Financial highlights

Kenmare uses various financial and non-financial performance measures, linked to our strategic objectives, to help evaluate the ongoing performance of the business.

The following measures are considered by management to be some of the most important in evaluating the overall performance of the Group year on year.

LTIFR

Descriptor: Lost time injury frequency rate.

Relevance: Measures the number of injuries per 200,000 man-hours worked at the Mine.

Performance: Although from an industry perspective Kenmare's safety performance remained robust, our LTIFR weakened in 2019 to 0.27 per 200,000 man-hours worked, with seven lost time injuries recorded during the year, compared to three in 2018.

Outlook: Kenmare is committed to continual improvement and in 2020 we are focusing on empowering employees and developing a culture of personal accountability for safety.

AI

Descriptor: All injuries.

Relevance: Measures the number of injuries at the Mine in the year.

Performance: Despite a downward trend in Kenmare’s LTIFR from 2015 to 2019, the number of ‘All Injuries’ increased by 14% in 2019 compared to 2018. 80% of the injuries recorded in 2019 were minor injuries (first aid injuries).

Outlook: Improving our safety performance is a key focus area for Kenmare in 2020.

Mining – HMC

Descriptor: Heavy mineral concentrate extracted from mineral sands deposits and which include ilmenite, zircon, rutile, monazite and other heavy minerals and silica.

Relevance: Provides a measure of heavy mineral concentrate extracted from the Mine, the feedstock for the product suite.

Performance: HMC production decreased by 12% in 2019 compared to 2018. This was as a result of declining ore grades, which averaged 3.58% THM in 2019 compared to 4.35% THM in 2018. This was partially offset by an 8% increase in excavated ore tonnes.

Outlook: Through continued optimisation efforts such as the dredge automation projects and Projecto Oitenta, Kenmare expects HMC production to increase in 2020 compared to 2019. From 2021, once the third of Kenmare’s outlined growth projects is complete, Kenmare expects HMC production to increase further to support production of 1.2 million tonnes per annum of ilmenite plus associated co-products.

Processing – finished products

Descriptor: Finished products produced by the mineral separation process.

Relevance: Provides a measure of finished products produced by the processing plants.

Performance: Finished product production reduced by 5% during 2019 compared to 2018, mainly as a result of lower HMC available for processing.

Outlook: Finished product production is expected to be lower in 2020 than in 2019, as outlined in our 2020 guidance, due to anticipated lower grades and lost production time due to the relocation of WCP B. However from 2021 we expect to produce 1.2 million tonnes per annum of ilmenite, plus associated co-products, on a sustainable basis.


EBITDA

Descriptor: Earnings before interest, tax, depreciation and amortisation.

Relevance: Eliminates the effects of financing and certain accounting decisions to allow assessment of the earnings and performance of the Group.

Performance: EBITDA was largely flat in 2019, compared to 2018. Although shipments of finished products decreased by 4% year-on-year and total cash operating costs increased by 4%, this was largely offset by a 8% increase in average received price per tonne (FOB).

Outlook: Kenmare expects to generate significantly stronger EBITDA from 2021 when it has achieved its expanded production rate of 1.2 million tonnes per annum of ilmenite, plus associated co-products.

Capital costs

Descriptor: Additions to property, plant and equipment in the period.

Relevance: Provides the amount spent by the Company on additions to property, plant and equipment in the period.

Performance: Investment in property, plant and equipment increased in line with the Group’s development strategy in 2019. Capital was incurred for sustaining existing operations, the construction of WCP C and the relocation of WCP B to the high grade Pilivili ore zone.

Outlook: Kenmare expects capital costs to be higher in 2020 than in 2019, as outlined in its development and sustaining capital guidance for the year. However, from 2021–2023, prior to the move of WCP A, we anticipate that capital costs will be significantly lower, with development capital of less than US$5 million per annum and sustaining capital of US$20–25 million per annum.

Cash operating costs

Descriptor: Total costs less freight and other non-cash costs, including inventory movements. For cash operating costs per tonne, this number is divided by the tonnes of final products produced.

Relevance: Eliminates the non-cash impact on costs to identify the actual cash outlay for production and, as production levels increase or decrease, highlights operational performance by providing a comparable cash cost per tonne of product produced over time.

Performance: Total cash operating costs increased by 4% in 2019 compared to 2018. This was due primarily to additional demurrage costs, principally as result of poor weather conditions during the first nine months of 2019, additional maintenance costs during the year and an adjustment to consumable spares stock. These cost increases were partially offset by lower payroll costs due to the localisation of staff and a reduced overtime requirement. The higher costs and lower production volumes resulted in a 9% increase in cash operating costs per tonne

Outlook: From 2021 when Kenmare has achieved its targeted production rate of 1.2 million tonnes per annum of ilmenite plus associated co-products, we expect cash operating costs per tonne to decrease to US$125–135 per tonne (in 2020 real terms).

Net cash/net debt

Descriptor: Total cash and cash equivalents minus bank loans.

Relevance: Provides a method to evaluate a company's cash flows. Net debt aids in understanding the leveraging of the company.

Performance: Net cash has remained in line with the prior year. Cash from operating activities has mainly been used to fund expenditure on property, plant and equipment and working capital in the year.

Outlook: From 2021 Kenmare expects to deliver lower cash operating costs per tonne due to increased production volumes. Through this margin expansion, we expect to generate significant free cash flow, which is anticipated to deliver an increased net cash position.

Shipments

Descriptor: Finished products shipped to customers during the period.

Relevance: Provides a measure of finished product volumes shipped to customers.

Performance: Shipment volumes decreased by 4% in 2019 compared to 2018, primarily as a result of challenging weather conditions impacting shipping capacity in the first nine months of the year. This was partially offset by a record quarter for shipments in Q4 2019.

Outlook: Shipment volumes are expected to be lower in 2020 than in 2019, as outlined in our guidance for the year. However, from 2021 shipping volumes are expected to increase significantly due to stronger production volumes.