Annual Report 2013

Operational Review

During 2013 the Phase II expansion project was completed. The expanded plant made a positive contribution in the second half of 2013 with output improving through 2014 to date.

Production +-

A total of 23,951,200 tonnes of reserves were mined at an average heavy mineral grade of 5.9%. After mining losses, 19,160,000 tonnes of ore were processed over the spirals at an average heavy mineral grade of 5.9%, resulting in HMC production of 1,137,200 tonnes. The production of HMC from WCP A was 934,100 tonnes for 2013 compared to 772,300 tonnes for 2012. The improved output was mainly due to the completion of the transition onto the dunal plateau by the end of the first quarter of 2013. Following this transition, Mining Plant A (WCP A and its two dredges) spent the remainder of 2013 in improved mining conditions with deep faces of generally moderate slimes and good grade ore. Mining Plant B (the new dredge Deirdre and WCP B), contributed 203,100 tonnes of HMC. Despite some teething problems, the plant performed well against the anticipated ramp up curve and has operated at nameplate throughput capacity.

WCP A suffered an unplanned stoppage as a result of a fire in the trommel section in October 2013. The fire occurred following completion of routine welding repairs. During the six week outage period the MSP continued to process HMC from WCP B and from a large stockpile of HMC produced prior to the incident. During this period, maintenance works on WCP A and the two dredges in Mining Pond A that had been scheduled for 2014 were completed.

The expanded MSP facilities were commissioned and ramped up in 2013. All major facilities have demonstrated an ability to perform at nameplate throughput capacity. Utilisation rates are still below targets, in large part due to power interruptions.

Ilmenite production increased by 69% to 209,400 tonnes during the fourth quarter of 2013 from 123,600 tonnes during the equivalent period in 2012. Ilmenite production for 2013 was 720,100 tonnes compared with 574,500 tonnes in 2012. The new auxiliary ilmenite plant contributed 116,000 tonnes in 2013.

The enhanced zircon and rutile circuits have demonstrated their ability to operate at target throughput levels. However, due to the extended shut during 2013 as part of the expansion, on-going optimisation of these circuits and power interruptions, output was low in 2013, and resulted in total zircon production of 31,400 tonnes (including 10,300 tonnes of a secondary zircon product) compared with 46,900 tonnes in 2012. Optimisation of the zircon and rutile circuits is currently on-going.

 

Power Supply +-

A key operational challenge for the Mine has been the unreliability of power supply. Power supply to the Mine has been highly volatile since the third quarter of 2013, caused by a combination of increased base load on the grid, electrical storm activity, and increased power demand for cooling in the Southern Hemisphere summer months which has pushed demand towards and occasionally beyond the transmission network’s capacity limits. A number of initiatives were taken by Kenmare in 2013 to enhance transmission capacity and address power instability issues, including:

  • Upgrade of the transmission grid, in collaboration with EdM. This upgrade consisted of the installation of capacitor banks at Nampula and Alto Molocue and the upgrading of the Alto Molocue SVC;
  • Kenmare commissioned a synchronous condenser (referred to as a “Dip Doctor”), a large piece of equipment designed to minimise voltage dips. The Dip Doctor has been effective, however, due to operational difficulties and storm damage, its availability during January and February 2014 was lower than planned; and
  • Installation of capacitor banks at the Mine.

In addition, Kenmare has been enhancing standard operating procedures and modifying equipment to minimise the amount of downtime experienced by each outage caused by voltage fluctuation. This has been very successful in the mining and wet concentrator plants where typical downtimes after a stoppage have reduced to less than an hour. The expanded MSP is inherently more sensitive to voltage fluctuations, and for the time being is taking longer to recover. Accordingly additional resources are being dedicated to resolving this issue.

Notwithstanding these initiatives, power supply has been subject to unplanned outages that have disrupted production. After investigation, it has become apparent that load growth on the northern network had been increasing more rapidly than EdM had anticipated. Consequently, especially with increased domestic load in the summer months, power demand at times exceeds the stable transmission capacity of the network, resulting in voltage instability. Kenmare has been working with EdM to resolve these issues and has been cooperating in a number of areas:

  • A load management plan is being implemented by EdM, which is designed to prevent the load on the northern transmission network exceeding stability limits at peak times. This plan has contributed to improvements in network stability.
  • Kenmare is working with EdM on a number of projects for the optimisation of the operation of the network to limit the frequency of supply interruptions.
  • EdM is enhancing transmission capacity of the network by adding a set of series capacitors. These capacitors are expected to increase transmission capacity at Nampula from 118MW to approximately 170MW. This should allow several years’ load growth before capacity limits are approached again.
  • EdM is in the financing stage of a major project to bring a new 400kV line to the northern network, which should resolve power transmission issues for the long term. EdM plans for this project to be complete by 2018.
  • Finally, Kenmare has entered an agreement with Aggreko, a supplier of portable power generators, to supply 7.5MW of diesel power generating capacity to the Mine. This is sufficient to power the MSP and will ensure smooth operation of the MSP through the Southern Hemisphere summer months of December to March. During the rest of the year, it will be a standby facility in case of unanticipated failure of the transmission system. These generators will increase production and confidence in the level of production. Since the MSP represents only one quarter of electrical demand, and the generators are planned only to be in continuous operation for one-third of the year, the additional cost will not be onerous relative to the benefits. The Aggreko generators are due to arrive in July, giving sufficient time for commissioning and optimisation before the unstable summer months.

Shipments +-

In 2013, 37 ships were loaded, bringing total sales for the year to 677,900 tonnes of finished products, comprising of 642,700 tonnes of ilmenite, 32,200 tonnes of zircon (including 10,300 tonnes of secondary grade zircon) and 3,000 tonnes of rutile. December 2013 also saw the 200th shipment from the Mine, bringing the cumulative product exports to over 3.5 million tonnes since commencement of operations.

HEALTH & SAFETY +-

2013 was a challenging year for the Company. There was one fatality and seventeen Lost Time Injuries (“LTIs”) which took the twelve month rolling Lost Time Injury Frequency Rate (“LTIFR”) to 0.50, higher than the target of 0.30 and prior year of 0.33. In July 2013, Mr De Poures Anantharaj, an engineer employed on the Bronagh J, was injured. He was evacuated to Nampula for medical care and was discharged with a medical clearance to travel home to India to recuperate. Unfortunately he passed away in Dar es Salaam while in transit to India, the cause of death being a cervical/neck injury.

The deteriorating trend from 2012 to 2013 in safety performance has been a key focus for the Group. Management at the Mine have carried out a detailed study of current safety performance and the outcome of incident investigations. Focus for 2014 will be on improving safety behaviour, recognition of safety risks, improved incident investigation and improved training.

Malaria

The Mine is located in an endemic malaria area, which represents a continuous challenge to employees, visitors and inhabitants of the local communities. There were 1,721 malaria cases recorded amongst operations and construction personnel at the Mine in 2013 as compared with 1,345 cases in 2012, a 28% increase. The increase in staff numbers over the year as a result of the expansion contributed in part to the increase. With continued spraying and other initiatives to reduce malaria, Kenmare is expecting to see an improvement in 2014. Kenmare continued its Mine site insecticide spraying and employee malaria awareness programmes throughout 2013. Kenmare also conducted an indoor residual insecticide spraying programme in the surrounding communities, benefiting the local population.

NOSA Safety System

NOSA is internationally recognised for its safety, health and environmental risk management system. The system is aligned with international standards (OHSAS 18001, ISO 14001) and assists companies to implement a holistic approach towards the management of safety, health and environmental processes. Progress on implementation of the NOSA system continued in 2013 with the development of the NOSA five star grading system. A gap analysis audit was conducted in December 2013 and the first star rating audit will be conducted in December 2014. Fifty-five staff were trained in safety, health and environmental procedures to act as representatives in their respective departments during the year.

The Mine’s safety statistics are as follows:


2013

2012

Man-hours worked

5,918,960

5,454,545

Man-hours worked since last LTI

150,685

707,151

Lost Time Injuries (“LTI”)

17

9

Fatalities (included in LTIs)

1

-

Medical Treatment Injuries (“MTI”)

13

10

First Aid Injuries (“FAI”)

85

94

All Injuries (“AI”)

115

113

Days lost to injuries

661

51

LTI Frequency Rate (“LTIFR’)

0.50

0.33

Malaria cases

1,721

1,345

Days lost to malaria

6,884

5,380

 

 

Additional safety training will be facilitated by NOSA in 2014. Manager, supervisor, and employee training was completed during 2013, along with baseline risk assessments for each operational area. An audit was also carried out for critical high risk activities identified during the baseline gap analysis to ensure the effectiveness and adequacy of controls for these high risk activities.

INX

INX is a risk-based incident management and reporting system that provides the operation with a compliance measurement system for safety, health and environment functions. Implementation of the INX database started in January 2014 and will continue with the training of key employees. The INX database will capture risk assessments, incidents, business intelligence, audits and inspections. This system monitors and analyses the essential environmental factors through the capture of key indicators.

ENVIRONMENT +-

Kenmare is committed to operating in an environmentally responsible manner and to minimising the impact of mining and processing operations on the local environment. The Mine is subject to the environmental laws and standards in force in Mozambique, together with international standards and guidelines of the World Bank, African Development Bank and FMO, as well as its own policies. The Mine applies the International Finance Corporation (“IFC”) Performance Standards (2006), as set out in the Environmental Management Plan (“EMP”) and is targeting compliance with the IFC Performance Standards 2012. The Mine consistently seeks to apply best practice in all of its activities. The above standards relate to emissions, effluent treatment, noise, radiation, water quality, rehabilitation, management of social impacts, among others. Where standards differ, Kenmare has committed to meeting the most stringent standard applicable.

The environmental management system involves monitoring to determine whether applicable standards are being observed, and if not, promptly reports incidents so that appropriate corrective action can be taken. The system is modelled after ISO 14001 which requires that environmental objectives and targets be set annually and regularly reviewed throughout the year, with performance tracked and checked through scheduled audits and inspections. The objective of this system is to achieve and facilitate compliance with the commitments in the EMP, and to ensure that non-compliance incidents are promptly addressed, through continual improvement of environmental performance.

Greenhouse gas

2013

2012

2011

Greenhouse gas (tonnes CO2)

43,144

112,244

90,549

 

 

 

In 2013, greenhouse gas emissions decreased from an estimated 112,244 tonnes CO2 equivalent total emission in 2012 to an estimated 43,144 tonnes CO2 equivalent. This was due to the completion of the expansion project resulting in a large reduction in mobile equipment on site.

Water management

2013

2012

2011

Water extraction (million cubic metres)

17.88

6.52

5.50

 

 

 

During the year Kenmare extracted a reported 17.88 million m3 litres of water compared with a reported 6.52 million m3 in 2012. Flow monitoring equipment was installed in the boreholes during the year resulting in a more accurate measure of the water volume abstracted. This contributed to the significant increase in the reported level of water extracted. The amount extracted remains below the water permit threshold of 32.4 million m3 per year in the amended water license obtained in 2013.

A monitoring program is in place to evaluate the quality of water and the groundwater level in the area of influence of Kenmare’s operations at the Mine, to minimise threats to human and environmental health, and to comply with legislative requirements.

A groundwater model is being developed to assess the effect of alternative water management strategies.

Solid waste management

The major challenge in waste management has been the implementation of recycling/reuse due to the remote nature of the Mine. Management of waste continued during 2013 with an increased focus on recycling projects.

It is not economic for most recycling/reuse companies to collect scrap, plastic and glass from the Mine. Kenmare has purchased a bailer to compact plastic and cardboard wastes. Partial waste segregation is occurring at the landfill site with the intention that segregated solid wastes will be transported alongside the more lucrative scrap metal, which is hauled to Nacala on a regular basis. The strategy is to involve the local community in waste recycling initiatives.

Kenmare is also focusing on maximising the opportunities for reuse of certain components. For example, plastic pallets are returned to the suppliers for reuse; transformers are being rebuilt for reuse at site; and dredge components are being refurbished rather than fully replaced.

A total of 116,070 litres of used oil were sent to Maputo and Beira for recycling and approximate 57 tonnes of general waste, mainly plastic and paper, were disposed of at the site landfill.

Effluent and surface water management

All four sewerage treatment plants operated within the specifications set out in the EMP and authorisations from MICOA during the year. The quality of the effluent discharged from all treatment plants was monitored and no major non-conformances were observed. During the year, 270 minor non-conformances in the sewerage treatment plants were reported.

Radiation

Uranium (U) and Thorium (Th) occur naturally within the ore bodies in the mineral monazite and thus heavy mineral sands are sources of ionizing radiation (radionuclides of the uranium and thorium decay chains). Processing of the mineral sands can lead to enrichment of these materials to levels which pose risks to employees and potential risks to the general community.

As required in the Radiation Management Plan, radiation monitoring in various working areas, stockpiles, product storage areas, and in the vicinity of the plant including community areas, was carried out during the year. No deviations were observed.

Rehabilitation

Upon successful rehabilitation of mined lands, Kenmare hands rehabilitated land back to the Government for allocation to local communities as farming (machamba) land. Rehabilitation was completed on twelve hectares of mined land in early 2013 and handed back to the Government in June. Kenmare is continuing to investigate ways to improve the quality of rehabilitated land.

Three trial plots were established on the rehabilitation areas to determine the appropriate soil fertility enhancement strategies to be used. These trials are currently underway and the first results indicate that significant progress has been made with rehabilitation of the old tailings areas where casuarina trees are being planted. An initial trial plot test has shown that mixing slimes into the soil during rehabilitation led to a 100% increase in yield of cassava (a local root crop) and improved ground coverage by grasses. The rehabilitated land can also be used for growing vegetables as proved in the trial plot.

Noise

Kenmare commissioned an independent consultant to conduct an environmental noise survey at selected points along the perimeter of the operation. The survey was conducted to determine the impact of noise created by the operation on the residents within the surrounding communities. A number of measurements were taken and the results were compared with the IFC Performance Standards. Results indicated that the ambient noise levels measured at the test community sites were within the IFC Performance Standards guideline of 55dBA for daytime activities and 45dBA for night time activities. In 2014 an external independent consultant will measure the noise levels in the plants and assess the potential health risk to employees of noise induced hearing loss and if necessary recommend appropriate control measures to reduce exposures. Annually thereafter the Occupational, Health and Safety department will monitor workplace noise.

Ambient Air Quality

Air quality monitoring is carried out monthly by Kenmare staff and annually by an independent specialist. The independent specialist monitoring results indicated that the particulate matter with diameter less than 10 microns (PM10), sulphur dioxide and nitrogen dioxide concentrations were within the IFC and AfDB air quality guidelines at all the measuring positions. Results for PM2.5 are to be obtained in 2014.

Biodiversity

Terrestrial Monitoring Program

A comprehensive terrestrial monitoring programme was implemented by Kenmare in 2012 and the second baseline assessment was conducted in 2013 to supplement the baseline data collected the previous year. The objective is to assess the effectiveness of mitigation measures contained within the EMP and, where necessary, to introduce additional measures to ensure that negative impacts of the Mine on terrestrial environmental health are minimised. These efforts are in line with the best practice requirements of the IFC Performance Standards. Erosion around the Mine and the increased number of trees harvested in the Icuri forest by the local population were the main problems identified. Considering that the Icuri forest is regarded as a high conservation forest, the auditors recommended that Kenmare engage with local communities regarding the ecological importance of the Icuri forest and investigate options for improving the sustainability of harvesting within the forest.

Marine Monitoring Program

No marine monitoring survey was conducted in 2013. The objective of the 2014 marine survey is to apply the methodology developed for earlier surveys to gather updated data on the health of the coral reef ecosystems surrounding the nearby islands and the local fisheries and to also assess the marine water and sediment for the presence of contaminants. Updated data will be compared with historical data using key performance indicators developed during the 2010 survey. This will enable the specialist team to identify trends in the health of the marine ecosystem and, where applicable, suggest measures to mitigate risks.

Audits

The Ministry of Environment Affairs (MICOA), accompanied by the Health, Marine and Mining Ministries conducted an annual audit of the Mine in September 2013. The main audit findings were inadequate waste segregation, inadequate waste recycling on site, some oil and product spillages at the vehicles repair shop and around plant pipes and conveyors, some expired chemicals in the stores and inadequate hand washing facilities for the Mine catering staff. An action plan to address these findings was developed and is being implemented.

EMPLOYEES +-

Kenmare recognises that employees are the backbone of the business and that a partnership with them is vital to achieving its business objectives.

Pre-employment, annual and exit medicals are performed at the Mine clinic with regular inspections on hygiene at the camp, kitchen and site ablutions. HIV/AIDS training forms part of Kenmare’s induction and refresher training to all employees and contractors that come to site. However, in compliance with Mozambican law, HIV/AIDS testing does not form part of a pre-employment medical.

Kenmare is committed to conducting its business without risk to the health and safety of its employees, contractors and the general public and applies a strategy of zero tolerance in order to achieve zero fatalities or major injuries.

Senior managers are responsible for ensuring that appropriate organisational arrangements and resources are made available for the fulfilment of this policy and for monitoring its implementation and effectiveness.

Kenmare’s Conditions of Employment Policy is compliant with the International Labour Organisation Labour Convention and FMO Core Labour Standards. These cover hours of work, meal breaks, transport, shift hours, overtime, standby, call outs and payment on Sundays and holidays, amongst others. Employee benefits are also included, with focus on retirement benefits, health, personal accidents and medical benefits. Kenmare does not employ child labour or engage in any forced labour practices.

Employee Demographics

The Mine’s employee statistics at the year ends are as follows:

2013

2012

Number of Employees

1,529

1,179

% Mozambican

89%

86%

% Expatriates

11%

14%

 

 

There were 1,529 employees at the Mine as at the end of December 2013. This amounted to an increase of 350 employees when compared to December 2012. The vast majority of the employees (89%) are Mozambicans, and 5% are women.

Training

Kenmare’s plans to promote Mozambicans to senior positions within the Mine are underpinned by its training programme.

The external training programmes in place are as follows:

  • Pre-employment programme – candidates are trained for three months at the National Institute for Employment and Vocational Training (“INEFP”) in Nampula before starting in full time employment with the Mine;
  • Apprenticeship programme – apprentices from the Mine undergo a three month programme at the INEFP in Maputo followed by nine months practical exposure to working in a plant environment at the mining and processing plants. This is followed by a further three years of both practical on the job and classroom training to qualify as artisans;
  • Assistants training programme – engineering assistants at the Mine undergo a six month programme at the INEFP in Maputo so that they can be promoted to artisan assistant level should vacancies arise;
  • Internships – this programme provides university students with work experience which assists them in completing their courses. Candidates are identified here for the graduate development programme detailed below;
  • Graduate development programme – this twenty four month programme provides employment to recent graduates from universities whereby during the programme their progress is mentored by more senior staff members. Graduates on the programme to date have included metallurgists, geologists, mechanical and electrical engineers, human resource practitioners etc.;
  • Bursary and educational assistance - this programme involves the Mine providing educational assistance for candidates to attend both graduate and post graduate higher level education in either Mozambique or South Africa;
  • Supervisory Training Programme – staff identified in the assistant training programme are offered the opportunity to be trained at the Mine by the University of Stellenbosch Business School and other institutions. The aim of this programme is to increase business skills of staff members and as part of identifying talent for management succession planning; and
  • Coaching and mentoring courses – supervisory staff are offered the opportunity to attend courses to assist them in the management of people and teams.

The in-house training programmes at the Mine are as follows:

  • Heavy mobile vehicle operator programme – trains staff in the operation of front end loaders, excavators and bulldozers used at the Mine;
  • Plant operator programme – exposes junior staff to the operations of the various parts of the mining and processing plants; and
  • Technical development programme – a twelve month programme which exposes junior engineering staff to repair and maintenance of specific plant and equipment.