Kenmare Resources plc Past, present & future. TZMI Congress, Hong Kong 2016

Transcription

1 Kenmare Resources plc Past, present & future. TZMI Congress, Hong Kong 2016 L I S T E D P R E M I U M

2 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 liability for the contents of, or omissions from, this Presentation, and for any other written or oral communication transmitted or made available to the recipient or any of its officers, employees, agents or representatives. No representations or warranties are or will be expressed or are to be implied on the part of the Company, or any of its respective officers, employees, agents or representatives in or from this Presentation or any other written or oral communication from the Company, or any of its respective officers, employees, agents or representatives concerning the Company or any other factors relevant to any transaction involving the Company or as to the accuracy, completeness or fairness of this Presentation, the information or opinions on which it is based, or any other written or oral information made available in connection with the Company. This Presentation does not constitute or form part of, and should not be construed as, an offer, invitation or inducement to purchase or subscribe for any securities of the Company nor shall it or any part of it form the basis of, or be relied upon in connection with, any contract or investment decision relating to such securities, nor does it constitute a recommendation regarding the securities of the Company. This Presentation is as of the date hereof. This Presentation includes certain statements, estimates and projections provided by the Company with respect to the anticipated future performance of the Company or the industry in which it operates. Such statements, estimates and projections reflect various assumptions and subjective judgments by the Company s management concerning anticipated results, certain of which assumptions and judgments may be significant in the context of the statements, estimates and projections made. These assumptions and judgments may or may not prove to be correct and there can be no assurance that any projected results are attainable or will be realised. In particular, certain statements in this Presentation relating to future financials, results, plans and expectations regarding the Company s business, growth and profitability, as well as the general economic conditions to which the Company is exposed, are forward looking by nature and may be affected by a variety of factors. The Company is under no obligation to update or keep current the information contained in this Presentation, to correct any inaccuracies which may become apparent, or to publicly announce the result of any revision to the statements made herein and any opinions expressed in the Presentation or in any related materials are subject to change without notice.

3 Overview The Past Kenmare started exploration for mineral sands in Mozambique almost 30 years ago (1987) Junior explorer/developer/established producer financing & construction challenges Remote location logistical, operational & infrastructure challenges The Present Rising production increased utilisation rates and stable power since December 2015 Falling cash operating costs on a unit and absolute cost basis Capital restructuring Reduced gross debt reduced by 74% to US$100m Provide US$75m of cash, before expenses Reduced annualised interest costs by c.84% to ~US$6m per annum The Future Commodity supply/demand outlook has improved rapidly through 2016 Moma has a huge resource base and installed infrastructure with potential for optimisation 3

4 1 Moma Mine The Journey

5 Initial introduction and early work Introduced to the project through Geoloski Zavod in early 1987 Mozambique in civil war Kenmare checked the deposit, drilling twin holes JV renegotiated, licence reissued, Kenmare in control. 5

6 First feasibility work Davy McKee commissioned to perform feasibility study based on the Congolone deposit Positive Feasibility Study completed in Dec 1989 Appointed Rothschild as financial advisor to assist in seeking a JV partner in

7 BHP comes - Joint Venture Memorandum of Understanding signed with BHP in 1993 with them taking over exploration and drilling MoU expanded in to a Joint Venture in 1995 Slow progress resulted in increasingly difficult relations between JV partners The signing of a peace treaty in Mozambique enabled exploration to move south The Namalope deposit was found (the area being mined today) 7

8 BHP goes - Beenup Beenup, developed by BHP in Western Australia, started in 1997 Operation closed 14 months later in January 1999 due to operational challenges Under new management they decided to exit Mineral Sands and sold or left their other assets - including Moma BHP provided Kenmare with technical work to date but exited the project leaving a funding gap 8

9 Moma DFS GRD Minproc from Perth were commissioned to develop a pre-feasibility study on the Namalope zone Kenmare acquired Beenup s Wet Concentrator Plant and Mineral Separation plant at low cost in January 2000; creating a platform to raise money Feasibility was completed in 2001, now we needed to finance a mine 9

10 Initial Financing A lender group of Development Finance Institutions (DFI) was facilitated by Rothschild and a first site visit was made in 2003 Lender Docs were completed summer 2004 and an equity raising was launched Difficult equity market conditions One of the DFI s took equity instead of sub debt and we convinced another lender to take up that sub debt We were funded 10

11 Phase 1 construction Lenders insisted the project completion risk would be taken by the contractor i.e. a fixed price contract Few mine engineering companies were prepared to take on this risk Multiplex appointed, taking on Bateman as a JV partner on a limited risk sharing basis EPC contract led to many of the systems not being fit for purpose, subsequently rectified by Kenmare Commercial production was declared in June

12 Expansion In 2009, despite the GFC, there was a developing deficit of sulphate ilmenite Moma needed more scale due to remote location and Phase 1 improvements required US$275 million of equity funding raised to fund the expansion and reduce gearing A EPCM contract was signed with Aveng/E&PC in September 2010 for delivery of the project in January 2012 Project implementation was challenging, causing delays and significantly escalated project costs 12

13 Completed project Kenmare took over the expansion in September 2013 and started to ramp up Increased ilmenite production from China and new projects globally, met subdued demand resulting in increased inventories Feedstock prices were in a four year down market Debt increased as project cashflows declined Kenmare stock price weakened significantly 13

14 Takeover approach and refinancing In June 2014, seizing an opportunity, Iluka made a takeover proposal Kenmare could not refinance due to the proposal and while Iluka prolonged its DD, Kenmare continued to get weaker Kenmare was under takeover panel rules until December 2015 when Iluka, realising that its proposal was not supported by Kenmare s major shareholders, withdrew Kenmare refinanced with the help of SGRF and our main shareholders but leaving the previous shareholding only owning 12% of the company 14

15 2 Moma Mine The Present

16 Transformed balance sheet post capital raise Net Debt (US$m) Interest Rates (%) % 350 9% % 200 7% 150 6% % Current * 4% Current * Reduced gross debt to US$100m All USD denominated with extended term, reduce interest rates and repayment holiday Increased cash available for working capital to US$75m 1 Provides a strong buffer should markets change for any unforeseen circumstances * Current net debt as at 28 July 2016 (after fees and expenses, estimated at US$13.4m and excluding cash on the balance sheet immediately prior to completion). Current interest rate based on spot LIBOR +4.75% (as at 05/11/2016). 1 Before fees and expenses, estimated at US$13.4m 16

17 H H H H H H H H H H H H H H2 2016* H H H H H H H H H H H H H H2 2016* Production continues to increase Ilmenite Production (000t) Zircon Production (000t) Stable power since December 2015 as a result of increased power infrastructure Further production improvements and cost reductions expected in 2017 * H production based on guidance given on 13 October

18 Sustainable cost reductions $250 $225 $200 $175 $150 $125 $100 Final Product Production (kt) - Right Axis Ongoing Cash Operating Cost per Tonne (US$/t) - Left Axis H H H H H H H H2 2016* Total cash cost per tonne of finished products (ilmenite, zircon & rutile) decreased 22% to US$153/t in H from US$197/t in H Finished product production up 24% on H Total cash operating costs down 4% on H Further reductions expected in H as a result of higher production volumes * H production and costs based on guidance given on 13 October

19 3 Moma Mine The Future

20 100+ Year Life of Mine Mineral Resources zone Category Sand (Mt) % THM* Congolone Measured Namalope Measured Namalope Indicated Nataka Indicated 1, Pilivili Indicated Congolone Inferred Pilvilli Inferred Mualadi Inferred Nataka Inferred 3, Mpitini Inferred Marrua Inferred Quinga North Inferred TOTAL RESOURCES 6, Moma is not one orebody Differing mineral assemblages and opportunities 1 Based on mineral resources and reserves as at 31/12/

21 Namalope & Nataka Namalope deposit is currently being mined until for WCP B and for WCP A Current mine plan to move both plants to Nataka after Namalope 100 year life of mine From , head grade at the mine was ~5.2%. From that the average grade will decline to ~4.5%. Decline in grade will require an increased mining fleet to maintain levels of HMC production, subject to market conditions and rates of return Future mine development being made following enhanced regional exploration 21

22 Congolone Congolone is a sizeable orebody: 280Mt 3.5% Heavy Mineral Concentrate High dunes and free flowing sand, low mining risk High TiO2 grade sulphate and chloride ilmenite Very dredgeable HMC to be transported to Moma MSP Long life operation 20yrs+ Potentially lower unit costs from high grades and high utilisation 22

23 Pilivili Pilivili resource definition has improved : 266Mt 3.9% Heavy Mineral Concentrate Larger deposit than previously thought Highest ilmenite and zircon grades in Kenmare portfolio 30km from existing Mineral Separation Plant Dredgeable, clean white sands Low expected unit costs driven by high grades and dredge mining 23

24 Future mine development Objectives: Maximise shareholder returns Developing multiple options for all market conditions Focus on margins not volume Maximise value by utilising installed capacity Exploring opportunities to improve on long term mine plan Higher mineral grades Higher dunes, free-flowing sands, lower slimes at Congolone & Pilivili Operate plants at rated capacity More efficient use of capital Have the information needed to make best decisions at right time Defined decision points to weigh investment, market conditions & earnings 24

25 Kenmare Resources Long Life, Low Cost Moma A low cost, long life asset Low cost dredge-mineable operation Significant infrastructure investment, including port facilities Life of mine over 100+ years Significant resource optionality Established producer >US$1.2bn invested since operations began 8% of global titanium feedstock supply Worlds largest producer of merchant ilmenite Robust balance sheet Restructuring has provided increased liquidity, reduced servicing costs and gross debt Exposure to emerging market urbanisation and developed world GDP 25