Interim Management Statement
(Thomson Reuters ONE) - Kenmare Resources plc ("Kenmare" or "the Company")31 August 2009Kenmare Resources plc 2009 Interim ResultsKenmare Resources plc, which owns and operates the Moma TitaniumMinerals Mine in northern Mozambique, issued its interim resultstoday.In the second quarter of 2009, production of Heavy MineralConcentrate (HMC) was up 23% from the first quarter, production ofilmenite was up 12.2%, production of zircon was up 45%, andproduction of rutile increased 158%. A Performance ImprovementProject (PIP) is 97% complete at the time of writing, compared to 75%on 16 April, as noted in Kenmare's Annual Report. This hascontributed to the steady increase in output. Results have continuedto improve with July being a record month for HMC and ilmeniteproduction.To date, Kenmare has relied on one trans-shipment vessel, the'Bronagh J'. While this vessel has performed well, it is prudent tomanage the risk that the mine could have to shut down for a period inthe event of a failure of the 'Bronagh J'. In August, the Grouppurchased an additional trans-shipment vessel and tug which willprovide loadout capacity beyond the envisaged production rate as wellas reducing operational risk.Demand for titanium feedstocks is related to global economic activityand has declined in 2009 due to the onset of the global recessionthough the extent is still uncertain. A strong industry inventorydestocking process which occurred during the first quarter of 2009has abated in the second quarter, with a subsequent increase inshipments from the Moma port facility.In response to the reduction in demand the major mineral feedstockproducers in the industry have reduced output in order to moreclosely align production to current market conditions. Industrycommentators anticipate that, the contraction phase of the cycle willcome to an end during the fourth quarter of 2009 with strong growthrestored in 2010.Since, with the completion of the PIP, Kenmare's management believesthat the plant has the capacity to operate at design levels, thecompany will be reporting operating costs and revenue in the incomestatement from 1 July 2009. Previously, costs net of revenues hadbeen capitalised in development expenditure.Charles Carvill Kenmare's Chairman said:"We are delighted that the Performance Improvement Project isvirtually finished and has been completed according to schedule. Asa consequence we are on target for full production before the end ofthe year.".For more information:Kenmare Resources plcTony McCluskey, Financial DirectorTel: +353 1 6710411Mob: + 353 87 674 0346Murray ConsultantsElizabeth HeadonTel: +353 1 498 0345Mob: + 353 87 989 7234Conduit PR LtdLeesa Peters/Charlie GellerTel: +44 207 429 6600Mob: +44 781 215 9885 www.kenmareresources.com INTERIM MANAGEMENT REPORTGroup activitiesThe principal activity of Kenmare Resources plc is the operation ofthe Moma Titanium Minerals Mine in Mozambique. The mine containsreserves of valuable heavy minerals including ilmenite, zircon andrutile.Mining is by means of dredging in an artificial mining pond, withconcentration of the heavy minerals in a floating wet concentratorplant (WCP) to produce a heavy mineral concentrate (HMC) which ispumped to a minerals separation plant (MSP) for further processing.The MSP separates and upgrades the HMC into the final products,ilmenite, rutile and zircon. These products are exported directlyfrom the mine site using a dedicated shipping terminal and atrans-shipment vessel which loads ocean-going ships.OperationsIn the second quarter of 2009, production of HMC was up 23% from thefirst quarter, production of ilmenite was up 12.2%, production ofzircon was up 45%, and production of rutile increased 158%. ThePerformance Improvement Project (PIP) is 97% complete at the time ofwriting this report, compared to 75% on 16 April, as noted inKenmare's Annual Report. This, combined with improved planning andmanagement at the mine, have contributed to the steady increase inoutput. Results have continued to improve with July being a recordmonth for HMC and ilmenite production.The focus now is to deliver on our forecast of full production beforethe year end. The management team is in place to accomplish this,and with the completion of the PIP, the necessary physical assets arealso in place.To date, we have relied on one trans-shipment vessel, the Bronagh J.While this vessel has performed well, it is prudent to manage therisk that the mine could have to shut down for a period of time ifthe Bronagh J were to fail. In August, the Group purchased anadditional trans-shipment vessel and tug previously employed in thetrans-shipment of lead-zinc concentrate from a mine in WesternAustralia. The vessels are located in Australia where some minormodification works will take place before they are transported to themine for operation in 2010. Having two trans-shipment vessels ofsimilar capacity, as well as reducing risk, will greatly improveloading rates and consequently should reduce freight rates, to thebenefit of our customers, and ultimately to the benefit of the mine.Demand for titanium feedstocks is related to global economic activityand has declined in 2009 due to the onset of the global recessionthough the extent of this reduction is still uncertain. A strongindustry inventory destocking process which occurred during the firstquarter of 2009 has abated in the second quarter, with a subsequentincrease in shipments from the Moma port facility.In response to the reduction in demand, the major mineral feedstockproducers in the industry have reduced output in order to moreclosely align production to current market conditions. Thesereductions entail both temporary cut-backs in operations and theearlier than anticipated closure of near depleted mines. Thisindustry discipline bodes well for tight market conditions and higherprices when demand recovers. Industry commentators anticipate thatthe contraction phase of the cycle will come to an end during thefourth quarter of 2009 with strong growth restored in 2010.Results for the six months ended 30 June 2009The loss for the period of US$0.2 million arises from Group corporateand exploration costs, net of foreign exchange gains and depositinterest earned.During the period there were additions to property, plant andequipment of US$38.1 million. Expenditure on plant and equipmenttotalled US$5.3 million. Development expenditure during the periodwas US$32.8 million of which US$13.4 million was loan interest,US$5.6 million was finance fees and US$13.8 million was operatingcosts net of revenue earned of US$15.6 million and net ofconstruction contract delay damages of US$1.2 million. These costshave been capitalised in property, plant and equipment as the minecontinued to ramp-up production during the period. As the mine is nowcapable of operating in the manner intended by management, operatingcosts and revenues will be reported in the income statement from 1July 2009.Inventory at the period end amounted to US$12.0 million, consistingof mineral products of US$8.3 million and consumable spares of US$3.7million. Included in plant and machinery are capital spares totallingUS$1.1 million. Trade and other receivables amounted to US$30.3million, of which US$10.1 million are trade receivables from the saleof mineral products, US$16 million is money due on the placingagreements entered into on 30 June 2009 with the Group's brokers withthe balance of US$4.2 million made up of amounts due from thecontractor, prepayments and other miscellaneous debtors.On 31 July 2009 the Group entered into a trade finance facility withAbsa Corporate and Business Bank to replace the facility it had withBarclays Bank plc which expired in January 2009.On 30 January and 31 March, the Group concluded two Deeds of Waiverand Amendment with the lenders to the mine which, among other things,deferred two senior debt principal instalments originally scheduledfor 2009. In accordance with the terms of the second of these deeds,fees of US$1.9 million became payable and 28.2 million ordinaryshares in Kenmare Resources plc were issued to the lenders. Anadditional contingent fee of US$0.5 million does not become payableand issue of a further 28.2 million shares is not required inaccordance with the terms of the deeds. Senior loan interest ofUS$6.1 million was paid in February 2009. Senior loan interestaccrued for the six month period was US$5.6 million and subordinatedloan interest accrued during the period was US$7.8 million.Subordinated loan interest capitalised until 2009 is repayable overthe term of the loans from 2010. Loan interest accrued and a foreignexchange gain of US$0.2 million on Euro-denominated debt resulted inan increase in the loan balance to US$341.9 million at the periodend.On 7 August 2009, the Group entered into a loan agreement with BancoComerical e de Investimentos, S.A., a Mozambican bank, for US$2.5million to fund the purchase of the trans-shipment vessel and tug.On 30 June 2009 the Group entered into a placing agreement with itsbrokers to place 54 million new ordinary shares at Stg19p per share.This placing resulted in proceeds of Stg£10.3 million (US$16.7million) being received by the Group on 5 August 2009. The Board ofKenmare extended the exercise period on the outstanding warrants,which would have otherwise expired on 23 July 2009, to 31 December2009. There are a total of 28.5 million warrants outstanding (with anexercise price of Stg19p) which, if exercised in their entirety,would raise approximately US$9 million.Principal risks and uncertaintiesThe Group's business may be affected by risks similar to those facedby many companies in the mining industry. These include geological,political, operational and environmental risks and changes in themacroeconomic environment. The main risks applicable to the mine areset out below:Commercial risksThe main use for ilmenite and rutile is as a feedstock for titaniumdioxide pigment, primarily used in the manufacture of paint, plasticsand fabrics. Zircon is primarily used in the ceramics industry.Consumption of titanium dioxide pigment and ceramics is closelycorrelated with global economic activity and demand can vary overtime. There is a risk of a material decline in prices for thatportion of the mine's output that is not fixed by contract, and arisk that planned shipments may be delayed by customers. Seniormanagement closely monitors production, shipments and prices, and tothe extent possible manages the mine's cost base to ensure it remainscompetitive.Operational risksThe achievement of target design production levels is dependent uponthe ability of mine management to continue to increase productionlevels and export final product. Earlier this year, the jettyrequired some temporary repairs, which were successfully completed.Senior management will ensure that final repairs, which are for theaccount of the Contractor, are implemented in a manner which willensure minimum disruption to export activities. Senior managementwill also continue to carefully manage the remaining aspects of theconstruction contract and allocate the required resources to enablethe mine management to overcome hurdles that may present themselvesin increasing production levels.Financing risksThe successful delivery of increased production levels depends on theavailability of sufficient finance. The Board carefully monitorssenior management's financing activities both with respect toexisting loans and prospective sources of funds. Project loandocumentation requires the maintenance of a Contingency ReserveAccount ("CRA") until financial completion, though this requirementhas been waived by project lenders until 31 December 2010.Senior management is maintaining a close dialogue with lenders andbelieves that sufficient funds are currently in place for Grouprequirements.Financial risksThe development of the mine has been financed in part by Euro and USDollar denominated senior and subordinated loans. At 30 June 2009 theloan balance was US$341.9 million, comprising US$214.8 milliondenominated in US Dollars and US$127.1 million denominated in Euro.The Euro denominated loans expose the Group to currency fluctuations.The borrowings issued at variable rates expose the Group to cash flowinterest risk. Borrowings issued at fixed rates expose the Group tofair value interest rate risk. Senior management regularly monitorsand reports to the Board on these currency and interest rate risks. The Board has determined that the Group's current policy of notentering into derivative financial instruments to manage such riskscontinues to be appropriate in light of the mix of fixed and variablerate exposures and currencies. The Group's policy with respect toliquidity and cash flow risk is to ensure continuity of fundingprimarily generated from operations.Environmental risksThe Group is committed to managing its operations in accordance withapplicable guidelines issued by the World Bank, MIGA, the AfricanDevelopment Bank and FMO, the environmental laws and standards inforce in Mozambique, as well as its own policies. In connection withthe participation of FMO in the June 2009 share placing, the Grouphas agreed to apply IFC Performance Standards to the mine. TheEnvironmental Management Plan (EMP) for the Moma Titanium MineralsMine sets out the monitoring activities, management and trainingprograms, reporting activities, auditing and mitigation measures thatare required in order to identify and reduce any negative impacts ofthe mine and to comply with applicable environmental laws andguidelines. Senior management regularly reports to the Board on thestatus of compliance with the Group's environmental and socialobligations, and aims to ensure that the EMP is properly implementedand maintained.Health and safety risksThe Group is committed to conducting its business in a manner thatminimises the exposure of its employees, contractors and the generalpublic to health and safety risks arising from its operations. TheGroup's operations personnel worked 615,840 hours to 30 June 2009,with 3 lost-time injuries. The Group's operations contractors worked352,523 hours to 30 June 2009, with 1 lost-time injury. Malaria is akey risk at the mine and the Group continues to develop and implementprograms to minimise its impact on all personnel at the mine. TheGroup will also continue to ensure that appropriate health and safetystandards are maintained in all Group activities.OutlookThe Group is focused on increasing production and shipments to targetlevels in the coming months, and on closing out the constructioncontract. The Group will continue to monitor Group fundingrequirements and obligations under the financing documentation, andwill continue to ensure that the Group retains sufficient liquidity.Related party transactionsMaterial related party transactions affecting the financialperformance of the Group in the period are disclosed in Note 10.Forward-looking statementsThis report contains certain forward-looking statements. Thesestatements are made by the Directors in good faith based on theinformation available to them up to the time of their approval ofthis report and such statements should be treated with caution due tothe inherent uncertainties, including both economic and business riskfactors, underlying any such forward-looking information.By order of the Board,ChairmanCharles Carvill28 August 2009RESPONSIBILITY STATEMENTThe Directors are responsible for preparation of the Half YearlyFinancial Report in accordance with the Transparency (Directive2004/109/EC) Regulations 2007 and with IAS 34, Interim FinancialReporting as adopted by the European Union.The Directors confirm that, to the best of their knowledge:- The condensed consolidated financial statements for the half yearended 30 June 2009 have been prepared in accordance with IAS 34Interim Financial Reporting as adopted by the EU;- The Interim Management Report includes a fair review of theinformation required by Regulation 8(2) of the Transparency(Directive 2004/109/EC) Regulations 2007, being an indication ofimportant events that have occurred during the first six months ofthe financial year and their impact on the condensed financialstatements; and a description of the principal risks anduncertainties for the remaining six months of the year; and- The Interim Management Report includes a fair review of theinformation required by Regulation 8(3) of the Transparency(Directive 2004/109/EC) Regulations 2007, being related partytransactions that have taken place in the first six months of thecurrent financial year and that materially affected the financialposition or performance of the entity during that period; and anychanges in the related party transactions described in the lastannual report that could do so.By order of the Board,ChairmanCharles Carvill28 August 2009INDEPENDENT REVIEW REPORTTO THE MEMBERS OF KENMARE RESOURCES PLCIntroductionWe have been engaged by the Company to review the group condensed setof financial statements in the Half Yearly Financial Report for thesix months ended 30 June 2009, which comprise the Group CondensedIncome Statement, Group Condensed Balance Sheet, Group Condensed CashFlow Statement, Group Condensed Statement of Changes in Equity andrelated notes 1 to 12. We have read the other information containedin the Half Yearly Financial Report and considered whether itcontains any apparent misstatements or material inconsistencies withthe information in the group condensed set of financial statements.This report is made solely to the Company's members, as a body, inaccordance with International Standard on Review Engagements (UK andIreland) 2410 issued by the Auditing Practices Board. Our work hasbeen undertaken so that we might state to the Company's members thosematters we are required to state to them in an independent reviewreport and for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility to anyone other thanthe Company and the Company's members as a body, for our review work,for this report, or for the conclusions we have formed.Directors' ResponsibilitiesThe Half Yearly Financial Report is the responsibility of, and hasbeen approved by, the Directors. The Directors are responsible forpreparing the Half Yearly Financial Report in accordance with theTransparency (Directive 2004/109/EC) Regulations 2007.As disclosed in note 1, the annual financial statements of the Groupare prepared in accordance with IFRSs as adopted by the EuropeanUnion. The group condensed set of financial statements included inthis Half Yearly Financial Report has been prepared in accordancewith International Accounting Standard 34, ''Interim FinancialReporting,'' as adopted by the European Union.Our ResponsibilityOur responsibility is to express to the Company a conclusion on thegroup condensed set of financial statements in the Half YearlyFinancial Report based on our review.Scope of ReviewWe conducted our review in accordance with International Standard onReview Engagements (UK and Ireland) 2410, ''Review of InterimFinancial Information Performed by the Independent Auditor of theEntity'' issued by the Auditing Practices Board for use in Ireland. Areview of interim financial information consists of making enquiries,primarily of persons responsible for financial and accountingmatters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland)and consequently does not enable us to obtain assurance that we wouldbecome aware of all significant matters that might be identified inan audit. Accordingly, we do not express an audit opinion.ConclusionBased on our review, nothing has come to our attention that causes usto believe that the group condensed set of financial statements inthe Half Yearly Financial Report for the six months ended 30 June2009 is not prepared, in all material respects, in accordance withInternational Accounting Standard 34 (IAS 34 - Interim FinancialReporting) as adopted by the European Union and the Transparency(Directive 2004/109/EC) Regulations 2007.Emphasis of Matter - Property, Plant and EquipmentWithout modifying our conclusion, we draw your attention to note 5regarding the disclosures made in the interim group condensedfinancial statements concerning the recoverability of Property, Plantand Equipment. The realisation of Property, Plant and Equipment ofUS$571.7 million included in the Group Condensed Balance Sheet, isdependent on the successful operation of the Moma Titanium MineralsMine and the continued availability of adequate financing for themine as referred to in note 7. The Half Yearly Financial Report doesnot include any adjustments relating to these uncertainties and theultimate outcome cannot at present be determined.Deloitte & ToucheChartered Accountants and Registered AuditorsDeloitte & Touche HouseEarlsfort TerraceDublin 228 August 2009 KENMARE RESOURCES PLC GROUP CONDENSED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2009 Unaudited Unaudited Audited 6 Months 6 Months 12 Months 30-Jun 30-Jun 31-Dec 2009 2008 2008 Notes US$'000 US$'000 US$'000Continuing OperationsRevenue - - -Operating expenses 2 (359) (8,809) (957)Finance income 160 720 1,302(Loss)/profit before (199) (8,089) 345taxIncome tax expense - - -(Loss)/profit for the (199) (8,089) 345period/yearAttributable to (199) (8,089) 345equity holders US$ cent per US$ cent per share US$ cent share per share(Loss)/profit per 4 (0.02c) (1.09c) 0.045cshare: basic(Loss)/profit per 4 (0.02c) (1.09c) 0.042cshare: dilutedThe accompanying notes form part of the condensed financialstatements KENMARE RESOURCES PLC GROUP CONDENSED BALANCE SHEET AS AT 30 JUNE 2009 Unaudited Unaudited Audited 30-Jun 30-Jun 31-Dec 2009 2008 2008 Notes US$'000 US$'000 US$'000AssetsNon-current assetsProperty, plant and equipment 5 571,735 514,706 539,672 571,735 514,706 539,672Current assetsInventories 12,077 6,497 6,405Trade and other receivables 30,337 4,755 3,033Cash and cash equivalents 5,631 47,727 40,536 48,045 58,979 49,974Total assets 619,780 573,685 589,646EquityCapital and reserves attributableto the Company's equity holdersCalled-up share capital 6 72,966 61,705 66,178Share premium 6 157,553 122,885 145,088Retained losses (30,990) (39,225) (30,791)Other reserves 43,887 42,471 42,668Total equity 243,416 187,836 223,143LiabilitiesNon-current liabilitiesBank loans 7 310,423 325,677 299,982Obligations under finance lease 2,226 2,286 2,264Provisions 8 3,992 3,999 4,179 316,641 331,962 306,425Current liabilitiesBank loans 7 31,478 26,807 34,842Provisions 8 610 - -Trade and other payables 27,635 27,080 25,236 59,723 53,887 60,078Total liabilities 376,364 385,849 366,503Total equity and liabilities 619,780 573,685 589,646The accompanying notes form part of the condensed financialstatements KENMARE RESOURCES PLC GROUP CONDENSED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2009 Unaudited Unaudited Audited 6 Months 6 Months 12 Months 30-Jun 30-Jun 31-Dec 2009 2008 2008 US$'000 US$'000 US$'000Cash flows from operatingactivities(Loss)/profit for the period/year (199) (8,089) 345Adjustment for:Foreign exchange movement (480) (37) (5,472)Share-based payment expense 83 27 -Operating cash outflow (596) (8,099) (5,127)(Increase)/decrease in (5,672) (866) 408inventories(Increase)/decrease in trade and (11,223) 87 1,809other receivablesIncrease/(decrease) in trade and 2,367 (2,539) (4,414)other payablesIncrease in provisions 423 - 1,674Cash used by operations (14,701) (11,417) (5,650)Finance costs (6,181) (7,200) (13,739)Net cash used in operating (20,882) (18,617) (19,389)activitiesCash flows from investingactivitiesAdditions to property, plant and (21,585) (18,171) (39,050)equipmentNet cash used in investing (21,585) (18,171) (39,050)activitiesCash flows from financingactivitiesProceeds on the issue of shares - 1,593 28,269Proceeds on shares to be issued 11 - -Repayment of borrowings - (17,312) (20,335)Increase in borrowings 7,077 43,954 29,316(Decrease)/increase in (6) 40 50obligations under finance leaseNet cash from financing 7,082 28,275 37,300activitiesNet decrease in cash and cash (35,385) (8,513) (21,139)equivalentsCash and cash equivalents at the 40,536 56,203 56,203beginning of period/yearEffect of exchange rate changes 480 37 5,472on cash and cash equivalentsCash and cash equivalents at end 5,631 47,727 40,536of period/yearThe accompanying notes form part of the condensed financialstatements KENMARE RESOURCES PLC GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2009 Called-Up Share Retained Other Total Share Premium Losses Reserves Capital US$'000 US$'000 US$'000 US$'000 US$'000Balance at 1January 2008 61,496 121,501 (31,136) 41,562 193,423Loss for the - - (8,089) - (8,089)periodShare-based - - - 909 909paymentIssue of share 209 1,384 - - 1,593capitalBalance at 30 June 61,705 122,885 (39,225) 42,471 187,8362008Profit for the - - 8,434 - 8,434periodShare-based - - - 197 197paymentIssue of share 4,473 22,203 - - 26,676capitalBalance at 31December 2008 66,178 145,088 (30,791) 42,668 223,143Loss for the - - (199) - (199)periodShare based - - - 1,219 1,219paymentIssue of share 2,234 927 - - 3,161capitalShare capital to 4,554 11,538 - - 16,092be issuedBalance at 30 June 72,966 157,553 (30,990) 43,887 243,4162009The accompanying notes form part of the condensed financialstatements KENMARE RESOURCES PLC NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 JUNE 2009 1. BASIS OF PREPARATIONThe Group Condensed Financial Statements for the six months ended 30June 2009 have been prepared in accordance with the Transparency(Directive 2004/109/EC) Regulations 2007 and IAS 34 Interim FinancialReporting as adopted by the EU.The accounting policies and methods of computation adopted in thepreparation of the Group Condensed Financial Statements areconsistent with those applied in the Annual Report for the financialyear ended 31 December 2008 and are described in those financialstatements.In the current financial year, the Group has adopted all Standardsand Interpretations which are effective from 1 January 2009. Adoptionhas resulted in no material impact on the financial statements.Both the figures for the six months ended 30 June 2009 and thecomparative amounts for the six months ended 30 June 2008 areunaudited. The Group condensed financial information for the yearended 31 December 2008 represents an abbreviated version of theGroup's full year financials statements for that year. Thosefinancial statements contained an unqualified audit report and havebeen filed with the Registrar of Companies.There were no other gains or losses during the six months periodended 30 June 2009 other than those reported in the Condensed IncomeStatement. As a result no Statement of Comprehensive Income has beenprovided.2. SEGMENTAL INFORMATIONIn prior years management considered the operation of the MomaTitanium Minerals Mine in Mozambique as its primary business segmentand its geographical segment. This is also the means by whichinformation is reported to the Group's Board for the purposes ofresource allocation and assessment of segment performance. Thereforethere is no change to the Group's reportable segments under IFRS8.Segmental information is presented as follows:SEGMENT Unaudited Unaudited Audited 30-Jun-09 30-Jun-08 31-Dec-08 US$'000 US$'000 US$'000Segment resultsOperating (expenses)/gainsMoma Titanium Minerals MineExpenses net of revenue (13,793) (17,386) (31,725)Loan interest (13,409) (13,295) (26,861)Finance fees (5,615) (901) (1,455)Total capitalised in developmentexpenditure (32,817) (31,582) (60,041)Foreign exchange (loss)/gain(expensed)/credited in the incomestatement (56) (8,955) 5,792Mozambique Uranium Project explorationexpenditure (113) (332) (503)Unallocated corporate (expenses)/gains (600) 422 (801)Corporate foreign exchange gain/(loss) 410 56 (5,445)Total operating expenses (359) (8,809) (957)Finance income 160 720 1,302(Loss)/profit before tax (199) (8,089) 345Income tax expense - - -(Loss)/profit for the period/year (199) (8,089) 345Other informationCapital additions 38,092 33,161 63,775Balance SheetMoma Titanium Minerals Mine assets 598,430 540,648 554,562Corporate assets 21,350 33,037 35,084Total assets 619,780 573,685 589,646Moma Titanium Minerals Mine liabilities 374,129 383,700 364,401Corporate liabilities 2,235 2,149 2,102Total liabilities 376,364 385,849 366,5033. SEASONALITY OF SALE OF MINERAL PRODUCTSSales of mineral products are not seasonal in nature.4. (LOSS)/ EARNINGS PER SHAREThe calculation of the basic and diluted (loss)/earnings per shareattributable to the ordinary equity holders of the parent is based onthe following data: Unaudited Unaudited Audited 30-Jun-09 30-Jun-08 31-Dec-08 US$'000 US$'000 US$'000(Loss)/profit(Loss)/profit for the period/yearattributable to equity holders ofthe parent (199) (8,089) 345 Unaudited Unaudited Audited 30-Jun -09 30-Jun -08 31-Dec-08 Number of Number of Number of Shares Shares SharesWeighted average number of issuedordinary shares for thepurposes of basic loss/earningper share 798,839,952 743,225,455 760,160,548Effect of dilutive potentialordinary sharesShare options 47,578,258 37,378,258 36,653,258Warrants 28,572,536 28,777,367 28,572,536Weighted average number of ordinary sharesfor the purposeof diluted loss/earning per share 874,990,746 809,381,080 825,386,342The basic loss per share and the diluted loss per share are the same,as the effect of the outstanding share options and warrants isanti-dilutive.5. PROPERTY, PLANT AND EQUIPMENT Plant Buildings Mobile Fixtures Construction Development Total & & & Equipment Equipment In Progress Expenditure Equipment Airstrip US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000CostBalance at 1January 2008 257,502 3,812 6,022 2,535 46,082 176,365 492,318Transfer fromconstruction inprogress 1,271 - - 1 (1,272) - -Reclassificationto inventory (897) - - - - - (897)Additions duringthe period 206 - - 19 1,354 31,582 33,161Balance at 30 524,582June 2008 258,082 3,812 6,022 2,555 46,164 207,947Transfer fromconstruction inprogress 1,132 - 177 77 (1,386) - -Reclassificationto inventory (285) - - - - - (285)Additions duringthe period 587 - 525 116 927 28,459 30,614Impairmentduring the - - (486) - - - (486)periodBalance at 31 554,425December 2008 259,516 3,812 6,238 2,748 45,705 236,406Transfer from 1,437construction inprogress - 473 61 (1,971) - -Additions duringthe period 1,257 - 129 48 3,843 32,815 38,092Impairmentduring the - - (362) (1) - (48) (411)periodBalance at 30June 2009 262,210 3,812 6,478 2,856 47,577 269,173 592,106AccumulatedDepreciationBalance at 1January 2008 2,775 74 2,207 302 - - 5,358Charge for the 3,412 95 604 407 - - 4,518periodBalance at 30June 2008 6,187 169 2,811 709 - - 9,876Charge for the 4,033 96 648 413 - - 5,190periodImpairmentduring the - - (313) - - - (313)periodBalance at 31December 2008 10,220 265 3,146 1,122 - - 14,753Charge for the 4,636 95 651 448 - - 5,830periodImpairmentduring the - - (212) - - - (212)periodBalance at 30June 2009 14,856 360 3,585 1,570 - - 20,371Carrying AmountBalance at 30June 2009 247,354 3,452 2,893 1,286 47,577 269,173 571,735Balance at 30June 2008 251,895 3,643 3,211 1,846 46,164 207,947 514,706Balance at 31December 2008 249,296 3,547 3,092 1,626 45,705 236,406 539,6725. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)A construction contract for the engineering, procurement, building,commissioning and transfer of facilities at the Moma TitaniumMinerals Mine in Mozambique was entered into on 7 April 2004. TheContractor is a joint venture formed for this project by subsidiariesof Multiplex Limited and Bateman B.V.The construction contract was amended in December 2006 to provide foramong other things, taking-over the Moma Titanium Minerals Mine worksin sections. At 30 June 2009, the only remaining section to be takenover was the roaster.During the period the Group carried out an impairment review ofproperty, plant and equipment. The cash generating unit for thepurpose of impairment testing is the Moma Titanium Minerals Mine asthis is the primary business and geographic segment of the Group. Thebasis on which the recoverable amount of the Moma Titanium MineralsMine is assessed is its value in use. The cash flow forecastemployed for the value in use computation is a life of mine financialmodel. The recoverable amount obtained from the financial modelrepresents the present value of the future pre tax and finance cashflows discounted at the average effective borrowing rate of the MomaTitanium Mineral Mine of 8.9%. Due to the specific nature of theproject financing, there is no basis to assume that current marketrates differ from those in the loan documents.Key assumptions include the following:- A mine plan covering 21 years of production based on only 75% ofNamalope proved and probable reserves. The additional reserves willbe incorporated in subsequent life of mine plans.- The cash flows assume ramp-up to expected production levels during2009. Expected production levels are annual production levels ofapproximately 800,000 tonnes of ilmenite per annum plus co-products,rutile and zircon.- Product sales prices are based on contract prices as stipulated inmarketing agreements with customers, or where contracts are based onmarket prices or production is not presently contracted, prices asforecast by the lenders' independent marketing consultant.- Operating and capital replacement costs are based on approvedbudget costs for 2009 and escalated by 2% per annum there after.The discount rate is the significant factor in determining therecoverable amount and a 1% change in the discount rate results in an8% change in the recoverable amount.Substantially all the property, plant and equipment will be mortgagedto secure project loans as detailed in Note 7.The carrying amount of the Group's plant and equipment includes anamount of US$1.6 million (2008: US$1.8million) in respect of assets held under a finance lease.Additions to development expenditure include loan interestcapitalised of US$13.4 million (2008:US$13.3 million), finance feesof US$5.6 million (2008: US$0.9 million), costs of US$13.8 million(2008:US$17.3 million) net of revenue earned of US$15.6 million(2008:US$9.0 million) and net of delay damages of US$1.2 million(2008:US$1.2 million). Included in development expenditure areamounts of US$1.1 million (2008: US$0.6 million) relating to sharebased payments as detailed in Note 9.The recovery of property, plant and equipment is dependent upon thesuccessful operation of the Moma Titanium Minerals Mine and continuedavailability of adequate funding for the mine. The Directors aresatisfied that at the balance sheet date the recoverable amount ofproperty, plant and equipment exceeds its carrying amount and basedon the planned mine production levels that the Moma Titanium MineralsMine will achieve positive cash flows. There was an impairment chargefor the period of US$0.4 million (2008: nil),6. SHARE CAPITALShare capital as at 30 June 2009 amounted to US$73.0 million (2008:US$61.7 million). During the period, 28.2 million ordinary shares inKenmare Resources plc were issued to the lender group as fees underthe terms of the Deed of Waiver and Amendment. The issue of theseshares resulted in finance fees of US$3.2 million which have beencapitalised in development expenditure as detailed in Note 5. US$2.2million of this issue has been credited to share capital and US$1.0million to share premium.On 30 June 2009 the Group entered into arrangements with its brokersto place 54 million new ordinary shares at Stg19p per share. Thisplacing resulted in proceeds of Stg£10.3 million (US$16.1 million)being received by the Group on 5 August 2009. The placing hasresulted in US$4.6 million been credited to share capital as ordinaryshares to be issued and US$11.5 million to share premium.7. BANK LOANS Unaudited Unaudited Audited 30-Jun-09 30-Jun-08 31-Dec-08 US$'000 US$'000 US$'000Senior loans 188,198 201,723 188,844Subordinated loans 153,703 150,761 145,980 341,901 352,484 334,824The borrowings are repayable asfollows:Within one year 31,478 26,807 34,842In the second year 40,646 37,043 36,633In the third to fifth year 121,938 111,128 109,899After five years 147,839 177,506 153,450 341,901 352,484 334,824Less amounts due for settlement within12 months (31,478) (26,807) (34,842)Amount due for settlement after 12months 310,423 325,677 299,982The bank loans have been made to the Mozambique branches of KenmareMoma Mining (Mauritius) Limited and Kenmare Moma Processing(Mauritius) Limited (the Project Companies). Bank loans are securedby substantially all rights and assets of the Company (other thancash held at the corporate level) and the Moma Titanium MineralsMine; security agreements over shares in the Project Companies; andthe Contingency Reserve Account. Loan balances set out in thesefinancial statements include accrued interest.The Company has guaranteed the bank loans during the period prior tocompletion. The final date for achieving completion was formerly 30June 2009. The Deed of Waiver and Amendment dated 31 March 2009extended this date to 31 December 2012. Completion occurs uponmeeting certain tests on a phased basis, including installation ofall required facilities, meeting certain cost and productionbenchmarks and social and environmental requirements (technicalcompletion, which must take place by 31 December 2010), meetingmarketing requirements (which must take place by 30 June 2011), andmeeting legal and permitting requirements, and filling of specifiedreserve accounts to the required levels. Upon completion, theCompany's guarantee of the bank loans will terminate. Failure tomeet any of the phased tests or, subject to extension for forcemajeure not to exceed 365 days, failure to achieve completion by 31December 2012, would result in an event of default under the Seniorand Subordinated Loan documentation which, following notice, wouldgive Lenders the right to accelerate the loans against the ProjectCompanies, and to commence a two-stage process allowing the Lendersto exercise their security interests in the shares and assets(including accounts) of the Project Companies and in the ContingencyReserve Account.Seven Senior Loan credit facilities were made available for financingthe Moma Titanium Minerals Mine. The aggregate maximum amount of theSenior Loan credit facilities is US$185 million plus ?15 million ofwhich $182.8 million and ?15 million had been drawn at 30 June 2009,and US$2.2 million was undrawn and prior to June 2009 was availableunder one of the facilities. The availability period for the undrawnUS$2.2 million expired on 30 June 2009 without the amount being drawnbecause of the failure of the Contractor to provide the necessarytied content. The Group will seek appropriate damages under thecontract for this failure. Loan interest repayments during theperiod totalled US$6.1 million, interest accrued of US$5.6 millionand a foreign exchange gain on the Euro-denominated senior loan ofUS$0.1 million, resulting in an overall decrease in the balanceoutstanding to US$188.2 million.Senior Loans were originally scheduled to be repaid in equalsemi-annual instalments commencing on 1 February 2008 in the case ofsix of the seven Senior Loan facilities, and on 2 February 2009 inthe case of the seventh. Principal instalments originally scheduledto be paid in 2008 were paid when due. On 30 January 2009, a Deed ofWaiver and Amendment was entered into by the Project Companieswhereby the Senior principal instalments due on 2 February 2009 weredeferred, to be repaid over the remaining life of the respective loanfacility commencing on 4 August 2009, and pursuant to which Kenmarecontributed US$15 million to the Contingency Reserve Account between12 December 2008 and 31 January 2009. On 31 March 2009 a second Deedof Waiver and Amendment was entered into by the Project Companieswhereby the Senior principal instalments due on 4 August 2009 werealso deferred, to be repaid over the remaining life of the loanfacilities commencing on 1 February 2010.7. BANK LOANS (CONTINUED)The Senior Loan tenors have therefore remained unchanged and rangefrom 6 to 9 years from 30 June 2009. Three of the Senior Loans bearinterest at fixed rates and four bear interest at variable rates.The Subordinated Loan credit facilities of ?47.1 million plus US$10million (excluding capitalised interest) were fully drawn down at theperiod end. Under the loan documents Subordinated Loans wererepayable in 21 semi-annual instalments commencing on 1 August 2009.Under the second Deed of Waiver and Amendment referred to above, thefirst scheduled Subordinated Loan principal instalment, which wouldhave otherwise been due on 4 August 2009 has been deferred and isscheduled for repayment on 1 February 2010, and if cash isinsufficient on such payment date, on the first semi-annual paymentdate thereafter on which sufficient cash is available, in accordancewith the terms of the financing documentation. The final instalmentsare due on 1 August 2019. The Subordinated Loans denominated in Eurobear interest at a fixed rate of 10% per annum, while theSubordinated Loans denominated in US Dollars bear interest atvariable rates. Pursuant to the original terms of the financingdocumentation, Subordinated Loan interest is being capitalised up toand including 4 August 2009. Subordinated Loan interest is due to bepaid in cash for the first time on 1 February 2010, but if cash isinsufficient on such payment date to make the schedule interestpayment, interest will be capitalised and become payable on the firstsemi-annual payment date on which sufficient cash is available, inwhole or in part, to the extent of available cash.The Standby Subordinated Loan credit facilities of ?2.8 million andUS$4 million were fully drawn down at period end. StandbySubordinated Loans bear interest at fixed rates in respect of ?2.8million and US$1.5 million and at variable rates in respect of US$2.5million. Standby Subordinated Loans are repayable on the same termsas the Subordinated Loans and have an option to require that KenmareResources plc purchase the loans on agreed terms.The Additional Standby Subordinated Loan credit facilities of US$12million and US$10 million were fully drawn down at period end. TheAdditional Standby Subordinated Loans bear interest at variablerates. The Additional Standby Subordinated Loans are repayable on thesame terms as the Subordinated Loans.In accordance with the terms of a Deed of Waiver and Amendment dated31 March 2009, fees of US$1.9 million became payable and 28.2 millionordinary shares in Kenmare Resources plc were issued to the lenders.An additional contingent fee of US$0.5 million does not becomepayable and issue of a further 28.2 million shares is not required inaccordance with the terms of the deeds.Interest margins on subordinated loans will increase by 3% untiltechnical completion and by 1% until financial completion. Thisadditional margin will be payable only after senior loans have beenrepaid in full. Loan facilities arranged at fixed interest ratesexpose the Group to fair value interest rate risk. Loan facilitiesarranged at variable rates expose the Group to cash flow interestrate risk. Variable rates are based on six month LIBOR. The averageeffective borrowing rate at the period end was 8.9%. The interestrate profile of the Group's loan balances at the period end was asfollows: Unaudited Unaudited Audited 30-Jun-09 30-Jun-08 31-Dec-08 US$'000 US$'000 US$'000Fixed rate debt 221,536 232,872 196,208Variable rate debt 120,365 119,612 138,616Total debt 341,901 352,484 334,824For bank borrowings which bear fixed and variable rates of interest,fair value is estimated to be equivalent to book value. Due to thespecific nature of the project financing, there is no basis to assumethat current market rates differ from those in the loans documents.Consequently the Directors consider them to be the same.Under that assumption that all other variables remain constant andusing the most relevant 6 month LIBOR, a 1% change in LIBOR wouldresult in a US$1.2 million (2008: US$1.2 million) change in financecosts for the year.7. BANK LOANS (CONTINUED)The currency profile of the bank loans is as follows: Unaudited Unaudited Audited 30-Jun-09 30-Jun-08 31-Dec-08 US$'000 US$'000 US$'000Euro 127,131 131,987 121,666US Dollars 214,770 220,497 213,158Total debt 341,901 352,484 334,824The Euro-denominated loans expose the Group to currency fluctuations.These currency fluctuations are realised on payment ofEuro-denominated debt principal and interest. Under that assumptionthat all other variables remain constant a 10% strengthening orweakening of Euro against the US Dollar, would result in a US$1.5million (2008: US$1.2 million) change in finance costs for the year.The above sensitivity analyses are estimates of the impact of marketrisks assuming the specified change occurs. Actual results in thefuture may differ materially from these results due to developmentsin the global financial markets which may cause fluctuations ininterest and exchange rates to vary from the assumptions made aboveand therefore should not be considered a projection of likely futureevents.The Directors have prepared cash flow projections for the estimatedlife of the Moma Titanium Minerals Mine. These forecasts are based onthe planned mine production levels, which are dependent on thecontinued adequate funding for the mine. The cash flow projectionsbased on planned mine production levels, arrangement of the tradefinance facility and revised financing arrangements detailed aboveshow that the mine operations will result in positive cash flows, andthat the mine will have adequate funding for the period of not lessthan twelve months from the date of this report. Accordingly theDirectors have prepared the financial statements on the basis thatthe Group is a going concern.8. PROVISIONSProvisions at the period end are made up of a mine closure provisionof US$2.8 million (2008: US$2.6 million) and a mine rehabilitationprovision of US$1.8 million (2008: US$1.4 million). US$0.6 million ofthe mine rehabilitation provision has been included in currentliabilities to reflect the estimated cost of rehabilitation work tobe carried out over the next year.9. SHARE BASED PAYMENTSThe Company has a share option scheme for certain Directors,employees and consultants. Options are exercisable at a price equalto the quoted market price of the Company's shares on the date ofgrant. The options generally vest over a three to five year period,in equal annual amounts. If options remain unexercised after a periodof seven years from the date of grant, the options expire. Optionexpiry period may be extended at the decision of the Board ofDirectors.During the period the Group recognised a share-based payment expenseof US$0.1 million (2008: US$0.03 million).10. RELATED PARTY TRANSACTIONSDuring the period 9 million share options were granted to Directorsat a cost of US$1.9 million, the key management personnel of theGroup. The share options are exercisable at a price equal to thequoted market price of the Company's shares on the date of grant. Theoptions vest over a three year period. US$0.8 million of the costshas been recognised in the period.11. EVENTS AFTER THE BALANCE SHEET DATEOn 31 July 2009 the Group entered into a trade finance facility withAbsa Corporate and Business Bank to replace the facility it had inplace with Barclays Bank plc which expired in January 2009.On 7 August 2009 the Group entered into a loan agreement with BancoComerical e de Investimentos, S.A. for US$2.5 million to fund thepurchase of an additional product trans-shipment barge and tug forthe mine. Interest accrues at 6 month LIBOR plus 6%, and is payablemonthly commencing September 2009 and principal is scheduled to berepaid in 54 monthly instalments commencing March 2010. This loan wasdrawn down on 10 August 2009. The loan will be secured by a mortgageon the purchased trans-shipment barge and tug and by a guarantee fromKenmare Resources plc.12. INFORMATIONThe Half Yearly Financial report was authorised by the Board on 28August 2009.The Half Yearly Financial Report is being sent to registeredshareholders by post or electronically to those who have elected forelectronic shareholder communication.Copies are also available from the Company's registered office atChatham House, Chatham Street, Dublin 2, Ireland. The statement isalso available on the Company's website atwww.kenmareresources.com.---END OF MESSAGE---This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 01.09.2009 - 08:01 Uhr
Sprache: Deutsch
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