Annual Report 2013

Business Review

Introduction
Kenmare Resources plc (“Kenmare” or “the Company”) is an Irish incorporated company with a premium listing on the London Stock Exchange and a secondary listing on the Irish Stock Exchange.

The principal activity of the Company and its subsidiary undertakings (together, the “Group”) is the operation of the Moma Titanium Minerals Mine (the “Mine”). The Mine is located on the northern coast of Mozambique. Mining operations are carried out by Kenmare Moma Mining (Mauritius) Limited and downstream processing is undertaken by Kenmare Moma Processing (Mauritius) Limited (together the “Project Companies”), both wholly-owned subsidiary companies within the Group.

The Group’s world class resource is estimated to contain approximately 200 million tonnes of ilmenite (equivalent to around 140 years production from the current plant) and associated co-products rutile and zircon. Ilmenite and rutile are titanium minerals used as feedstocks to produce titanium dioxide (TiO2) pigment, titanium metal and welding electrodes. Zircon, a high value zirconium silicate mineral, is an important raw material for the ceramics industry where it is used as an opacifier and frit compound for decorative wall and floor tiles and sanitary ware. Zircon is also used in the refractory and foundry industries and to produce zirconia and zirconium chemicals for a variety of applications. The nature of Kenmare’s deposit, with abundant fresh water, no overburden, a good ore grade and attractive products which do not have to be upgraded before being used, gives Kenmare the ability to mine, concentrate and separate its products with relatively low capital and operating costs. Kenmare operates a dedicated port facility adjacent to the Mineral Separation Plant (“MSP”) which allows for the shipment of products to customers at minimum cost. These factors enabled Kenmare to move from Phase I into a 50% Phase II expansion, now complete. At full expanded output, Kenmare will supply around 8% of the world’s titanium feedstock supply.

Summary of Reserves and Resources +-

The total proven and probable ore reserves in the Namalope mining concession allocated to Kenmare as at 31 December 2013 is estimated at 820 million tonnes, grading 3.0% ilmenite, 0.19% zircon and 0.059% rutile, containing 24 million tonnes of ilmenite, 1.6 million tonnes of zircon and 0.48 million tonnes of rutile. The total resource (excluding reserves) held by Kenmare under a combination of exploration licences and mining concessions as at 31 December 2013 is estimated at 7.2 billion tonnes, grading 2.4% ilmenite, 0.17% zircon and 0.054% rutile, containing 170 million tonnes of ilmenite, 12 million tonnes of zircon and 3.9 million tonnes of rutile. Grades are set out in the Reserve-Resource table below.

An intensive drilling and sampling programme was carried out during 2013 in the Namalope and Nataka reserve areas to improve geological definition and grade control. A total of 30,104 metres of infill drilling was completed. This drilling was primarily within the areas to be mined during 2015 to 2019 at Namalope, greatly increasing the knowledge and confidence in the reserves in this part of the deposit. The map shows exploration licences and mining concessions held by Kenmare:

The following table sets out Kenmare’s mineral resources and reserves as at 31 December 2013:

Reserve-Resource Table

Zones

Category

Ore

(Mt)

% THM*

%
Ilmenite in THM

%
Ilmenite in ore

% Rutile in ore

% Zircon in ore

THM

(Mt)

Ilmenite (Mt)

Rutile (Mt)

Zircon (Mt)

Reserves

Namalope

Proved

241

4.3

82

3.5

0.077

0.25

10

8.4

0.18

0.60

Namalope

Probable

134

3.5

81

2.9

0.067

0.20

4.8

3.8

0.09

0.27

Nataka

Probable

445

3.2

84

2.7

0.047

0.16

14

12

0.21

0.73

TOTAL RESERVES

Proved & Probable

820

3.6

82

3.0

0.059

0.19

29

24

0.48

1.6

 

Resources

Category

Sand (Mt)

% THM*

%
Ilmenite in THM

%
Ilmenite in sand

% Rutile in sand

% Zircon in sand

THM

(Mt)

Ilmenite (Mt)

Rutile (Mt)

Zircon (Mt)

Congolone

Measured

167

3.3

77

2.5

0.060

0.24

5.4

4.2

0.1

0.4

Namalope

Measured

85

3.7

80

3.0

0.068

0.22

3.2

2.5

0.1

0.2

Namalope

Indicated

142

3.1

78

2.4

0.058

0.17

4.3

3.4

0.1

0.2

Pilivili

Inferred

227

5.4

80

4.3

0.13

0.35

12

9.8

0.3

0.8

Mualadi

Inferred

327

3.2

80

2.6

0.061

0.21

10

8.4

0.2

0.7

Nataka

Inferred

5,800

2.8

82

2.3

0.047

0.15

160

130

2.7

8.6

Mpitini

Inferred

287

3.6

80

2.9

0.070

0.24

10

8.3

0.2

0.7

Marrua

Inferred

54

4.1

80

3.3

0.19

0.19

2.2

1.8

0.1

0.1

Quinga North

Inferred

71

3.5

80

2.8

0.14

0.28

2.5

2.0

0.1

0.2

TOTAL RESOURCES

7,160

2.9

81

2.4

0.054

0.17

210

170

3.9

12

 

 

 

 

 

 

 

 

 

 

Resources are additional to Reserves. Estimates for Namalope Proved Reserve and the Namalope Measured and Indicated Resources comply with the new JORC Code 2012 (Australasian Code for Reporting Ore Reserves and Mineral Resources). Table 1 documentation for the Namalope Reserves and Resources can be found at www.kenmareresources.com. The Namalope Probable Reserve is not currently fully compliant with the JORC Code 2012 as part of the reserve lies outside the area of the original DFS. Estimates for all Resources and Reserves except Namalope were prepared and first disclosed under the JORC Code 2004. They have not been updated to comply with the JORC Code 2012 on the basis that the information has not materially changed since they were last reported.

The competent person for the Namalope and Nataka reserves and resources is Mr Colin Rothnie (MAusIMM). The competent person for the other resources is Dr Alastair Brown (FIMMM). Mr Rothnie and Dr Brown are independent consultants, although both are shareholders and former employees of Kenmare. Mr Rothnie and Dr Brown have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the JORC Code 2012. Mr Rothnie and Dr Brown consent to the inclusion in this report of matters based on their information in the form and context in which it appears.

THM is total heavy minerals of which ilmenite (typically 82 per cent.), rutile (typically 1.7 per cent.) and zircon (typically 5.6 per cent.) total approximately 90 per cent. Tonnes and grades have been rounded and hence small differences may appear in totals. Mt represents million tonnes. The licence over the Quinga South inferred resource, which was not held under Kenmare’s mineral licensing contract, expired during the year as it had been held undeveloped for ten years. This results in a reduction in resources of 71 million tonnes, grading 2.7% ilmenite, 0.28% zircon and 0.14% rutile, containing 2.4 million tonnes of ilmenite, 0.2 million tonnes of zircon and 0.1 million tonnes of rutile. 

The Group has identified the presence of significant rare earth oxides (“REOs”) in the tailings of the MSP.  These REOs, including cerium, lanthanum and neodymium, are found in monazite, present in Namalope and Nataka deposits at a grade of 0.02% (0.56% of the total heavy minerals). Monazite concentrate is used as a feed for REO plants internationally. The MSP concentrates monazite in the rejects stream as part of normal operations. A study to evaluate the production of monazite was completed. The project to assess the economics of producing monazite is currently on hold and will be revisited in due course. The monazite content of the ore reserves is presented in the table below.

Monazite

Zones

Category

Ore (Mt)

% THM*

%
Monazite
in THM

%
Monazite
in ore

Monazite
(Mt)

Reserves

Namalope

Proved

241

4.3

0.63

0.027

0.065

Namalope

Probable

134

3.5

0.42

0.015

0.020

Nataka

Probable

445

3.2

0.54

0.018

0.078

TOTAL RESERVES

Proved & Probable

820

3.6

0.55

0.020

0.163

 

 

 

 

 

The economics of producing a monazite concentrate as by-product from the existing reserves have yet to be assessed. Consequently the monazite mineralisation does not constitute a reserve and the ore categories in this table are for the Mine’s existing products, ilmenite, rutile and zircon.

 

Mining +-

The Group undertakes mining and concentrating activities in two separate dredge mining operations in the Namalope deposit. Dredge mining has the lowest cost per tonne of solids handling in the mineral sands industry. At the Mine, dredging takes place in two artificial freshwater dredge ponds by three dredges feeding two separate floating wet concentrator plants (“WCP A” and “WCP B”). Before mining begins, the area ahead of the dredge path must be prepared by clearing the vegetation and removing topsoil. The topsoil is either applied directly to an area then being rehabilitated, or stockpiled for use in later rehabilitation.

The dredges cut the ore at the base of a prepared ore face, allowing mineral-bearing sands to collapse into the dredge pond from where they are suctioned and pumped by the dredges to the respective floating wet concentrator plant. Feed to WCP A is supplemented by a dry mining operation. The dry mining operation uses standard surface mining equipment to mine the ore which is then slurried and pumped to WCP A to supplement the dredge mining feed.

The first processing stage consists of rejecting oversize material through trommels in the case of WCP A and vibrating screens in the case of WCP B. The undersize material in WCP A then passes into a surge bin as plant feed, while the undersize material in WCP B is passed through a de-sliming process prior to entering the surge bin. The respective feeds are passed over progressive stages of spiral gravity separators which separate heavy minerals from silica sand and clay tailings. The products from the wet concentrator plants are heavy mineral concentrate (“HMC”) and tailings.

HMC consists of the valuable heavy minerals ilmenite, rutile and zircon, some non-valuable heavy minerals, and a small amount of light minerals, the bulk of which is silica. HMC, representing approximately 5% by weight of the total sand mined, is pumped to the MSP where it is stockpiled prior to further processing.

Tailings, which consist of a coarse tails fraction (silica sand) that settles immediately and a fine tails fraction (clay) that settles less quickly, are co-deposited at the rear of the dredge pond into a series of settling ponds. Thickened fine tails are pumped from these settling ponds to drying paddocks located in the rehabilitation zone where the dried material helps the subsoil retain moisture and nutrients to aid re-vegetation.

After the tailings have sufficiently dewatered, they are re-contoured. Topsoil containing seeds and organic material is placed onto the re-contoured tailings. Rehabilitation is completed by fertilising and seeding or planting with a variety of native and/or other species of vegetation as well as food crops. When the rehabilitation of an area has been completed to an acceptable standard, the area is transferred to the government and thence to the local communities. The first such transfer took place in 2013. The rehabilitation process continues to be optimised with input from local communities, the competent authorities and non-governmental organisations.

Mineral separation +-

The MSP uses screening, magnetic, electrostatic and gravity separation circuits to separate valuable minerals from non-valuable minerals, and also to make different ilmenite, rutile and zircon product grades to meet specific customer requirements.

HMC is transferred from stockpiles by front-end loaders and fed to the WHIMS (Wet High Intensity Magnetic Separation) plant, a new feed preparation section of the MSP added during the Phase II expansion. The WHIMS plant has improved the thermal efficiency of the MSP by separating the magnetic and non-magnetic fractions in wet form, thereby allowing the non-magnetic fraction to be fed directly into the wet gravity separation circuit without undergoing unnecessary drying. The magnetic fraction is dried and processed by electrostatic separation in either of two ilmenite plants to produce final ilmenite products. A 50 tonne per hour ilmenite roaster and downstream magnetic separation plant were built as part of Phase I to increase the quality of the ilmenite products when required, but it has not proved necessary to operate the roaster to date. The non-magnetic fraction of the WHIMS output passes to the wet gravity separation circuit which removes any remaining silica and trash minerals. Electrostatic separators are then used to separate the conducting mineral rutile from the non-conducting mineral zircon.

Storage and transportation +-

Final products are stored in a 220,000 tonne capacity warehouse. Included in this capacity is a separate dedicated 35,000 tonne capacity zircon warehouse, which has been commissioned as part of the expanded plant. This has reduced the potential for cross-contamination of final product. Both warehouses have facilities for loading of product onto a 2.4 km long overland conveyor, which leads to a 400 m long jetty. The conveyor transports product to the end of the jetty where the product is loaded onto Kenmare’s transhipment vessels, the Bronagh J and the Peg, at a rate of 1,000 tonnes per hour. The vessels then transport the products to a deep water transhipment point 10 km offshore, where they self-discharge into customer vessels.

Other infrastructure +-

The Mine has other supporting infrastructure including a 170 km 110 kV power transmission line, a sub-station, 6 MVA of standby diesel power generation capacity, an accommodation village, offices, laboratory, a jet-capable airstrip, water supply and sewage treatment plants.