expansion. Following a recent drilling programme, the mineral resources at Moma have increased by over 60%. This confirms Moma’s position as one of the premier deposits of titanium minerals and zircon in the world, and provides great opportunity for Kenmare’s continued growth.
Kenmare expects to ramp-up initially to annual production levels of 800,000 tonnes of ilmenite (the main titanium-bearing mineral), 56,000 tonnes of zircon (a zirconium mineral used in the ceramics industry) and 21,000 tonnes of rutile (a titanium dioxide mineral).
Product Market
We continue to experience strong market demand for Moma minerals and have entered into a number of heads of agreements with new customers. These are presently being converted into full sales agreements, which are expected to be concluded shortly.
The titanium feedstock market continues to perform well, driven by strong demand from the end-use markets, the most important of which are titanium dioxide (TiO2) pigment and titanium metal. Pigment demand growth rates of over 3% are predicted to be sustainable into the future. This growth, combined with the depletion of existing mines which are coming to the end of their resource lives, will give Moma plenty of scope for expansion. Demand for feedstock from the smaller titanium metal market is also very robust with production growth of over 20% in 2006. This strong demand from end use markets resulted in a tight market for titanium feedstocks in 2006. Despite some new sources of supply entering the market in 2007, the market for our products is expected to remain in tight supply, which will continue to put upward pressure on prices. The zircon market performed strongly in 2006 and prices increased by around 20% over the previous year.
Operations
The 170 km overhead power transmission line was successfully energised in January 2007 and cold commissioning of the two mining dredges followed immediately. The commissioning process was subsequently extended to the floating wet concentrator plant and, following the resolution of snags, the plant was successfully tested and a taking-over certificate for the mining component was issued by Kenmare. This represents the first step of a phased handover of the works under a contract amendment between Kenmare and the contractor in which all changes to the original contract were agreed. Mining is now taking place using one dredge on a 24 hour basis. The Kenmare operations team are continuing to fine-tune the systems for maximum efficiency. As the mining pond is widened and deepened over the coming months, the second dredge will be brought into production. Once the mineral separation plant is taken over from the contractor, the heavy minerals concentrate will be further separated into the final products prior to export.
The accommodation village, roads, product storage warehouse, overland conveyor and export jetty are all substantially complete. Construction of the self-propelled, 4,000 tonne capacity product transportation barge has been completed in Singapore and sea-trials have been carried out.
Drilling activities during the past year continued to examine the numerous deposits within our Moma licences. This has yielded excellent results at the Nataka deposit, where the inferred resource has increased from 49 million tonnes to 110 million tonnes of contained ilmenite, with associated increases in co-products. These results have been independently verified by SRK Consulting. This increases the total resource under licence to Kenmare by more than 60%, from 101 million tonnes to 163 million tonnes of contained ilmenite, with associated increases in co-products to 12.4 million tonnes of zircon and 3.6 million tonnes of rutile. As the Nataka orebody remains open laterally and at depth, further increased tonnage is probable.
Social Responsibility
The Kenmare Moma Development Association (KMAD), a not-for-profit organisation, is continuing its activities in the area surrounding the mine. The key objective of KMAD is to use the presence of the mine to generate long term sustainable opportunities for people in the local communities. Working with local and international partners, initiatives during the past year included a HIV/AIDS awareness programme, a savings and credit programme, a partnership with Worldwide Wildlife Fund on creating and promoting cooperatives of local food producers and other initiatives, and the construction of a new primary school in Topuito, a local village. The local soccer field has been upgraded and Kenmare’s operations staff has pitched in very enthusiastically and have voluntarily organised sporting events. Their support in this area is most appreciated.
Exploration
Kenmare also has an active uranium exploration programme underway in northern Mozambique. We have been granted licences over 1,400 km2 to explore in both the Tete and Niassa provinces. Further licence applications covering 900 km2 have been submitted. Initial field work has involved ground surveying using gamma radiation meters followed by trenching and sampling. Uranium mineralisation has already been identified in both Karoo sedimentary and granitic rocks. As a result, we have increased the size of our exploration team and look forward to reporting to shareholders on our progress.
Financial Results
During 2006, we report a loss of US$4.3 million, arising primarily from foreign exchange losses on Euro-denominated debt and Kenmare’s corporate operating costs, net of interest earned. Construction costs capitalised during the year amounted to US$78 million while deferred project development costs and mineral exploration costs deferred increased by US$36.5 million. Bank loans amounted to US$266.1 million at the year end.
Board Appointment
Tony Lowrie has joined the Board of Directors and it is my pleasure to recommend him for election at the Annual General Meeting. Tony commands great respect in the equity markets and brings a wealth of experience which will assist Kenmare’s continued development.
Now that we have commenced mining we are pushing for a rapid start up of the minerals separation plant and the first shipments to customers. We are in the fortunate position that the market for our products is strong with positive price trends throughout. This, together with the strong indications of support we have received from our customers, gives us the necessary comfort to push rapidly into a major capacity expansion which we hope will bring us to production of 1.2 million tonnes of ilmenite plus co-products by the end of 2009.
We in Kenmare are extremely proud of what has been achieved so far. I would like to take this opportunity to thank everyone who has worked so hard to reach this point. I would also like to thank you, our shareholders, for your support and the Government of Mozambique for its support of Kenmare.
Charles Carvill
Chairman
30th April 2007
Download a PDF version of 2006 Preliminary Results 
For further information:
Michael Carvill
Managing Director
+353 1 671 0411
+353 87 674 0110
Tony McCluskey
Financial Director
+353 1 671 0411
+353 87 674 0346
Murray Consultants
Elizabeth Headon
Tel: +353 1 498 0300
Mob: +353 87 989 7234
Conduit PR Ltd
Leesa Peters
Tel: +44 207 429 6600
Mob: +44 781 215 9885
