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Kenmare output up; deleveraging plan

29 April 2016 08:17

Kenmare Resources' ore mined increased by 120% to 7,061,000 tonnes in the first quarter and issued an update on a proposed deleveraging to reduce outstanding debt.

Kenmare - which operates the Moma titanium minerals mine in northern Mozambique - said the increase in ore mined was mainly due to improved power supply quality and consistency.

Heavy mineral concentrate (HMC) production in Q1 2016 increased 90% to 274,800 tonnes (Q1 2015: 144,500 tonnes) while ilmenite output increased 39% to 185,000 tonnes (Q1 2015: 132,900 tonnes).

Zircon production increased 12% to 11,600 tonnes (Q1 2015: 10,400 tonnes).

Total shipments of finished products were down 37% at 132,700 tonnes (Q1 2015: 209,600 tonnes) as the delayed arrival of a vessel and inclement weather at the end of March delayed the departure of two large ilmenite shipments.

Production guidance of 950,000 tonnes of ilmenite production in 2016 (+/- 10%) is up 24% on achieved 2015 production.

The group also issued an update on its proposals to materially reduce outstanding debt from US$367.8 million as of 31 December to not more than US$100 million; to provide the group with additional liquidity from part of the net proceeds of a capital raise; and to amend the terms of residual loans.

It is expected that existing events of default under the current debt facilities would also be remedied upon implementation of the proposals.

The deleveraging plan includes the following key elements:

- A US$100 million placing of new ordinary shares with State General Reserve Fund, a sovereign wealth fund of the Sultanate of Oman ("SGRF"), and a US$100 million placing of new ordinary shares with King Ally Holdings Limited (in aggregate US$200 million) ('the cornerstone placing') and an additional firm placing, at the same issue price as the cornerstone placing, of not less than US$75 million for which participation commitments will be sought from a number of new and existing institutional shareholders;

- Application of US$200 million of the proceeds of the Cornerstone Placing and Firm Placing to repay US$250 million of debt, together with the discharge of an amount equal to interest accruing on project loans (excluding the Super Senior Facility) from 25 November, 2015 until the date of receipt of Lender approvals, with the balance of the net proceeds (after expenses of the issue and of the Capital Restructuring) of the Cornerstone Placing and Firm Placing being retained by the Company for working capital purposes;

-An open offer to existing shareholders to subscribe for new ordinary shares on the same terms as under the Cornerstone Placing and Firm Placing. The maximum size of the Open Offer will be such as to enable the discharge of all remaining outstanding indebtedness in the event of full subscription under the Open Offer on the basis that for every US$3 raised under the Open Offer US$4 of debt obligations are extinguished;

- To the extent that subscriptions under the Open Offer are insufficient to reduce outstanding indebtedness to US$100 million, the amount of debt in excess of US$100 million will be equitised at the Issue Price;

- A share capital reorganisation will also be proposed as part of the Capital Restructuring pursuant to which ordinary shares in issue will be consolidated, with all new ordinary shares to be issued under the Capital Restructuring being on a post-consolidation basis.

The net effect of these arrangements will be that the amount of debt remaining outstanding following the completion of the capital restructuring will not be more than US$100 million and (dependent on the level of subscription for new ordinary shares under the open offer) could be less.

At 8:17am: (LON:KMR) Kenmare Resources PLC share price was -0.01p at 0.8p

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Related Company: KMR

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