Kenmare Preliminary Results for the year ended 31 December 2005

 | Source: Kenmare Resources Kenmare Resources

Dear Shareholder,
 
I am very pleased to report that during 2005 Kenmare has achieved excellent progress in the development of the Moma Titanium Minerals Project in Mozambique. Construction activity is over 80% complete and the Project Contractor, a joint venture between Multiplex Limited and Bateman BV, indicates that by the end of 2006 the plant will be ready for handover to Kenmare.
 
We achieved several significant milestones during the year, including the successful shipping of the wet concentrator and minerals separation plants from Western Australia to Mozambique using a number of specialised, ocean-going barges. The landing and off-loading of these plants at Moma was also completed without incident and they are currently being reassembled with good progress to date. The permanent accommodation village is complete and currently houses a large number of construction workers. Later this year, as the number of construction workers decreases, the housing will become available to Kenmare's own operations staff. The air strip is busy with an air charter twice weekly transporting workers in and out of Moma.
 
Two suction cutter dredges, our principal mining equipment, arrived in Durban ahead of schedule. One has been delivered to Moma and is being assembled and the other is currently being transported to site. Construction of the product transportation barge is underway in Singapore. The jetty, for export of product, is ahead of schedule. The start-up mining pond containing the re-assembled concentrator plant and dredges is scheduled to be filled during the third quarter of 2006 using fresh water from nearby Lake Mavele. This will be supplemented, if necessary, by water from boreholes which have also been drilled. The 170 km overhead power transmission line linking the Mozambican grid at Nampula to the Moma site is almost complete and will be energised in June 2006.
 
We have already hired the core management team for the ongoing operation of the mine. We are delighted by the calibre of people that have joined us and injected their enthusiasm and experience into making Moma a great success. All of the operations team have specific experience relevant to our task.
 
The key objective for Kenmare in the coming months is the successful delivery of the mine within the existing envelope of project financing. Everyone in the Company is focused on this demanding task. We are looking forward to taking charge of the mine and the moving into production.
 
I was delighted to announce recently the results from our resumed exploration drilling programme. Total resources at Moma have increased from 72 million tonnes to 101 million tonnes of ilmenite plus valuable co-products zircon and rutile, which have also increased to 7.8 million and 2.7 million tonnes respectively. This increase makes Moma one of the largest exploitable titanium feedstock and zircon deposits in the world.
 
We continue to make progress on the marketing of Moma production and are pleased to report that we concluded further ilmenite sales during the past year. Discussions are also ongoing with a number of other customers for the uncommitted production and we anticipate entering further sales agreements in the run-up to mine commissioning. The market outlook for titanium minerals, ilmenite and rutile, is positive, buoyed by strong growth in all end use sectors. The pigment sector, which is by far the largest component of demand, is forecast to grow at an average compound annual rate of 3% until at least 2015. A principal driver of this growth is China, which currently relies almost exclusively on sulphate-route technology utilising sulphate grade ilmenite as its feedstock. This strong demand is putting upward pressure on ilmenite prices and is expected to continue due to limited new supply.
 
The titanium metal sector is also growing strongly due to the resurgence in demand from the aerospace industry, as is the welding electrode sector due to the recent shipbuilding boom.
 
Demand for zircon continues to be very robust with price increases of 20% expected in 2006, following on from similar increases in 2005. The continuing strong demand from the ceramics sector, most notably from China, coupled with limited new supply, is expected to see these tight market conditions for zircon sand prevail in the coming years.
 
The financial results for 2005 have been prepared in accordance with the Group's policies under International Financial Reporting Standards (IFRS). Construction costs capitalised during the year amounted to US$113.7 million while mineral exploration and project development costs deferred amounted to US$42.6 million. To fund the expenditure, loan disbursements amounted to US$164.7 million at the year end.
 
Kenmare is committed to a programme of ongoing improvement in all areas of its corporate responsibility. In line with our view of the importance of these issues, Kenmare's safety performance is a key Board meeting agenda item, together with the progress of the social initiatives being undertaken by the Moma Development Association.
 
In July 2005, I was pleased to announce that Dr Chris Gilchrist, Kenmare's Chief Operations Director, was elected as an Executive Director of the Board.
 
I look forward to taking over the plant from the Contractor and, while realising that it is a huge task, also look forward to a smooth ramp-up of production to our anticipated steady state levels and subject, inter alia, to market demand, targeting subsequent expansion of the Moma Project.  
 
Charles Carvill
Chairman
 
For more information:
www.kenmareresources.com
 
The full report with tables can be downloaded from the following link:

Attachments

Preliminary Results for 2005

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