30316 1 April 2021 5:56 pm V9Annual Report and Accounts 2020ANNUAL REPORT AND ACCOUNTS 2020RESPONSIBLY MEETING GLOBAL DEMAND FOR QUALITY-OF-LIFE MINERALSKenmare-AR-2020.indd 3Kenmare-AR-2020.indd 301/04/2021 17:57:0301/04/2021 17:57:03 30316 1 April 2021 5:56 pm V9Kenmare Resources plc is an established mining company that operates the Moma Titanium Minerals Mine, located on the north east coast of Mozambique.Who we areKenmare Resources is the world’s largest producer of mineral sands products, key raw materials ultimately consumed in everyday “quality-of-life” items such as paints, plastics and ceramic tiles. Listed on the London Stock Exchange and Euronext Dublin, Kenmare has been in production for 13 years and has a long-term commitment to being a responsible corporate citizen.What we doKenmare’s production in 2020 accounted for ~5% of global titanium feedstocks, supplying customers operating in more than 15 countries. Between 2018 and 2020 the Group invested in three growth projects to increase production of ilmenite, Kenmare’s primary product, to 1.2 million tonnes per annum on a sustainable basis. At this expanded rate, Kenmare will produce ~7% of global supply and has sufficient resource to last >100 years.How we do itWe mine titanium-rich sands mainly using dredges, which float in artificial ponds, removing just 3-5% of ore mined. We then progressively rehabilitate the land, before it is handed back to local farmers. We are proud of our low environmental impact; over 90% of our power requirements are generated by renewable hydroelectricity sources and we do not use any chemicals in our mining or processing. Once they are separated, we transport our final products to customers vessels from our dedicated port facility. For more information visit:www.kenmareresources.com @KENMARERES KENMARE RESOURCES PLC @KENMARERESOURCESPLCWELCOME TO THE 2020 ANNUAL REPORTKenmare-AR-2020.indd 3Kenmare-AR-2020.indd 301/04/2021 17:57:0301/04/2021 17:57:03 Financial highlights
Revenue (down 10%)
EBITDA (down 17%)
Profit after tax (down 63%)
US$243.7M
US$16.7M
0.25 PER 200K
Lost time injury frequency rate
HOURS WORKED
Dividend per share (up 22%)
US$76.7M
USC10.00
34.3 M TONNES
Excavated ore (down 7%)
Total finished products produced
(down 15%)
Total finished products
shipped (down 17%)
840,500
TONNES
853,100
TONNES
BUSINESS OVERVIEW
Contents
Business Overview
Financial Highlights
Our markets
Who we are
2020 year in review
Strategic Report
A strong investment case
Chairman’s statement
Managing Director’s statement
COVID-19 statement
Key performance indicators
Our business
Our strategy
Business model
Stakeholder engagement
Our operating model
Our operations
Our approach to sustainability
Our host country: Mozambique
Development projects
Operating review
Mineral reserves and resources
Market report
Financial review
Principal risks and uncertainties
Sustainability
Governance
Board of Directors
Executive Committee
Corporate Governance report
Nomination Committee report
Sustainability Committee report
Audit & Risk Committee report
Directors’ remuneration report
Annual report on remuneration
Directors’ remuneration policy report
Group Financial Statements
Directors’ report
Directors’ responsibilities statement
Independent auditor’s report
Consolidated statement of
financial position
Consolidated statement of
comprehensive income
Consolidated statement of
changes in equity
Consolidated statement of cash flows
Notes to the consolidated
financial statements
Company Financial Statements
Parent company statement of
financial position
Parent company statement of
changes in equity
Parent company statement of
cash flows
Notes to the parent company
financial statements
Other information
Shareholder profile
Glossary – alternative performance
measures
Glossary – terms
General information
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30316 1 April 2021 5:56 pm V9The raw materials we produce are used in the production of everyday “quality-of-life” items such as paints, paper, plastics and ceramic tiles as well as titanium metal, a light strong metal.TITANIUM (Ti)The titanium feedstocks rutile & ilmenite are predominantly used for the manufacture of titanium dioxide (TiO2) pigment, with smaller quantities used to produce titanium metal and welding electrode fluxes.Titanium feedstock production is a ~US$4.5 billion per annum industry and the TiO2 pigment industry has annual revenues of over ~US$15 billion. Industry revenuesUS$4.5BNin 2020Kenmare production 756KTin 2020Kenmare market share5%in 2020RARE EARTH ELEMENTS Monazite is a mineral containing Rare Earth Elements (REEs), which Kenmare sells as part of a suite of minerals in our concentrates products. Once separated, the REEs, such as neodymium and praseodymium, are used in a variety of industrial and technological applications, including in the manufacture of wind turbines and electric cars.The rare earths market is worth approximately US$3 billion a year and expected to see significant growth in the coming years.Industry revenuesUS$3BN in 2020Production35.2KTin 2020Kenmare market share<1% in 2020ZIRCONIUM (Zr) Zircon sand is a primary feedstock to a wide range of consuming industries, of which the ceramics sector is the largest, due to its brilliant whiteness. Zircon is also used in refractory, foundry and chemical applications. The zircon sand supply sector represents an approximately US$1.7 billion per annum industry with Europe and Asia being the largest markets. Industry revenuesUS$1.7BNin 2020Production43.3KTin 2020Kenmare market share5%in 2020OUR MARKETS02Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 2Kenmare-AR-2020.indd 201/04/2021 17:57:0501/04/2021 17:57:05 30316 1 April 2021 5:56 pm V903Kenmare Resources plc Annual Report and Accounts 2020BUSINESS OVERVIEWProducts containing titanium feedstocks, zircon and rare-earths are found in every room of the homePharmaceuticalsGlazes and enamelsCoated fabrics and textilesAudio systemsPaints and coatingsFoodsCosmetics and antiperspirantsPaperCosmeticsCeramic tiles Plastics and rubberToothpasteInksCamera lensesCatalytic converters Electric vehiclesKey: Titanium Rare Earth Elements Zirconium Kenmare-AR-2020.indd 3Kenmare-AR-2020.indd 301/04/2021 17:57:0601/04/2021 17:57:06 01
Who we are
We are focused on
maximising value and
creating opportunities
from the Moma Mine for
the benefit of employees,
host communities, and
customers, as well as our
shareholders.
02
WE
ARE
life of mine
>100 YEARS
6.4 BILLION TONNES
Mineral Resources
Lost Time Injury Frequency
Rate per 200k hours worked
0.25
97%
of our employees at site
are Mozambican
04 Kenmare Resources plc
Annual Report and Accounts 2020
Read more about Aida’s story on page 8
Read more about Joana’s story on page 21
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03
04
BUSINESS OVERVIEW
05
1ST QUARTILE
aiming to become one of the
highest margin producers in our
industry
7%
market supply attributable to
Kenmare at 1.2 Mtpa ilmenite
production rate
7,100 TONNES
weight of WCP B, our mining
plant that we relocated in one
piece, by road
23 KM
distance WCP B was relocated to
a new high grade ore zone
EBITDA
US$76.7M
USC10.0/SH
recommended full year 2020
dividend
Read more about Higino’s story on page 43
Read more about Gary’s story on page 39
Read more about Dionisio’s story on page 57
Kenmare Resources plc
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FEBRUARY
First production from Wet
Concentrator Plant C
The construction of WCP C took place during
2019 and the new mining plant delivered
its first HMC production in late February
2020. WCP C was the second of Kenmare’s
three growth projects with the objective of
increasing ilmenite production to 1.2 Mtpa
from 2021.
500tonnes per hour
additional mining
capacity
US C8.2/SH
up 22% in 2020 to USc10.0/sh
MAY
Payment of first full
year dividend
In March 2020 Kenmare declared its full year
dividend of USc8.18 per share, comprised of
a USc2.66 interim dividend (paid in October
2019) and a final dividend of USc5.52 per share
(paid in May 2020). This was in line with our
policy to return a minimum of 20% of profit
after tax as shareholder returns. Following
the completion of the three growth projects,
Kenmare expects to pay increased shareholder
returns from 2021.
2020 YEAR IN REVIEW
JULY
Donation of ventilators to support
COVID-19 care
In July 2020 Kenmare donated eight ventilators to the
provincial health authorities in Nampula, the nearest city
to the Moma Mine, to assist in Mozambique’s fight against
COVID-19. This increased the number of ventilators
available in Nampula from three to 11. Earlier in the year,
Kenmare also donated 50 CPAP machines, which are
another type of ventilation equipment used to treat people
with COVID-19. Hand sanitising kits, digital thermometers
and personal protective equipment were also provided to
community health centres and to villages close to the mine.
23,000
reusable face masks
distributed in Namalope
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Annual Report and Accounts 2020
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STRATEGIC REPORT
SEPTEMBER
WCP B move completed safely
WCP B and its dredge were successfully moved 23km by road from their previous mining area
at Namalope to a new high grade ore zone called Pilivili in September 2020. The relocation
represented the heaviest piece of mining equipment ever to be moved in Africa and it was
particularly unusual due to the combination of the weight of the load and the length of the distance
travelled. The WCP B move was the final of Kenmare’s three growth projects to deliver 1.2 Mtpa of
ilmenite production on a sustainable basis.
WCP B weighed
7,100
tonnes and was
moved in one piece
2020 YEAR IN REVIEWOCTOBER
First production
from Pilivili
WCP B commenced production in Pilivili in
late October 2020. As a result of the higher
ore grades mined at Pilivili in November and
December, HMC production increased by 45%
in Q4, quarter on quarter.
Following the move, Kenmare expects to
deliver stronger cash flow generation and a
first quartile position on the industry revenue
to cost curve.
+45%
increase in ilmenite
production guided
for 2021
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30316 1 April 2021 5:56 pm V9WE ARE UNIQUESUPPORTING OUR EMPLOYEESI have been at Kenmare since 2007 and have had the opportunity to continue my studies whilst working, obtaining a degree in Chemistry. Kenmare really helps to support the empowerment of women and that is what I like most about the company. In the future, I hope to become a Laboratory Manager.”Aida Adriano, Laboratory ChemistKenmare-AR-2020.indd 8Kenmare-AR-2020.indd 801/04/2021 17:57:1401/04/2021 17:57:14 30316 1 April 2021 5:56 pm V9A strong investment case10Chairman’s statement12Managing Director’s statement14COVID-19 statement16Key performance indicators18Our business22Our strategy24Business model26Stakeholder engagement28Our operating model30Our operations32Our approach to sustainability34Our host country: Mozambique35Development projects36Operating review40Mineral reserves and resources44Market report48Financial review52Principal risks and uncertainties58Sustainability66STRATEGIC REPORT Kenmare-AR-2020.indd 9Kenmare-AR-2020.indd 901/04/2021 17:57:1501/04/2021 17:57:15 A STRONG INVESTMENT CASE
With a 13-year production track record, a commitment to responsible business
practice, and a potential mine life of >100 years, Kenmare has a compelling investment
case. Our strategy to deliver growth, margin expansion and shareholder returns is
underpinned by five key characteristics we believe are vital to realising our full potential
for all our stakeholders.
Our five key
characteristics
WHO
WE
ARE
We are unique
The Moma Mine is a tier one asset and
one of the largest titanium minerals
deposits in the world.
Moma is a low cost, bulk mining
operation that mines more than 30
million tonnes every year.
Mineral Resources of 6.4 billion tonnes,
are sufficient to support a production
rate of 1.2 million tonnes ilmenite a year
for more than 100 years.
Read more on page 44
We are responsible
Kenmare is committed to operating in
a sustainable and responsible manner.
In 2020 we employed 1,485 people at
the Mine and 97% of our employees
are Mozambican. We are dedicated to
increasing female representation in the
workforce, up 20% in 2020, and targeting
11.5% by the end of 2021. We are proud of
our low environmental impact, with 90%
of the Moma Mine’s power requirement
in 2020 being provided from a renewable
hydroelectric source.
Read more on page 66
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STRATEGIC REPORT
STRATEGIC REPORT
We are competitive
Kenmare has a market-leading position
as the world’s largest supplier of
ilmenite. We have customers operating
in more than 15 countries and believe
that our expanded ilmenite production
will be comfortably absorbed by strong
demand for our products. Titanium
feedstock production is a US$4.5bn
industry and at 1.2 Mtpa, Kenmare’s
production will represent 10% of
global supply.
Read more on page 48
We are innovative
We believe in the importance of
innovation and continual improvement.
The relocation of WCP B in September
2020 was an example of this
commitment, as the heaviest piece of
mining equipment ever moved in Africa.
As a result of this successful project, we
are now positioned to deliver increased
production at a lower cost for the long
term, benefiting all stakeholders. We
have also been fitting our dredges with
state of the art automation systems.
Read more on page 36
We are disciplined
Kenmare has a robust financial position,
with net debt of US$64.0 million at the
end of 2020, including US$87.2 million
of cash. In 2020 we generated US$76.7
million of EBITDA and US$16.7 million
of profit after tax. For March 2021, the
Board has recommended a 2020 full
year dividend of USc10.0 per share.
Read more on page 52
And our focused strategy . . .
Growth
Since 2018, Kenmare has invested ~US$180
million in three growth projects, with the
objective of increasing ilmenite production
to 1.2 Mtpa on a consistent basis. In 2020,
Kenmare successfully completed the third
of these projects, the relocation of WCP B
to a new high grade ore zone. Production
for ilmenite in 2021 is forecast to increase
between 45% and 60%.
Margin Expansion
Kenmare is targeting a first quartile position
on the industry revenue to cost (or margin)
curve.
Ilmenite production is expected to increase
between 45-60% in 2021. This will help drive
lower unit costs as we benefit from improved
economies of scale. This will help to expand
our margins and strengthen cash flow
generation.
Shareholder Returns
The Board has recommended a 2020 full year
dividend of USc10.0 per share.
This represents a 22% increase from 2019,
in recognition of 2020 as a transitional year,
before higher production volumes.
For 2021, we are targeting a dividend of 25%
profit after tax.
...creates a sustainable competitive advantage.
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CHAIRMAN’S STATEMENT
STEVEN MCTIERNAN
Chairman
A YEAR OF
TRANSITION
It was expected that 2020 would be a crucial year for
Kenmare before the onset of the global pandemic, marking
the first mining transition away from Namalope, where
operations began in 2007.
I am pleased to report that we are now at the end of
Kenmare’s previously outlined growth programme, putting
us on track for sustainably higher production volumes,
supporting our strategy to increase shareholder returns.
Dear shareholders,
The global spread of COVID-19 has been
rapid, and the impacts have been far reaching.
The depth of the disruptions caused to
businesses and personal lives globally cannot
be overestimated. Protecting our people and
our business, whilst supporting our suppliers,
customers and communities, has been at
the forefront of our minds in formulating our
response.
Prices for the commodities we produce have
remained strong, despite the significant and
materially negative, impact of COVID-19 on
global growth. Demand for ilmenite, our primary
product, remains robust; buoyed by strong
demand for home DIY.
Successful Completion of Production
Growth Programme
Over the past three years, Kenmare has made
significant investment into three development
projects to achieve our targeted production
rate of 1.2 million tonnes of ilmenite per annum.
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Annual Report and Accounts 2020
WCP C began producing HMC in late February
2020 but the pandemic had a greater impact
on the already complicated move of WCP B. In
some instances, this meant we had to take bold
and agile steps to mitigate global restrictions
for the movement of people and goods, as
well as interruptions to the operations of our
suppliers.
By Q3 2020, the third and final project in
Kenmare’s growth programme, the relocation
of WCP B to Pilivili, was completed successfully
and safely. Ultimately, the move was hugely
successful and completed on time. Though
the mitigations required resulted in increased
costs, anything less would have been at greater
cost to the business.
Shareholder Returns
Adhering to our shareholder commitments
of sustainable capital returns, I am pleased to
report that Kenmare maintained its dividend
payments throughout 2020. We have now
delivered three consecutive dividends
and, subject to shareholder approval, the
final dividend for 2020 is due to be paid in
May 2021.
We are increasing our 2020 dividend to
USc10.0 per share, significantly higher than
our minimum policy and up 22% from 2019,
bridging to the strong current free cash flow of
the business.
Following the completion of the development
projects, we are generating stronger free
cash flow, providing an opportunity to deliver
increased shareholder returns. For 2021 we are
targeting a dividend pay out of 25% of profit
after tax, up from the previous 20% minimum
policy.
successfully moved in 2020
WCP B
1.2MTPA
targeted production range
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30316 1 April 2021 5:56 pm V9We are increasing our 2020 dividend to USc10.0 per share, significantly higher than our minimum policy and up 22% from 2019, bridging to the strong current free cash flow of the business.”success of Kenmare over the last four and a half years, beginning with his visionary support for the Group following the investment by the OIA in 2016. Sameer Oundhakar has replaced Tim on the Board and is a Senior Manager in the Diversified Private Equity Investments department of OIA, having joined in 2018. He has extensive Private Equity experience across industry sectors and geographies and we look forward to working with him and benefiting from his expertise and diverse experience.Gabriel Smith has decided not to stand for re-election as a Non-Executive Director at this year’s AGM, following eight years of service on the Board. Gabriel’s significant industrial and financial experience, and effective stewardship as Chair of the Audit & Risk Committee, has been of huge importance to the progress and success of the Group.Deirdre Corcoran, Kenmare’s Financial Controller and Company Secretary, has also decided to leave the Group following the 2021 AGM. She joined Kenmare in 1999 and has been an integral part of the finance team, playing a considerable role in the development of Kenmare. She has also provided appreciable service to the Board and will be sadly missed by all. Following the AGM, the Company Secretary role will be filled by Chelita Healy, who is a solicitor and has worked in a support role to Deirdre since joining Kenmare in 2019. Outlook The global effects of COVID-19 have been unprecedented in our lifetime, affecting the lives of all. There remains a significant degree of uncertainty and while we are hopeful that the roll out of various vaccines will ultimately be successful, it is expected to take time, particularly in emerging markets.Kenmare is now well positioned to sustainably produce at significantly higher production levels, with ilmenite production expected to grow 45-60% year-on-year in 2021. Moma is one of the largest titanium minerals deposits in the world and we remain on target to become one of the lowest cost producers of ilmenite, supporting increased free cash flow and higher dividends. Acknowledgements It is testament to the strong relationships we have endeavoured to build with all stakeholders that Kenmare was able to complete the complex move of WCP B during such a turbulent period. I would like to offer my sincere thanks to all who contributed for their dedication and commitment to the Company, in particular our employees, contractors, and suppliers. Finally, I would like to express my gratitude to all stakeholders for their commitment and support through an unprecedented year. We expect to deliver record production into a strong product market for 2021, supporting further increased shareholder returns.Steven McTiernan,ChairmanUSc10/sh2020 Full Year Dividend+22%dividend increase year on yearSustainability Kenmare has always valued the importance of taking a sustainable approach to everything that we do. In 2020, the investor community and wider societal expectations have rightly continued to increase for all companies, particularly those operating in the extractive industries.. For the second year running, we were delighted to see our efforts to operate as a responsible corporate citizen were recognised at the Chartered Accountants Ireland Published Accounts Awards, with Kenmare winning the award for Best Social Responsibility Reporting. However, industry best practices continue to advance at a rapid pace and there is always more that we can do.Following the establishment of a board level Sustainability Committee in October 2019, in 2020 we reviewed all corporate policies, hired a dedicated Head of Sustainability and will be shortly publishing our inaugural Sustainability Report. This report will help to provide all stakeholders with an increased understanding of our approach and strategy to sustainability, whilst also providing an increased level of disclosure for this important area of our business.In preparation for this sustainability report, we completed a materiality assessment of key topics with a wide range of stakeholders as well as an employee engagement survey. These inputs have helped to guide our first public targets as we continue our journey to deliver value for all stakeholders. Board DevelopmentWe continue to recognise the need for a broad range of skills, experience and diversity to support and challenge management in the execution of Kenmare’s strategy. Elizabeth Headon stepped down from the Board last year and I would like to thank her again for her significant contributions on the Board of Kenmare. In 2020, we were delighted to welcome Deirdre Somers as a Non-Executive Director. Deirdre is a Chartered Accountant and served as Chief Executive of the Irish Stock Exchange from 2007 to 2018, through a period of transformation culminating in its sale in March 2018 to Euronext NV. Her wide-ranging experience has already been shown to complement the Board. IIn 2021, Tim Keating stepped down from his role at the OIA (Oman Investment Authority) and has therefore stepped down from the Board. Tim has had a critical impact on the STRATEGIC REPORT13Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 13Kenmare-AR-2020.indd 1301/04/2021 17:57:1901/04/2021 17:57:19 MANAGING DIRECTOR’S STATEMENT
Safety
As always at Kenmare, the health, safety
and wellbeing of our people and our host
communities are our highest priorities.
Unfortunately, there was a fatality at the Moma
Mine on 31 August 2020, a sad and regrettable
event for all of us. A thorough investigation was
conducted and the incident was found to be
non-work related. However, we have taken all
the steps we can to prevent a similar tragedy
from ever happening again.
In 2020, we achieved a Lost Time Injury
Frequency Rate (“LTIFR”) of 0.25 per 200,000
man-hours worked which represents an
improvement compared to 2019 (0.27).
This is testament to Kenmare’s continuing
improvements in safety leadership and risk
assessment practices. We also retained our
five-star NOSA safety accreditation for the fifth
consecutive year.
Sustainability
Kenmare’s commitment to sustainability is at
the heart of all we do. Even before the mine
began construction, we formed the Kenmare
Moma Development Association (“KMAD”)
in 2004 to support the development of the
local community. However, we are always
looking for ways to improve and, in May 2020,
following on from the recent establishment of
the Sustainability Committee of the Board, we
appointed a Head of Sustainability. We also
reported to the Carbon Disclosure Programme
(CDP) for the first time as we strengthened our
sustainability disclosure and for 2020 we are
publishing our inaugural Sustainability Report.
Kenmare was also named the most transparent
extractive company in Mozambique by the
Centre for Public Integrity’s Extractive Industry
Transparency Index.
We are also exploring and implementing
initiatives to reduce our CO2 emissions. The
first major project to be approved is the
development of a RUPS (Rotary Uninterruptible
Power Supply), to reduce the usage of diesel
generators whilst providing increased power
stability. The project is expected to reduce total
mine emissions by ~15%. This is a Net Present
Value positive project, using conservative
assumptions, that will also provide significant
risk mitigation benefits to our business.
We were pleased to provide support to local
communities in Nampula province in the fight
against COVID-19 with donations of PPE and
other essential supplies. This included 50
CPAP oxygen breathing machines and eight
ventilators.
Our people are central to the delivery of our
strategy. At the end of 2020 we had 1,503
MICHAEL CARVILL
Managing Director
INCREASING
PRODUCTION
TO 1.2MTPA
2020 marked the last step of our capital development plans to
deliver capacity of 1.2 Mtpa of ilmenite.
Three projects were completed over three years, with the aim
of increasing grade and mined volumes to allow operation at
sustainably higher production volumes.
For Kenmare, 2020 marked a culmination of our
multi-year development projects, with the move
of WCP B from Namalope to Pilivili. Despite the
significant challenges posed by COVID-19, I am
proud of the commitment shown by the team
to safely complete the move. This has already
begun to deliver significant value for the
Company, as we benefited from a year-on-year
57% increase in mined grades in Q4 2020.
results and recommending a Full Year 2020
dividend payment of USc10.0 per share. This
is significantly beyond our minimum dividend
commitment of 20% of profit after tax and
reflects 2020 as a year of transition. We are
targeting a dividend based on 25% of profit
after tax for 2021, which is expected to benefit
from higher production volumes and lower
guided unit costs.
Through these turbulent times we remain
committed to our dividend policy, paying an
interim dividend following our half-yearly
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30316 1 April 2021 5:56 pm V9 The relocation of WCP B to Pilivili was a project of epic proportions. The 7,100 tonne WCP B move is the world’s heaviest and largest mining plant transport to date.”employees and 97% of our employees at the Moma Mine were Mozambican. The workforce at Moma received over 14,700 hours of training during 2020 as we believe in providing continuing development opportunities and that doing so is central to attracting and retaining the best people.Growth projects2020 marked the final step in our multi-year growth programme to deliver capacity of 1.2 Mtpa of ilmenite, plus associated by-products. Three projects were completed over three years with the aim of increasing grade and mined volumes to allow operation at sustainably higher product volumes. The year began with the first production from our third mining pond, WCP C, in late February 2020. The plant has been operating at expected throughput levels and remains on track to be completed within the original budget though acceptance, performance testing and defect remediation discussions continue with the WCP contractor.Our project team successfully delivered the relocation of WCP B to Pilivili in Q3 2020, despite various global restrictions required in response to COVID-19. It was a project of epic proportions, the WCP alone weighing over 7,100 tonnes, and being wider than a football pitch and higher than a seven-storey building. The 7,100 tonne WCP B move is the world’s heaviest and largest mining plant transport to date. The ramp-up of operations began in Q4 and is continuing well, with production in line with expectations and, as expected, mining ore grades significantly higher than previously mined in Namalope.These projects have firmly positioned us to deliver on our three strategic pillars in 2021: growth, margin expansion and shareholder returns. Operational performanceFaced with an array of COVID-19 related uncertainties, Kenmare withdrew and then instated revised production guidance for the year but achieved the midpoint or above of the revised guidance for all products in 2020. Following the move of WCP B, in Q4, production increased by 7% compared to Q4 2019 and by 30% compared to Q3 2020.Total operating costs came within original guidance but unit costs were negatively impacted by the lower production volumes. From 2021, we expect this trend to reverse as unit costs will benefit from higher production volumes, driving stronger margins and increased free cash flow. Product marketThe titanium feedstocks we produce are principally used to make pigment, essential for imparting whiteness and opacity in the production of paper, paint, plastic and a range of other manufactured goods. Kenmare continues to be the largest global supplier of ilmenite and the fourth largest producer of titanium feedstocks. Kenmare saw five consecutive quarters of stronger ilmenite prices to the end of Q2 2020. The ilmenite market was expected to soften in H2 2020 due to impacts of COVID-19, but Chinese demand remained strong and end markets recovered more quickly than expected. Prices were marginally softer in Q3 but resumed an upward trend in Q4. OutlookI would like to express my thanks to all our stakeholders, particularly those in Mozambique, for their unwavering support in the past year, including our employees, host communities, suppliers, and the Government.In 2021 we will continue to focus on the three pillars of our strategy: growth, margin expansion and shareholder returns, whilst continuing to develop partnerships with stakeholders and increasing our sustainability efforts.We believe that the fundamentals of our business have never been stronger. Whilst there is more work to be done to deliver increased production volumes in 2021, we do so with the benefit of a strong balance sheet, healthy product market outlook, good grades, a long life orebody, a fit for purpose set of assets and a great team.Michael Carvill,Managing DirectorWCP B move facts7,100 TONNESweight of the WCP7 STOREYS height of the WCP60 METERS width of the WCP23 KMdistance of the move from Namalope to PiliviliSTRATEGIC REPORT15Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 15Kenmare-AR-2020.indd 1501/04/2021 17:57:1901/04/2021 17:57:19 30316 1 April 2021 5:56 pm V9TONY MCCLUSKEYFinancial Director Our strong balance sheet allowed us to move WCP B while maintaining dividend payments to shareholders, despite the challenges posed by COVID-19.”MICHAEL CARVILL Managing Director IThe outbreak of COVID-19 whilst executing a large capital programme has been a testing period for all, but through this the commitment of our people has also shined.”BEN BAXTER Chief Operations OfficerA massive thank you and congratulations to the whole team that maintained safe and productive operations through 2020, despite the challenges posed by COVID-19.”COVID-19 STATEMENTQHow did Kenmare respond to COVID-19? QHow did Kenmare deliver the WCP B move despite COVID-19?QHow did COVID-19 impact Kenmare’s capital allocation? AWe took quick steps to implement strict access controls, hygiene protocols and social distancing measures at the site in March 2020.We also limited travel to and from site and established testing facilities on site which currently allows us to test all employees once a week.AWe have been incredibly fortunate to have dedicated employees, willing to go the extra mile and strong relationships with our contractors.I couldn’t have asked more from our Owners Team, our EPCM contractor Hatch, and the other contractors. Sacrifices were made by many to deliver WCP B to Pilivili on time.AWe accelerated the draw on our debt facilities early in the pandemic, due to the uncertainty impact during a period of high capital expenditure.The measures we undertook to mitigate the impacts of COVID-19, particularly regarding the move of WCP B were essential but not costless. However, given our strong balance sheet we were able to maintain dividend payments.QHow has Kenmare supported employees and local communities through this period?QHow have operations been affected by COVID-19?QDoes this affect the Company’s future strategy?AThe pandemic required us to respond effectively and quickly to minimise the potential exposure to the workforce and local communities. Kenmare donated eight ventilators and 50 CPAP (non-invasive ventilation machines) to the regional health authorities and donated reusable masks, medical gloves and aprons, digital thermometers and sanitation kits to local villages.AIt is difficult to attribute direct impacts to COVID-19, as we continued to produce and export our products throughout 2020. However, there is no doubt that there have been impacts. We have seen a recent spike in cases, in Mozambique and at site. This has limited the availability of employees, including senior management. The vaccine will be slower to roll out in Africa than in the northern hemisphere and we need to remain vigilant. AWe are already seeing the benefits of the higher production, following the successful move of WCP B. It’s sensible to remain prudent and retire some of the debt we have drawn, whilst also increasing dividends. The board is recommending a 22% increase in dividends in respect of 2020, in recognition of this. We are also targeting a dividend pay out ratio of 25% for 2021, higher than our minimum policy. Read more about the effect of COVID on our financial performance on pages 52 to 57 Read more about the effect of COVID on our operational performance on pages 40 to 4316Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 16Kenmare-AR-2020.indd 1601/04/2021 17:57:2101/04/2021 17:57:21 STRATEGIC REPORT
Our response
Operations
Stringent health protocols,
social distancing, regular testing
& restricted travel.
Read more about our response to
COVID-19 on page 72
Local community
Kenmare donated medical equipment
locally and regionally.
Read more about the steps we took to
help on page 72
Development projects
COVID-19 created a challenging
environment for completion of our
capital programmes.
Read more about how we dealt with
them on pages 36 to 39
Markets
Despite COVID-19, demand for our
products remained strong in 2020.
Read more about the effect of COVID on our financial performance on pages 52 to 57
Read more about the effect of COVID on our operational performance on pages 40 to 43
Read more on pages 48 to 51
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Annual Report and Accounts 2020
17
KEY PERFORMANCE INDICATORS
We use various financial and non-financial performance measures to help evaluate the
ongoing performance of our business. Linked to our strategic objectives, the following
measures are considered by management to be some of the most important in evaluating
our overall performance year on year.
Health & Safety
LTIFR:
Lost Time Injury Frequency Rate.
AI:
All injuries, including lost time injuries and
other less serious injuries.
0.25
59 CASES
9
3
0
.
0
2
0
.
2
1
.
0
7
2
0
.
5
2
0
.
1
5
9
4
4
6
6
5
9
5
Production
Mining – HMC produced:
Heavy Mineral Concentrate (HMC) extracted
from sand ore, which contains valuable
ilmenite, zircon, rutile and monazite.
1,201K TONNES
6
0
4
,
1
3
2
3
,
1
1
7
3
,
1
2
0
2
,
1
1
0
2
,
1
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Relevance
Measures the total number of injuries at the
Mine in the year.
Performance
Total injuries decreased by 8% in 2020
compared to 2019.
Outlook
Building on an excellent improvement in 2021.
Continually improving our safety performance
is a key focus area for Kenmare in 2021.
Relevance
Measures the number of injuries per 200,000
hours worked at the Mine that result in time
lost from work.
Performance
Kenmare’s safety performance improved in
2020 to 0.25 per 200,000 hours worked. There
were nine lost time injuries recorded during
the year compared to seven in 2019 but the
number of hours worked increased with the
additional development project contractors at
the mine.
Outlook
Kenmare is committed to continual
improvement and in 2021 we will reinforce
our safety culture through improving safety
leadership, as well as hazard identification and
risk assessment practices.
Relevance
Provides a measure of production from the
mine, which is the feedstock of our final
products.
Performance
HMC production in 2020 was flat compared to
the prior year. 2020 ore grades increased by
9% to 3.90%, compared to 2019 (3.58%). Higher
grades were offset by reduced excavated ore
volumes due to the two-month interruption
to operations at WCP B during relocation.
Although ore volumes were down 7% year-on-
year, WCP C commenced production in late
February 2020, and contributed to both grade
mined and tonnes excavated.
Outlook
In 2021 production of HMC is expected to be
significantly higher than in 2020, due primarily
to WCP B mining higher grade ore in Pilivili.
More than 50% of Moma’s production is
attributable to WCP B following its relocation,
as Pilivili is the highest grade ore zone in
Moma’s portfolio.
Link to risk
Link to strategy
Link to risk
Link to strategy
Link to risk
Link to strategy
9
9
3
7
4
8
5
8
18
Kenmare Resources plc
Annual Report and Accounts 2020
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STRATEGIC REPORT
Risk key:
Strategic
Operational
Financial Strategy key:
Growth
Margin Expansion
Shareholder returns
Processing:
Finished products produced by the mineral
separation process.
Marketing
Shipments:
Finished products shipped to customers
during the period.
Financials
EBITDA:
Earnings before interest, tax, depreciation,
and amortisation.
841K TONNES
853K TONNES
US$76.7M
9
7
9
1
8
0
,
1
3
4
0
,
1
8
8
9
1
4
8
4
2
0
,
1
0
4
0
,
1
4
7
0
,
1
9
2
0
,
1
3
5
8
16
17
18
19
20
16
17
18
19
20
Relevance
Provides a measure of finished products
produced by the processing plants.
Relevance
Provides a measure of finished product
volumes shipped to customers.
Performance
Shipment volumes in 2020 decreased by 17%
compared to 2019 due to adverse weather
conditions during a significant portion of the
year, reduced availability of the transhipment
vessels, which underwent works to increase
capacity and reduced production.
Outlook
Shipping volumes are expected to increase
significantly in 2021, in-line with increased
production volumes and supported by
upgrades to the transhipment vessels.
Performance
Production of all finished products decreased
by 15% compared to 2019. This was due to
HMC consumption being 5% lower during
the year, lower MSP recoveries and reduced
ilmenite content in the HMC during the first
nine months of the year. MSP recoveries were
negatively impacted by inconsistent HMC
availability through the year. As expected,
the ilmenite content in the HMC increased as
mining commenced in Pilivili.
Outlook
Production of all finished products in 2021
is expected to be higher than in 2020, due
primarily to WCP B mining higher grade ore in
Pilivili. Ilmenite production in 2021 is expected
to be 1.1 million to 1.2 million tonnes, building
towards 1.2 million tonnes per annum on a
consistent basis.
.
4
3
9
.
6
2
9
.
7
6
7
.
5
0
6
.
2
5
16
17
18
19
20
Relevance
Eliminates the effects of financing, tax,
depreciation, amortisation and foreign
exchange movements to allow assessment of
the earnings and performance of the Group.
Performance
EBITDA decreased in 2020, compared to 2019.
Shipments of finished products decreased
by 17% year-on-year and total cash operating
costs increased by 1%, this was partially offset
by a 10% increase in average received price per
tonne (FOB).
Outlook
Kenmare expects to generate significantly
stronger EBITDA from 2021 through achieving
its expanded production rate of 1.2 million
tonnes per annum of ilmenite, plus associated
co-products.
Link to risk
Link to strategy
Link to risk
Link to strategy
Link to risk
Link to strategy
6
4
7
5
8
4
13
12
14
7
15
16
Kenmare Resources plc
Annual Report and Accounts 2020
19
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KEY PERFORMANCE INDICATORS CONTINUED
Risk key:
Strategic
Operational
Financial Strategy key:
Growth
Margin Expansion
Shareholder returns
Financials continued
Capital costs:
Additions to property, plant and equipment
in the period.
Cash operating costs:
Total group costs less freight and other non-cash
costs, including inventory, excluding movements
in provisions. For cash operating costs per tonne
this number is divided by the tonnes of finished
product produced.
Net cash/(debt):
Total cash and cash equivalents minus
bank loans.
US$141.5M
US$158.0M
220
US$(64.0)M
5
.
1
4
1
.
5
8
6
19
20
200
180
160
140
120
100
1
.
6
16
.
2
9
2
17
1
.
0
4
18
16
.
)
8
4
4
(
17
)
1
.
4
3
(
.
5
3
1
18
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7
3
1
19
20
.
)
0
4
6
(
.
6
6
5
1
19
.
6
7
5
1
20
.
4
3
3
1
.
5
2
4
1
3
.
1
5
1
16
17
Cash operating cost per tonne
Total cash operating costs
18
Relevance
Provides the amount spent by the Group on
additions to property, plant and equipment in
the period.
Performance
Investment in property, plant and equipment
increased in line with the Group’s development
strategy in 2020. Capital costs were incurred
for sustaining existing operations, the
construction of WCP C and the relocation of
WCP B to the high grade Pilivili ore zone.
Outlook
Capital costs are expected to be significantly lower
in 2021. Expenditure on development projects
and studies is expected to be approximately
US$58 million. These costs primarily relate to the
remaining costs associated with the relocation of
WCP B (US$22 million), mainly carried over from
2020, the RUPS power stability project (US$16
million) and improvement projects to enhance the
resilience of existing operations (US$9 million). The
balance is attributable to studies and community
resettlement costs in preparation for the relocation
of WCP A to Nataka in 2025. Sustaining capital
costs from 2021 onwards are expected to be
approximately US$20 million to US$25 million.
Relevance
Eliminates freights costs and non-cash costs to
identify the actual cash outlay for production
and, as production levels increase or decrease
highlights operational performance by providing
a comparable cash cost per tonne of product
produced over time.
Performance
Total cash operating costs increased by 1% in
2020 compared to 2019. The higher costs and
lower production volumes resulted in a 19%
increase in cash operating costs per tonne.
Outlook
Total cash operating costs are anticipated to
increase in 2021 due to increased production
and the need to transport WCP B’s HMC
production from Pilivili, which is a greater
distance than the previous mining area
of Namalope, to the MSP. However, cash
operating costs per tonne are expected to
decrease due to higher anticipated production
volumes, and further decrease in 2022 as the
Company targets a first quartile position on the
industry revenue to cost curve.
Relevance
A measure of the Group’s financial leverage.
Performance
During 2020 the balance of the Term Loan
of US$42.7 million and the full amount of the
Revolving Credit Facility of US$40 million were
drawn to provide the Group with enhanced
liquidity during the period of uncertainty posed
by the COVID-19 pandemic.
Outlook
From 2021, Kenmare expects to deliver
lower cash operating costs per tonne due to
increased production volumes. Through this
margin expansion, we expect to generate
significant free cash flow, which is anticipated
to deliver an increased net cash position.
Link to risk
Link to strategy
Link to risk
Link to strategy
Link to risk
Link to strategy
12
20 Kenmare Resources plc
Annual Report and Accounts 2020
4
7
5
8
6
15
7
8
12
15
16
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30316 1 April 2021 5:56 pm V9I’ve worked in the community relations team at Kenmare for more than 10 years. I feel proud to be part of this organisation that operates with integrity and social responsibility towards its employees and communities. It’s been a privilege to see how the lives of the local communities have benefited during my time here. Through my work at Kenmare, I have been able to provide a good home and a quality education for my children.”Joana Abilio, Community Relations OfficerWE ARE RESPONSIBLEOPERATING WITH INTEGRITYSTRATEGIC REPORT21Kenmare Resources plc Annual Report and Accounts 202021Kenmare-AR-2020.indd 21Kenmare-AR-2020.indd 2101/04/2021 17:57:2601/04/2021 17:57:26 30316 1 April 2021 5:56 pm V9VISIONSTRATEGYVALUESTO BE A LEADING TITANIUM MINERALS PRODUCER POSITIONED IN THE FIRST QUARTILE OF THE INDUSTRY REVENUE TO COST CURVE.INTEGRITYCOMMITMENTRESPECTACCOUNTABILITYEXCELLENCEOur purposeResponsibly meeting global demand for quality-of-life minerals.GROWTHMARGIN EXPANSIONSHAREHOLDER RETURNSOUR BUSINESSWE CAREWE GROWWE EXCELWe believe our purpose to “Responsibly meet global demand for quality-of-life minerals” is best served through the alignment of our culture, values, and strategy. 22Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 22Kenmare-AR-2020.indd 2201/04/2021 17:57:2701/04/2021 17:57:27 30316 1 April 2021 5:56 pm V9 Business through exploration, production expansion projects, and expanding existing and new markets. • Employees by providing attractive work opportunities, treating them fairly and providing opportunities for personal growth to match their interests and capabilities. • Host communities by forming partnerships to develop and promote economic and social wellbeing. The safety, health, security and wellbeing of our employees, the environment, communities and other stakeholders. Our host communities by forming partnerships; sharing and participating in the preservation of their environment, traditions and values. Company assets by providing suitable security and risk management systems and striving for best practice in the operation and maintenance of company assets.CASE STUDYEmployee engagement survey In 2020 we completed our first, Group-wide, employee engagement survey The survey catered to all levels of employee literacy and was made available in English and Portuguese High levels of participation with 92% (1,393 people) of the workforce taking part 97% of Kenmare employees rated themselves as engaged or highly engaged in their roles Results from the survey will be used to help devise and implement groupwide actions to positively influence organisational cultureSTRATEGYWE GROW Optimising operations, increasing productivity and lowering costs through the continuous improvement of processes, procedures and skills. Achieving control and standardisation through planning and developing systems and processes of work. Striving for best practice in all areas of operations, customer service and corporate citizenship. WE EXCEL BY:WE CARE FOR:WE GROW OUR: OUR PRINCIPLESAt Kenmare, our actions are informed by our guiding principles: We Care, We Grow, We Excel23Kenmare Resources plc Annual Report and Accounts 2020STRATEGIC REPORTKenmare-AR-2020.indd 23Kenmare-AR-2020.indd 2301/04/2021 17:57:2801/04/2021 17:57:28 OUR STRATEGY
Our vision is to be a leading titanium minerals producer positioned
in the first quartile of the industry revenue to cost curve.
We will deliver this vision through the Group’s strategy, which is focused on the three pillars
of growth, margin expansion and shareholder returns.
Enablers
Linked to our responsible and integrated approach
We believe our purpose to “Responsibly meet global demand for
quality-of-life minerals” is best served through the alignment of
our culture, values, and strategy. Strong environmental, social and
governance (ESG) management is a fundamental responsibility of
business.
Sustainability has always been central to the way we do business
at Kenmare; however, there is always more that we can do, and we
have been evolving our practices and improved the structure of
our sustainability process.
Some of these steps have included:
The hiring of a dedicated Head of Sustainability in 2020
The first submission to CDP in 2020
The completion of Kenmare’s first extensive materiality review
The first publication of public sustainability targets
And will include:
The publication of our inaugural Sustainability Report, for 2020,
in April 2021.
The publication of our first Modern Slavery Statement in April
2021
Aligning our strategy with the interests of our
stakeholders
Meaningful engagement with stakeholders is part of our culture. It
is embedded in all that we do as a company. The differing interests
of stakeholders are considered in the business decisions we make
across the Company, at all levels, and are reinforced by our Board
setting the tone from the top.
As part of our materiality review, a range of external and internal
stakeholders were engaged to rate key issues related to Kenmare’s
operation. Issues that matter most to them now and into the
future. They help define the content of the sustainability report,
in alignment with the GRI principles, and help inform our strategy
development.
Read more about our business model on pages 26 to 27
Read more about our marketplace on pages 48 to 51
Read more about our approach to sustainability on pages 66 to 77
24 Kenmare Resources plc
Annual Report and Accounts 2020
Strategic pillars
Growth
We have outlined a programme of three development
projects to increase our ilmenite production to 1.2 million
tonnes per annum. This increase is delivered through
an increase in mining productivity, expanded mining
capacity and access to higher grade ore.
Margin expansion
Optimising the performance of all assets is crucial to
maximising margin. In addition to higher revenues,
increased production helps to reduce unit costs.
Shareholder returns
Making capital returns to shareholders is an essential
part of Kenmare’s strategy to deliver value to our
shareholders, whilst balancing the needs of the business
and maintaining a strong balance sheet. Kenmare has
a dividend policy to pay a minimum of 20% of Profits
After Tax.
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Our vision is to be a leading titanium minerals producer positioned
in the first quartile of the industry revenue to cost curve.
We will deliver this vision through the Group’s strategy, which is focused on the three pillars
of growth, margin expansion and shareholder returns.
STRATEGIC REPORT
Priorities
Performance
Outlook
45-60%%
Increase in production of ilmenite
for 2021.
The increase in production has been supported
by the completion of three significant
development projects
2018: 20% capacity increase of WCP B
2019: Development of WCP C
2020: Move of WCP B from Namalope
to Pilivili
Reducing unit costs
Kenmare achieved an EBITDA margin
of 33% in 2020, which is expected to
improve in 2021.
Kenmare’s strategy to increase margins has three
approaches:
Increasing throughput – through dry mining
and dredge automation
Raising utilisation – by improving mine
planning to increase operating time
Increasing revenue capture – through higher
recoveries and additional product streams
Increased dividends
In recognition of 2020 as a year of
transition, the Board is recommending a
22% increase in dividends for 2020.
Following the completion of the WCP B to
Pilvili, Kenmare expects production in 2021 to
be significantly higher and sustained in the
long term. Guidance for 2021 has been set
between 1.1 and 1.2 million tonnes of ilmenite,
plus associated by-products, representing a
45-60% increase in production volumes from
2020.
WCP C produced first HMC in February 2020.
The project has been operating at expected
throughput levels and remains on track to be
completed within the original budget of US$45
million, although some defect remediation
remains to be closed out with contractors.
Increased costs were incurred with the WCP
B project, related to required COVID-19
mitigation measures. However, the original
project scope was delivered broadly in line
with expectations. WCP B was successfully
relocated from Namalope to Pilivili in Q3 2020
and began producing in Q4, our strongest
production quarter of the year.
As expected, production of ilmenite in 2020
was lower than in 2019. This was due to the
lower grades available for mining ahead of the
move to Pilivili and the downtime of WCP B
associated with the move. Utilisations through
the MSP (Mineral Separation Plant) were
also negatively affected by low HMC stocks
because of lower mined production.
Kenmare is targeting a first quartile position
in the industry margin curve (or revenue to
cost curve), providing more stable cashflows
and insulation against future commodity price
cycles. Kenmare’s cash operating costs per
tonne are expected to decrease from US$188
per tonne in 2020 to between US$132 and 146
per tonne in 2021.
Despite a planned increase in capital
expenditure during 2020 and the unexpected
challenges posed by COVID-19; dividend
payments were maintained. A 2019 final
dividend of USc5.52 per share was paid
following the AGM May 2020 and a 2020
interim dividend of USc2.31 per share was also
paid in October.
Maintaining a prudent level of cash remains a
strategic priority for Kenmare to help insulate
the business from unexpected shocks.
However, the board is sufficiently confident in
the outlook of the company to recommend a
2020 final dividend that is substantially above
the dividend policy minimum of 20% profit after
tax. It has proposed a payment of USc7.69 per
share, subject to shareholder approval, to be
paid in May 2021.
The Board has also proposed a target dividend
payout ratio of 25% of profit after tax in 2021.
Read more about our KPIs on pages 18 to 21
Read more about our Risks on pages 58 to 65
Kenmare Resources plc
Annual Report and Accounts 2020
25
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BUSINESS MODEL
Inputs
Our unique and sustainable model
MARKET FUNDAMENTALS
Global demand
Read about the uses for our
products on pages 3 and 48
Competition
Read about the expected supply
on page 48
Commodity Prices
See the positive trend in prices
on page 48
OUR INTEGRATED APPROACH
Responsible approach
Read about our integrated
Approach to Sustainability on
page 34
Good corporate
governance
Read about our corporate
governance from page 84
Stakeholder engagement
Read about our materiality
assessment on page 28
ASSETS
Our people
Read about our People on
page 72
Large resource
Read about our 100 year life of
mine on page 44
High grade opportunities
Read about the development of
mining at Pilivili on page 38
Significant financial
resources
Read about the strength of our
financial position on page 52
Renewable energy source
90% of our power requirements
are met by hydroelectricity, see
page 76
Underpinned by
our values (ICARE)
26 Kenmare Resources plc
26
Annual Report and Accounts 2020
Communities
Environment
People
mitm
m
o
c
r
u
O
Governance
e
n
t to ESG
Our
operating
model
Read more about these
topics on page 30 and in our
inaugural sustainability
report
Our b u s i n ess str
Growth
y
g
e
t
a
Margin
expansion
Read more about
our strategy on
page 24
Shareholder
Returns
INTEGRITY
COMMITMENT
ACCOUNTABILITY
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STRATEGIC REPORT
Outputs and shared value
CUSTOMERS
853,100
tonnes of product
sold in 2020
EMPLOYEES
97%
of employees rated
themselves as engaged
or highly engaged
SHAREHOLDERS
22%
increase in
dividends
We believe the products we produce
are of the lowest carbon-intensity
in our industry, benefiting from
90% of our power requirements
being sourced from a renewable
hydroelectric source. With the
implementation of the new RUPS
power stability project, we are
aiming to further reduce our total
CO2 emissions by 15% in 2022.
The success of our business model
enables us to invest further to foster
a skilled and engaged workforce,
working as a team to achieve our
shared vision. Our employees are
the cornerstone of our business and
the objective of our safety culture
is to ensure that we provide a safe
working environment.
In March 2021, Kenmare proposed a
2020 full year dividend of USc10.0
per share, up 22% on the 2019 full
year dividend. For 2021 we are
targeting a dividend payout ratio
of 25%.
LOCAL COMMUNITY
US$2.0M
invested in community
development initiatives
through KMAD
Kenmare aims to be a catalyst
for positive social and economic
change in local communities.
Through KMAD, the three key focus
areas are economic, healthcare
and education development.
ENVIRONMENT
180
HECTARES
of land
rehabilitated
Kenmare is committed to responsible
environmental stewardship and
efficient use of natural resources.
We are proud of our low
environmental impact, including
employing progressive rehabilitation
practices, sourcing 90% of our power
requirements from renewable
hydroelectric sources, and avoiding
the use of chemicals in our mining
and processing operations.
Read more about our sustainable approach on pages 66 to 77
Kenmare Resources plc
Kenmare Resources plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
27
y
c
n
f i c i e
f
a l e
Build strong relationships
with our stakeholders
h
t
l
a
e
h
f
o
e
r
u
t
l
u
c
a
e
t
o
m
o
r
P
y
t
e
f
a
s
d
n
a
Maintain a market leading
R ed uce unit costs throu g h
pro d uction gro w th
position
n
t i o
a
r
e
p
e o
v
o
r
I m p
THIS
ENABLES
US TO
Reduce our
environmental impact
R
e
thro
m
u
g
ain c
h th
R
e
t
u
r
n
a
s
h flo
e c
y
cle
w p
o
sitiv
e
c
a
p
i
t
a
l
t
o
s
h
a
r
e
h
o
l
d
e
r
s
I
n
v
e
s
t
i
n
o
u
r
f
u
t
u
r
e
RESPECT
EXCELLENCE
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STAKEHOLDER ENGAGEMENT
Section 172(1)
Engaging with our
stakeholders is key to
our understanding and
considering their respective
needs and perspectives.
Stakeholder engagement plans are developed,
reviewed, and updated regularly. In addition
to operating as a responsible business and
mitigating risks, at Kenmare we look to build
relationships with relevant stakeholders
that are based on trust, transparency,
and fairness. We conducted a materiality
assessment in 2020 to help us understand
the perceptions, needs and important issues
of our stakeholders. By understanding the
matters of importance to our stakeholders, the
Board can consider their needs and concerns
in its decision making. Read more about our
materiality process on page 68.
The Board sets the tone from the top to ensure
that decisions we make at all level of the
business, which could impact our stakeholders,
are taken with due regard to their differing
interests.
We engage with our stakeholders through a
range of channels. The feedback generated
informs our materiality assessment, as well
as our disclosure and risk management. Read
more about our risk management on page 58.
Our approach to stakeholder engagement
aligns with Provision 5 of the UK Corporate
Governance Code 2018 (the “Code”),
which applies to the Company by virtue of
its premium listing on the London Stock
Exchange. Whilst section 172 of the UK
Companies Act 2006 is not directly applicable
to the Company due to it being a provision
of UK company law, we are pleased to report
here in relation stakeholder engagement in
connection with Provision 5 of the Code.
For further information as to how the Board
and the Company consider the matters
referenced in section 172, please see our
Corporate Governance Report (in particular
the ‘Board activities in 2020’ table on page 86
and the ‘Shareholder Engagement’, ‘Community
Engagement’ and ‘Workforce Engagement’
sections on pages 88 to 89), ‘Our approach
to sustainability’ on page 34 and the
‘Sustainability’ section on pages 66 to 77.
28
Kenmare Resources plc
Annual Report and Accounts 2020
Employees and unions
Communities
Government and
regulators
Shareholders
Suppliers, contractors
and customers
Why it is important to engage
At Kenmare we believe that our employees
are the cornerstone of our business and
that a partnership approach is vital to
achieving business objectives. We provide
competitive remuneration and invest in
professional and personal development,
while providing a safe and healthy working
environment.
Ways we engage / How we monitor our
engagements
Facilitate quarterly union meetings
Undertake quarterly performance and
feedback meetings with employees
Undertake bi-monthly departmental
‘focal points’ meetings
Engage union representatives
constructively on collective bargaining
issues
Encourage networking forums such as
the Kenmare Women in Mining Forum
Operate an independent
whistleblowing service
Company newsletters, town halls and
pulse surveys
Key Issues / Significant topics raised
Training & development opportunities
Remuneration
Working conditions
Labour rights
Human rights
Health and safety
How do we respond? / examples of
actions taken
Updating H&S policy
Increased investment in employee
development, including a new
leadership training programme
Employee engagement survey
First Modern Slavery Statement in 2021
Why it is important to engage
Kenmare values highly its strong
relationship with its host communities.
Our stakeholder engagement plan
is updated annually and reflects the
changing dynamics in the relationship
between the Mine and the host
communities.
Ways we engage / How we monitor our
engagements
Host formal bi-monthly community
meetings, in addition to ad hoc
meetings, in order to understand and
discuss local peoples’ concerns
Support a community radio station
in order to inform the community of
Kenmare’s and KMAD’s activities
Conduct Environmental, Social
and Health Impact Assessments
to identify potential positive and
negative impacts of the Mine’s
activities
Operate grievance mechanisms to
address community concerns
KMAD hosts quarterly meetings and
publishes a quarterly newsletter
Key Issues / Significant topics raised
Respect for local values and traditions
Community development initiatives,
including those to stimulate economic
development
Employment and procurement
opportunities
Land rehabilitation
Community wellbeing
How do we respond? / examples of
actions taken
All land mined is rehabilitated and
handed back
KMAD support of local communities
surrounding the mine
Donations of medical equipment to
support local communities
Why it is important to engage
Why it is important to engage
Why it is important to engage
Kenmare is committed to being a
responsible corporate citizen. We are
Our investors are the owners of the business
and their continued support is critical to the
We believe in building stable, long term
relationships based on mutually beneficial
focused on ensuring that our host country
business. They provide the capital to develop
terms with our suppliers, contractors,
shares in the benefits of the Moma
Mine and our partnership approach
ensures that we keep the Government
of Mozambique well-informed of our
activities.
and expand our operations responsibly
and sustainably and we need to ensure we
continue to deliver a compelling investor
proposition.
customers and financial service providers. It
is integral to business success that we work
in collaboration with the whole value chain,
as we strive for compliance with our ethical,
environmental and safety standards.
Ways we engage / How we monitor our
Ways we engage / How we monitor our
Ways we engage / How we monitor our
Direct engagement with local, regional
Investor conferences, webinars and
Organise one-on-one meetings and
Site visits, workshops, meetings and
engagements
presentations
roadshows
Site visits
Meeting
Direct dialogue at the Annual General
Corporate materials including
announcements, company website, Annual
Report and social media profiles
engagements
Direct communication
Contractual relationships
training
Operate an independent
whistleblowing service
Key Issues / Significant topics raised
Key Issues / Significant topics raised
Key Issues / Significant topics raised
Compliance with applicable laws and
Operating and financial performance
Working conditions
Growth strategy
Capital expenditure projects
(ESG) performance
Labour rights
Human rights
Security
Environmental, social and governance
Health and safety
How do we respond? / examples of
How do we respond? / examples of actions
How do we respond? / examples of
actions taken
taken
actions taken
Increased proposed dividends in 2020 &
Supply chain compliance programme
Two lender disbursed funds from local
Inaugural Sustainability Report for 2020
Mozambican banks
targets for 2021
Reporting to CDP
engagements
and national government authorities
regarding mining rights, environmental
issues, permitting and other relevant
topics
Provide monthly, quarterly and
annual reports to Ministry of Mineral
Resources and Energy
Provide an annual report to the
Ministry for Land and Environment
Provide a quarterly report to the
District authorities
Provide a Portuguese summary
of Kenmare’s Annual Report to all
government departments
Employment opportunities and labour
regulations
rights
Health and safety
Environmental stewardship
Licences and permitting
Taxation and royalties
Increased production of corporate
materials in Portuguese to increase
transparency
Donations of medical equipment to
support the regional health service
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STRATEGIC REPORT
Employees and unions
Communities
Government and
regulators
Shareholders
Suppliers, contractors
and customers
Why it is important to engage
Why it is important to engage
At Kenmare we believe that our employees
are the cornerstone of our business and
that a partnership approach is vital to
achieving business objectives. We provide
competitive remuneration and invest in
professional and personal development,
while providing a safe and healthy working
environment.
Kenmare values highly its strong
relationship with its host communities.
Our stakeholder engagement plan
is updated annually and reflects the
changing dynamics in the relationship
between the Mine and the host
communities.
Ways we engage / How we monitor our
Ways we engage / How we monitor our
engagements
engagements
Facilitate quarterly union meetings
Host formal bi-monthly community
Undertake quarterly performance and
feedback meetings with employees
Undertake bi-monthly departmental
‘focal points’ meetings
Engage union representatives
constructively on collective bargaining
issues
Encourage networking forums such as
the Kenmare Women in Mining Forum
Operate an independent
whistleblowing service
Company newsletters, town halls and
pulse surveys
Remuneration
Working conditions
Labour rights
Human rights
Health and safety
meetings, in addition to ad hoc
meetings, in order to understand and
discuss local peoples’ concerns
Support a community radio station
in order to inform the community of
Kenmare’s and KMAD’s activities
Conduct Environmental, Social
and Health Impact Assessments
to identify potential positive and
negative impacts of the Mine’s
activities
Operate grievance mechanisms to
address community concerns
KMAD hosts quarterly meetings and
publishes a quarterly newsletter
Community development initiatives,
including those to stimulate economic
development
Employment and procurement
opportunities
Land rehabilitation
Community wellbeing
Key Issues / Significant topics raised
Key Issues / Significant topics raised
Training & development opportunities
Respect for local values and traditions
How do we respond? / examples of
How do we respond? / examples of
actions taken
Updating H&S policy
Increased investment in employee
development, including a new
leadership training programme
Employee engagement survey
First Modern Slavery Statement in 2021
actions taken
All land mined is rehabilitated and
handed back
KMAD support of local communities
surrounding the mine
Donations of medical equipment to
support local communities
Why it is important to engage
Kenmare is committed to being a
responsible corporate citizen. We are
focused on ensuring that our host country
shares in the benefits of the Moma
Mine and our partnership approach
ensures that we keep the Government
of Mozambique well-informed of our
activities.
Ways we engage / How we monitor our
engagements
Direct engagement with local, regional
and national government authorities
regarding mining rights, environmental
issues, permitting and other relevant
topics
Provide monthly, quarterly and
annual reports to Ministry of Mineral
Resources and Energy
Provide an annual report to the
Ministry for Land and Environment
Provide a quarterly report to the
District authorities
Provide a Portuguese summary
of Kenmare’s Annual Report to all
government departments
Key Issues / Significant topics raised
Compliance with applicable laws and
regulations
Employment opportunities and labour
rights
Health and safety
Environmental stewardship
Licences and permitting
Taxation and royalties
How do we respond? / examples of
actions taken
Increased production of corporate
materials in Portuguese to increase
transparency
Donations of medical equipment to
support the regional health service
Why it is important to engage
Our investors are the owners of the business
and their continued support is critical to the
business. They provide the capital to develop
and expand our operations responsibly
and sustainably and we need to ensure we
continue to deliver a compelling investor
proposition.
Ways we engage / How we monitor our
engagements
Investor conferences, webinars and
presentations
Organise one-on-one meetings and
roadshows
Site visits
Direct dialogue at the Annual General
Meeting
Corporate materials including
announcements, company website, Annual
Report and social media profiles
Why it is important to engage
We believe in building stable, long term
relationships based on mutually beneficial
terms with our suppliers, contractors,
customers and financial service providers. It
is integral to business success that we work
in collaboration with the whole value chain,
as we strive for compliance with our ethical,
environmental and safety standards.
Ways we engage / How we monitor our
engagements
Direct communication
Contractual relationships
Site visits, workshops, meetings and
training
Operate an independent
whistleblowing service
Key Issues / Significant topics raised
Operating and financial performance
Growth strategy
Capital expenditure projects
Environmental, social and governance
(ESG) performance
Key Issues / Significant topics raised
Working conditions
Labour rights
Human rights
Health and safety
Security
How do we respond? / examples of actions
taken
Increased proposed dividends in 2020 &
targets for 2021
How do we respond? / examples of
actions taken
Supply chain compliance programme
Two lender disbursed funds from local
Inaugural Sustainability Report for 2020
Mozambican banks
Reporting to CDP
Kenmare Resources plc
Annual Report and Accounts 2020
29
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OUR OPERATING MODEL
Kenmare’s operational
process is well established
and environmentally sound.
The Moma Mine is a low-
cost, bulk mining operation
that predominantly
utilises hydro-generated
power and progressive
rehabilitation processes.
1. Mining
Dredging takes place in three artificial
ponds, where four dredges feed three Wet
Concentrator Plants (A, B and C). The dredges
cut into the ore at the pond’s base, causing the
mineralised sand to slump into the pond where
it is pumped to a WCP. Kenmare also has two
dry mining operations to supplement ore feed
to WCP A and WCP B.
3. Dune
rehabilitation
Tailings are deposited into a series of
settling ponds, dried and re-contoured,
with the previously removed topsoil
redeposited. Rehabilitation is completed
by planting a variety of vegetation
as well as food crops. The area is
then transferred back to the local
communities.
2. Wet Concentrator Plant
The first processing stage at the WCPs
consists of rejecting oversize material. Next,
the ore feed is passed over progressive
stages of gravity spirals, which separate the
HMC from tailings (silica sand and clay).
4. Heavy Mineral
Concentrate
HMC is pumped to the Mineral
Separation Plant (MSP), where
it is stockpiled prior to further
processing. HMC consists of
valuable heavy minerals (ilmenite,
rutile, zircon and monazite), other
heavy minerals and a small amount
of other minerals (the bulk of which
is silica sand).
Mining
Processing
30 Kenmare Resources plc
Annual Report and Accounts 2020
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30316 1 April 2021 5:56 pm V9Other infrastructure: Other infrastructure on site includes a 170km 110kV power transmission line, a sub-station, a leased 9.6 MW diesel generator plant, an accommodation village, offices, a laboratory, an airstrip, water supply and sewage treatment plants.Storage and exportProcessing5. Wet High Intensity Magnetic SeparationHMC is transferred from stockpiles by front-end loaders and fed to the Wet High Intensity Magnetic Separation (WHIMS) plant to separate magnetic from non-magnetic fractions.7. Product storage warehouseIlmenite and rutile are stored in a 185,000 tonne capacity warehouse, which also contains an enclosed area to store the mineral sands concentrate product (containing monazite). Zircon is stored in a separate 35,000 tonne capacity warehouse to reduce the potential for cross-contamination. The warehouses load the products onto a 2.4 km-long overland conveyor.9. Ocean-going bulk carrierThe vessels transport the products to a deep water transhipment point 10 km offshore, where they self-discharge into customer bulk carrier vessels. These vessels then transport the final products to multiple destinations around the world.6. Magnetic, gravity and electrostatic separationThe MSP uses magnetic, gravity and electrostatic circuits to separate the valuable minerals of ilmenite, rutile, zircon and monazite into products. The magnetic fraction of WHIMS output is dried and processed by electrostatic separation to produce ilmenite products. The non-magnetic fraction of the WHIMS output passes to the wet gravity separation circuit to remove silica and trash minerals. Electrostatic separators are then used to separate the conducting mineral rutile from the non-conducting minerals zircon and monazite.8. Conveyor and jettyThe conveyor transports product to the end of a 400 metre long jetty, where product is loaded onto transhipment vessels, at a rate of 1,000 tonnes per hour. Kenmare owns and operates two transhipment vessels, the Bronagh J and the Peg.STRATEGIC REPORT31Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 31Kenmare-AR-2020.indd 3101/04/2021 17:57:3101/04/2021 17:57:31 30316 1 April 2021 5:56 pm V9NamalopeNatakaMualadiPiliviliNampulaConveyor and JettyMineral Separation PlantACBThe Moma Titanium Minerals Mine is located on the north-east coast of Mozambique. It is one of the largest titanium minerals deposits in the world and began production in 2007. The Moma Mine has a low environmental impact, progressively rehabilitating the land as we mine. It also benefits from access to low-cost, renewable power (from the Cahora Bassa Hydroelectric Complex), to supply 90% of requirements. Moma consist of three Wet Concentrator Plants (WCPs), two of which are mining the Namalope ore zone and one in the Pilivili ore zone. Kenmare is targeting 1.2 Mtpa of ilmenite production on a sustainable basis, which represents 7% of global titanium feedstock supply.32Kenmare Resources plc Annual Report and Accounts 2020OUR OPERATIONS32Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 32Kenmare-AR-2020.indd 3201/04/2021 17:57:3201/04/2021 17:57:32 30316 1 April 2021 5:56 pm V9Our mine pathsAWCP A WCP A has been mining the Namalope ore zone since 2007 and is scheduled to continue mining there until 2025, when it will move to the Nataka deposit. Nataka is the largest ore zone within Moma’s portfolio. Within Nataka, a high grade mine path has been identified for WCP A, which averages a grade of 3.6% THM for 20 years. WCP A has a throughput capacity of 3,250 tonnes per hour (tph), and two dredges, Catarina and Mary Ann, provide feed to WCP A.BWCP B WCP B mined the Namalope ore zone from 2013 to August 2020. In September 2020, WCP B was relocated to the high grade Pilivli ore zone and it recommenced production in late October. Kenmare evaluated a number of ore zones within Moma’s portfolio and Pilivili was selected due to its high grades and other favourable characteristics, such as low slimes and proximity to the Mineral Separation Plant (MSP). WCP B has a throughput capacity of 2,400 tph, following the upgrade work undertaken in 2018, and it has one dredge, named Deirdre.CWCP C WCP C is the newest and smallest of the three Wet Concentrator Plants. It commenced production in February 2020 and it has a throughput capacity of 500 tph, representing one-fifth of the size of WCP B and one-sixth of the size of WCP A. WCP C is mining a high grade area of the Namalope ore zone, which is inaccessible to the two larger Wet Concentrator Plants. It has one dredge, named Julia.NamalopeNatakaMualadiPiliviliNampulaConveyor and JettyMineral Separation PlantACB Read more in the Operational review on pages 40 to 43STRATEGIC REPORT33Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 33Kenmare-AR-2020.indd 3301/04/2021 17:57:3301/04/2021 17:57:33 30316 1 April 2021 5:56 pm V9Materiality assessmentIn 2020, we conducted a review to find out the topics that matter most to Kenmare and our stakeholders. Identification and evaluation of these material topics ensure that our business strategy takes account of significant social, environmental, and economic topics and the management of sustainability issues is embedded in wider business processes. This process helps to develop our sustainability strategy, informs metrics and KPIs to improve future performance and provided the context for our inaugural standalone Sustainability Report. Read more about our materiality assessment on page 68 Read more about sustainability on pages 66 to 77ECONOMIC Growth Margin Shareholder returns Capital efficiency Risk managementEFFICIENT Resource efficiency Energy use and management Climate change risksENVIRONMENTAL Emissions & air quality Water stewardship Tailings Progressive rehabilitation BiodiversitySOCIO-ENVIRONMENTAL Health & safety Land aquisition & resettlement Environmental regulationsSOCIAL Local communities KMAD Human rightsSOCIO-ECONOMIC Anti-bribery & corruption Diversity, inclusion Equal opportunities Labour practices Employees SecuritySUSTAINABLESOCIAL RESPONSIBILITY MINDSETGOOD CORPORATE GOVERNANCEKMADThe Kenmare Moma Development Association (“KMAD”) is a not-for-profit organisation established in 2004. KMAD aspires to be a catalyst for positive social and economic change in the host communities of the mine. The focus of our work is framed by three key pillars: livelihoods and economic development, healthcare development and education development. Read more about KMAD on page 66OUR APPROACH TO SUSTAINABILITYKenmare’s long-standing and ongoing commitment to sustainability is underpinned by our values and purpose: to responsibly meet global demand for quality-of-life minerals. For more than 30 years, Kenmare has been building a responsible culture that values and supports sustainability. Responsible decision-making is at the centre of our ability to deliver long-term stakeholder value. We are fully committed to doing what is necessary to protect the health and safety of our people, operate in an environmentally responsible manner and support our host communities. From exploration to extraction, construction to closure, sustainability is a vital consideration at all stages of the mine cycle.Good corporate governance is the collective responsibility of the Board and all levels of management and critical to the long-term success of the Group. The standards and practices adopted are applied in a consistent manner with our values of Integrity, Commitment, Accountability, Respect and Excellence (ICARE) and together form the foundation of our approach to sustainability. We have sought to ensure regular and meaningful engagement with all stakeholders to build relationships based on trust and respect. We set clear targets to challenge ourselves to improve our sustainability performance, transparency, and accountability. To deliver these targets, we embed sustainability performance measures throughout Kenmare. 34Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 34Kenmare-AR-2020.indd 3401/04/2021 17:57:3501/04/2021 17:57:35 30316 1 April 2021 5:56 pm V9OUR HOST COUNTRY: MOZAMBIQUEMozambique is a mining friendly jurisdiction with a growing natural resources industry. There are currently over 60 natural resources companies with a presence in country. In addition to titanium minerals, coal, gold and aluminium are all mined in Mozambique. The discovery of the Rovuma basin natural gas fields in the north of the country in 2011 is set to transform the economy in the coming decades, with an estimated US$20+ billion investment underway from several multinational companies.Working in partnershipDuring our 30-year history in country, Kenmare has fostered strong relationships with the Government of Mozambique, local authorities, and our host communities. The Government has always upheld the terms of our licences and other agreements, and we value their partnership highly. In 2020, Kenmare’s production accounted for 7% of Mozambique’s exports. Good governanceIn 2020, Kenmare was named the most transparent company in Mozambique by the Centre for Public Integrity’s Extractive Industry Transparency Index. Mozambique is one of the 52 countries that implements the Extractive Industries Transparency Initiative (EITI) and Kenmare representatives have been on Mozambique’s EITI coordinating committee since its inception in 2009.Democracy in actionDemocratic elections have been held every five years in Mozambique since 1994, with the most recent election held in October 2019.Kenmare began exploring for titanium minerals in Mozambique in 1987 and has had a continued unbroken presence in country for over 30 years. Mozambique lies on the south-eastern coast of Africa and shares borders with Tanzania, Malawi, Zambia, Zimbabwe, Eswatini and South Africa. The country has an area of almost 800,000 km2, with a coastline of 2,470 km.Moma mineMaputoMozambiqueSTRATEGIC REPORT35Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 35Kenmare-AR-2020.indd 3501/04/2021 17:57:3601/04/2021 17:57:36 DEVELOPMENT PROJECTS
BEN BAXTER
Chief Operations Officer
GARY SHORT
Project Director
DELIVERING
GROWTH
In 2018 Kenmare announced three development projects that
together had the objective of increasing ilmenite production
to 1.2 million tonnes (plus co-products) per annum, on a
sustainable basis, from 2021.
Completion of
Targeting 2021 ilmenite production of
WCP B MOVE
1.1-1.2 MILLION TONNES
45-60%
Representing a
increase in ilmenite production in 2021
36 Kenmare Resources plc
Annual Report and Accounts 2020
The first development project, a 20% expansion
of WCP B, was commissioned successfully in
late 2018. The second project, the development
of WCP C, commenced production in
late February 2020. The third project, the
relocation of WCP B to Pilivili, was successfully
undertaken in Q3 2020. The ramp-up began
in Q4 2020 and continues to progress well,
with production in line with expectations and
ore grades significantly higher than previously
mined in Namalope.
In 2020, Kenmare produced 765,000 tonnes of
ilmenite and is targeting production of 1.1-1.2
million tonnes in 2021, an uplift of between 45%
and 60%, and accounting for approximately 5%
of global supply of titanium feedstocks.
This significant increase in targeted production
is supported by increased, improving
utilisations, and the mining of higher-grade ore.
The higher production volumes are expected
to reduce unit costs, as well as increase
revenues, as the operation benefits from
economies of scale.
Kenmare’s cash operating costs per tonne are
expected to decrease to US$132-US$146 per
tonne in 2021, providing expanded margins and
greater cash flow stability. As a result, Kenmare
is targeting a position in the first quartile of
the industry revenue to cost curve, providing
protection against downward commodity price
cycles.
The following progress milestones were
achieved in 2020, in accordance with the
development programme:
Commissioning of WCP C
Completion of the WCP B move from
Namalope to Pilivili in Q3 2020, and
successful recommissioning in Q4 2020
Initiation of pre-feasibility works for
future mining in Nataka
WCP C development
The development of WCP C was the second of
Kenmare’s three development projects. WCP
C mines a high-grade area of the Namalope
ore zone (averaging 5% Total Heavy Minerals
(“THM”)), which was not accessible to the
larger WCP A and WCP B mining operations.
The ore lies below the water table and is
therefore not suitable for our supplementary
dry mining operations. The high-grade ore
and close location to the MSP, with associated
low pumping costs, allow this plant to make a
meaningful contribution to lowering unit costs
at Moma.
The project consisted of three main
deliverables:
Design, manufacture, transportation and
commissioning of a bespoke dredge by
Royal IHC, using Kenmare’s experience of
mining conditions at Moma;
Design, fabrication and construction of
a 500 tph wet concentrator plant, using
preferred metallurgical equipment by
Mineral Technologies; and
Provision of supporting electrical, piping
and pumping infrastructure designed and
managed under an EPCM contract with
Hatch Engineering
WCP C has provided satisfactory HMC
production in 2020, producing 169,000 tonnes
of HMC. While the start of operations was
delayed, due to the late completion of the
concentrator plant by the turnkey contractor,
WCP C ramped up quickly in March 2020. The
plant has a rated capacity of 500tph and has
been consistently and reliably fed by the Julia
dredge. Utilisations have been on plan and
metallurgical efficiencies have been in line with
expectations.
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STRATEGIC REPORT
Completion of
WCP B move
Overview
The move of WCP B was an essential
project in 2020, as the existing area
being mined in Namalope had been
depleted. Pilivili was chosen as the new
mining area as is the highest-grade ore
zone in Moma’s portfolio, with Mineral
Reserves of 180Mt at 4.4% Total Heavy
Mineral. It is also relatively close to the
MSP (Mineral Separation Plant), being
23km away.
COVID-19 challenges
Global restrictions for the movement of
goods and people, related to COVID-19,
led to the delayed fabrication and
delivery of electrical infrastructure
and the HMC pipeline. Agile project
management prevented a delay to the
move of WCP B, which was delivered on-
time to prevent a shortage of ore.
First production in
Q4 2020
HMC production commenced on 25
October 2020 and production ramped
up successfully through the quarter.
Grid power was established from mid-
December 2020 while HMC haulage
continues pending the imminent
commissioning of the HMC pipeline in
Q2 2021.
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37
Slimes assessments, including
considerations on mining method,
processing and tails emplacement.
Water provision, with geophysical and
drilling work exploring an aquifer closer
to Nataka than the one included in our
concept study.
These studies, which will continue into 2022,
are expected to inform the optimal mining
approach for the Nakata orebody which
should enable the mine to maintain ilmenite
production at 1.2 Mtpa.
Ben Baxter
Chief Operations Officer
DEVELOPMENT PROJECTS CONTINUED
However, whilst the plant is delivering HMC
to expectation, the project has not been
formally closed out due to the non-completion
of performance tests. This was the result
of COVID-19 restrictions on the contractor.
There are also outstanding items on the feed
preparation section of the plant which minimise
ore losses. The project is expected to be
completed below its budget of US$45 million.
WCP B move to Pilivili
The last of the outlined development projects
has been the relocation of WCP B to the
high grade Pilivili ore zone. This move was
successfully undertaken in Q3 2020, and HMC
production began at the end of October 2020.
The project was approved in 2019 and involved
the relocation of the existing mining operation
from the depleted ore zone of Namalope
to a new mining zone in Pilivili. The project
comprised the safe relocation of the dredge
and concentrator plant, using self-propelled
modular transporters (SPMTs), along a
dedicated 23km x 60m wide roadway designed
and built to cope with the pressure created by
the 7,000 tonne weight.
Pilivili, being a new mining area, required
significant infrastructure development.
The project created the required electrical
infrastructure upgrades and extensions, various
support services, as well as providing a positive
displacement pumping system to transport
the heavy mineral concentrate to the Mineral
Separation Plant.
The project execution phase was extremely
challenging and dynamic due to the many
and staggered disruptions because of the
COVID-19 pandemic. Delays were incurred
in the fabrication stages in Q2 and Q3 2020
and in H2 the relocation and installation
schedules were impacted by late deliveries and
restrictions on the movement of goods and
people.
Contingency planning allowed for a one-month
extension of mining in Namalope, mining low
grade ore; therefore reducing the contribution
of WCP B in 2020. The relocation commenced
at the end of August and was completed inside
two months, ahead of expected schedule.
Plans were initiated to ensure that WCP B
production could restart on time. However, due
to COVID-19 restrictions, some installations
were not completed in time for the WCP B
recommissioning:
Operations utilised Kenmare’s diesel-
powered generators until the electrical
infrastructure was completed in December.
Road haulage of HMC was employed as an
interim measure due to the HMC pipeline
fabrication being delayed. Installation
continued in Q1 2021, with commissioning of
the pipeline expected in Q2.
The project is expected to be delivered for
US$127 million, ahead of the forecast US$106
million original budget forecast. US$21 million
of the overrun directly relates to COVID-19
mitigation measures; fabrication and
installation changes, catch up strategies and
extensions of contracts.
The delivery of the WCP B relocation and
WCP C is testament to the commitment and
integration of the Kenmare Owner’s Team, our
EPCM engineer, Contractors, and Operations
workforce. To deliver the project under such
challenging conditions was an exceptional
achievement.
Production in Pilivili commenced successfully
in Q4 2020. The production ramp up and
plant operating time exceeded expectations,
that combined with significantly higher
start-up grades, contributed to the best HMC
production quarter of 2020. Kenmare expects
to produce between 1.1-1.2 million tonnes of
ilmenite in 2021.
Nataka Prefeasibility.
The Nataka ore zone is Kenmare’s largest
orebody, with both WCP A and C expected
to mine there in the future. A 20-year higher
grade mine path has been identified for WCP
A from 2025 onwards at conceptual level, and
this path is now subject to a prefeasibility level
assessment.
Studies were commenced in 2020 on several
work streams:
Mining method validations including
dredging and supplementary mining
options. As part of these works, a hydro-
mining trial, commenced in early 2021.
Orebody knowledge improvements with
resource drilling programmes as well as
geotechnical and hardness assessments,
including the purchase of a specialised drill
rig to deliver improved resource evaluations.
38 Kenmare Resources plc
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30316 1 April 2021 5:56 pm V9Since I joined Kenmare in 2018, there hasn’t been a dull moment. We’ve been busy with feasibility studies and completing three expansion projects. My biggest achievement has been the development of our project owners’ team, including Hatch, and the effective integration of the team with site operations and our executive team. I enjoy working in the flat structure at Kenmare, we have regular dialogue with the executives. Through the COVID-19 pandemic we’ve had weekly Steering Committee meetings, which have been critical in allowing us to remain nimble through a dynamic period. The movement of a mining plant hadn’t been done before in this way, in our industry. Together with our partners, we have successfully delivered a world class project, which is something I am very proud of.”Gary Short, Project DirectorWE ARE INNOVATIVEBUILDING A SUCCESSFUL PROJECTS TEAMSTRATEGIC REPORT39Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 39Kenmare-AR-2020.indd 3901/04/2021 17:57:3901/04/2021 17:57:39 30316 1 April 2021 5:56 pm V9Mining throughputs171819204,8224,6344,5485,184Spiral Feed Rate (t/hr)Excavated ore (t) and Grade (%HM)1718192033,507,86536,803,7504.5%4.4%3.6%3.9%36,803,75034,357,361Dredged ore (t) Dry mining ore (t) Excavated Ore Grade (%)BEN BAXTER Chief Operations OfficerHIGINO JAMISSEMoma Mine General ManagerOPERATING REVIEWDuring the first half of the year, mining and processing operations were restricted by falling grades and the challenges of COVID-19. COVID-19 presented significant disruption to the operation of the mine with changes in shift patterns, transportation, access to spares and prioritisation of the implementation of many mitigation measures. Despite this disruption, and thanks to the extraordinary commitment of our employees and contractors, the Mine continued to operate safely through the year. Significant efforts were placed on improving health and safety outcomes in 2020. A review and reorganisation of hazard identification and risk assessment processes was successfully implemented to improve workplace safety. We saw an improvement in LTIFR from 0.27 in 2019 to 0.25 in 2020, and our lowest ever All Injury Frequency Rate (AIFR) of 1.61. This was achieved while on-boarding more than 700 new contractor staff related to the ongoing development projects. For more information on our safety performance in 2020, read the Sustainability Review on pages 66 to 77.MiningHMC production remained at the same level as 2019, despite two months’ relocation time for the WCP B move. This was helped by increased mining capacity, benefitting from the commissioning of WCP C in Q1 2020. Total throughputs (tonnes per operating hour onto the rougher spirals) increased by 8% year on year to 5,184tph.Additional mining from WCP C partly compensated for the loss of excavated ore resulting from the two-month relocation of WCP B from Namalope to Pilivili. A total of 34.4Mt of ore was mined in 2020, compared to 36.8Mt in 2019. The higher grades from WCP C throughout the year and the Pilivili grades in Q4 contributed to a slightly higher mined grades of 3.9% over the year.A YEAR OF TRANSITIONThe commissioning of WCP C in Q2, and the successful relocation of WCP B in Q3 form the bedrock of our strategy to sustainably increase ilmenite production to our target of 1.2 million tonnes per annum, from 756,000 tonnes in 2020.Mining at WCP A was challenging, affecting both throughputs and utilisations, due to harder mining conditions being encountered. The dredge automation project was completed after installation down-time in Q1 and subsequently brought benefits; however further work was required through the year to fully optimise.WCP B experienced a dynamic mine plan through 2020. The relocation pond in Namalope was in a fixed location and COVID-19 related project delays were fluid, eventuating in a move taking place a month later than expected. This required the mining of additional Namalope ore that had been identified as contingency ore but was at a lower grade than the Pilivili ore in the mine plan. However, the relocation proceeded swiftly once underway in Q3, ahead of expectations (and also permitted refurbishments to the dredge). The ramp up of throughputs and operating times also proceeded ahead of plan in Q4.WCP C performed well in 2020, delivering HMC to expectations. Whilst the project was delivered later than expected at the end of February 2020, the ramp up was faster than 40Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 40Kenmare-AR-2020.indd 4001/04/2021 17:57:4001/04/2021 17:57:40 expected. Due to COVID-19 restrictions and
the inability to complete performance tests, the
project remains open, and some modifications
are required to minimise feed losses.
Supplementary dry mining is used to augment
ore excavated by the dredges. Performance
was below expectation in Q1 2020, caused by
difficulties in pumping ore a longer distance
than usual to WCP A. However, from Q2
onwards the dry mining performed well,
reaching the highest levels of production in Q4
since 2016. At WCP B, reduced opportunity for
dry mining locations in Namalope moderated
the contribution. On start up at Pilivili, due to
the high grades encountered, the dredge filled
WCP B’s capacity without dry mining being
required.
Overall mine utilisation fell to 64% in 2020,
from 71% in 2019, significantly impacted by the
downtime as a result of the move of WCP B.
Adjusting for the time lost during the move,
utilisation was 68% on a like-for-like basis, a
reduction of 3%..
The main reasons for reduced performance
were:
A deterioration in mining conditions which
lead to shortages of feed from the dredges
and dry mining to WCP A. This resulted
in more time operating one instead of two
processing circuits.
Delays in delivery of improvement projects
(Projecto Oitenta) due to lockdowns and
transportation disruptions associated
with COVID-19. The remaining projects
are expected to be delivered in H1 2021,
and new projects to counter effects of
challenging mining conditions have been
proposed.
Shortages of spares which resulted in a
review and improvement in critical spares
stock holdings.
Mining recoveries continued to be good at
more than 90% across the mine, slightly lower
than 2019 levels, due to increased slimes levels
at WCP A.
HMC quality suffered some variability and is an
area of focus because whilst reported grades
were good:
the Total Heavy Mineral (THM) contained
less valuable heavy minerals (VHM); and
sampling controls at the Mine were
identified as introducing some bias leading
to overstatement.
The combination of these factors reduced
the contained ilmenite in the HMC which
affected the yield to final products. Changes
in metallurgical controls have eliminated the
sampling bias and, since the move of WCP B to
Pilivili, ilmenite content in HMC has increased.
Processing
Final product output was impacted in 2020
by low HMC feed availability, exacerbated by
reduced valuable mineral content in the HMC.
HMC consumption decreased by 5% in 2020
compared to 2019. However, on the start-up
of mining at Pilivili, HMC volumes picked up
significantly and ran ahead of processing
capacity, leading to the building of a 50k tonne
stockpile at the year end.
Significant upgrade work took place in the
MSP in H2 2020, taking advantage of available
circuit time due to feed shortages. These
circuit upgrades included additional separation
equipment to increase capacity and make
operations more robust when operating at 1.2
million tonnes per annum of ilmenite.
Ilmenite production was 756,000 tonnes,
15% down on 2019, impacted by reduced
HMC availability and therefore consumption.
Original guidance of 800,000-900,000 tonnes
was withdrawn earlier in the year due to the
uncertain impacts of COVID-19 on operations
and project delivery timelines. However,
production for the year was above the middle
of the revised guidance of 700,000– 800,000
tonnes of ilmenite.
The increased stop-start nature of operations,
lower HMC feed grade, power unreliability and
commissioning activities all affected recoveries
during the year. Recoveries were also impacted
by the lack of stockpiled materials available for
retreatment relative to prior years.
Zircon production was equally affected by
the shortage of HMC feed, and subsequent
lower recoveries. Primary zircon production
fell 8% on 2019 levels to 43,200 tonnes, whilst
concentrates fell 13% to 34,900 tonnes.
Rutile production decreased by 28% in
2020 to 6,000 tonnes, affected by the same
challenges as zircon in addition to increased
conductor contaminants impacting separation.
Adaptations to the plant set up were made
by year end to accommodate this however,
recoveries fell to 67% though an increased
proportion was captured in concentrate
products.
The move of WCP B to the high grades of
Pilivili provides a strong outlook for final
product production. Increased HMC output
and the development of a HMC stockpile by
year end led to increased production in Q4
2020 and this is expected to continue in 2021.
Steadier operations, benefitting from consistent
feed availability and rates, are expected to also
deliver improved recoveries.
STRATEGIC REPORT
Mine Overall Utilisation (%)
3
7
1
7
9
6
4
6
17
18
19
20
Mine recovery (%)
.
0
2
9
1
.
2
9
6
.
1
9
.
0
0
9
17
18
19
20
Spiral Recovery (%HM)
Mine HMC Quality (%THM)
.
9
2
9
.
9
2
9
.
8
2
9
.
2
2
9
17
18
19
20
HMC Treated (t)
1,372,713
1,367,997
2
6
7
6
1
,
1
7
5
9
1
,
17
18
1,214,713
3
7
9
6
,
19
8
7
1
,
0
5
1,157,859
20
HMC treated (t) Closing HMC Stock (t)
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OPERATING REVIEW CONTINUED
Power
There were no long-term power outages in
2020, however with the relocation of WCP
B from Namalope to Pilivili, significant new
infrastructure was commissioned and this
included 56 hours of planned outages.
Whilst overall power reliability from EdM (the
transmission grid operator) improved by 20%
relative to 2019, operating time at the mining
operations was impacted by up to 3% because
of power disruptions. At the MSP, to maintain
efficient processing, Kenmare uses diesel-
powered electric generators as a primary
power source during the summer wet season.
However, in December 2020 the generators
were unavailable as they were required to
power the Pilivili mining operation, due to
COVID-19 related installation delays to Pilivili’s
grid power infrastructure. This led to poor
power supply to the MSP in Q4.
Rotary Uninterruptible Power Supply
In early 2021, following a successful feasibility
study, Kenmare approved the installation of a
Rotary Uninterruptible Power Supply (“RUPS”).
RUPS will improve the year-round reliability
of power at the MSP, which suffers from
lost operating time and significant recovery
losses when operating with unstable power
supply. Research conducted by Kenmare in
2020 considered alternative power supply
options including installation of self-generated
sustainable energy options, such as solar
and battery options. In collaboration with our
engineering partner Hatch, the RUPS was
chosen as the best solution.
The RUPS facility will comprise of a set of
four kinetic energy storage units operating
through a flywheel with the ability to deliver
reactive power in the event of a mains power
dip or outage. Should the interruption be of
significant time (more than eight seconds),
diesel engines start to provide back-up power.
The advantage over our current method of
using generators is that the system can react
to outages when they occur, as opposed
to using generators constantly throughout
the four-month rainy season to mitigate the
unpredictability of outages. RUPS will provide
voltage dip protection throughout the year,
rather than only during the rainy season.
The RUPS provides the best solution for
Kenmare as it will:
Reduce Kenmare’s diesel costs (and
associated CO2 emissions by approximately
15%) by eliminating the use of diesel powered
generators throughout the rainy season
Allow Kenmare to better utilise, the low-cost
and renewable, electricity provided by the
Cahorra Basa hydroelectric power, whilst
also bringing power reliability to the MSP
Result in increased product recoveries
through the avoidance of power outages
and significant dips
Provide at power solution that is
independent from the grid, at reduced
production volumes, to protect against
unexpected external power events
The project is expected to cost US$16 million
and generate a positive NPV, which would
increase significantly should feedstocks to the
MSP be available. The RUPS project is targeted
for implementation in early 2022.
Shipping
A total of 43 ocean-going vessels visited Moma
during 2020.
The Company shipped 853,000 tonnes of
finished products in 2020, which comprised
766,000 tonnes of ilmenite, 43,600 tonnes
of primary zircon, 6,200 tonnes of rutile
and 37,100 tonnes of concentrates. This
represented a 17% decrease compared to 2019
due primarily to reduced production, as well as
a second year of poor weather, particularly in
Ilmenite produced (kt)
Ilmenite recovery (%)
.
2
8
9
9
.
5
8
5
9
.
9
2
9
8
.
9
3
9
.
9
0
9
4
.
1
9
.
0
6
5
7
20
.
3
6
8
16
.
9
6
8
20
19
18
17
Recovery of ilmenite (%)
17
19
18
Total ilmenite (kt)
42
Kenmare Resources plc
Annual Report and Accounts 2020
Q2 and Q3, impacting loading rates.
Kenmare carried out research into the impacts
of weather on the Moma loading operations,
comparing weather related downtime to
historical weather data for the Moma area.
The expectation is that whilst minor long term
negative impacts can be seen on wave heights,
2019 and 2020 represent outliers in the data
set rather than a long-term deterioration.
Capacity increase works were completed on
the two transhipment vessels in 2020. The
objective was to ensure all production can
be shipped, even with significant weather
disruption. The work included an upgrade of
the thruster control system on the Bronagh
J, as well as significant upgrade works on
the Peg, carried out during an extended dry
docking for Class certification maintenance
between September and November. Upgrades
included an improved offloading system,
including a new loading excavator. With both
vessels in operation, Kenmare saw a significant
improvement in volumes shipped through
Q4 2020. Further improvement works to the
transhipment vessels are expected to be
completed in H1 2021.
In closing, after more than seven years as
General Manager of the Moma Mine, Koos
Grove stepped aside for the appointment of
our first Mozambican General Manager, Higino
Jamisse. Koos has been instrumental in the
development of the mine, particularly in the
development of systems and standards helping
us to mature as a business. We thank him for
his excellent contribution to the success of
Kenmare, and wish him well for the future. I
am delighted with the internal appointment
of Higino to the GM role and wish him great
success in the execution of our strategy to
deliver a safe 1.2Mt of ilmenite per annum.
Ben Baxter
Chief Operations Officer
Zircon production including
concentrates (t)
73,960
76,550
87,181
78,138
17
18
Standard Zircon (t)
Secondary Zircon Concentrate (t)
20
19
Special Zircon (t)
Mineral Sands Concentrate (t)
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30316 1 April 2021 5:56 pm V9Primary Zircon Recovery (%)161718192061.367.059.653.259.1Overall Zircon Recovery (%)161718192078.689.5806976.9Rutile produced (t)171819208,2788,1549,1335,957Rutile recovery including that sold in other products (%)1718192081.066.0 62.866.9Rutile Recovery Single Product (%)Rutile Recovery in other products (%)WE ARE COMPETITIVEAPPOINTING A MOZAMBICAN GENERAL MANAGERHigino Jamisse became Moma’s first Mozambican General Manager in September 2020. Higino was raised in Imhambane province in the south of the country and studied Mechanical Engineering at Eduardo Mondlane University in Maputo. He joined Kenmare in 2012 as Engineering Manager before being promoted to Operations Manager four and a half years later.I am proud to be a part of the fantastic team we have at Kenmare. The strength and resilience of our team has never been more evident than in 2020 through the challenges posed by COVID-19. I’m confident that following the successful move of WCP B to Pilivili, we are now well positioned to increase our production, reduce costs and obtain our first quartile position in our industry.”Higino Jamisse Moma Mine General ManagerSTRATEGIC REPORT43Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 43Kenmare-AR-2020.indd 4301/04/2021 17:57:4101/04/2021 17:57:41 MINERAL RESERVES AND RESOURCES
A >100 year mine life
Introduction
The Group’s world-class resource is estimated
to contain approximately 182 million tonnes
of ilmenite (equivalent to around 140 years
production at 1.2 million tonnes per annum), plus
associated co-products rutile and zircon, and
concentrates containing monazite.
The nature of Kenmare’s deposits, with abundant
fresh water, no overburden, a good ore grade
and attractive products that do not have to be
upgraded before being used. This gives Kenmare
the ability to mine, concentrate and separate
its products with relatively low capital and
operating costs, in part due to more than 90%
of energy consumed being derived from low-
cost hydroelectric power. Kenmare operates a
dedicated port facility adjacent to the MSP, which
allows for the shipment of products to customers
at minimum cost.
Summary of reserves and resources
The total proved and probable ore reserves
under the Namalope, Pilivili, and Nataka mining
concession are estimated as at 31 December
2020 at 1.54 billion tonnes, grading 2.7% ilmenite,
0.18% zircon and 0.059% rutile, containing 42
million tonnes of ilmenite, 2.8 million tonnes
of zircon, 0.91 million tonnes of rutile, and 0.16
million tonnes of monazite. The total ore resource
(excluding reserves) held by the Group under a
combination of exploration licences and mining
concessions is estimated as at 31 December 2020
at 6.4 billion tonnes, grading 2.4% ilmenite, 0.16%
zircon and 0.052% rutile, containing 150 million
tonnes of ilmenite, 10 million tonnes of zircon and
3.3 million tonnes of rutile.
Details are set out in the table on page 47.
44 Kenmare Resources plc
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STRATEGIC REPORT
Total mineral reserves
1.6 BN TONNES
Total mineral resources
6.4 BN TONNES
Life of mine
>100 YEARS
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30316 1 April 2021 5:56 pm V9NAMPULA PROVINCENametilQuingaAngocheMomaMogincualNampulakm0 10 20 30NampulaProvinceNampulaNametilMogincualQuingaAngocheNatakaMomaLardeZambéziaProvinceQuinga NorthCongolone and MarruaNamalopeMualadiPiliviliMpitiniMap area(Moma mine)MaputoMozambiqueThe map shows exploration licences and mining concessions held by the Group.The Namalope deposit continues to support WCP A and the newly commissioned WCP C. WCP B was relocated to the Pilivili deposit in 2020. Reductions in the reserve statement relate to depletion from mining in 2020 and dredge path revisions that were made during the year to optimise the mine plan. The Namalope reserves now comprise 115Mt of ore at 2.8% ilmenite (representing 3.2Mt contained ilmenite), 0.20% zircon (0.23Mt) and 0.064% rutile (0.07Mt). A further 7,633m of drilling was undertaken at Namalope in 2020 to improve orebody knowledge: Increased focus was placed on mineral fractionation analysis within 2020 and 2021 mine paths; Closed spaced drilling along WCP C mine path was completed to improve our understanding of the mining floor; and Additional resource drilling was completed on the WCP B path in Namalope to improve knowledge of the Indicated Resource that could be mined as contingency ore close to the relocation pond. This was mined in July and August 2020.In 2020, Pilivili reserve was mined for two months in Q4 resulting in reserves of 177Mt of ore at 3.6% ilmenite, representing 6.4 Mt of contained ilmenite, 0.25% zircon (0.45Mt) and 0.08% rutile (0.14Mt). Mining life for WCP B in Pilivili is estimated at 8 years. The 2020 Pilivili drilling programme (13,352m) focused on improving orebody knowledge within the dry mining path and south western areas of the deposit. The Nataka deposit represents a large, long-life mining opportunity for the Group. Reserve status was unchanged in 2020, with probable reserves of 1,248Mt of ore at 2.56% ilmenite (representing 32Mt of contained ilmenite), 0.17% zircon (2.11Mt) and 0.06% rutile (0.70Mt). Studies continued in 2020 to develop the 20-year high grade mining plan for WCP A post-Namalope, in preparation for pre-feasibility study completion. An economic assessment has yet to be completed as part of a prefeasibility study on this new path, and hence, until completed, the path will not be translated into the reserve category. A further 2,279m of drilling was completed during the year to complement this work.Widely spaced exploratory drilling programmes continued in 2020 in the Mualadi (4,065m) ore zones, with a view of broadening understanding of these deposits, and this will continue into 2021. No drilling activity was undertaken in the Congolone, Mpitini and Quniga North deposits during 2020.MINERAL RESERVES AND RESOURCES CONTINUED46Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 46Kenmare-AR-2020.indd 4601/04/2021 17:57:4301/04/2021 17:57:43 STRATEGIC REPORT
The following table sets out Kenmare’s mineral resources and reserves as at 31 December 2020:
Zones
Reserves
Namalope
Namalope
Pilivili
Pilivili
Nataka
TOTAL
RESERVES
Resources
Congolone
Namalope
Pilivili
Namalope
Congolone
Nataka
Pilivili
Congolone
Pilivili
Mualadi
Nataka
Mpitini
Marrua
Quinga North
TOTAL
RESOURCES
Category
Ore (Mt)
%
THM*
% Ilmenite
in THM
% Ilmenite
in ore
% Rutile
in ore
% Zircon
in ore
THM
(Mt)
Ilmenite
(Mt)
Rutile
(Mt)
Zircon
(Mt)
Proved
Probable
Proved
Probable
Probable
Proved &
Probable
70
45
38
139
1248
1540
Category Sand (Mt)
205
Measured
137
Measured
7
Measured
106
Indicated
55
Indicated
1321
Indicated
101
Indicated
24
Inferred
36
Inferred
327
Inferred
3 637
Inferred
287
Inferred
54
Inferred
71
Inferred
3.5
3.5
6.0
3.9
3.1
3.3
81
81
82
82
82
82
2.8
2.8
4.9
3.2
2.6
2.7
%
THM*
3.3
3.4
3.8
2.8
3.8
3.2
3.1
2.4
2.3
3.2
2.6
3.6
4.1
3.5
% Ilmenite
in THM
80
81
82
81
79
84
76
78
76
80
82
80
80
80
% Ilmenite
in sand
2.7
2.8
3.1
2.2
3.0
2.7
2.3
1.9
1.8
2.6
2.1
2.9
3.3
2.8
0.06
0.06
0.11
0.07
0.06
0.059
% Rutile
in sand
0.07
0.06
0.06
0.05
0.08
0.05
0.05
0.05
0.04
0.06
0.04
0.07
0.19
0.14
0.20
0.19
0.34
0.23
0.17
0.18
% Zircon
in sand
0.22
0.19
0.21
0.16
0.23
0.17
0.16
0.13
0.13
0.21
0.14
0.24
0.19
0.28
2.0
1.6
2.2
5.5
39.0
50.3
THM
(Mt)
6.8
4.7
0.3
2.9
2.1
42.9
3.1
0.6
0.8
10.0
93.0
10.0
2.2
2.5
2.0
1.3
1.8
4.5
32.0
41.6
Ilmenite
(Mt)
5.5
3.8
0.2
2.4
1.7
36.0
2.3
0.4
0.6
8.4
77.0
8.3
1.8
2.0
0.04
0.03
0.04
0.10
0.70
0.91
Rutile
(Mt)
0.1
0.1
0.0
0.1
0.0
0.7
0.1
0.0
0.0
0.2
1.6
0.2
0.1
0.1
0.14
0.09
0.13
0.32
2.11
2.8
Zircon
(Mt)
0.4
0.3
0.0
0.2
0.1
2.2
0.2
0.0
0.0
0.7
5.0
0.7
0.1
0.2
6 368
2.9
82
2.4
0.052
0.16
181.9
150.4
3.3
10.1
Resources are additional to reserves. Estimates for Namalope, Nataka and Pilivili reserves and the Namalope, Nataka, Congolone and Pilivili resources
comply with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”) 2012 edition. Table 1
documentation for these reserves and resources can be found at www.kenmareresources.com. Estimates for all other resources were prepared and first
disclosed under the 2004 edition of the JORC Code. They have not been updated to comply with the JORC Code 2012 edition on the basis that the
information has not materially changed since they were last reported.
The competent person for the Namalope, Nataka and Pilivili reserves and resources and the Congolone resources is Mouhamed Drame (MAusIMM).
Mr. M Drame is an employee of Kenmare and does not hold any shares in the Company. The competent person for the other resources is Dr Alastair
Brown (FIMMM). Dr Brown is an independent consultant who is a shareholder in and former employee of Kenmare. Mr M. Drame and Dr. A. 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 edition. Mr. M. Drame and Dr. A. Brown consent to the inclusion in this report of the
matters based on their information in the form and context in which it appears.
* THM is total heavy minerals of which ilmenite (typically 82%), rutile (typically 2.0%) and zircon (typically 5.5%) total approximately 90%. Tonnes and grades have been rounded and hence small
differences may appear in totals. Mt represents million tonnes.
Kenmare Resources plc
Annual Report and Accounts 2020
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MARKET REPORT
Kenmare’s main product is a titanium feedstock mineral called ilmenite, representing
more than 70% of our revenues. We also produce a range of valuable co-products minerals,
including zircon, rutile and monazite.
Zircon
Through our production of zircon sand
products, Kenmare supplies a key raw material
to the global ceramics market which accounts
for ~50% of global zircon demand. Zircon is a
preferred feedstock for high-quality ceramic
tiles and sanitaryware due to its brilliant
whiteness and its opacifying properties.
Other key properties of zircon include its high
melting point and thermal shock resistance
leading it to be consumed in the refractory and
foundry industries.
Finally, zircon is also consumed in a growing
number of chemical applications ranging from
medical to cosmetics to alloys used in nuclear
power plants.
Titanium feedstocks
Kenmare supplies titanium to the global market
through our production of ilmenite and rutile
products. Titanium feedstocks are primarily
consumed to produce titanium pigment
which accounts for ~90% of total demand
for titanium feedstocks. Titanium pigment is
used in everyday items such as paint, plastics
and fabrics due to its attractive properties,
including brilliant whiteness and ultraviolet
protection, making it a difficult product to
substitute.
Titanium feedstocks are also used for titanium
metal and welding electrode flux production
where titanium’s high strength to weight ratio
and high melting point are desired properties.
As a result of its end-use markets, titanium
feedstocks have a close relationship to global
economic growth.
See more about our products and their uses
on page 3.
Rare earths
Kenmare has recently entered the rare-
earths market through our monazite-rich
mineral sands concentrate which it started
selling in 2019. Important rare earths, such as
neodymium, praseodymium and dysprosium,
are separated from the mineral sands
concentrate and used in rapidly growing
industries.
Neodymium, praseodymium and dysprosium
are primarily used to produce rare earth
magnets which can be used in multiple rapidly
growing industries such as renewable energy
(wind turbines) and electric vehicles.
2020 revenue by product (%)
Zircon 19%
Concentrates
7%
Rutile
2%
Ilmenite 72%
48 Kenmare Resources plc
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STRATEGIC REPORT
The macroeconomic environment
The World Bank estimates that global GDP will grow by 4% in 2021 after a 3.4% contraction in
2020 as a result of the COVID-19 pandemic. Industrial production is expected to form a major
component of the recovery which will boost TiO2 demand. Shifts in consumer behaviour are also
having a positive impact on the downstream markets for titanium pigment. Coatings demand
continues to be boosted by DIY trends globally, as well as strong demand and low inventory in
housing markets in large economies such the US and China. The shift to online retail is also having
positive impact on titanium pigment demand for plastic.
Market trends
How will this impact us?
How are we responding
COVID-19
COVID-19 restrictions have
materially affected certain
downstream industries such
as the aerospace industry
Supply constraints
Lower availability of high-
quality ilmenite products for
Kenmare’s customers
Consumer
confidence
Consumers are ramping
up production as they gain
confidence in the market
following a strong H2 2020
and positive indicators in
early 2021
Kenmare is working closely with
our customers to understand
their sales outlook and placing
volumes in other markets, if
necessary, benefiting both
Kenmare and our customers
Kenmare has made increased
volumes available to our
customers through our
expanded production to
offset lower supply from other
ilmenite producers
Kenmare is ensuring sufficient
supply to our customers in
order for them to successfully
increase production and meet
market demand
Record pigment
production in China
Increasing pigment production
in China is leading to a higher
proportion of Kenmare sales
that are sold into the Chinese
market
Kenmare is partnering with
the strongest and most
stable consumers of ilmenite
in China, while ensuring
continued strong relations with
consumers outside China
Increasing supply
of ilmenite
concentrates
Ilmenite produced from
concentrates will continue
to compete with Kenmare
ilmenite in China by offering
lower prices
Kenmare is working with
customers who achieve the
most value from consuming
Kenmare ilmenite instead of
lower quality products
Long-term market opportunities
Growing GDP and urbanisation
in large population economies
Kenmare’s expanded production
in 2021 allows it to meet demand
growth associated with global
urbanisation trends.
The majority of this demand growth
is expected to be supplied by growth
in Chinese pigment production in
the coming years. Kenmare has
good relations with the existing
fastest growing pigment producers
in China and continues to work with
prospective new customers who are
likely to enter the market.
Consolidation in the
consumer markets
Kenmare’s expects to see further
consolidation in both the titanium
feedstocks and zircon markets in the
coming years.
Kenmare has long-term, strong
relations with leading consumers
in both the titanium feedstock
and zircon markets. This positions
Kenmare well to benefit from and
adjust to consolidation in our
consumer markets.
Increasing chloride
pigment production in China
Kenmare has positioned our ilmenite
products as preferred products
for the production of high-grade
chloride products suitable for
use in the chloride pigment
production process.
This market is expected to
experience the most growth in the
coming years and as a result we
expect demand for our ilmenite
for this process to increase
strongly along with higher chloride
pigment production.
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Kenmare Resources plc
Annual Report and Accounts 2020
49
MARKET REPORT CONTINUED
Zircon market in 2020
The zircon market was in oversupply entering 2020 and zircon
inventories were high at the consumer and producer level. Global
restrictions due to COVID-19 had an impact on downstream
market demand which exacerbated the weak zircon sand market
conditions. As a result, zircon sand prices decreased through the
year in both China and Europe – the major regions for Kenmare’s
zircon products. Despite these difficult market conditions,
Kenmare successfully sold all zircon production in 2020.
Major zircon producers reduced sales into the market throughout
2020 to align supply of zircon to lower demand. This resulted in
a shift of inventories upstream and it is now understood that the
majorityof inventories lie with the zircon producers. Zircon demand
recovered in H2 2020 and the outlook for H1 2021 is positive. The
improving demand, coupled with the low customer inventories,
has brought more optimism to the market in 2021. Kenmare
is experiencing excess demand for its zircon products in 2021
despite the increased production. As a result, price increases have
been announced for Q2 2021 and we expect to see a stronger
pricing environment for our primary zircon and concentrates as we
move through 2021.
Zircon market share
Kenmare 5%
Decreasing zircon inventories at Chinese ports (‘000 tonnes)
250
200
150
100
50
0
6
1
t
c
O
7
1
n
a
J
7
1
r
p
A
7
1
l
u
J
7
1
t
c
O
8
1
n
a
J
8
1
r
p
A
8
1
l
u
J
8
1
t
c
O
9
1
n
a
J
9
1
r
p
A
9
1
l
u
J
9
1
t
c
O
0
2
n
a
J
0
2
r
p
A
0
2
l
u
J
0
2
t
c
O
1
2
n
a
J
Global titanium feedstocks market in 2020
The market for titanium feedstocks was strong in 2020, this was
particularly true for ilmenite, Kenmare’s primary product. Constraints to
supply coupled with robust demand led to Kenmare achieving a 22%
increase in the average achieved ilmenite price compared to 2019.
Despite the disruption to downstream industries caused by the COVID-19
pandemic, demand for titanium feedstocks remained strong and
Kenmare received more demand for our products than it could supply in
2020. This was primarily due to low ilmenite inventories at the beginning
of 2020, record pigment production in China. and a firm recovery in
global demand in the second half of 2020 in the pigment market.
The ilmenite market started 2020 positively as pigment producers
increased production following a period of destocking in 2019 and
demand for titanium feedstocks increased as a result. This led to a fourth
consecutive quarter of higher ilmenite prices for Kenmare in Q1 2020. The
COVID-19 pandemic had relatively minor impact on the feedstock market in
Q1 as both ilmenite and pigment production were similarly affected in China.
In Q2 2020, demand for pigment decreased significantly as lockdowns to
try and control the COVID-19 pandemic reduced demand for products
containing pigment as global economic activity slowed. Pigment
companies reduced production, except in China, which lowered demand
for ilmenite. Conversely, pigment production rebounded strongly in China
in Q2 2020 as the country emerged from the COVID-19 lockdown and
Chinese pigment producers decreased price to increase sales to export
markets. This led to strong demand for ilmenite and Kenmare achieved
another quarter of higher ilmenite prices in Q2 2020. The lower global
pigment production in Q2 2020 had an impact on ilmenite demand in
early Q3 and ilmenite prices softened slightly in the quarter. Despite this,
demand for pigment increased strongly in Q3 2020 as lockdowns ended
and there was a large increase in demand for DIY paint and certain
plastic goods. This momentum continued into the fourth quarter and
Kenmare saw large demand for its ilmenite products and saw another
quarter of price increases.
The sentiment in the market ended on a positive tone. Real demand for
products containing titanium pigment is increasing and inventories in
the supply chain remain at low levels. As a result, Kenmare is receiving
increased demand from its long-term customers for ilmenite in 2021,
while the strength in the spot market for ilmenite has accelerated again
in Q1 2021. The year 2021 is looking positive for the ilmenite and market
demand is comfortably absorbing Kenmare’s expanded ilmenite supply.
Strong momentum in the ilmenite market
Regional pigment consumption
$300/t
$250/t
$200/t
$150/t
$100/t
$50/t
$0/t
)
t
/
$
(
e
c
i
r
p
e
t
i
n
e
m
l
I
&
e
g
a
r
e
v
A
India
0.2
SE Asia
Brazil
China
W Europe
USA
0.7
0.9
1.1
2.7
2.9
H1
H2
H1
H2
H1
H2
H1
H2
H1
H2
2016
2017
2018
2019
2020
Ilmenite price ($/t)
Average price ($/t)
0
0.5
1
1.5
2
2.5
3
Pigment consumption (kg/capita)
50 Kenmare Resources plc
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STRATEGIC REPORT
Key developments in the ilmenite market in 2020
1
Increasing ilmenite demand in China
2
Changing landscape of ilmenite suppliers
2020 was a record year for Chinese pigment production as pigment
producers in the region reduced prices in order to gain market
share. This strategy was successful and led to sulphate pigment
plants operating at high utilisation rates and record chloride pigment
production in China. Chinese pigment production is reliant on ilmenite
as a feed source, either directly or through ilmenite beneficiation. This
resulted in a strong increase in demand for ilmenite in 2020 which
could only partly be met by increased domestic ilmenite supply.
Kenmare expects to see the demand for our ilmenite in China
increase again in 2021 as existing chloride pigment plants get closer
to full production and new chloride pigment lines are commissioned
this year requiring low-impurity ilmenite products, such as
Kenmare products.
The ilmenite market shifted in 2020 again towards lower quality
ilmenite products available on the market. High-quality ilmenite from
Vietnam and India remained constrained by government policy. On
top of this, two Australian mines which supplied high-quality ilmenite
closed in 2020 while two mines in Africa had lower production due to
orebody depletion and COVID-19 related restrictions. This limited the
availability of higher quality ilmenite in the market.
However, this decrease in supply was offset by increased supply
of ilmenite concentrates from Mozambique and Australia and the
increased supply of ilmenite from China and Norway. These sources
are less suitable for beneficiation into high-grade chloride products
but are expected to continue to compete in the sulphate pigment
market in China going forward.
Quarterly Chinese pigment production (‘000 tonnes)
llmenite concentrate imports to China (‘000 tonnes)
120
100
80
60
40
20
0
3
Q1
2018
Q2
2018
Q3
2018
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Market resilient through period of uncertainty
s
e
n
n
o
t
0
0
0
‘
350
300
250
200
150
100
50
0
4
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020
Q2 2020 Q3 2020 Q4 2020
Market outlook strong for 2021
2020 was a year that posed multiple challenges for the titanium
feedstocks and downstream industries. Certain regions suffered more
than others and certain industries suffered more than others. Through
our strong relationships with customers and diverse customer
base, Kenmare was able to work with our customers to match sales
with individual customer demand by removing sales from weaker
market segments in 2020 and placing the volume in stronger market
segments. In doing so, both Kenmare and our customers emerged
from a challenging year with low inventories and in a good position to
meet market growth in 2021.
Titanium feedstock demand (‘000 TiO2 units)
The recovery of the downstream markets in H2 2020 was stronger
than expected and this has continued into 2021. Kenmare’s
customers are seeing stronger demand and are ramping up
production to meet this demand. As a result, Kenmare is experiencing
increased demand for its ilmenite products and the market is showing
its requirement for Kenmare’s increased supply.
The positive market conditions has resulted in further increases in
market prices for ilmenite and Kenmare has a strong order book for
Q2. With downstream demand continuing to improve, we expect to
see a robust market continue through H2 2021.
Feedstock Supply/Demand (TiO2 units ‘000 tonnes)
10,000
8,000
7,000
6,000
5,000
4,000
9,000
8,000
7,000
6,000
5,000
2016
2017
2018
2019
2020
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
f
1
2
0
2
f
2
2
0
2
f
3
2
0
2
f
4
2
0
2
f
5
2
0
2
Existing supply
Potential new supply
Total feedstock demand
Kenmare Resources plc
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FINANCIAL REVIEW
TONY MCCLUSKEY
Financial Director
SHAREHOLDER
RETURNS
The successful development of WCP C and move of WCP B
in 2020 provides us with a foundation to grow production,
expand margins and increase returns to shareholders.
Highlights
The major highlights of 2020 include the
safe and successful moving of WCP B from
Namalope to the high-grade Pilivili zone and
commencement of production by the new
WCP C. Investment in these capital projects in
accordance with our growth strategy provides
a solid foundation to materially increase
production in 2021. Given the largely fixed
cost base, this increase in production will
enable Kenmare to drive down unit operating
costs and increase margins, thus moving the
Group’s position towards the first quartile of the
industry revenue to cost curve.
Revenue
US$243.7M
33%
US$76.7M
EBTIDA margin
EBITDA
Notwithstanding the planned HMC production
interruption during the WCP B move and
COVID-19-related challenges, Kenmare
delivered a robust financial performance in
2020 generating EBITDA of US$76.7 million
(2019: US$92.6 million).
Ilmenite accounts for 72% of total 2020
revenues (2019: 68%) and the ilmenite market
continued to strengthen through 2020 with
average ilmenite prices (FOB) increasing
by 20% compared to 2019. However, the
combination of lower volumes shipped and
a zircon market that was weaker than 2019
contributed to a reduction in revenue to
US$243.7 million (2019: US$270.9 million).
Whilst the zircon market has stabilised in early
2021, ilmenite demand remains strong and the
outlook for the remainder of 2021 is positive.
A reduction in HMC processed and a temporary
reduction in ilmenite recovery contributed to a
reduction of finished products by 15% compared
to 2019. Total cash operating costs in 2020
increased by 1% to US$158.0 million (2019:
US$156.6 million). Hence, predominantly due to
reduced production, unit cash operating costs
increased by 19% to US$188 per tonne in 2020
(2019: US$158 per tonne).
Cash generated from operations and drawn
from debt facilities established in December
2019 gave Kenmare a robust financial platform
to respond to increased capital investment
of US$141.5 million (2019: US$68.5 million)
and hold sufficient cash to address COVID-
19-related risks facing the Group in 2020. As
a result, Kenmare finished the year with cash
of US$87.2 million (2019: US$81.2 million)
and debt of US$64.0 million (2019: net cash
US$13.7 million).
Taking on board the supportive ilmenite
market outlook, reducing development capital
requirements and a healthy balance sheet, the
Directors are pleased to recommend a final
dividend of USc7.69 per share. The resultant
2020 full year dividend is USc10.00 per share
(2019: USc8.17c per share). This dividend
represents a return of 66% (2019: 20%) of profit
after tax to shareholders.
52
Kenmare Resources plc
Annual Report and Accounts 2020
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2020 results
The key financial metrics were as follows:
Revenue (US$ million)
Freight (US$ million)
Revenue FOB (US$ million)
Finished products shipped (tonnes)
Average price per tonne FOB (US$/t)
Average ilmenite price per tonne FOB (US$/t)
Average zircon price per tonne (FOB) (US$/t)
Total operating costs1 (US$ million)
Adjusted total cash operating cost (US$ million)
Cash operating cost per tonne of finished product (US$/t)
Net ilmenite unit cost (US$/t)
EBITDA (US$ million)
Profit after tax (US$ million)
Net (debt)/cash (US$ million)
Full year dividend per share (USc)
STRATEGIC REPORT
2020
243.7
(12.2)
231.5
853,100
271
220
1,003
209.4
158.0
188
125
76.7
16.7
(64.0)
10.00
2019
FY change %
270.9
(15.4)
255.5
1,029,300
248
184
1,163
211.7
156.6
158
81
92.6
44.8
13.7
8.18
-10%
-21%
-9%
-17%
+9%
+20%
-14%
-1%
+1%
+19%
+54%
-17%
-63%
–
22%
Notes to table: Additional information in relation to these Alternative Performance Measures (APMs) is disclosed in the glossary. 1Included in operating cost are depreciation and amortisation.
As a final highlight in the year, everyone in
Kenmare was delighted that the Kenmare
2019 Annual Report was selected for the best
Small/Medium Quoted Company Award in
the Chartered Accountants 2020 Published
Accounts Awards. We appreciate the
recognition of the work across the Group that
went into the Annual Report and look forward
to building upon this success with our future
reporting.
Production
Kenmare mined 34.4 million tonnes of excavated
ore in 2020, representing a 7% decrease
compared to 2019 (36.8 million tonnes). The
lower volume was offset by higher ore grades,
with average grades mined of 3.90% THM
compared to 3.58% THM in 2019. This resulted
in production of HMC remaining relatively
unchanged at 1,201,100 tonnes (2019: 1,202,100
tonnes). HMC feed into the MSP reduced by 5%
to 1,157,900 tonnes (2019: 1,214,700 tonnes).
Due to the reduced HMC feed and a temporary
reduction in ilmenite content in the HMC,
ilmenite production decreased by 15% to
756,500 tonnes in 2020 (2019: 892,900
tonnes). Likewise, production of co-products
decreased. Primary zircon production was
43,300 tonnes (2019: 46,900 tonnes),
concentrates production was 35,200 tonnes
(2019: 40,200 tonnes) and rutile production
was 6,000 tonnes (2019: 8,300 tonnes).
Revenue
Revenue decreased by 10% in 2020 to
US$243.7 million compared to 2019 (US$270.9
million), as a result of a 17% decrease in tonnes
of finished product sold offset by a 9% increase
in the average received price per tonne (FOB).
Shipments during the year comprised 766,500
tonnes (2019: 930,700 tonnes) of ilmenite,
43,100 tonnes (2019: 50,200 tonnes) of primary
zircon, 37,200 tonnes (2019: 38,900 tonnes) of
concentrates and 6,300 (2019: 9,500) tonnes
of rutile.
Ilmenite revenue (FOB) decreased in the
year by 1% to US$168.9 million (2019: US$171.1
million), as a result of an 18% reduction in
shipment volumes, offset by a 20% increase
in average prices. The reduction in shipping
volumes was mainly attributable to adverse
weather conditions during a significant portion
of the year and reduced availability of the
transhipment vessels, which underwent works
to increase capacity. Ilmenite prices have
continued to strengthen in early 2021. Primary
zircon revenue (FOB) decreased by 26% to
US$43.2 million (2019: US$58.5 million) due to
a 14% price decrease and a 14% decrease in
shipment volumes. However, the zircon market
showed signs of recovery in the last quarter
of 2020 and prices appear to have stabilised
at those recovered levels in early 2021. Freight
costs in 2020 decreased to US$12.2 million
(2019: US$15.4 million), reflecting lower average
freight rates during the year.
Deirdre Corcoran
Deirdre will be hugely missed by all
her friends and colleagues in Kenmare
when she leaves the Company following
the AGM.
During her 22 years as Company
Secretary and Financial Controller,
Deirdre has made an enormous
contribution to the development of the
Moma Mine and to building Kenmare into
the successful Company that it is today.
Her professionalism, integrity and
leadership have enabled Deirdre to
influence the direction of the Company
and to help us safely navigate many
challenges over the years.
On behalf of myself and everyone in
Kenmare, I would like to thank her for
her loyalty and commitment. I wish
her every success and happiness in
the future.
Kenmare Resources plc
Annual Report and Accounts 2020
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FINANCIAL REVIEW CONTINUED
Operating costs
Cost of sales
Other operating costs
Total operating costs
Freight charges
Total operating costs less freight charges
Non-cash costs
Depreciation and amortisation
Share-based payments
Mineral products inventory movements
Adjusted total cash operating costs
Finished product production (tonnes)
Cash operating cost per tonnes of finished product (US$/t)
2020
US$m
179.1
30.3
209.4
(12.2)
197.2
(42.3)
(1.8)
4.9
158.0
840,500
188
2019
US$m
FY change
%
178.4
33.3
211.7
(15.4)
196.3
(33.4)
(1.8)
(4.5)
156.6
988,300
158
-
-9%
-1%
-21%
–
27%
–
209%
1%
-15%
19%
Total operating costs decreased by 1% in
2020 to US$209.4 million compared to 2019
(US$211.7 million) and adjusted total cash
operating costs increased slightly to US$197.2
million (2019: US$196.3 million). The main
contributors to increased cash operating costs
include COVID-19-related costs, heavy mobile
rentals, insurance premia, crop compensation,
WCP C-related costs and the cost incurred
since late October 2020 of transporting HMC
by truck from Pilivilli to the MSP. In addition
to the reduced variable cost component due
to lower production, these cost increases were
offset by reductions in logistics and travel,
fuel and exchange-rate related savings. Due
to the 15% decrease in production of finished
products, cash operating costs per tonne
increased by 19% to US$188 per tonne in 2020
(2019: US$158 per tonne).
Finance income and costs
The Group recognised finance income of
US$0.6 million in 2020 (2019: US$1.5 million),
consisting of interest on bank deposits.
Finance costs were US$11.3 million in 2020
(2019: US$8.9 million), including loan interest
of US$9.3 million (2019: US$5.0 million). The
increase in loan interest year on year reflects
the higher debt quantum, as the balance of the
US$150 million facility was drawn in March and
April 2020, partially offset by lower US LIBOR
54 Kenmare Resources plc
Annual Report and Accounts 2020
interest rates. There was also an unwinding of
the discount on the mine closure provision of
US$0.7 million (2019: US$0.5 million) in 2020.
The Group maintains trade finance facilities with
Absa Corporate and Business Bank and Barclays
Bank that enable it to receive early payment
in respect of customer invoices. The lower
requirement for funds due to operating cash
flow generated and use of debt facilities in the
year resulted in a reduction in the cost of these
facilities to US$0.7 million (2019: US$1.5 million).
Lease interest amounted to US$0.3 million
(2019: US$0.4 million) during the year.
Exchange movements
An exchange loss of US$1.0 million (2019:
loss US$1.9 million) arose during the year.
This primarily relates to operating and
capital costs denominated in Mozambique
Metical and South African Rand. Kenmare
holds South African Rand based on forecast
expenditures as a partial hedge against
exchange movements. However, the South
African Rand strengthened in the second half
of 2020 resulting in losses on South African
denominated costs to the extent not hedged.
These were offset by gains on Mozambique
Metical denominated costs which weakened
against the US Dollar throughout the year.
Tax
The tax charge for the financial year amounted to
US$6.0 million (2019: US$5.2 million). The majority
of this tax charge is payable by Kenmare Resources
plc’s mining subsidiary, Kenmare Moma Mining
(Mauritius) Limited (“KMML”) in Mozambique.
KMML’s tax charge amounted to US$5.7 million
(2019: US$5.7 million) based on KMML’s taxable
profits of US$16.4 million (2019: US$15.9 million).
The increase in profits in KMML was mainly
due to an increase in the value of HMC sold by
KMML to Kenmare Resources plc’s processing
subsidiary, Kenmare Moma Processing (Mauritius)
Limited (“KMPL”), net of an increase in deductible
costs. The value of HMC is linked to the value of
finished products processed by KMPL and sold
to third party customers. Average prices received
for finished products increased and the cash
cost of mining increased, partly as a result of the
addition of the WCP C plant in 2020. Both of these
contributed to the increase in HMC value which is
determined in accordance with the KMML Mineral
Licence Contract. The income tax rate applicable
to taxable profits of KMML is 35% (2019: 35%).
The Company, Kenmare Resources plc., had
a tax charge of US$0.3 million (2019: US$0.5
million tax credit) in the financial year and a
deferred tax asset of US$0.2 million (2019:
US$0.5 million) at 31 December 2020.
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30316 1 April 2021 5:56 pm V9Strong operational cash flow generation and a robust balance sheet enabled Kenmare to fund elevated capital costs and increase dividends by 22% in 2020.”DividendsIn October 2018, Kenmare announced a dividend policy to return a minimum of 20% of profit after tax to shareholders, which is subject to prevailing product market conditions and ensuring that the Group retains a prudent level of cash to fund debt and capital requirements.Notwithstanding a reduced profit after tax in 2020, the positive ilmenite market outlook, reducing development capital requirements following the completion of the WCP B move and a healthy balance sheet support increasing the return for 2020 to above the 20% minimum.An interim dividend of USc2.31 per share was paid in October 2020, based on the Group’s results for the six months to 30 June 2020. Kenmare generated profit after tax of US$16.7 million in 2020 (2019: US$44.8 million) and the Board is recommending a final dividend of USc7.69 per share, which is subject to shareholder approval at the AGM. This would give a full dividend of USc10.00 for 2020, which represents 66% of profit after tax.The financial statements do not reflect the final dividend that is being recommended for shareholders to approve at the 2021 Annual General Meeting. Cash flowsNet cash generated from operations in 2020 was US$71.2 million (2019: US$76.4 million).Investing activities of US$139.4 million (2019: US$64.8 million) during the year represented additions to property, plant and equipment. US$82.7 million (2019:US$67.3 million) of the US$110 million Term Loan Facility was drawn in March 2020 and the US$40.0 Revolving Credit Facility was drawn in April 2020. In May 2020, the Group paid a final 2019 dividend of US$6.0 million (2019: US$ nil) representing USc5.52 per share. In October 2020, the Group paid a 2020 interim dividend of USc2.31 per ordinary share, totalling US$2.6 million (2019: US$3.0 million). Lease repayments of US$1.1 million (2019: US$1.0 million) were made in the year. Consequently, Kenmare finished the year with US$87.2 million (2019: US$81.2 million) of cash and cash equivalents, representing an increase before foreign exchange gains of US$4.6 million (2019: decrease US$15.8 million).Balance sheetIn 2020 there were additions to property, plant and equipment of US$141.5 million (2019: US$68.5 million). Additions consisted of US$6.5 million (2019: US$26.8 million) for the completion of WCP C, US$104.4 million (2019: US$16.1 million) for the relocation of WCP B to the high grade Pilivili ore zone, US$27.7 million (2019:US$23.7 million) on sustaining capital and US$2.9 million (2019: US$1.9 million) on other development capital. US$6.3 million of sustaining capital relates to dry dock works required to retain the Peg and Sofia transhipment vessels’ regulatory sailing class and to improve transhipment cycle times. The WCP C project has entered operations within the original forecast of US$45 million. A number of outstanding matters, such as acceptance and performance testing and defect remediation, remain outstanding. However, the additional initiatives required to mitigate the impacts of COVID-19-related delays on the WCP B move have increased overall project costs, much of which is attributable to extension of the project schedule including delivery of the HMC pipeline. US$141.5Minvestment in plant, property & equipmentUS$87.2Mcash at 31 December 2020US$64.0MNet debt at 31 December 2020STRATEGIC REPORT55Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 55Kenmare-AR-2020.indd 5501/04/2021 17:57:4601/04/2021 17:57:46 30316 1 April 2021 5:56 pm V9These costs are fully funded from Kenmare’s existing financial resources and are expected to increase the original capital cost of US$106 million by up to 20%, bringing the total estimate to US$127 million.Depreciation increased to US$42.3 million in 2020 (2019: US$33.4 million), primarily due to the increased asset cost relating to the significant investment in new property, plant and equipment, increased investment in mobile equipment in recent years and a review of the useful lives of certain assets. The mine closure provision increased by US$11.0 million in 2020 (2019: US$5.5 million). This was due to updated estimated closure costs of US$3.4 million and a reduction in the discount rate used to estimate the closure cost provision, which amounted to US$7.6 million. Capital disposals during the year amounted to US$11.1 million (2019: US$5.3 million), principally relating to heavy mobile fleet and other assets no longer operational and disposed of during the year.The Group conducted an impairment review of property, plant and equipment at the period end and the key assumptions of this review are set out in Note 13 of the financial statements. No impairment provision is required as a result of this review. Inventory at year-end amounted to US$63.7 million (2019: US$51.9 million), consisting of intermediate and finished mineral products of US$31.4 million (2019: US$26.5 million) and consumables and spares of US$32.3 million (2019: US$25.4 million). The increased investment in consumables and spares reflects increased stock holdings to support planned higher production in 2021 and relates to stocks held for plant added in 2020, mainly WCP C. Closing stock of HMC at the end of 2020 was 50,200 tonnes compared with 7,000 tonnes at the start of the year. The increase of HMC was partly due to additional production from WCP B when it commenced mining in the high-grade Pilivili orebody in Q4 2020. Closing stock of finished products at the end of 2020 was 145,500 tonnes (2019: 159,000 tonnes) and the increase in stock cost is partly attributable the increased unit costs in the year. Trade and other receivables amounted to US$29.9 million (2019: US$41.2 million), of which US$23.1 million (2019: US$32.2 million) was trade receivables from the sale of mineral products and US$6.8 million (2019: US$9.0 million) was comprised of prepayments and other miscellaneous debtors. The reduction in trade receivables at the year-end was mainly due to invoice discounting of sales in December 2020. All trade receivables are current and an expected credit loss of US$0.2 million (2019: US$0.2 million) was recognised during the year.Cash and cash equivalents increased by US$6.1 million (2019: decrease of US$15.8 million) during the year and at 31 December 2020 amounted to US$87.2 million (2019: US$81.2 million).Lease liabilities amounted to US$3.4 million (2019: US$4.5 million) at year-end.Tax liabilities and trade and other payables amounted to US$1.6 million (2019: US$4.4 million) and US$50.1 million (2019: US$36.0 million) respectively at year-end. The increase in trade and other payables is due to the increased level of capital projects creditors and timing of payments at the year end. At the year-end, debt amounted to US$145.8 million (2019: US$60.9 million). This consists of debt drawn of US$150.0 million and loan interest of US$1.2 million, net of transaction costs of US$5.4 million. The weighted average interest rate on Group debt at year-end was 5.8% (2019: 7.3%).Accounting policiesThe financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union; therefore, the Group financial statements comply with Article 4 of the IAS Regulation. The financial statements have also been prepared in compliance with the Irish Companies Act 2014. The Group’s significant accounting policies and details of the significant accounting judgements and critical accounting estimates are disclosed in the Note 1 to the financial statements. Financial outlookHaving delivered a multi-year capital investment programme culminating in 2020 in the completion of WCP C and the WCP B move, Kenmare’s focus now turns to ensuring that this additional capacity is used to deliver increased production and drive down unit operating costs.Kenmare has faced significant challenges arising from COVID-19 in 2020 and will continue to navigate the uncharted waters of this global pandemic. Whilst the Group continues to implement mitigation measures to protect our people, our host communities and our business, this remains a key risk. Further detail covering the risks associated with COVID-19 are outlined on pages 59 to 62.The principal projects planned for 2021 include closing out the remaining positive displacement pumping pipeline infrastructure in order to transport HMC from WCP B to the MSP, installation of a rotary uninterruptible power supply that will enhance the resilience of the MSP by improving year-round reliability of power supply, further production improvement projects and continued work on studies for mining the Nakata orebody to secure Kenmare’s future at Moma. Management will continue to seek out projects to improve margins as well as to enhance the resilience and sustainability of the business. Kenmare plans to deliver these projects in a safe and sustainable manner.Cash operating costs are anticipated to increase in 2021 due to increased production and additional costs associated with the greater distance from the MSP whilst mining at Pilivili than at Namalope. However, unit cash operating costs are expected to decrease in 2021 due to higher anticipated production volumes. Increasing production and reducing unit costs will provide a robust financial platform from which to deliver our strategic objectives of growing the business and increasing margins, which we expect will improve Kenmare’s competitive position as the Group moves towards the first quartile on the industry revenue to cost curve. In turn, whilst retaining a robustly healthy balance sheet, this growth and margin improvement will enable us to build on our dividend policy and deliver our third key objective of increasing shareholder returns.Tony McCluskeyFinance Director22%increase in 2020 dividend25%profit after tax dividend in 2021FINANCIAL REVIEW CONTINUED56Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 56Kenmare-AR-2020.indd 5601/04/2021 17:57:4701/04/2021 17:57:47 30316 1 April 2021 5:56 pm V9WE ARE DISCIPLINEDACQUIRING NEW SKILLSI’ve been at Kenmare for 11 years and during that time I’ve benefited from training provided by Kenmare that allowed me to acquire new technical and soft skills. I enjoy working at Kenmare because it provides me with financial security for my family and has improved the quality of my life.”Dionisio Chapala, Environmental, Health & Safety SamplerSTRATEGIC REPORT57Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 57Kenmare-AR-2020.indd 5701/04/2021 17:57:4701/04/2021 17:57:47 PRINCIPAL RISKS AND UNCERTAINTIES
Risk management framework
An overview of the risk management and internal control framework, responsibilities within it and
the relationship between functions is illustrated below. While the Board is ultimately responsible
for risk management within the Group, it has delegated responsibility for the monitoring of the
effectiveness of the Group’s risk management and internal control systems to the Audit & Risk
Committee. The Board and Audit & Risk Committee receive reports from executive management
on the key risks to the business and the steps being taken to mitigate such risks. The Audit & Risk
Committee reviews the principal risks and uncertainties.
Managing risk is an
integral part of our business.
A comprehensive process
is in place for assessing and
managing risks associated
with business and strategic
corporate decisions.
Through this process,
significant risks faced by
the Group are identified,
evaluated and appropriately
managed.
BOARD OF DIRECTORS
AUDIT AND RISK COMMITTEE
Operations
Moma Mine
Executive Committee
Executive Directors
Internal Audit
Maputo office
Senior Management
1ST LINE OF DEFENCE
2ND LINE OF DEFENCE
3RD LINE OF DEFENCE
Operational management has
ownership, responsibility and
accountability for directly assessing,
controlling and mitigating risks.
Provided assurance to senior
management and Executive
Directors.
The Board of Directors has ultimate
responsibility for Risk Management.
The Board receives reports and
updates from the Board Committees
and the Executive Directors on the
key risks facing the business and the
steps taken to manage these risks.
The Executive Committee monitors
and facilitates the implementation of
effective risk management practices
by departmental management and
ensures appropriate risk reporting up
and down the organisation.
The Board delegates its risk
management responsibilities to the
Audit & Risk Committee, whereby
the ARC monitors the effectiveness
of the Group’s risk management and
internal control systems.
Internal Audit provides assurance
to the Board on how effectively the
organisation assesses and manages
its risks. It includes assurance on the
effectiveness of the first and second
lines of defence.
58 Kenmare Resources plc
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STRATEGIC REPORT
Risk assessment process
The Group’s risk assessment process is based
on a co-ordinated, Group-wide approach
to the identification and evaluation of risks
and the manner in which they are monitored
and managed. This process begins with a
bottom-up approach involving managers
from the mine’s departmental areas who,
through a programme of workshops, regularly
perform a detailed risk review to update
departmental risk registers. In assessing the
potential impact and likelihood of each risk
identified, management considers the existing
key controls and evaluates the risks in terms
of potential residual impact. A standard risk-
scoring matrix is used to ensure consistency in
reporting across all areas.
Departmental risk registers are consolidated
into a Group Risk Register. The Executive
Committee provides input to ensure that there
is a top-down view of the key risks facing
the Group. This includes consideration and
assessment of any newly identified emerging
risks. Following a review of the Group Risk
Register by the Executive Committee, the
principal risks identified for the Group and their
mitigations are submitted to the Audit & Risk
Committee and Board for review and approval.
As part of this review and approval process
the Audit & Risk Committee provides a robust
assessment of the emerging and principal
risks faced by the Group. This is achieved by
offering alternative viewpoints and challenging
risk scoring assumptions as appropriate.
Risk Appetite
Exploration for and the development of mineral
resources, together with the construction
and development of mining operations in
Mozambique, are activities that involve high
risk. Therefore, Kenmare makes informed
decisions prior to engaging in any associated
activities which pose a significant risk to
the Group. Where activities are undertaken,
appropriate mitigations are put in place
commensurate with the degree of risk that is
faced. For some risks, such as Country Risk and
Industry Cyclicality, there is a limit on the level
of mitigation that can be put in place given the
single jurisdiction and the single industry in
which the Group operates.
Emerging risks
Kenmare considers emerging risk as part of
the risk assessment process within our risk
management framework. An emerging risk is
one that could potentially impact the Group;
however, the risk is not yet fully understood,
limiting our ability to fully assess the likelihood
and impact of such risks. Such risks are
closely monitored, enabling us to implement
mitigations when necessary or appropriate. An
example of a risk that has transitioned from
an emerging risk to a principal risk is the risk
relating to COVID-19, which is reflected in the
risk entitled “COVID-19” described below.
Principal risks and uncertainties
Under Section 327(1)(b) of the Companies Act
2014, Regulation 5(4)(c)(ii) of the Transparency
(Directive 2004/109/EC) Regulations 2007 and
UK Disclosure and Transparency Rule 4, the
Group is required to give a description of the
principal risks and uncertainties that it faces.
These risks are similar to those faced by many
companies in the mining industry. A description
of the principal risks and uncertainties,
together with any mitigating factors and
controls, are set out in the table on pages 60
to 65. This table is not prioritised nor is it an
exhaustive list of all risks that may impact the
Group, but rather the Board’s view of principal
risks at this point in time. There are additional
risks which are not yet considered material or
which are not yet known to the Board or fully
understood but which may assume greater
importance in the future.
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Risk heat map
The risk heat map plots the impact and likelihood of each risk that the
management believe could influence performance.
1. Grant and maintenance of licences
2. Country risk
3. Geotechnical risk
4. Severe weather events
5. Uncertainty over physical
characteristics of the orebody
6. Power supply and transmission risk
7. Asset damage or loss
8. COVID-19
9. Health, Safety and Environment (HSE)
10. Mineral resource statement risk
11. IT security risk
12. Development project risk
13. Industry cyclicality
14. Customer concentration
15. Foreign currency risk
16. Loan default risk
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Kenmare Resources plc
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59
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
STRATEGIC
Description
Potential Impact
How we manage the risk
Risk trend
Grant and maintenance of licences
The Group’s mining
activities require a
number of licences and
approvals to be granted
and remain valid in the
relevant mining areas in
northern Mozambique.
The Group may not
be granted or may not
maintain necessary
licences and approvals
for it to operate in
accordance with its
plans. In addition, the
costs associated with
obtaining or maintaining
a licence or approval
may be higher than
expected.
Country risk
The Group’s operations
are located entirely in
Mozambique. There
may be potential
adverse operational
or financial impacts
from changes in the
political, economic,
fiscal or regulatory
circumstances in
Mozambique.
A new aspect of this
underlying risk has been
identified regarding
insurgency risk in Cabo
Delgado province,
which, although more
than 600 kilometres by
road from the Moma
Mine, could have an
adverse impact on
the Mine’s assets and
personnel, as well as the
operations of the Mine.
A failure to obtain or maintain
a necessary licence or
approval would significantly
affect the Group’s ability to
operate, its ability to generate
cash and the valuation of the
Group’s assets. In addition,
if the costs associated with
obtaining or maintaining
a licence are higher than
expected, the financial
performance of the Group may
be adversely affected.
Robust foundation agreements (Mineral
Licensing Contract and Implementation
Agreement) provide rights to be issued a number
of licences and approvals.
Maintenance of existing licences in good
standing.
The Group continually demonstrates its
commitment to the future long-term development
of the Mine.
The Group maintains a positive working
relationship with the Government of Mozambique
through regular contact, promoting open and
honest two-way communication.
Engagement with affected local communities
to work towards obtaining the required
environmental and resettlement approvals.
Costs of resettlement in
relation to certain areas
affected by our Mine
Plan may be higher than
originally expected.
The severity of Country
risk has increased
due to the new risk of
insurgency in the Cabo
Delgado province.
Binding foundation agreements are in place with
legal and fiscal stability clauses and international
arbitration provisions.
The Group maintains a positive working
relationship with the Government of Mozambique.
Kenmare monitors closely any developments in
the national environment.
Frequent engagement with the Mozambique
Defence Department, navy, marines and police.
In-house monitoring of activities and ongoing
improvement of security strategy.
Onsite diesel storage and power generation
system sufficient to maintain processing and
export activities in place to mitigate electrical
supply infrastructure impacts.
Kenmare has operated in
Mozambique since 1987;
however, it remains subject to
risks similar to those prevailing
in many developing nations,
including economic and social
instability, changing regulatory
requirements and increased
taxes, risk of insurgency. Such
events may cause significant
disruption to the operation
or cause an increase in costs
in order to ameliorate their
impact.
Country risk is a factor in
determining the economics
of the Mine and increasing
country risk may have an effect
on the Group’s financial results.
The insurgency in the Cabo
Delgado province may
represent a threat to the
electrical generation and
transmission facilities utilised
by the Group.
Risk trend key:
Risk is unchanged
Risk is increased
Risk is decreased
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STRATEGIC REPORT
OPERATIONAL
Description
Potential Impact
How we manage the risk
Risk trend
Geotechnical risk
An external berm failure
at the Moma Mine could
result in a major slimes/
water spill into adjoining
valleys, potentially
impacting on local
communities and/or the
operating assets.
Severe weather events
Climate change and
the location of the
Group’s operations on
the Mozambican coast
give rise to risk from
cyclone activity and
severe wind/flooding.
Such events pose risk
to the safety of mine
staff, contractors and
visitors, as well as to
physical damage to the
operational assets.
The nature of dredge mining
gives rise to the creation of
artificial ponds and a potential
for failure of berm systems
that surround the pond. A
failure of a berm could cause
loss of life, damage to the
operating assets and cessation
of the operation of the mining
WCPs for a prolonged period.
Permanently employed staff with geotechnical
engineering skills.
Prudent geotechnical design and controls.
Daily inspections.
Interlocking external audits from two separate
and independent geotechnical consultants.
Safety/diversion berm erected to protect
downstream from pond berm failure.
Ongoing installation and monitoring of pipes on
ponds to control excess water.
There have been no
significant changes to
the assessment of the
risk.
Mine and associated infrastructure designed to
appropriate cyclone rating.
Designated cyclone-proofed buildings at the Mine.
Ongoing weather/cyclone monitoring.
Cyclone readiness plan covering land-based and
marine assets.
Disaster management programme.
Insurance cover.
Adequate stocks of materials and supplies on site.
There have been no
significant changes to
the assessment of the
risk.
In extreme weather
circumstances, there is a risk
of loss of life.
There is a risk of physical
damage to the production
plant, which may result in an
inability to operate the Mine.
The probability of adverse
weather events is considered
low. Such events are also
foreseeable, thereby allowing
for disaster planning.
Less severe adverse weather
could impact supply logistics
to and from the Mine.
Uncertainty over physical characteristics of the orebody
Orebody characteristics
may not conform to
existing geological or
other expectations
or may have an
unanticipated effect on
production.
Physical characteristics of an
orebody, including divergence
from expectations, may cause
reduced production levels or
a necessity to incur increased
production costs in order to
maintain production at the
intended level.
Extensive sample testing.
Extensive orebody drill programme including
introduction of cone penetration testing to
measure orebody properties relating to hardness.
Test pits/trenching implemented.
Growing expertise in managing unexpected
mining conditions.
Dry mining operations.
Improved throughput modelling.
There have been no
significant changes to
the assessment of this
risk, but the introduction
of cone penetration
testing is likely to reduce
this risk in future years.
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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
OPERATIONAL (continued)
Description
Potential Impact
How we manage the risk
Risk trend
Power supply and transmission risk
The Mine is reliant on
the delivery of stable
and continuous electric
power from the Cahora
Bassa Dam via a power
transmission line to the
Mine.
Significant disruption to, or
instability in, the power supply
at the Mine could have a
material and adverse effect on
the ability to operate the Mine
or to operate it in the lowest
cost manner, thereby adversely
affecting production volumes
and/or operating costs.
An occurrence of these risks
could result in damage to or
destruction of key mining,
processing or shipping
facilities at the Mine.
Loss of key assets could result
in disruption to production
and/or shipping, significant
replacement cost and
consequential monetary losses.
High levels of COVID-19 in our
workforce and contractors
could result in reduced
operations or delay in
execution of projects due to
staff being unable to work.
Asset damage or loss
The operation of a
large mining and
processing facility
carries an inherent risk
of technical failure of
equipment, fires and
other accidents.
COVID-19
COVID-19 represents
a risk to all personnel
involved in our
operations and to our
host communities.
COVID-19 could have
an impact on the
health and availability
of workforce and
contractors, and
the health of the
surrounding community.
Ongoing investment by EdM in power supply and
transmission infrastructure.
On-site diesel-powered generators to maintain
part of the operations in the event of a loss of grid
power.
Robust and open relationship with EdM, based on
long-term power supply agreement.
Mine’s Synchronous Condenser (Dip Doctor)
reducing the effect of grid power instability.
Approval of the rotary UPS (RUPS) project
providing increased power reliability whilst
maintaining the advantages of low-cost
hydroelectrical power.
There have been no
significant changes to
the overall assessment
of this risk.
It is expected that the
RUPS project, once
commissioned and
operational will reduce
this risk.
Programme of inspections and planned
maintenance with a team of specialist engineers.
Standard operating procedures.
Fire detection and suppression systems.
Annual external risk assessment and compliance
audit.
Insurance cover.
Carrying sufficient strategic spares to continue
operations.
There have been no
significant changes to
the overall assessment
of this risk.
COVID-19 management plan, which includes on
site PCR testing facility. Proactive workforce
testing and isolation protocols for new/returning
employees prior to commencing work.
The COVID-19 pandemic
is a new principal risk.
Risk trend key:
Risk is unchanged
Risk is increased
Risk is decreased
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STRATEGIC REPORT
OPERATIONAL (continued)
Description
Potential Impact
How we manage the risk
Risk trend
Health, Safety and Environment (HSE)
The operation of a large
mining and processing
facility carries a
potential risk to the
health and safety of
workforce, visitors and
the local community.
Incidents carry potential
for environmental
damage to surrounding
areas.
Mineral resource statement risk
A material misstatement
in the reserves and
resources statement.
A material misstatement
could adversely impact on the
Group’s valuation.
IT security risk
The Group is dependent
on the employment of
advanced information
systems and is exposed
to risks of failure in
the operation of these
systems. Further, the
Group is exposed to
security threats through
cybercrime.
A failure in these systems
could lead to:
disruption to critical
business systems;
loss or theft of confidential
information, competitive
advantage or intellectual
property; and
financial and/or reputational
harm.
Prioritisation of HSE by management.
Appropriately trained staff.
Standard operating procedures.
Ongoing hazard identification programme.
Health and Safety awareness programme
implemented for the Company and community.
Mine clinic and evacuation procedures for staff.
Community investment and programmes
including health clinic and education programmes.
Compliance with applicable HSE standards and
legislation.
JORC-compliant statement prepared by
competent persons.
Ongoing drilling and sampling programme.
Ongoing reconciliation of mining results to
resource models.
Analysis by external certified IT specialists of
Group information systems to ensure reliability
and protected to top information security
standards.
Third-party specialists provide network assurance.
Ongoing strategic and tactical efforts to address
the evolving nature of cyber threats.
Increased user training and IT security awareness.
There have been no
significant changes to
the overall assessment
of this risk.
There have been no
significant changes to
the overall assessment
of this risk.
There have been no
significant changes to
the overall assessment
of this risk.
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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
OPERATIONAL (continued)
Description
Potential Impact
How we manage the risk
Risk trend
The impact of potential delays
and overruns of development
projects is currently limited
as the three development
projects designed to increase
production are operational,
with the exception of the
positive displacement pumping
(PDP) system at Pilivili.
In relation to existing development projects:
Appropriate management of PDP piping delivery.
Commissioning plans for PDP pump system.
Alternative trucking system in place.
Insurance cover in place.
In relation future development projects:
Project appraisal and design process, including
pre-feasibility and feasibility studies.
Owner’s team and use of industry experts with
track records of delivery of development projects
for Kenmare.
Given the progress
made in relation to the
development projects
designed to increase
production, this risk has
reduced significantly,
including as a result of
the successful move of
WCP B to Pilivili.
Development project risk
The Group’s long-term
plan is to deliver a
significant increase in
production capacity
of ilmenite plus co-
products through the
implementation of a
number of development
projects.
In addition, our large
licence area means
that from time to time
our plants need to be
moved to different
parts of the orebody,
which will entail further
development projects.
For instance, it is
currently planned that
WCP A will be moved
in 2025 to the Nataka
orebody.
All development
projects entail the risk
of taking longer and
costing more than
anticipated.
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STRATEGIC REPORT
FINANCIAL
Description
Potential Impact
How we manage the risk
Risk trend
Industry cyclicality
The Group’s revenue
generation may be
significantly and
adversely affected by
declines in the demand
for and prices of the
ilmenite, zircon, rutile
and concentrates
products that it
produces. During rising
commodity markets,
there may be upward
pressure on operating
and capital costs.
Customer concentration
The customer base
for the Group’s
ilmenite, zircon and
rutile products is
concentrated.
Foreign currency risk
The Group’s
revenues are entirely
denominated in US
Dollars, whereas costs
are denominated in a
number of currencies
including South African
Rand, Mozambican
Meticais, Euros and US
Dollars.
Loan default risk
The inability to meet
existing loan repayment
obligations as they
become due or comply
with loan covenants.
Unfavourable product market
events beyond its control and/
or pressure on operating or
capital costs may adversely
affect revenue and financial
performance.
Global portfolio of customers.
Long-term contracts with certain key customers.
Ongoing cost control and disciplined financial
management.
Industry analysis to develop suitable assumptions
in our commodity price forecasting used for
planning purposes.
There have been no
significant changes to
the overall assessment
of this risk.
The Group’s revenue
generation may be significantly
affected if there ceases to be
demand for its products from
major existing customers and
it is unable to further expand
its customer base in respect of
the relevant product.
Active management of existing customer
relationships and development of new customers.
Market intelligence to track developments in
customer demand.
Development of mineral sands concentrate as
an additional co-product stream with a different
customer base.
There have been no
significant changes to
the overall assessment
of this risk.
The nature and location of the
Mine and the intrinsic volatility
of exchange rates give rise
to an ongoing significant
probability of occurrence of
an adverse exchange rate
fluctuation. The impact of
such a fluctuation can be large
across calendar years.
Group debt is denominated in US Dollars.
A natural hedge exists between revenue receipts
and US Dollar-denominated costs.
A further natural hedge exists between the value
of US Dollars and commodity prices over the
long term. When commodity prices increase, the
Group’s non-US Dollar-denominated costs tend
to increase in US Dollar terms. When commodity
prices decrease, the Group’s non-US Dollar-
denominated cost tend to decrease in US Dollar
term.
There have been no
significant changes to
the overall assessment
of this risk.
The Group does not believe
that a significant risk exists
in failing to meet the current
repayment obligations or to
comply with loan covenants.
However, the consequences of
such failures could negatively
affect the Group’s financial
position.
Low leverage and net debt.
The Group continually monitors liquidity
requirements and covenant compliance.
Flexibility to control expenditure to ensure
covenant headroom.
There have been no
significant changes to
the overall assessment
of this risk.
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30316 1 April 2021 5:56 pm V9SUSTAINABILITYOur approach to sustainabilityDriven by our purpose of responsibly meeting global demand for quality-of-life minerals, Kenmare remains committed to maintaining a sustainable business. We are focused on conducting all activities in a manner that minimises risks to, and maximises opportunities for, our people and our host communities, guided by responsible environmental stewardship and ethical business practices. Supporting the safety of our people, and local communities, is always at the heart of what we do as with strive to achieve zero harm in our operations. Materiality assessmentMateriality is the principle of defining topics that matter most to our business and stakeholders. Identification and evaluation of these topics helps us to understand how they may affect our ability to create value over time. This ensures that the business strategy takes account of significant social and environmental topics and the management of sustainability issues is embedded in wider business processes that are integral to the delivery of our strategy.These topics have helped to develop our sustainability strategy, informed metrics and KPIs to improve future performance and provided the context for our inaugural standalone Sustainability Report. Our inaugural sustainability reportKenmare is proud to announce the production of its first standalone sustainability report, to be published in April 2021. The 2020 Sustainability Report aims to assist stakeholders to further understand our business by providing transparent demonstration and disclosure of Kenmare’s sustainability performance during the reporting period. In order to disclose on material issues which are relevant to stakeholders, this report has been developed in alignment with the Global Reporting Initiative (GRI). Further details of Kenmare’s sustainability programmes are available at www.kenmareresources.com/sustainability.GRI standardsWe have produced our Sustainability Report in alignment with the Global Reporting Initiative (GRI) Standards. GRI reporting helps to ensure that disclosure of material information is in a set, standardised way, so that economic, environmental, and social performance can be easily quantifiable and compared by our stakeholders.Aligning to the UN’s SDGsKenmare acknowledges the importance of supporting the UN’s 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs). During 2021, we are planning to identify the most relevant and high priority SDGs for Kenmare to further develop outcome-based objectives and targets in order to make a positive contribution.KMADKenmare aims to be a catalyst for positive social and economic change in the host communities of our operations in Mozambique. One of the ways we achieve this is by supporting the Kenmare Moma Development Association (KMAD). Established in 2004, KMAD is a not-for-profit organisation that implements development programmes in the areas surrounding the Moma Mine. KMAD’s initiatives have three key focuses, which are livelihoods and economic development, healthcare development and education development. In 2020, KMAD’s expenditure totalled US$2.0 million. 0.25LTIFRvs 0.27 in 201990%electricity from renewal sources180.5HArehabilitated$145.8Mspent (55% of total procurement spend) with Mozambique suppliers97%of employees are Mozambican62%of employees are from local communities Read more on page 74 or read the KMAD Annual report at www.kenmareresources.com/sustainability/kmad66Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 66Kenmare-AR-2020.indd 6601/04/2021 17:57:4901/04/2021 17:57:49 30316 1 April 2021 5:56 pm V9COMMUNITIESUnderstanding and engaging with communities impacted by and near to Kenmare’s operations underpins the Company’s approach to developing strong community relations and building trust and acceptance. We highly value our relationships with our host communities and are committed to conducting activities in a manner that minimises risk and maximises opportunities for local people to share in the benefits of our activities.PEOPLEKenmare recognises that our employees are the cornerstone of our business and our success relies on the people who work for us, their safe work, talents, skills and engagement. In everything we do we are guided by our Principles: We Care, We Excel, We Grow and our values describe the professional behaviours we expect - Integrity, Commitment, Accountability, Respect and Excellence.ENVIRONMENTKenmare is committed to operating in an environmentally responsible manner and ensures sustainable stewardship of the environment within our sphere of influence by preventing, mitigating or offsetting any impacts of our activities. Understanding and monitoring the environment in which we operate is critical to effective and responsible management of environmental impacts.GOVERNANCEKenmare’s governance is grounded in transparency, using our values and principles to guide our day to day business decisions and ethical decision making. We recognise that strong governance is a key element in building and maintaining trust with stakeholders.STRATEGIC REPORT67Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 67Kenmare-AR-2020.indd 6701/04/2021 17:57:5001/04/2021 17:57:50 30316 1 April 2021 5:56 pm V9HigherLowerImportance to StakeholdersLowerHigherImportance to Kenmare13245678910111215131417161819202122232425High-Priority TopicsTopic categoriesEnvironmentEnvironment1 Energy use and management2 Hazardous waste3 Non-hazardous solid waste4 Noise5 Emissions & air quality6 Biodiversity and ecological impacts7 Radiation8 Tailings storage9 Climate change risks10 Rehabilitation & closure11 Water stewardshipOur PeopleOur People12 Diversity, inclusion & equal opportunities13 Labour practices14 Workforce health, safety & well-beingCommunitiesCommunities15 Socio-economic contributions16 Land use and food security17 Community relationships18 Security19 Land acquisition and resettlement20 Community health & safetyGovernanceGovernance21 Product stewardship & assurance22 Business transparency23 Supply chain management & standards 24 Anti-bribery & corruption25 Legal & Regulatory complianceFuture importance of issuesIssue expected to grow in importance over 5-10 yearsIssue to maintain level of performance2020 materiality assessmentDuring 2020 Kenmare completed its first extensive materiality review. A range of external and internal stakeholders were engaged to rate key sustainability issues related to Kenmare’s operation that matter most to them now and into the future. Identified topics were analysed by the Kenmare Management Team to guide the content of the Sustainability Report and further inform our sustainability strategy development. The materiality matrix shown below plots the relative importance of all material issues. Our sustainability report discusses our approach and performance for each high priority topic, as per the GRI standards. Our review process involved three steps: consultation, analysis and approval. This process was led by a third party, who liaised with external and internal stakeholders, before the findings were validated by the Executive Committee and the Board’s Sustainability Committee.Sustainability performance in 2020Sustainability targets provide guidance for Kenmare’s operations in order to continuously review and improve performance. The table below provides Kenmare’s key sustainability metrics for 2020. Target2020 PerformanceCommentarySafetyReduction in Lost Time Injury Frequency Rate (LTIFR) to a target of 0.25.0.25Achieved target.Reduction from 2019 LTIFR of 0.27Zero community fatalities as a result of operations. ZeroZero community related fatalities.EnvironmentZero reportable incidents.Zero reportable incidentsZero reportable environmental events Deliver strategic review of rehabilitation.DeliveredLand rehabilitation and biodiversity strategic approach developed. Achieve 160ha of rehabilitation.Achieved Exceeded rehabilitation target.180ha rehabilitated. SUSTAINABILITY CONTINUED68Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 68Kenmare-AR-2020.indd 6801/04/2021 17:57:5001/04/2021 17:57:50 STRATEGIC REPORT
Target
Communities
2020 Performance
Commentary
Build Supply Chain capacity in policy compliance.
Achieved
Supply chain policy compliance programme has
commenced. A number of key supplier audits conducted.
Work will continue in 2021.
Improve female representation in the workplace to meet
a target of 8.50%
Achieved
10.64% achieved.
2021+ Targets
2021 will focus on the implementation of the recommendations of the Taskforce for Climate related Financial Disclosures, identification of priority UN
Sustainable Development Goals (SDGs) to further develop outcome based objectives and targets and further implementation of our Human Rights
Policy with Kenmare’s supply chain. It will also be a year of consolidation and implementation of the specific strategies that have been developed
during 2020. Kenmare will continue to disclose performance against its 2021 public targets, as set out below.
Target
People
Zero work related fatalities
Reduction in Lost Time Injury Frequency Rate (LTIFR) to achieve a target of 0.22
Embed new risk assessment processes
Roll-out of destigmatising HIV programme
Conduct a formal external review of our Malaria Vector Control programme
Communities
By when
Annual review
Annual review
2021
No major community incidents as a result of operational activities (Level 5 as defined by Kenmare incident
consequence matrix)
Annual review
Meet annual procurement target in Mozambique
Increase companywide representation of women in the workforce to 11.5%
Environment
2021
2021
No major environmental incidents (Level 5 as defined by Kenmare incident consequence matrix)
Annual review
Implement water reporting in alignment with ICMM Water Reporting Guideline
Define a GHG reduction target
Implement climate change programme aligned with the Task Force on Climate Related Financial Disclosures (TFCD)
recommendations
Annual rehabilitation target of 200 ha achieved
Governance - Human Rights
Publication of first Modern Slavery statement
Security practices are in conformance with the Voluntary Principles on Security and Human Rights
2021
2021
2022
2021
2021
2021
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30316 1 April 2021 5:56 pm V9SUSTAINABILITY CONTINUEDIn October 2019, Kenmare announced the establishment of a Sustainability Committee as part of our commitment to strong corporate governance and continuous improvement. The Committee has worked with management and guided the development of key policies and strategies for the business. Please see page 92 for the Committee’s report.Kenmare’s governance is grounded in transparency, using our values and principles to guide our day-to-day business decisions and ethical decision making. We recognise that strong governance is a key element in building and maintaining trust with stakeholders. In October 2020, Kenmare was named the “Most Transparent Company in Mozambique” by the Centre for Public Integrity’s Extractive Industry Transparency Index. Kenmare is very humbled to receive this award in recognition of our commitment to transparency and our support of the EITI. We have also taken on suggestions to produce more corporate materials in Portuguese, increasing accessibility. All our company policies, www.kenmareresources.com/sustainability/policies, have been provided to Moma Mine’s third-party service providers (including contractors and suppliers) and they have been asked to adhere to them and commit to supporting them.Business ethicsKenmare is committed to upholding the highest possible ethical standards. All our activities are conducted in accordance with our core values: Integrity, Commitment, Accountability, Respect and Excellence (ICARE).Our commitment to ethical behaviour is outlined in our Business Ethics Policy. Employees undergoing induction or annual refresher training, must attest, by means of a signature, that they have read and understood the requirements of this Business Ethics Policy and Kenmare’s internal Code of Conduct and that they will comply with them. Anti-briberyBribery is strictly prohibited by Kenmare. We are committed to acting professionally, fairly and with integrity in all our business dealings and relationships, wherever we operate. Kenmare is bound by the laws of Ireland, including the Criminal Justice (Corruption Offences) Act 2018, in respect of its conduct both at home and abroad. We also comply with any applicable laws relevant to countering bribery and corruption in the jurisdictions in which we operate. Employees receive regular and relevant training on how to comply with the Kenmare Anti-Bribery Policy including through the induction process for all new employees. WhistleblowingKenmare has a whistleblowing policy and procedure in place that provides all Kenmare employees and third-party service providers, as well as any member of the public, with the opportunity to independently and anonymously report conduct that is in contravention of the Business Ethics Policy or the Anti-Bribery Policy. This service is provided in Portuguese and English and, in order to uphold its independence, is outsourced. This service is widely publicised within the organisation, to suppliers and in host communities. All whistleblowing reports are directed to the independent provider’s central facility, then sent to Kenmare’s Internal Auditor and General Counsel, in the case of the Moma Mine, or Company Secretary, in the case of our Dublin office, for consideration of the appropriate next steps. All reports and outcomes are presented to Kenmare’s Audit & Risk Committee. In 2020, Kenmare received two whistleblowing reports through the 24/7 whistleblowing service provided by a third-party service provider, Safecall. Both reports were investigated fully by Kenmare and reported to the Audit & Risk Committee and Board. No evidence was found to substantiate the claims made in either report. Investigation findings was provided to the whistleblower where that was possible.Political engagementKenmare maintains a positive working relationship with government stakeholders at national, regional, district and local level through regular engagement. This work ensures government stakeholders are aware of and can provide input to our present and future activities.Kenmare does not make any form of political donation.Respecting Human RightsKenmare believes respecting human rights is right thing to do and critical to the success of the business. Through our Human Rights Policy, Kenmare supports the International Bill of Human Rights, including the UN Declaration of Human Rights; the Voluntary Principles on Security and Human Rights; the International Labour Organisation’s Fundamental Conventions and Declaration on Fundamental Principles and Rights at Work; and Part I, Chapter IV (Human Rights) of the OECD Guidelines for Multinational Enterprises. Our human rights commitment includes the prohibition of modern slavery in all its forms. This means we have zero tolerance for child labour, forced labour or discrimination.AWARDNamed the most transparent extractive industries company in Mozambique Read more in the case study on the next pageGOVERNANCE70Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 70Kenmare-AR-2020.indd 7001/04/2021 17:57:5101/04/2021 17:57:51 30316 1 April 2021 5:56 pm V9We have a commitment to good governance through transparency and accountability. It’s great to see these efforts are being recognised externally as well.”Gareth Clifton, Mozambique Country ManagerSUSTAINABILITY CASE STUDYREPORTING TRANSPARENCYKenmare has been named as the most transparent company in Mozambique by the Centro de Integridade Pública (CIP) Extractive Industry Transparency Index.The main objective of the index is to contribute to the information on the extractive sector (mining, oil & gas) in Mozambique being made available to society, in a regular, detailed and timely manner. CIP assessed companies on the quality of information in the areas of tax, governance, social and environmental aspects and on their degree of openness with host communities. Kenmare will develop a Portuguese web site to assist further with transparency of information to complement the current English web site.STRATEGIC REPORT71Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 71Kenmare-AR-2020.indd 7101/04/2021 17:57:5101/04/2021 17:57:51 30316 1 April 2021 5:56 pm V9Kenmare’s aim is Zero Harm. The safety of our employees and contractors is a key priority and we are committed to all employees and contractors returning home safely and uninjured. We recognise that our people are our greatest asset and as a company we are committed to investing in our workforce and creating a respectful, inclusive, and diverse work environment.Safety A non-work-related incident at the Moma Mine resulted in the unfortunate death of one of our employees. A comprehensive investigation was completed and outcomes were communicated to the workforce. Kenmare’s Employee Assistance Programme was made available to any employee needing support as a result of this event.The Loss Time Injury Frequency Rate (LTIFR) at the end of 2020 was 0.25 per 200,000 work hours, with a total of 7,334,804 hours worked. This was a slight improvement from 2019 with an LTIFR of 0.27, following a total of 5,212,535 hours worked. Despite the encouraging downward trend in the LTIFR our operations recorded a total of nine Lost Time Injuries (LTI) in 2020 compared with seven LTIs during 2019. The increase in the total number of work hours is mainly due to the relocation project of WCP B and increased employees at our WCP C.Our All Injury Frequency Rate (AIFR) at the end of 2020 was 1.61 compared with 2.44 in 2019. This is the lowest AIFR in Kenmare’s history. 2020201920182017Hours worked7,334,8045,240,1634,888,5744,627,491Lost time injuries (LTIs)9739Fatalities (included in LTIs)0000Medical treatment injuries (MTI)12643First aid injuries (FAIs)38514937All injuries (AIs)59645649Days lost to injuries717343236521All injury frequency rate (AIFR)1.612.442.262.11LTI frequency rate (LTIFR)0.250.270.120.39The primary reason for an increased number of days lost to injuries was that one LTI resulted in an extended period of medical leave.In the first six months of 2020, there were a total of five LTIs and, in response, a review of this incident trend was undertaken. Several areas for improvement were identified including ineffective risk assessments, less safe work practices and reduced leadership time in the field. SecurityDuring the year, Kenmare’s security strategy was reviewed with a renewed focus on people protection, theft mitigation and insurgency monitoring. Work plans have been developed for 2021. Our strategy includes the direct employment of security personnel, engagement of security contractors and work with the local Police and National armed services. All security work is conducted in alignment with the Voluntary Principles of Security and Human Rights.HealthKenmare recognises the importance of safeguarding the health and wellbeing of its workforce and making available medical expertise and health programs to host communities. In 2020, we continued a range of health initiatives to address the prevalence of malaria and HIV/AIDS in our host communities. The global COVID-19 pandemic also brought some unique challenges to the way we work at Kenmare. COVID-19Stringent risk mitigation measures have been in place across our operation and offices since March 2020. At the Moma Mine, heightened health protocols, social distancing procedures and COVID-19 testing in a purpose-built clinic is ongoing. The site is well-equipped to care for anyone with a suspected or confirmed case of COVID-19, including isolation accommodation and two new respirators that were purchased for the medical clinic. Kenmare’s head office in Dublin has been temporarily closed with employees working remotely and, where necessary, reduced numbers allowed in the office. During 2020 there were 77 positive COVID-19 cases on site. Kenmare is committed to supporting the Mine’s host communities in the fight against COVID-19. To this end, Kenmare donated eight ventilators and 50 CPAP (non-invasive ventilation with oxygen) machines to the health authorities in Nampula, which is the nearest city to the Moma Mine.The Company also donated disposable aprons, medical gloves, hand sanitation gel, digital thermometers and masks to local villages. Please see page 16 for further detail on Kenmare’s response to COVID-19.MalariaIncidences of Malaria amongst Kenmare’s employees and contractors continue to decline, down by approximately 50% over the last four years. On-going initiatives to reduce malaria amongst our workforce at the Moma Mine and in our host communities include health awareness programmes, vector control through indoor residual spraying and use of mosquito nets. Despite this, the rate of malaria in local communities has remained relatively constant. PEOPLESUSTAINABILITY CONTINUED72Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 72Kenmare-AR-2020.indd 7201/04/2021 17:57:5201/04/2021 17:57:52 30316 1 April 2021 5:56 pm V9Consequently, Kenmare is exploring a research partnership with University of Pretoria Institute for Malaria Control and International SOS, who provide medical services at our operation, with the aim of designing and implementing a new vector programme during 2021.HIV/AIDSInternal HIV/AIDS awareness initiatives have been conducted through a range of communication methods including toolbox talks, newsletter article and posters. Shirts printed with the HIV/AIDS awareness messages have been distributed to all employees along with booklets and leaflets providing general information on prevention and positive living. Condom dispensers are placed throughout the site, with condoms freely available. Free HIV/AIDS testing is also available on site including counselling by HIV peer educators.Human Resources In 2020, Kenmare’s workforce included 1,503 employees and 2,258 contractors across our Moma Mine, Dublin, London, Maputo, Nampula and Beijing offices. Our Mozambique operation employs 1,478 full time employees. Of these 97% are Mozambican and 62% of the mine employees are from local communities. The sustainability of our local employment programme has been underpinned by the successful technical development of local artisans (trades and trades assistants), who have replaced expatriates following completion of inductions and training via our on-site practical training centre. Kenmare’s University Internship and Graduate Development Programmes (GDP) have also seen successful recruitment and promotion of local graduates into the operation. In 2020, 27 people participated in the GDP and past graduates now fill roles including plant supervisors, metallurgists and geologists.Kenmare is focused on increasing the number of females in our workforce as we recognise that diversity is a key driver of business success. At the end of 2020, females represented 20% of our Board of Directors, and 11% of the executive management team, which is unchanged compared to 2019. During 2020 female participation in the workforce increased from 8% to 10.64%. This is a significant achievement and a result of our recruitment processes and systems to support diversity in the work place. We acknowledge there are still improvements to be made and for 2021 we have set a further increase in participation to a target of 11.5%.Seven females were also employed in senior roles reporting directly to the executive committee, with an additional 24 females at the Mine in positions of leadership responsibility. Training and developmentKenmare invests in training and development initiatives for our employees at all levels of the business, as building capacity and capability are key to sustainable development. In 2020, we invested US$ 639,00 in training and development and delivered over 21,000 hours of training to our employees at the Moma Mine.Labour relationsKenmare remains highly focused on managing positive labour relations, which are essential to our productivity and strategy delivery, and on maintaining effective communication channels with our employees and the appropriate union representatives. No industrial action was experienced during 2020, continuing the Moma Mine’s largely stable labour relations of the past four years. We respect our workforce’s right to exercise freedom of association and collective bargaining without interference and free from discrimination, as stated in our Freedom of Association Policy.It’s fantastic to see such high levels of engagement from our employees. The feedback also provides us with new areas of focus.”Caetano Amurane, Human Resources ManagerSUSTAINABILITY CASE STUDYEMPLOYEE SURVEYInaugrual employee engagement surveyKenmare conducted its first employee engagement survey during 2020, aimed at gaining a better understanding of the overall level of employee engagement and wellbeing and to identify areas to improve overall engagement levels.The survey was conducted anonymously in both Portuguese and English. There was a very pleasing participation rate of 92% with the survey being completed both electronically and manually.Significantly, the results show that 97% of employees have high levels of overall engagement. More than 93% of employees indicated they would recommend Kenmare as a great company to work for and over 95% responded that their job allows them to take accountability and ownership for their results.As we continue to learn from the survey and constantly improve our workplaces, Kenmare’s focus areas for 2021 will include greater celebration of success, improved communications and career and leadership development.STRATEGIC REPORT73Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 73Kenmare-AR-2020.indd 7301/04/2021 17:57:5201/04/2021 17:57:52 30316 1 April 2021 5:56 pm V9COMMUNITIESKenmare has been committed to working in partnership with host communities and all levels of government to deliver local and regional benefits since before mining commenced at Moma in 2007. Our approach is based on participation, relationships, transparency, fairness, facilitation and collaboration. Community engagementRegular formal and informal engagement processes are in place to ensure the voices of our host communities are heard and information about our operations is readily available. Due to COVID-19, this year’s engagement program has included an increased radio presence and smaller but more frequent community meetings. During 2020, 14 complaints and grievances were received and zero were outstanding at year end. The complaints and grievances covered the following areas: crop compensation, employment opportunities and payment terms. Our project expansion during 2020 included the opening of a new mining area and road infrastructure to relocate WCP B. This work was approved by the Mozambican government after submission of a comprehensive and IFC compliant Environmental and Social Impact Assessment (ESIA) and a Resettlement Action Plan (RAP). Community Development & KMADCommunity development projects are primarily funded and managed through the Kenmare Moma Development Association (KMAD). KMAD’s activities have three key areas of focus: livelihoods and economic development, healthcare development, and education development. Identification of local and regional development projects is a participative process with host communities. KMAD has been operating since 2004, and during this time has delivered significant improvements to local infrastructure, including: Drilling 25 water boreholes to provide clean drinking water for approximately 24,000 people. Constructing over 56 classrooms, built health clinics which have provided >91,000 consulatations. Supported local projects which have generated income of >US$2,750,000 for more than 2,030 local people. Kenmare is committed to creating employment opportunities for local people that deliver sustainable economic growth. In 2020, KMAD approved five new projects in its host communities, including a carpentry workshop, a building materials shop, electricity voucher machine and two multi-media centres, all of which have been financed and commenced, except the multimedia project which is on hold due to COVID-19. As part of the Pilivilli project RAP, a further seven economic development projects were approved including grocery shops, fishery shops and a micro mill project. At the end of 2020, 56 small-scale business projects were being supported by KMAD, which directly benefit 286 people, including 102 women, and their families and employees.Other development projects supported by KMAD include: Conservation Agriculture development programmes for 1,018 farmers to improve skills and enhance farm productivity. Support for vulnerable groups within the community through income generation initiatives, health services, and food and livestock donations. Healthcare projects including infrastructure improvements, construction of a new maternity facility at the Mtiticoma Health Clinic, capacity development of medical staff and access to clean drinking water via bores for villages surrounding the mine. Education projects including funding for the construction of classrooms and other educational infrastructure, capacity development of teachers, student scholarships, vocational training and a focus on educational outcomes for primary students. Economic valueKenmare’s Moma Mine represents the only major economic activity in the local area, which is characterised by relatively low socio-economic development and high unemployment. To share the value of the Mine’s presence, Kenmare looks to maximise opportunities through direct and indirect employment and in-country procurement. In 2020, Kenmare sourced 53% (US$69.8 million) of operational procurement spend within Mozambique, (including fuel and electricity). Spend in Nampula Province, where the Moma mine is located, represented 11.5% (US$13.8 million) of overall operational procurement spend, with US$5.2 million spent in local districts. Read the KMAD Annual report at www.kenmareresources.com/sustainability/kmadUS$49.9MContributed (Kenmare total/$41.2M Mozambique) in employee wages and benefitsUS$145.8Mspent (54% of total procurement spend) with Mozambique suppliersUS$2.0Minvested in community initiatives through KMADUS$6.1Min royalties to the Mozambique GovernmentUS$16.8Min all taxes from the GroupSUSTAINABILITY CONTINUED74Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 74Kenmare-AR-2020.indd 7401/04/2021 17:57:5301/04/2021 17:57:53 30316 1 April 2021 5:56 pm V9SUSTAINABILITY CASE STUDYCONSERVATION AGRICULTURE Improved agricultural productivityand participation KMAD’s Conservation Agriculture (CA) project continued in 2020 with the objective of transferring skills to local farmers that will enable them to sustainably increase their farm productivity, reduce crop disease, improve market connections and grow crops that were previously not viable in the area.At the start of 2020, there were 291 farmers registered to participate in the CA project and by year-end this number had increased by over 270% to 1018, of which 68% were female. By year end, 700 farmers had prepared their land for CA. The National Association for Rural Extension (AENA) was contracted to deliver the project and continued to train the farmers by splitting their fields in two, with one side being farmed using CA techniques and the other side with traditional farming techniques. The 2019/2020 production season results showed an average 55% yield advantage of CA when compared with traditional production methods. For further information on KMAD activities please see our Sustainability Report and KMAD Annual Report, available on our website in April 2021 STRATEGIC REPORT75Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 75Kenmare-AR-2020.indd 7501/04/2021 17:57:5301/04/2021 17:57:53 30316 1 April 2021 5:56 pm V9There is growing pressure on and competition globally for environmental resources, such as land, water and biodiversity. Kenmare is committed to operating in an environmentally responsible manner and to minimising the impact of mining and processing operations on the environment and host communities. We are proud of our low environmental impact, managed by: Obtaining 90% of our power requirements from renewable sources. Progressive land rehabilitation. No chemicals used in our mining or processing operations.Further information on all environmental aspects, including air, noise, waste, of Kenmare’s operation is available in our inaugural Sustainability Report, to be published in April 2021.Kenmare’s environmental management system is guided by the Company’s Environmental Policy, risk identification, management standards and the annual setting of objectives and targets. This system has been developed taking into account the ISO 14001 environmental management system requirements and IFC Performance Standards, 2012.The Kenmare Board’s Sustainability Committee approved three key sustainability strategies during 2020: Land Management, Water Stewardship and Energy & Climate Change.These strategies provide a framework for work currently underway in these key areas and defines a future direction for improvements. The movement of WCP B in 2020 involved the opening of a new mining area and the building of a road to facilitate the relocation. This work was approved by the Mozambican government after submission of a comprehensive IFC compliant Environmental and Social Impact Assessment (ESIA).Energy and climate change Energy is an essential resource for our business and our approach focuses on ensuring a safe, stable, reliable and cost-effective energy supply. ENVIRONMENTKenmare also acknowledges the scientific evidence that supports the influence of humans on the climate and the resultant physical impacts. We are committed to contributing to global climate action through implementation of energy efficiencies, ensuring our business is resilient to climate change and continually reducing our carbon footprint.SupplyIn Mozambique, Kenmare’s principal electricity source is the Cahora Bassa hydroelectrical power station with transmission through the Electricidade de Mocambique (EdM) transmission grid. In 2020, 90% of Kenmare’s electrical energy requirement or 185,714 MWh was produced from this renewable power source (hydropower), similar to that in 2019. Kenmare aims to maximise the use of hydropower in its operations as it substantially reduces the Group’s greenhouse gas emissions. However, due to the varying reliability of the northern power network in Mozambique, the Moma Mine uses diesel-powered electric generators (10 MW capacity) in the summer rainy season to ensure uninterrupted operation of our Mineral Separation Plant (MSP). In 2020 21,185MWh were generated by diesel-powered generators compared to 21,599 MWh in 2019, a 2% reduction. In 2020, Kenmare’s total electricity use at the Moma Mine was 206,900 MWh compared to 207,029 MWh in 2019. Our Dublin head office has zero CO2 emissions as the supply is 100% renewable.Energy and carbon footprintKenmare is committed to minimising our energy and carbon footprint. To do so, the Company has commenced detailed analysis and assessment of climate-related risks to the operation and identification of ongoing efficiencies and improvements. In 2020, our first year to disclose climate change data through the CDP Climate Change questionnaire, Kenmare has been ranked in the ‘Disclosure’ Band with a score of D. This reflects our work to date and the early stages of our Energy and Climate Change Strategy. Our report is available at the CDP website, www.cdp.net/en 2020201920182017Scope 1 greenhouse gas (tonnes CO2)104,81078,60581,51173,234Scope 2 greenhouse gas (tonnes CO2)1120110110110Notes to table:1. Based on Kenmare’s current understanding of our annual, average Scope 2 greenhouse gas emissions from hydropower. These emissions relate to construction activities and decaying biomass from flooded land linked to hydropower facilities.Kenmare approved the installation of a Rotary Uninterruptible Power Supply (RUPS) at Moma in 2021, at a cost of $16M. RUPS will improve the year-round reliability of power at the MSP, which suffers from lost operating time but also significant recovery losses when operating with unstable power supply. It is expected that the RUPS will reduce Kenmare’s diesel costs and associated CO2 emissions by approximately 15% through the elimination of diesel powered generators and ensure Kenmare continues to take advantage of the existing low cost sustainable energy source of Cahorra Basa hydroelectric power.Read more about the project on page 42. Adapt to a changing climateKenmare recognises that there are both physical and transition risks associated with climate change. As such our integrated risk management process, which has a short, medium and long-term view, incorporates the impacts of a changing climate on our operations, specifically severe weather impacts. This risk assessment will be further enhanced in 2021 and 2022 as we align our Energy and Climate Change strategy to the recommendations of the Taskforce on Climate related Financial Disclosures (TCFD).Land managementKenmare’s land management approach is to conduct progressive rehabilitation of disturbed areas, support sustainable food security practices, protect and conserve biodiversity and engage with stakeholders on our land management practices. SUSTAINABILITY CONTINUED76Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 76Kenmare-AR-2020.indd 7601/04/2021 17:57:5401/04/2021 17:57:54 30316 1 April 2021 5:56 pm V9The Moma Mine is in a remote rural area of Mozambique, heavily dependent on land for food production. Our mining process temporarily impacts land that would otherwise be utilised for food production. Farmers whose farm land is impacted by the mine are provided with alternative land for food production as part of the RAP. Mineral sands mining is transitory in nature and lends itself to progressive rehabilitation which enables the return of land to communities as soon as possible to resume food production. This requires successful rehabilitation of the disturbed land, soil monitoring and approval from the Mozambique environmental regulator. An annual rehabilitation target is set by Kenmare and has been consistently achieved since 2018, in 2020 180ha of mined land were rehabilitated and >10,100 casuarina trees planted. To date, Kenmare has rehabilitated 1,157ha of mined land.To further support sustainable food production, biodiversity enhancement and conservation, and enduring prosperity for local communities, Kenmare is working through KMAD with NGOs and the Mozambique government on a number of initiatives. These include conservation agriculture, agroforestry, crop diversification and forest restoration. They also include developing alternate food and revenue streams from forestry such as honey production, medicinal plants, fruit harvesting and tree species selection for construction timber.Water stewardship Kenmare recognises water as a precious resource and is committed to working collaboratively with stakeholders to ensure effective long-term water stewardship and enduring access to clean, safe water for local communities.Extracted from a local aquifer using groundwater bores, Kenmare uses water in the mining and processing of sand, tailings deposition, dust suppression and for drinking and sanitation supplies. Current groundwater withdrawal volumes are well within current regulatory approved withdrawal volumes, average monthly withdrawal 1380 ML vs regulatory limit 2700ML/month. Using the World Resources Institute Aqueduct™ tool, the Moma operation is identified as being located in an area of low baseline water stress. During 2020, a total of 19.439ML of water was extracted. With a chemical-free mining process at Moma, most of the water utilised, except for water lost through evaporation, is returned to the groundwater table. The aquifer also receives annual rainfall recharge.Kenmare is working to align reporting on water use and management to the ICMM Guidelines on Water Reporting, which incorporates the Minerals Council of Australia Water Accounting Framework (WAF) and expects to commence reporting in 2021.10,100Casuarina trees planted180HAof mine land rehabilitated3strategies endorsed by the board Land Management, Energy & Climate Change, Water Stewardship StrategiesSUSTAINABILITY CASE STUDYREHABILITATIONAchieving our targetsMineral sands mining is transitory in nature and lends itself to progressive rehabilitation. Saplings are procured from community nurseries, bringing local economic benefits to our rehabilitation efforts.Strong collaboration between our Mine Planning and Environmental teams, and having a successful on site nursery, has ensured that our annual rehabilitation target has been achieved since 2018. In 2020, 180ha of land was rehabilitated and 10,100 casuarina trees have been planted. To date over 1,157ha of mined land has been rehabilitated. Kenmare aims to return land to local communities as soon as possible after mining, to enable food production to resume. This requires successful rehabilitation, soil monitoring and approval from the Mozambique environmental regulator. STRATEGIC REPORT77Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 77Kenmare-AR-2020.indd 7701/04/2021 17:57:5401/04/2021 17:57:54 30316 1 April 2021 5:56 pm V9Before I joined Kenmare in 2010 I didn’t have any experience in mining but through the training I have received I have been able to progress into a supervisory role. I am proud to have been one of the first two Mozambican employees to be promoted into this role in the Mineral Separation Plant.”Donald Timo Chintendere, Mineral Separation Plant Shift SupervisorKenmare-AR-2020.indd 78Kenmare-AR-2020.indd 7801/04/2021 17:57:5601/04/2021 17:57:56 30316 1 April 2021 5:56 pm V9Board of Directors80Executive Committee82Corporate Governance report84Nomination Committee report90Sustainability Committee report92Audit & Risk Committee report94Directors’ remuneration report98Annual report on remuneration101Directors’ remuneration policy report113GOVERNANCE Kenmare-AR-2020.indd 79Kenmare-AR-2020.indd 7901/04/2021 17:57:5701/04/2021 17:57:57 30316 1 April 2021 5:56 pm V9Age: 67 Appointed: 2018Skills and experience: Clever Fonseca has worked in the titanium industry for over 35 years. He has extensive knowledge and board-level management experience of mineral sands mining and he has worked in the titanium pigment and feedstock industries. He was responsible for developing Brazil’s only dredge-mined mineral sands operation, was Vice President of Global Supply and Mining for Millennium Inorganic Chemicals (now Cristal Global) in the US, and also served as Executive Director of Mineral Deposits Ltd in Melbourne. Most recently, he was Chief Executive of TiZir Ltd until 2012. He has a BSc in Mining Engineering from Universidade Federal De Pernambuco, and an MBA from Fundacao Getulio Vargas, both in Brazil.Age: 63 Appointed: 2019Skills and experience: Elaine Dorward-King has over 30 years’ experience in the mining, chemicals and engineering industries, including the mineral sands sector. She served as Executive Vice President of Sustainability and External Relations for Newmont Goldcorp, the world’s leading gold mining company, from March 2013 to December 2019. Prior to that, she worked from 1992 to 2013 for Rio Tinto, holding positions including Global Head of Health, Safety and Environment, and Managing Director of Richards Bay Minerals in South Africa. She holds a Bachelor of Science, magna cum laude, from Maryville College, Tennessee and a PhD in Analytical Chemistry from Colorado State University.External appointments: Elaine is a Non-Executive Director of NASDAQ-listed Great Lakes Dredge & Dock Corporation, JSE and NYSE-listed Sibanye Stillwater Ltd, and NYSE and TSX-listed Novagold Resources Inc.Steven McTiernan Chairman and Non-Executive Director Age: 69 Appointed: 2013Skills and experience: Steven McTiernan has over 45 years of diverse natural resources industry and investment banking experience with Amoco, BP, NatWest Markets, CIBC and the Chase Manhattan Bank, where he was Senior Vice President. He served as Senior Independent Director of Tullow Oil plc and was a Non-Executive Director for 11 years until January 2013, he was an Independent Director at First Quantum Minerals Ltd until June 2012, and was an Independent Director at Songa Offshore SE until January 2014. He received an MA in Natural Sciences from the University of Cambridge.External appointments: Steven serves as Non-Executive Chairman of Hurricane Energy plc.Michael Carvill Managing Director Age: 61 Appointed: 1986Skills and experience: Michael Carvill is a Fellow of the Institute of Engineers of Ireland (FIEI). He holds a BSc in Mechanical Engineering from Queen’s University Belfast and an MBA from the Wharton School of the University of Pennsylvania. He worked as a contracts engineer in Algeria and as a project engineer at Tara Mines, Ireland.External appointments: Michael is a Director of Vico Camperdown Ltd and Merindol Ltd.Tony McCluskey Financial Director Age: 56 Appointed: 1999Skills and experience: Tony McCluskey has worked with Kenmare since 1991. He was originally appointed as Company Secretary and Financial Controller, before becoming Financial Director in 1999. He holds a Bachelor of Commerce degree from University College Cork and is a Fellow of the Institute of Chartered Accountants. Before joining Kenmare, he worked for a number of years with Deloitte as a Senior Manager in Dublin. He has worked on a part-time basis as a lecturer with Chartered Accountants Ireland and has worked overseas.Peter BacchusNon-Executive Director Age: 52 Appointed: 2017Skills and experience: Peter Bacchus has over 20 years’ experience in investment banking, with a focus on the global natural resources sector, including as European Head of Investment Banking at US investment bank Jefferies, Global Head of Mining & Metals at Morgan Stanley, and Head of Investment Banking, Industrials and Natural Resources at Citigroup, in Asia and Australia. He is a Member of the Institute of Chartered Accountants, England & Wales, and holds an MA in Economics from the University of Cambridge, United Kingdom. External appointments: Peter is the Chairman and Chief Executive of Bacchus Capital Advisers Ltd, an independent investment banking boutique based in London. He is also a Non-Executive Director of US and South African-listed Gold Fields and Australian-listed Galaxy Resources.Elaine Dorward-KingNon-Executive DirectorClever FonsecaNon-Executive Director SANSARNBOARD OF DIRECTORS80Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 80Kenmare-AR-2020.indd 8001/04/2021 17:58:0001/04/2021 17:58:00 30316 1 April 2021 5:56 pm V9Age: 69 Appointed: 2013Skills and experience: Gabriel Smith has considerable executive experience and has been on several boards representing companies in different industries. He began his career as a Loan Officer at Citibank London. He was Managing Director of a technical trading company before joining Tinfos, a Norwegian silicomanganese, pig iron and titanium dioxide producer, as Chief Executive Officer from 1990 to 2007. From 2003 to 2006 he held the position of Chairman of Pan Fish, and from 2007 to 2009 he held the position of Chairman of Lighthouse Caledonia, both public companies in the seafood sector. He received his undergraduate degree in Economics from Dartmouth College and has an MBA from Amos Tuck School in the US.External appointments: Gabriel sits on the Board of Tinfos, a private hydropower company.Age: 54 Appointed: 2020Skills and experience: Deirdre Somers has over 20 years’ experience in senior management positions, having served as Chief Executive of the Irish Stock Exchange (ISE) from 2007 to 2018 and, prior to that, as its Director of Listing. She led the ISE’s transformation to a highly profitable entity with global specialisms culminating in its sale in March 2018 to Euronext NV. She also held the position of President and Board Chair of the Federation of European Securities Exchanges from 2015 to 2018. Deirdre, a qualified Chartered Accountant, also worked with KPMG for eight years and holds a Bachelor of Commerce degree from University College Cork.External appointments: Deirdre is a Non-Executive Director of the following investment entities: iShares plc, iShares II plc, iShares III plc, iShares IV plc, iShares V plc, iShares VI plc and iShares VII plc. She also serves as a Non-Executive Director for BlackRock Institutional Pooled Funds plc and Institutional Cash Series plc, both of which are listed on Euronext Dublin, Aquis Exchnange plc which is listed on the Alternative Investment Market of the London Stock Exchange and M&G General Partner Inc. and Episode Inc.Sameer Oundhakar Non-Executive Director Age: 47 Appointed: 2021Skills and experience: Sameer Oundhakar is a Senior Manager in the Diversified Private Equity Investments department of OIA (Oman Investment Authority), having joined in 2018. He has extensive Private Equity experience across industry sectors and geographies. He has worked in the Middle East (OIA, Seera Investments), UK (Boston Consulting Group, Columbia Threadneedle, American Express) and India (HSBC, Larsen & Toubro). He has a Bachelor’s degree with distinction in Mechanical Engineering from Veermata Jijabai Technological Institute (VJTI), Mumbai, a Post Graduate Diploma in Management from the Indian Institute of Management Lucknow and an MBA from INSEAD.External appointments: Sameer is a Non-Executive director with Strategic and Precious Metals Processing LLC (SPMP), an Antimony and Gold Plant in Oman and with Nova S.A. an Argentina based crop protection products company. Graham MartinNon-Executive Director Age: 66 Appointed: 2016Skills and experience: Graham Martin has over 30 years’ experience in the global natural resources sector with a particular focus on Africa. From 1997 to 2016 he served as an Executive Director of Tullow Oil plc, an oil and gas exploration, development and production company listed on the London, Irish and Ghanaian stock exchanges. Prior to Tullow, he was a partner at the US energy law firm Vinson & Elkins LLP, and at the UK corporate law firm Dickson Minto WS. He holds a degree in Law and Economics from the University of Edinburgh.External appointments: Graham is Non-Executive Chairman of United Oil & Gas plc, an AIM listed oil and gas company.Gabriel Smith Non-Executive Director Deirdre Somers Non-Executive Director NSRNRAANATIONALITYCOMPOSITIONLENGTH OF TENUREBOARD GENDER DIVERSITY2 Directors: 3-6 years4 Directors: 6+ years4 Directors: 0-3 years43111United KingdomIrelandBrazilNorwayAmerica1 Non-Executive7 IndependentNon-Executives2 Executives8 Male2 FemaleCommittee key A Audit and Risk N Nomination R Remuneration S Sustainability C Committee Chair81Kenmare Resources plc Annual Report and Accounts 2020CORPORATE GOVERNANCEKenmare-AR-2020.indd 81Kenmare-AR-2020.indd 8101/04/2021 17:58:0201/04/2021 17:58:02 EXECUTIVE COMMITTEE
Michael Carvill
Managing
Director
Tony McCluskey
Financial
Director
Ben Baxter
Chief Operations
Officer
Michael Carvill has been the Managing Director
of Kenmare since 1986. He worked as a contracts
engineer in Algeria and as a project engineer at
Tara Mines, Ireland. He is a Fellow of the Institute
of Engineers of Ireland (FIEI). He holds a BSc
in Mechanical Engineering (Queen’s University,
Belfast) and an MBA (Wharton School, University of
Pennsylvania).
Tony McCluskey has worked with Kenmare since
1991. He was originally appointed as Company
Secretary and Financial Controller, before becoming
Financial Director in 1999. Before joining Kenmare,
he worked for a number of years with Deloitte
as a senior manager in Dublin and also worked
overseas. He holds a Bachelor of Commerce degree
from University College Cork and is a Fellow of the
Institute of Chartered Accountants.
Ben Baxter has spent 25 years in the mineral sands
industry joining Kenmare Resources plc in 2015
as Chief Operations Officer. He was previously
employed by Rio Tinto at RBM in South Africa and
QMM in Madagascar where he held a broad range
of geological, mine planning and leadership roles
before being appointed General Manager Operations
at QMM and General Manager Mining at RBM.
At Kenmare Ben is responsible for all aspects of
Operations and Project development, and has taken
a significant part in the development and execution
of the strategy to deliver 1.2Mt of ilmenite production
per annum on a sustainable basis at the Moma Mine.
Ben holds a BSc (Hons) in Applied Geology from the
University of Leicester, UK and an MSc in Mining
Geology from the Camborne School of Mines, UK.
Gareth Clifton
Mozambique Manager
Deirdre Corcoran
Financial Controller
and Company
Secretary
Jeremy Dibb
Corporate Development
and Investor Relations
Gareth Clifton holds a BA Economics degree from the
University of Exeter and an MSc in African Studies
from the University of Edinburgh. He joined Kenmare
in 2001 having worked as a General Manager for
Union Transport LDA. He previously held the position
of manager for a Mozambican shipping agent and
also worked for the UNDP.
Deirdre Corcoran graduated from University College
Dublin with a Bachelor of Commerce degree and a
Masters in Accounting. She qualified as a Chartered
Accountant with Deloitte & Touche in 1995. She
then worked as Finance Manager with Concern
Worldwide, based in Ethiopia, for a number of years
before joining Kenmare Resources plc in 1999 as
Financial Controller. She was appointed Company
Secretary in March 2000.
Jeremy Dibb joined Kenmare in June 2014. He
previously covered the mining sector as an equity
research analyst at Macquarie and Canaccord
Genuity, where he was a Director in the Metals and
Mining Research team. Prior to this he worked at
Cazenove Capital and Fidelity. Jeremy holds an MBA
from the Saïd Business School at the University
of Oxford and a BA (Hons) from the University
of Nottingham. Jeremy has also been a CFA®
charterholder since 2011.
Terence Fitzpatrick
Group General
Manager-Technical
Cillian Murphy
Marketing Manager
Rajan Subberwal
General Counsel
Terence Fitzpatrick is a graduate of University of
Ulster (Mech. Eng.). He worked as Project Manager
and then Technical Director of Kenmare from 1990
to 1999. He was responsible for the development of
the Ancuabe Graphite Mine in Mozambique, which
achieved completion in 1994. He was appointed
to the Board of Kenmare in 1994. He served as a
Non-Executive Director from 2000 to 2008. He was
appointed as Technical Director in February 2009.
Cillian Murphy joined Kenmare in October 2016. He
graduated with a BSc in Economics and Finance
from University College Dublin. Cillian initially worked
in Kenmare’s Investor Relations and Corporate
Development team before becoming a Marketing
Executive. He has been Marketing Manager since
January 2020.
Rajan Subberwal joined Kenmare in June 2013 as
its first General Counsel. He had previously worked
at Sullivan & Cromwell LLP, London, since 2001,
where for many years he advised Kenmare on the
commercial and financing aspects of the Moma
Project. Prior to S&C, he trained with Clifford Chance
LLP in London and Frankfurt. Rajan is qualified to
practise law in Ireland, England and Wales and New
York. He has a BA from Oxford University, an LLB
from the University of London and an LLM from
Harvard Law School.
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Kenmare Resources plc
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83
CORPORATE GOVERNANCE REPORT
The Directors recognise the importance of corporate governance and ensure that appropriate corporate governance procedures are in place. In the
financial year under review, the Directors have complied with all relevant provisions of the 2018 UK Corporate Governance Code (the “Code”) issued
by the UK’s Financial Reporting Council (FRC) in July 2018. A copy of the Code can be obtained from the Financial Reporting Council’s website,
www.frc.org.uk. This report, together with the other reports in the “Governance” part of this document, explains how the principles of the Code have
been applied.
Board leadership and company purpose
BOARD OF DIRECTORS
Role of the Board
The Board is collectively responsible for the leadership, oversight, control, development
and long-term success of the Group. It works with management to set corporate
vision and develop strategy, with the aim of creating long term sustainable value for
its shareholders, while recognising and discharging wider responsibilities to other
stakeholders, including employees, customers, suppliers and the communities in which it
operates, and to the environment. The Board should constructively challenge and hold to
account the management team, in regard to both operational and financial performance
of the Group and wider sustainability goals. It is also responsible for ensuring that
accurate and understandable information is provided about the Group to shareholders
and finance providers and other stakeholders on a timely basis.
The Board’s responsibilities include:
ensuring that appropriate management, development and succession plans are in
place;
reviewing the environmental and health and safety performance of the Group;
approving the appointment of Directors’ and their remuneration and severance;
ensuring that satisfactory dialogue takes place with shareholders;
understanding the views of the Group’s other key stakeholders and keeping
engagement mechanisms under review so that they remain effective;
assessing the basis on which the Group generates and preserves value over the long-term;
assessing and monitoring culture;
providing a means for the workforce to raise concerns in confidence and reviewing its
operation;
carrying out a robust assessment of the Group’s emerging and principal risks; and
monitoring the Group’s risk management and internal control systems and reviewing
their effectiveness.
SUPPORTED BY
Matters reserved for
the Board
The Board has a formal schedule of
matters specifically reserved for its
decision, including:
strategic decisions;
risk management and internal
controls;
acquisitions and capital
expenditure above agreed
thresholds;
approval of interim and final
dividends and share purchases;
changes to the capital structure;
tax and treasury oversight;
approval of half-yearly and annual
financial statements;
budgets and matters currently or
prospectively affecting the Group
and its performance;
Board and Committee
membership; and
Remumeration policy
Audit & Risk
Committee
Monitors the
appropriateness and
integrity of the Group’s
financial reporting, external
audit, internal audit and risk
management processes.
Nomination
Committee
Evaluates the composition
of the Board to ensure
an effective balance of
skills and experience, and
considers succession
planning for Directors and
Senior Executives.
Remuneration
Committee
Determines the policy
for remuneration of the
Chairman, the Executive
Directors, the Company
Secretary and such other
executive management as it
is designated to consider.
Sustainability
Committee
Oversees the
implementation of the
Group’s sustainability-
focused corporate policies.
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CORPORATE GOVERNANCE
Composition and operation
of the Board
The Board consists of 10 Directors, of which
two are Executive and eight are Non-Executive.
Biographical details, including each Director’s
date of appointment, are set out on pages 80
and 81. The majority of the Board is made up
of independent Non-Executive Directors. The
Chairperson is required to be a Non-Executive.
The Board has delegated responsibility for
management of the Group to the Managing
Director and the management team.
A clear division of responsibility exists between
the Chairman, whose principal responsibility is
the effective running of the Board and is not
responsible for executive matters regarding
the Group’s business, and the Managing
Director, whose principal responsibility is
running the Group’s business. A summary of
the role and responsibilities of each of the
Chairman and the Managing Director can be
found on the Company website at
www.kenmareresources.com/about-us/
corporate-governance.
The Board has delegated some of its
responsibilities to four Committees of the
Board: Audit & Risk, Remuneration, Nomination
and Sustainability. Each Committee has written
terms of reference that set out its authorities
and responsibilities.
Non-Executive Directors
S. McTiernan
P. Bacchus
E. Dorward-King
C. Fonseca
E. Headon1
T. Keating2
G. Martin
G. Smith
D. Somers3
Executive Directors
M. Carvill
T. McCluskey
Company Secretary
D. Corcoran4
These terms of reference are available for
review at the Company’s registered office and
on the Company’s website
www.kenmareresources.com/about-us/
corporate-governance.
In May 2020, Elizabeth Headon who had served
as a Non-Executive Director for nine years,
retired from the Board and Peter Bacchus was
appointed as the Senior Independent Non-
Executive Director in her place.
The appointment of Deirdre Somers in August
2020 has restored female representation on
the Board to 20%. The diversity policy on Board
appointments is set out in the Nomination
Committee Report on page 90.
In March 2021, Tim Keating resigned as a
Director and Sameer Oundhakar was appointed
to the Board having been nominated by African
Acquisitions Sarl, the Company’s largest
shareholder and a company controlled by OIA.
All Directors offer themselves for re-
appointment at the Company’s Annual General
Meeting. Directors may take independent
advice in the furtherance of their duties at the
Company’s expense.
Board meetings
The Board meets regularly to ensure that
all its duties are discharged effectively. All
Directors are expected to prepare for and
attend meetings of the Board and the AGM. If
a Director is unable to attend a Board meeting
in person, teleconference arrangements
are available to facilitate participation. As a
result of the COVID-19 pandemic, most Board
and Committee meetings in 2020 were held
virtually. In the event that a Board member
cannot attend or participate in the meeting,
the Director may discuss agenda items with
the Chairman, Managing Director or Company
Secretary in advance of the meeting.
A schedule of Board and Committee meetings
is circulated to the Board for the following year.
A more detailed agenda and Board materials
are made available electronically in the week
preceding the meeting.
During 2020, the Board held nine meetings.
Details of the Directors’ and Secretary’s
attendance at Board and Committee meetings
are set out below:
Full Board
B
A
Audit & Risk
Committee
B
A
Remuneration
Committee
B
A
Nomination
Committee
B
A
Sustainability
Committee
B
A
9
9
9
9
3
9
9
9
3
9
9
9
9
9
9
9
3
9
9
9
3
9
9
8
5
3
2
5
1
5
3
4
4
4
3
4
4
4
4
3
4
4
4
3
3
4
7
7
4
7
7
7
7
4
7
6
5
3
2
5
1
4
4
3
4
4
7
6
1. Ms. E. Headon retired on 13 May 2020.
2. Mr. T. Keating resigned on 16 March 2021.
3. Ms. D. Somers was appointed on 19 August 2020.
4.
In attendance only.
Column A indicates the number of meetings held during the period the Director was a member of the Board and/or Committee
Column B indicates the number of meetings attended during the period the Director was a member of the Board and/or Committee
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CORPORATE GOVERNANCE REPORT CONTINUED
Board activities in 2020
Topic
Key activities and discussions
Culture
Conducted a corporate culture survey in order to better define the Group culture.
Approved policies on Anti-bribery, Diversity & Inclusion, Employment, Human Rights and Whistleblowing.
Continued to promote Kenmare’s values across the Group.
Identified areas for strengthening of the Group culture.
Corporate Issues
Received a report at every Board meeting from the Investor Relations manager.
Convened an EGM to approve the migration of the Company’s securities from CREST to Euroclear Bank.
Revised the Company’s Articles of Association in line with best practice for listed companies in Ireland and to deal with
the CREST migration.
Strategy
Conducted an overall strategic review covering corporate strategy, future mining plans, impact of COVID-19 on the
market and on finances, future landscape of the market, power sources, capital allocations, competitive landscape and
the political and economic situation in Mozambique.
Received and reviewed regular departmental strategic and corporate strategy updates.
Operations
Received reports and presentations from senior management at every Board meeting regarding business operations,
Finance and Risk
Management
development projects and marketing information.
Reviewed the conduct of the WCP C construction project and the move of WCP B to Pilivili.
Considered power supply projects for the Moma Mine.
Considered regular reports on and received an expert presentation on the Mozambican security situation.
Received reports and presentations from the Financial Director at every Board meeting regarding the Group’s financial
performance.
Approved the Group’s Annual Report and Accounts for 2019 and Half Year Results to 30 June 2020.
Approved the Group’s 2021 budget.
Approved payment of the Company’s interim and final dividends.
Considered the impact of the COVID-19 pandemic on the Group’s finances and prospects.
Considered investment of funds.
Received regular reports from the Chairman of the Audit & Risk Committee.
Reviewed the principal risks and uncertainties facing the Group.
Health, Safety and
Environment
Board Development
and Succession
At every Board meeting, health, safety and environmental updates for operations and the community were provided by the
Chief Operations Officer.
Reviewed plans to minimise COVID-19 infections at Moma.
Approved Kenmare’s Energy and Climate strategy, Water strategy & Land Management Strategy.
Received regular reports from the Chair of the Sustainability Committee.
Received regular reports from the Chairman of the Nomination Committee and the Chairman of the Remuneration
Committee.
Approved the appointment of Ms. D. Somers as a Non-Executive Director.
Considered the findings of the internal Board evaluation.
Independence of Non-Executive Directors
The Board has carried out an evaluation of the
independence of its Non-Executive Directors,
taking account of the relevant provisions of
the Code and whether the Non-Executive
Directors discharge their duties in a proper
and consistently independent manner, and
constructively challenge the Executive
Directors and the Board.
In March 2021, Mr. S. Oundhakar was appointed
to the Board by African Acquisition Sarl, as
provided for under the Subscription and
Relationship Agreement entered into in 2016.
86 Kenmare Resources plc
Annual Report and Accounts 2020
As a result, Mr. S. Oundhakar is not considered
to be independent. The Board is satisfied
that each of the other current Non-Executive
Directors fulfils the independence requirements
of the Code.
Mr. S. McTiernan has been Chairman of the
Company since June 2014. On his appointment
as Chairman, Mr. S. McTiernan met the
independence criteria as set out in the Code.
Senior Independent Director
Mr. P. Bacchus is the Group’s Senior
Independent Director (SID). The principal role
of the SID is to provide a sounding board for
the Chairman and to act as an intermediary
for other Directors and shareholders. The
SID is responsible for the appraisal of the
Chairman’s performance throughout the year.
He is also available to meet shareholders upon
request, in particular if they have concerns
that cannot be resolved through the Chairman
or the Managing Director. A summary of the
role of the SID can be found at
www.kenmareresources.com/download_file/905.
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CORPORATE GOVERNANCE
Analysis of 2020 evaluation
The evaluation indicated a high level of
satisfaction with the composition, performance
and effectiveness of the Board, its Chair and
Committees. It found that there are good
communications both within the Board/
Committees and with management. A number
of key focus areas were identified for the Board
to consider. These include:
Continued consideration of succession
planning at Board and management level
Increased allocation of Board meeting time
to consideration of strategic issues
Increased diversity on the Board
Detailed periodic reviews by the Board into
principal business risks
There were also some procedural matters
raised such as availability of time for Board
discussions and visits to Moma (when
permitted).
Arising from the evaluation process, a number
of actions were agreed by the Board which
will be implemented by the Chairman during
the current year. As part of the process, the
Board Skills Matrix was updated and potentially
beneficial skill sets for any future Board
appointees were identified. The evaluation also
assisted in drawing up Board objectives for the
current year and planning professional training
for the Directors.
Induction and Development of Directors
New Non-Executive Directors undertake a
structured induction process which includes a
series of meetings with management, a briefing
session with internal and external solicitors on
the responsibilities of a Director under Irish
law and applicable stock exchange rules and a
session with the Company Secretary regarding
corporate policies.
Directors’ Compliance Statement
The Directors have drawn up a Compliance
Policy Statement as defined in section
225(3)(a) of the Irish Companies Act 2014.
Arrangements and structures have been put
in place that are, in the Directors’ opinion,
designed to secure material compliance with
the Company’s relevant obligations. These
arrangements and structures were reviewed
during the financial year to ensure they
remained appropriate and comprehensive. The
Directors’ Compliance Statement is set out in
full in the Directors’ Report on page 126.
Share Ownership and Dealing
Details of the Directors’ interests in Kenmare
shares are set out in the Remuneration Report
on page 106. The Kenmare Resources plc
Dealing Policy applies to the Directors and
to all employees. Under this policy, Directors
and employees may not deal in Kenmare
shares while they are in possession of inside
information about the Group. Kenmare also
operates a Dealing Code which applies to the
Directors and to employees who are able to
access restricted information about the Group.
Under the Dealing Code, Directors and relevant
employees are required to obtain clearance
from the Company before dealing in Kenmare
shares and persons discharging managerial
responsibilities are prohibited from dealing in
the shares during closed periods, as defined by
the Dealing Code.
Company Secretary & Legal
The Directors have access to the advice
and services of the Company Secretary, Ms.
D. Corcoran, who advises the Board and
Committees on governance matters. The
Company’s Articles of Association provide that
the appointment or removal of the Company
Secretary is a matter for the Board.
Kenmare’s General Counsel and Company
Secretarial team provide advice, guidance
and support to executive and operational
management and work closely with them
to provide training to our employees.
Together they provide support on a range of
matters including establishing policies and
procedures, providing compliance training and
communications, providing legal advice on
compliance and business issues, monitoring
and investigating whistleblower calls and
ensuring the Group is informed of any changes
to regulation and/or reporting requirements.
During 2020, workflows included CREST
migration, third party due diligence, induction
training and policy updating.
Composition, succession
and evaluation
Board Evaluation
In accordance with provisions of the Code,
a performance evaluation of the Board is
carried out annually, and facilitated externally
every third year. In 2018, the comprehensive
performance evaluation was conducted by the
Institute of Directors in Ireland (IOD), which
has no connection with the Company. In 2020,
the performance evaluation process was
conducted internally.
2020 Board Evaluation Process
In December 2020 and early 2021, Mr. P.
Bacchus, the Senior Independent Non-
Executive Director, appraised the performance
of the Board, subcommittees and each of the
Non-Executive Directors.
The various phases of the internal performance
evaluation process are set out below:
In December 2020, a questionnaire
covering key aspects of Board and
Committee effectiveness, including the
composition, the content and conduct of
meetings, interaction with management,
the effectiveness of the Chair and the
Directors’ continuing education process,
was made available online to all Directors.
This was completed on an anonymous
basis to facilitate openness in scoring and
comments;
Completed questionnaires, including views
on performance and recommendations
for improvement, were received by the
Company Secretarial team in January 2021
and an analytics report was provided to
Mr. P. Bacchus, as the Senior Independent
Director;
Follow-up discussions were held with each
of the Directors individually to clarify any
points raised in the questionnaire and
to evaluate the performance of fellow
Directors and the Senior Independent
Director then prepared separate summary
reports on the Board and its Committees;
Each of the Committees considered the
summary report as part of the review
of its own performance and terms of
reference and recommended any changes
it considered necessary to the Board for
approval;
The Board formally concluded on its
own performance, on the performance of
Committees and on the performance of
individual Directors, including the Chairman.
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CORPORATE GOVERNANCE REPORT CONTINUED
Review and Effectiveness of the Risk
Management and Internal Control
Systems
The Board conducted a review of the
effectiveness of the Group’s risk management
and internal controls systems, including
financial, operational and compliance controls,
and as part of this it obtained a report from the
internal auditor. In the course of this review the
Board did not identify nor was it advised of any
failings or weaknesses which it determined to
be significant.
Compliance Policies & Training
Kenmare insists on honesty, integrity
and fairness in all aspects of its business
and expects the highest standards of
professionalism and ethical conduct to be
maintained in all its activities. The Kenmare
Group has in place detailed policies and
procedures on a range of relevant areas such
as anti-bribery, diversity & inclusion, health and
safety, environment, human rights and business
ethics. Depending on the nature of their role,
Directors and employees of the Group receive
more detailed training on those policies both
as part of their induction process and our
ongoing training programme. An e-Learning
programme which includes topics such as
insider dealing, anti-bribery and whistleblowing
has been put in place, initially for Directors and
administrative staff with a plan to roll this out to
site employees, if it is successful.
Whistleblowing
Kenmare promotes a culture of openness and
accountability and encourages staff to report
suspected wrongdoing as soon as possible, in
the knowledge that their concerns will be taken
seriously and investigated as appropriate,
and that their confidentiality will be protected
wherever possible. Concerns can be raised
with a line manager, externally with SafeCall,
an independent external reporting line or with
the Chairman of the Audit & Risk Committee
or our General Counsel. Employees may raise
concerns anonymously if they wish. Kenmare’s
policies make clear that retaliation against any
employee who raises a genuine concern is
prohibited. Where concerns are raised, they are
investigated in an appropriate and independent
manner.
Stakeholder Engagement
Kenmare has adopted a Stakeholder
Engagement Policy (available on its website
at www.kenmareresources.com/sustainability/
policies) pursuant to which it will, inter alia:
Engage openly and honestly with its key
stakeholders (including shareholders) using
appropriate communication tools and in a
regular and timely manner, having regard to
commercial sensitivities; and
Consult and listen to all its stakeholders as
appropriate, understand their aspirations,
concerns and their views within the context
of its decision-making processes.
Community Engagement
Kenmare values highly its strong relationship
with its host communities. Our stakeholder
engagement plan is updated annually and
reflects the changing dynamics in the
relationship between the Mine and the
community. We work with local Communities
through the Kenmare Moma Development
Association (KMAD). Read more on page
74 or read the KMAD Annual report at www.
kenmareresources.com/sustainability/kmad.
In January 2020, Kenmare hosted a site visit
for the Chairman, the Sustainability Committee
and Executive Directors to its Moma Mine.
Committee members took the opportunity to
meet with management, staff and community
members and to visit some of the projects
being implemented by KMAD. As a result of
the COVID-19 pandemic and resulting travel
restrictions, the Directors were unable to visit
Moma later in the year.
Workforce Engagement
The Board has designated Mr. G. Martin as
the Non-Executive Director responsible for
engagement with the Group’s workforce.
In connection with this role, in early 2020,
Mr. G. Martin met with the Group’s senior
management in Dublin and Maputo, as well
as Mine management and staff at Moma. As
a result of the COVID-19 pandemic, Mr. G.
Martin was unable to visit the Moma Site or
the Dublin office later in the year as planned
but held teleconference calls with employees
in both locations in November 2020 to discuss
any concerns they might have or issues they
wished to raise with the Board.
External experts may be invited to attend
certain Board or Committee meetings to
address the Board (or relevant Committee, as
the case may be) on relevant industry matters
and on developments in corporate governance,
risk management and executive remuneration.
Training and development requirements for
the Directors are discussed in the evaluation
process and Directors are encouraged to
undertake appropriate training on relevant
matters. In addition, all Directors have access to
an online database which is regularly updated
with relevant publications and changes in
legislation.
Audit, risk and internal control
Board’s Approach to Risk Management
and Internal Control
The Board of Directors has responsibility for
the Group’s system of internal control. This
involves an ongoing process of identifying,
evaluating and managing the significant
risks faced by the Group and reviewing the
effectiveness of the resultant system of internal
control that has been in place throughout the
financial year and up to the date of approval of
the Annual Report and Accounts. The Board
has delegated to management the planning
and implementation of the system of internal
control throughout the Group. The system
of internal control is designed to provide
reasonable, but not absolute, assurance against
material misstatement or loss and accords
with Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting (September 2014). The key elements
of the system include the following:
The Board, in conjunction with
management, identifies the major risks
faced by the Group and determines the
appropriate course of action to manage
these risks;
Risk assessment and evaluation are an
integral part of the management process
throughout the Group. Risks are identified
and evaluated and appropriate risk
management strategies are implemented;
The Board maintains control and direction
over appropriate strategic, financial,
organisational and compliance issues, and
has put in place an organisational structure
with defined lines of responsibility and
authority; and
Capital expenditures are controlled centrally
and, if in excess of predefined levels, are
subject to approval by the Board.
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CORPORATE GOVERNANCE
In November 2020, the Company conducted
its first, Group-wide, employee engagement
survey. The survey catered to all levels of
employee literacy and was made available
in English and Portuguese. There was high
levels of participation with 92% (1,393 people)
of the workforce taking part. 97% of Kenmare
employees rated themselves as engaged or
highly engaged in their roles. The results from
the survey will be used to help devise and
implement companywide actions to positively
influence organisational culture.
Shareholder Engagement
Communications with shareholders are given
high priority. Annual Reports and Accounts
are sent to shareholders. Major transactions
and production guidance are also notified to
the market, and the Company’s website www.
kenmareresources.com, provides the full text of
all announcements. The website also contains
annual and interim reports and investor
presentations. In addition, the Company
maintains several social media accounts such
as Twitter, LinkedIn and Facebook, which are
regularly updated with project and corporate
news.
The following Corporate Governance
documents are available on
www.kenmareresources.com:
Directors’ remuneration policy
Terms of reference of the Nomination,
Remuneration, Audit & Risk and
Sustainability Committees together with
their most recent reports and meeting
attendance details
Memorandum and Articles of Association of
the Company
Policies on Health & Safety, Human
Rights, Business Ethics, Anti-Bribery,
Whistleblowing, Employment, Diversity
& Inclusion, Freedom of Association,
Community Engagement and Investment
and Stakeholder Engagement
Whistleblower hotline contact numbers
Principal risks and uncertainties
Statement of payments to governments
Our website contains the following information
for investors:
Annual and interim reports and
presentations
Share price information
Regulatory news
FAQs on our debt financing
Details of meetings and voting
Circulars
Details of major shareholders
FAQs for shareholders about their holdings
Where necessary, the Board and Committee
Chairpersons engage with shareholders on
specific topics and, where relevant, provide
feedback to other Directors. The Chairman and
Senior Independent Director are also available
throughout the year to meet shareholders on
request.
The Board is kept informed of the views of
shareholders through the Executive Directors’
attendance at investor presentations and
results presentations. Relevant feedback from
such meetings, investor relations reports and
brokers notes are provided to the entire Board
on a regular basis. The Board also receives
briefings from the Company’s brokers.
Capital Markets Days and site visits to the
Moma Mine for major shareholders are held
periodically and feature presentations by the
Executive Directors. These events are attended
by members of the Board, as well as various
brokers, analysts and potential investors.
On an ongoing basis, our Investor Relations
team acts as a focal point for contact with
investors and they provide information and
deal with queries as they arise. The Company
Secretary engages annually with proxy
advisors in advance of the Company’s AGM.
The Company’s AGM affords shareholders the
opportunity to question the Chairman and the
Board.
OIA Relationship Agreement
OIA (formerly the State General Reserve
Fund (“SGRF”)) currently does not fall within
the definition of controlling shareholder
under the Listing Rules as it holds less than
30% of Kenmare’s equity. However, the
Company and African Acquisition Sarl, the
vehicle through which SGRF invested in the
Company, have entered into arrangements
equivalent to those that would be expected
to be in place between a listed company and
its controlling shareholder. This is to ensure
the independence of the Company from that
shareholder. In particular, the Company entered
into a subscription and relationship agreement,
dated 18 June 2016, with African Acquisition
Sarl that, amongst other things, sets forth the
relevant arrangements.
Substantial Holdings
The Company is not owned or controlled
directly or indirectly by any government or
by any corporation or by any other natural
or legal person severally or jointly. The major
shareholders do not have any special voting
rights. Details of the substantial holdings as
at 31 December 2020 and 26 March 2021 are
provided on page 124.
Stock Exchange Listings
Kenmare, which is incorporated in Ireland and
subject to Irish company law, has a premium
listing on the London Stock Exchange (LSE)
and a secondary listing on Euronext Dublin
(formerly the Irish Stock Exchange).
AGM Update
The AGM is an opportunity for the Directors
to deliver presentations on the business and
for shareholders, both institutional and private,
to question the Directors directly. Generally,
all Directors attend the AGM and are available
to meet with shareholders. Notice of the AGM,
proxy statement and the Annual Report and
financial statements are sent to shareholders
at least 21 days before the meeting. A separate
resolution will be proposed at the AGM on each
separate issue including a particular resolution
relating to the adoption of the Directors’
Report and Auditor’s Report and the financial
statements. Details of the proxy votes for and
against each resolution, together with details
of votes withheld, are announced after the
result of the votes by hand. These details are
published on the Company’s website following
the conclusion of the AGM. At the AGM held on
13 May 2020, there were no material votes cast
against any resolutions.
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Kenmare Resources plc
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89
NOMINATION COMMITTEE REPORT
Chairman’s Overview
I am pleased to present the report of the Nomination Committee for 2020. During the year, the
Committee met four times and the main areas of focus were Board renewal, succession planning
at Board level, the composition of the Board’s Committees and diversity on the Board. This report
describes how the Committee has fulfilled its responsibilities during the year under its Terms of
Reference and under the relevant requirements of the UK Corporate Governance Code 2018.
The Committee considered the appointment of Ms. Deirdre Somers as a Non-Executive Director,
the result of which was her co-option to the Board in August 2020.
Board renewal
During 2020 and early 2021, the Committee considered the structure, size, skills and composition
of the Board and its Committees. The Committee maintains a skills matrix of the current Board to
identify areas for enhancement and to highlight skills that may be required, or which need to be
replaced due to Board retirements. Following the retirement of Ms. E. Headon in May 2020, the
Committee considered that the Board would be enhanced by the appointment of an additional
Director with suitable financial and capital markets experience.
An external recruitment consultant, The Effective Board LLP (which has no connection with the
Company), was engaged to assist in the process which resulted in the co-option of Ms. D. Somers to the
Board in August 2020. This process is outlined on page 91. Ms. D. Somers has over 20 years’ experience in
senior management positions, having served as Chief Executive of the Irish Stock Exchange (“ISE”) from
2007 to 2018 and, prior to that, as its Director of Listing. Ms. D. Somers led the ISE’s transformation to a
highly profitable entity with global specialisms culminating in its sale in March 2018 to Euronext NV. She
also held the position of President and Board Chair of the Federation of European Securities Exchanges
from 2015 to 2018. Ms. D. Somers brings a wealth of governance experience at the highest level and
her skillset complements the skills of her fellow Directors to provide a robust balance of knowledge,
experience and diversity on the Board. This should benefit the Company greatly in the years ahead.
PETER BACCHUS
Chairman of the
Nomination Committee
Principal responsibilities
of the Committee:
Regularly reviewing the structure, size,
composition and length of service of the
Board and making recommendations
to the Board with regards to changes
considered advisable;
Assessing the effectiveness and
performance of the Board and Committees
including consideration of the balance
of skills, knowledge, independence,
diversity and experience of the Board and
Committees, and other factors relevant to
its effectiveness;
Considering succession planning for
Directors and other Senior Executives,
taking into account the challenges and
opportunities facing the Group, what skills
and expertise are needed in the future, and
ensuring a diverse pipeline for succession;
Identifying, and nominating for the
approval of the Board, candidates for
appointment as Directors and ensuring
that there is a formal, rigorous and
transparent procedure for appointment;
Reviewing the results of the Board
performance evaluation process that
relate to the composition of the Board, its
diversity and how effectively the members
of the Board work together; and
Reviewing periodically the time input
required from a Non-Executive Director.
The standard terms of contract for Non-
Executive Directors are available on
request from the Company Secretary, at the
Company’s registered office during normal
business hours, and at the AGM (for 15
minutes prior to the meeting and during the
meeting).
See the Committee’s terms of reference at
www.kenmareresources.com/application/
files/4715/7004/3586/2019-10-02_Terms_of_
Reference_-_Nominations_Committee.pdf.
Membership and meetings
In May 2020, Dr. E. Dorward-King joined
the Committee. In December 2020, Mr. S.
McTiernan stepped down as Chairman and
member of the Committee and Mr. P. Bacchus
joined and took over the Chair. As a result, the
Nomination Committee now consists of Mr. P.
Bacchus, Mr. G. Martin, Mr. G. Smith and
Dr. E. Dorward-King, all of whom are
Independent Non-Executive Directors. Dr. E.
Dorward-King attended all meetings held after
she became a member of the Committee. Mr.
S. McTiernan attended all of the Committee
meetings held in 2020 during the period in
which he was a member of the Committee.
Name
Mr. P. Bacchus
Mr. G. Martin
Mr. G. Smith
Dr. E. Dorward-King
Role
Chairperson
Member
Member
Member
90 Kenmare Resources plc
Annual Report and Accounts 2020
Independent
Date of Appointment to Committee
Meetings Attended
Yes
Yes
Yes
Yes
2/12/2020
25/05/2017
12/03/2013
13/05/2020
N/A
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Ensuring that the Board continues to have the
requisite skills to support the Company’s strategy
will remain a priority for my tenure as Chairman.
I will also focus on the strategy for further
enhancing the Board’s diversity. As shown on
page 81, the Board is balanced in terms of tenure
with four Non-Executive Directors in their first
term of three years; two in their second term and
two undertaking a third term of three years.
Succession
Each year the Committee considers the
leadership needs of the Group and succession
planning for senior management roles including
the Managing Director and Financial Director.
During the year, the Committee received
updates from management on succession
planning activities through the Group. Board
members regularly engage with members of
the senior management team who present at
Board and strategy meetings.
Committee composition
During the year, the Committee considered and
made recommendations to the Board regarding
changes to the composition of the Board’s
Committees. Dr. E. Dorward-King succeeded Ms. E.
Headon as Chair of the Sustainability Committee
and became a member of the Nomination
Committee. Mr. C. Fonseca became a member
of the Audit & Risk Committee. Mr. S. McTiernan
stepped down from his position as a member
of both the Remuneration and Nomination
Committees and as Chair of the Nomination
Committee. The current committee memberships
of each Director are set out on pages 80 to 81.
Diversity and inclusivity
Kenmare recognises the benefits of diversity and
its objective to achieve greater diversity at Board
and senior management level, as well as across
the wider workforce. This is supported by the
Group’s Diversity and Inclusion Policy. The Board
keeps this policy under review to ensure that it
is effective in achieving diversity in its broadest
sense, having regard to experience, age, gender,
religious beliefs, sexual orientation, race, ethnicity,
disability, nationality, background and culture and
instructs any search consultants it engages to
consider this in sourcing candidates.
While the Board will always seek to appoint
candidates on merit against objective criteria,
greater diversity is actively considered when
making Board appointments. Gender and
diversity will continue to be given careful
consideration when shortlisting candidates as
part of the process of Board refreshment and
renewal, as it was in 2020. We were therefore
pleased to announce the appointment of
Ms. D. Somers to the Board in August 2020.
Following Mr. G. Smith’s retirement from the
Board at the 2021 Annual General Meeting,
female representation on the Board will be 25%
excluding Mr. S. Oundhaker (non-independent).
The Board is working towards having female
Directors represent one third of the Board
as soon as possible and by no later than our
Annual General Meeting in 2022.
The Board and Executive Management is
committed to increasing female representation in
senior leadership positions across the Group. The
Group is also making progress with this objective,
with 11% of the Executive Committee being
female and a further 7 women in their direct
reports. The Board and management continue to
focus on evolving and implementing strategies
for recruiting and developing colleagues in ways
that promote diversity and inclusion.
Additional Directorships
During the year, Dr. E. Dorward-King and
Ms. D. Somers were appointed as Non-Executive
Directors of several other companies. Prior to
accepting these appointments, each of Dr. E.
Dorward-King and Ms. D. Somers discussed
the matter with the Chairman of the Board who
was satisfied that the responsibilities resulting
from these new positions would not adversely
impact on their respective time commitments to
Kenmare, and would be likely to enhance their
respective abilities to contribute to the long-term
success of the Group.
Board effectiveness
In accordance with provisions of the Code, a
performance evaluation of the Board is carried
out annually and facilitated externally every third
year. In 2018, an external performance evaluation
was conducted by the Institute of Directors
in Ireland (IOD). The IOD has no connection
with Kenmare. In 2020, in my role as Senior
Independent Director, I conducted an internal
performance evaluation. Further details are set
out in the Corporate Governance section of the
report. I am pleased to report that the results of
the 2020 evaluation process were positive and
that a number of actions were agreed which will
be implemented during the current year. These
are designed to drive Board effectiveness in
Kenmare as the Group continues to implement
its strategy of growth, margin expansion and
delivering shareholder returns.
Committee effectiveness
The Committee’s performance and effectiveness
was also considered as part of the internal
evaluation. I am pleased to confirm that the
Committee continues to operate effectively.
Peter Bacchus
Chairman of the Nomination Committee
31 March 2021
CORPORATE GOVERNANCE
Process for Board
appointments:
01The Committee approves a role
specification based on skills and
experience required and the
Diversity Policy
appointed
02An independent search agent is
03The Committee considers a
longlist and then a shortlist of
potential candidates and holds
interviews
invited to meet with all Board
members
04The preferred candidate is
05The Committee makes a
recommendation to the
Board for consideration and
references are followed up
06Following Board approval, the
appointment is announced in
line with regulations and an
induction process takes place
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30316 1 April 2021 5:56 pm V9NameRoleIndependentDate of Appointment to CommitteeMeetings AttendedDr. E. Dorward-KingChairpersonYes4/11/2019 Mr. C. FonsecaMemberYes2/10/2019 Mr. G. MartinMemberYes2/10/2019 Mr. T. KeatingMemberNo2/10/2019 Chairperson’s OverviewI am pleased to present the report of the Sustainability Committee for 2020. During the year, the Committee met seven times and the main areas of focus were as set out below. This report describes how the Committee has fulfilled its responsibilities during the year under its Terms of Reference and under the relevant requirements of the UK Corporate Governance Code 2018.Areas of focus in 2020 Area of focusSustainability Committee actionHealth & Safety Considered management’s report on Health and Safety of Employees and the Community around the Moma Mine at every meeting. Reviewed management’s plans to minimise COVID-19 exposure at the Moma Mine.Environment Reviewed and approved the Kenmare Energy and Climate strategy. Reviewed the arrangements for the future Moma Mine closure. Reviewed the Company’s role in environmental audit and stewardship. Reviewed and approved the Kenmare Water Strategy. Carried out a review of Kenmare’s geotechnical management. Reviewed and approved the Kenmare Land Management Strategy.Community & Social Affairs Considered management’s report on Community & Social Affairs & Community Development at every meeting. Reviewed and approved the Kenmare Community Strategy. Reviewed Security, Human Resources, Engagement and Human Rights at the Moma Mine. Reviewed community health metrics. Received several updates (including one from an expert) on the political situation in Mozambique and its country risk rating.Employees Approved arrangements for an employee engagement survey and reviewed the survey findings in early 2021. Monitored health and safety incidents and initiatives at the Moma Mine.ESG Targets Reviewed and approved the Company’s 2021 public ESG targets. Reviewed and approved Executives’ ESG targets for 2021 and reviewed achievement of ESG targets for 2020.Terms of Reference Considered its terms of reference to ensure they remain appropriate for the Group’s needs. The terms of reference are available on the Kenmare website at www.kenmareresources.com/application/files/2215/7004/3355/2019-10-02_Terms_of_Reference_-_Sustainability_Committee.pdfSUSTAINABILITY COMMITTEE REPORTELAINE DORWARD-KING Chair of the Sustainability CommitteePrincipal responsibilities of the Committee: Oversee management of health, safety, security, social and environmental risks, and facilitate progressive employment practices on our operating sites; Facilitate fair land access, compensation, and timely rehabilitation arrangements in our mining areas; Advocate for and promote community development, particularly economic, healthcare and education in our host communities; Incorporate management of climate change and other sustainability factors into Group plans, with external reporting where appropriate to recognised international norms; and Monitor socio-political developments within the region and Mozambique.See the Committee’s terms of reference at www.kenmareresources.com/about-us/corporate-governance/sustainability-committeeMembership and meetingsIn May 2020, Dr. E. Dorward-King succeeded Ms. E. Headon as Chair of the Committee. Ms. E. Headon attended all Committee meetings prior to her retirement. The Sustainability Committee now consists of Dr. E. Dorward-King (Chair), Mr. C. Fonseca and Mr. G. Martin, all of whom are Non-Executive Directors. 92Kenmare Resources plc Annual Report and Accounts 2020Kenmare-AR-2020.indd 92Kenmare-AR-2020.indd 9201/04/2021 17:58:0801/04/2021 17:58:08 CORPORATE GOVERNANCE
2020 sustainability performance
We commend the team for their continued
focus on health and safety, especially in this
unprecedented year with COVID-19 and
achieving the lowest All Injury Frequency Rate
in the history of the company. The roll-out of
a new risk assessment process and increased
quality leadership time in the field is starting to
show benefit.
The Committee had the opportunity to visit the
Moma operations in January 2020 and engage
with the workforce, visit local community
leaders, observe development projects, and
receive an update on environmental matters
including land rehabilitation and biodiversity.
This visit helped to inform the work of the
Committee during the year.
This year saw the Committee oversee
significant focus on setting direction with
regard to managing social and environmental
risk and enhancing structure to deliver
performance. This is reflected in the
Committee’s endorsement of a number of
strategies: Energy and Climate Change, Land
Management, Water Stewardship and External
Relations and the creation of a new role, the
Head of Sustainability, to lead this change. The
Committee welcomed the appointment of Mr. K.
Ramsey, an experienced sustainability expert, to
this role in April 2020.
Our commitment to further disclosure and
transparency is reflected in our disclosure of
climate change data through the CDP Climate
Change questionnaire and the development of
a range of public targets.
Significant progress was made on increasing
gender diversity in the workforce with women
representing 10% of employees by the end of
2020, compared to 8% at the end of 2019. Our
workforce comprised 97% Mozambican and
62% of our workforce live locally to the Mine.
The team completed their first comprehensive
Materiality Assessment which will guide the
sustainability strategy for the Company and
guide the content of Kenmare’s first stand-
alone GRI aligned Sustainability Report.
We made progress working with our major
suppliers to develop capability and support
their adoption of our policies and conducted a
preliminary audit in this regard.
Committee effectiveness and
priorities for 2021
As outlined in the Corporate Governance
Report, during 2020 there was an internal
evaluation of the Committee’s performance and
effectiveness. I am pleased to confirm that the
Committee continues to operate effectively.
Priorities for the Committee during 2021
will be to continue to provide oversight and
guidance on sustainability risk management
and performance. In particular it will be the first
year of implementation of the Water, Land and
Energy strategies.
Discussions during 2021 will include
implementation of the recommendations of
the Taskforce for Climate related Financial
Disclosures, identification of priority UN
Sustainable Development Goals (SDGs) to
further develop outcome-based objectives
and targets, and further implementation of
our Human Rights Policy with Kenmare’s
supply chain. We will also review an updated
programme for malaria vector control and
evaluate efforts to further reduce injury rates.
Conclusion
I would like to thank the Committee members
for their commitment and input to the work of
the Committee during 2020. I also thank Mr.
M. Carvill, Managing Director, for his affirmative
leadership, the operations team led by Mr. B.
Baxter and the external affairs team led by
Mr. G. Clifton for their dedication to strong
social and environmental performance. Finally,
I appreciate the insights and sound counsel
during the year from the previous Chair of the
Committee, Ms. E. Headon.
Elaine Dorward-King
Chair of the Sustainability Committee
31 March 2021
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Annual Report and Accounts 2020
93
AUDIT & RISK COMMITTEE REPORT
Chairman’s Overview
I am pleased to present the report of the Audit & Risk Committee for 2020. During the year, the
Committee met five times and the main areas of focus were as set out on page 97. This report
describes how the Committee has fulfilled its responsibilities during the year under its terms of
reference and under the relevant requirements of the UK Corporate Governance Code 2018.
External audit
Independence and Non-Audit Services
The Committee is responsible for ensuring that the external auditor is independent and for
implementing appropriate safeguards where the external auditor also provides non-audit services
to the Group. The Committee closely monitors the level of audit and non-audit services that audit
firms provide to the Group. The Committee has adopted a policy on the provision of non-audit
services by the external auditor on the basis that they may provide such services only where
the engagement will not compromise their audit objectivity and independence, they have the
understanding of the Group necessary to provide the service and they are considered to be the
most appropriate to carry out the work. All non-audit services provided by audit firms must be
approved by the Committee.
KPMG is the Group’s external auditor and has confirmed to the Committee that it is independent
from the Group under the requirements of the Irish Auditing and Accounting Supervisory
Authority’s (IAASA) Ethical Standards for Auditors. The Committee reviews and approves any
GABRIEL SMITH
Chairman of the Audit &
Risk Committee
Principal responsibilities of
the Committee:
Monitoring the integrity of the Group’s
financial statements and any formal
announcements relating to the Group’s
financial performance and reviewing
significant financial reporting judgements
contained in them;
Assessing whether the Annual Report
and Accounts, taken as a whole, is fair,
balanced and understandable, and
provides the information necessary
for shareholders to assess the Group’s
performance, business model and strategy;
Monitoring the external auditor’s
independence and objectivity and, in
particular, the appropriateness of the
provision of non-audit services;
Monitoring the effectiveness of the Group’s
internal control and risk management
systems;
Considering the appropriate risk appetite
for the Group and overseeing the current
and prospective risks faced by the Group
and its strategy in relation to future risks;
Ensuring the risk management function
is properly resourced, with adequate
information rights and sufficient
independence such that it is free from
management interference;
Making recommendations for the Board
to put to shareholders for their approval
in General Meetings regarding the
appointment, remuneration and terms of
engagement of the external auditor;
Monitoring the effectiveness of the
internal audit function; and
Reporting to the Board, identifying any
matters in respect of which it considers
that action or improvement is needed, and
making recommendations as to the steps
to be taken.
The Chairman of the Audit & Risk Committee
attends the Annual General Meeting to
answer questions on the report on the
Committee’s activities and matters within the
scope of the Committee’s responsibilities.
See the Committee’s terms of reference at
www.kenmareresources.com/application/
files/8315/7004/4339/2019-10-02_Terms_of_
Reference_-_Audit__Risk_Committee.pdf.
Membership and meetings
The Audit & Risk Committee consists of its
Non-Executive Chairman, Mr. G. Smith, and
Non-Executive Directors Mr. P. Bacchus,
Mr. C. Fonseca and Ms. D. Somers. As outlined
in the Directors’ biographical details, set
out on pages 80 and 81, members bring
considerable financial, accounting and
mining industry experience to the work
of the Committee. Mr. G. Smith has been
designated by the Board as the Committee’s
financial expert. He together with Mr. P.
Bacchus and Ms. D. Somers, who are both
Chartered Accountants, all meet the specific
requirements for recent and relevant financial
experience, as set out in the 2018 Code.
Details of the skills and experience of the
Committee members are set out on pages 80
and 81.
Ms. E. Headon attended both Committee
meetings held prior to her retirement as a
Director. Mr. C. Fonseca and Ms. D. Somers have
attended all Committee meetings held since
their respective appointments to the Committee.
Name
Mr. G. Smith
Mr. P. Bacchus
Mr. C. Fonseca
Ms. D. Somers
Role
Chairman
Member
Member
Member
94 Kenmare Resources plc
Annual Report and Accounts 2020
Independent
Date of Appointment to Committee
Meetings Attended
Yes
Yes
Yes
Yes
12/03/2013
25/05/2017
13/05/2020
19/08/2020
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CORPORATE GOVERNANCE
appointment of an individual, within three years
of having previously been employed by the
current external auditor, to a senior managerial
position in the Group.
The Company Secretary, the external audit
lead partner and, from time to time, the Finance
Director attend meetings at the invitation of
the Committee. At least once each year, the
Committee and the external auditor discuss,
without management present, matters relating
to its remit and any issues.
KPMG was approved as auditor by the
Company at the AGM in May 2019 and began
their engagement in July 2019. Since the
commencement of KPMG’s engagement, the
lead audit partner has been David Meagher.
In 2020, KPMG provided a number of audit
services and non-audit services. The non-audit
services consisted mainly of audit related
assurance concerning the review of the half-
yearly financial statements and Mozambican
tax compliance services and other related
matters. The Committee is satisfied that the
external auditor’s knowledge of the Group
was an important factor in choosing them
to provide these services. The fees paid to
KPMG for non-audit work in 2020 amounted
to US$82,000 and represented 33% of the
total KPMG fees for the year. The Committee
is therefore satisfied that the non-audit work
did not compromise KPMG’s independence or
objectivity and that it was in the interests of
the Group to retain KPMG for those services.
Details of the amounts paid to KPMG during
the year for audit and other services are set
out in Note 7 to the consolidated financial
statements on page 147.
Effectiveness
The Committee, on behalf of the Board, is
responsible for the relationship with the
external auditor and for monitoring the
effectiveness and quality of the external audit
process. The Committee’s primary means of
assessing the effectiveness of the external
audit process is by monitoring performance
against the agreed audit plan. In addition, we
consider the following:
The experience and knowledge of the
external audit team;
The quality of presentations to the Board
and Committee;
The technical insights provided relevant to
the Group;
Demonstration of a clear understanding of
the Group’s business and key risks; and
The results of post-audit interviews
with management and the Audit & Risk
Committee Chairman.
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95
AUDIT & RISK COMMITTEE REPORT CONTINUED
Considered the role and effectiveness
of internal audit in the overall context of
the Group’s risk management framework
and was satisfied that the function has
appropriate standing within the Group;
Ensured that the Internal Auditor had
access to the Chairman of the Board if
required; and
Ensured co-ordination between Internal
Audit and the external auditor to maximise
the benefits from clear communication and
co-ordinated activities.
On the basis of the above the Committee
concluded that, for 2020, the Internal Audit
function was performing well and is satisfied
that the quality, experience and expertise of
the function is appropriate for the Group.
Whistleblowing
The Company has a Whistleblowing Policy
in place and a third-party service provider
is engaged to provide a confidential 24/7
whistleblowing service available to all
employees to report any wrongdoing in the
workplace. Two reports were received in
2020. Both reports were fully investigated
and the matters closed out. The service
does not replace the internal processes
within the organisation, but seeks to provide
an alternative for those employees who, for
any reason, do not wish to use the internal
processes. The Audit & Risk Committee
Chairman is also positioned to receive written
complaints in confidence on accounting, risk
issues, internal controls, auditing issues and
related matters for reporting to the Audit &
Risk Committee.
Following a review of the Group risk register
by senior management, the principal risks
identified for the Group and their mitigations
are submitted to the Audit & Risk Committee
and Board for review and approval. These
risks are included in the principal risks and
uncertainties facing the Group as set out on
pages 58 to 65. As part of the internal audit
function, controls identified in the risk register
are tested to ensure they are operating
effectively.
The Committee assessed the Group’s risk
management and internal control framework
in line with the FRC Guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting and reviewed
the audit and review summary reports from
the external auditor. The Committee, having
assessed the above information, is satisfied
that the internal control and risk management
framework is operating effectively and has
reported this opinion to the Board.
Internal audit
The Internal Auditor prepares an Internal Audit
plan for each financial year proposing the audit
areas to be covered and the timeframe for each.
This is presented to the Committee for approval.
The Internal Auditor updates the Committee
on progress at regular intervals and prepares a
final report on his findings which he presents at
a meeting with the Committee for discussion.
The Committee can question the Internal
Auditor on the contents of the report and the
processes employed by him in investigations.
This report is considered by the Committee and
material matters and recommendations are then
reported to the Board.
The Committee is responsible for monitoring
and reviewing the operation and effectiveness
of the Internal Audit function including its
focus, plans, activities and resources. To fulfil
its duties during 2020, the Committee:
Reviewed and approved the Internal Audit
annual plan to ensure alignment with the
Group’s principal risks;
Considered and was satisfied that the
competencies, experience of and level of
resources available to the Internal Auditor
were adequate to achieve the proposed plan;
Based on the above, the Committee is satisfied
with the effectiveness of the external auditor
for 2020.
Financial reporting and significant
financial judgements
A key responsibility of the Committee is to
consider the significant areas of complexity,
management judgement and estimation that have
been applied in the preparation of the financial
statements. The Committee has reviewed the
suitability of the accounting policies which have
been adopted and whether management have
made appropriate judgements and disclosures.
The table on page 97 sets out the significant
matters considered by the Committee in relation
to the financial statements for the year ended 31
December 2020.
Under Provision 25 of the 2018 UK Corporate
Governance Code, the Committee, upon
request from its Board, should ‘provide advice
on whether the annual report and accounts,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
company’s position and performance, business
model and strategy.’ The Board has tasked the
Committee with this role, which is incorporated
into the Committee’s terms of reference.
In line with the above, the Committee has
undertaken a review of the 2020 Annual Report
and Accounts and confirmed to the Board
that it was the opinion of the Committee that,
taken as a whole, the 2020 Annual Report and
Accounts are fair, balanced and understandable
and provided the information necessary for
shareholders to assess the Group’s position
and performance, business model and strategy.
In advance of providing such a confirmation
to the Board, the Committee considered the
adequacy of the systems and internal controls,
the consistency of the various elements of the
2020 Annual Report and Accounts (taking into
account reports received by the Board during
the year), the level of information provided, the
narrative reporting and the language used.
Risk management
The Group has identified and documented
critical risks to the business, including key
operational risks and related controls in its risk
register. The Mine’s operational risks to the
business are reviewed quarterly and updated.
The Group’s operational risks are reviewed
annually and the corporate and business risks
on the Group’s risk register are updated.
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CORPORATE GOVERNANCE
Areas of focus in 2020 and to date in 2021
Area of focus
Audit & Risk Committee action
Financial Reporting
Risk Management
and Internal Control
Internal Audit
External Audit
The Committee reviewed the 2020 Half Yearly Financial Report issued in August 2020, the 2020 Annual Report and
Accounts in March 2021 and all formal announcements relating to these statements before submitting them to the Board
of Directors with a recommendation to approve.
The Committee undertook a review of the 2020 Annual Report and Accounts and confirmed to the Board that it was
the opinion of the Committee that, taken as a whole, the 2020 Annual Report and Accounts are fair, balanced and
understandable and provided the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy.
The Committee reviewed the Group’s risk management and internal control framework established for identifying,
evaluating and managing key risks.
The principal risks facing the Group were reviewed and considered.
The Committee reviewed and approved Anti-Bribery and Whistleblowing Policies.
The Committee approved the internal audit charter and the plan for 2020.
The Committee reviewed internal audit reports during the year covering: IT audit of the Kenmare network, third party risk
management, crop compensation processes, inventory management, fuel management and various procurement related reviews.
The Committee agreed the fees and audit plan of the external auditor, KPMG, for their audit of the 2020 Annual Report and
Accounts and their review of the 2020 Half Yearly Financial Report.
The Committee reviewed the safeguards designed to avoid the possibility that the auditor’s objectivity and independence could
be compromised. The Committee is satisfied that the appropriate policy is in place in respect of services provided by external
auditors.
At the November 2020 Committee meeting, KPMG outlined to the Committee in detail the external audit plan.
Post completion of the 2020 audit and half year review, in conjunction with KPMG, review meetings were held with senior finance
management and it was confirmed by both parties that no issues had arisen during the audit or review process.
Terms of Reference
The Committee considered its terms of reference to ensure they remain appropriate for the Group’s needs. The terms of reference
are available on the Kenmare website at www.kenmareresources.com/about-us/corporate-governance/audit-committee
Estimates and judgements
The Committee reviewed in detail the following areas of significant judgement, complexity and estimation in connection with the 2020 financial
statements. The Committee considered the report from the external auditor on the audit work undertaken and conclusions reached as set out in their
audit report on pages 128 to 133.
Areas of judgement
Audit & Risk Committee considerations
Property, plant and
equipment
The recovery of property, plant and equipment is dependent upon the successful operation of the Mine. The realisation of
cash flow forecast assumptions would result in the recovery of such amounts. During the financial year the group carried
out an impairment review of property, plant and equipment. As a result of the review no impairment provision is required
in the financial year 2020. Details of the impairement review, assumptions and judgements are included in Note 13 to the
consolidated financial statments.
Revenue recognition
The Group sells its mineral products on the Incoterms FOB, CFR and CIF and has identified the performance criteria and
recognition of revenue in relation to products, freight and insurance. Following discussions with management, the Audit &
Risk Committee was satisfied that the revenue recognition methodology used by management is appropriate.
Audit & Risk Committee effectiveness and priorities for 2021
As outlined in the Corporate Governance Report, during 2020 there was an internal evaluation of the Committee’s performance and effectiveness.
I am pleased to confirm that the Committee continues to operate effectively. The Committee will continue to focus on internal control, external audit
planning and risk management during 2021.
The Committee would like to thank KPMG for their work on the 2020 financial statements. I would also like to thank my fellow Committee members for
their commitment and input to the work of the Committee during 2020 as well as the Company Secretary and the financial team for their assistance,
guidance and support. I wish Deirdre Somers well in her role as Chair of the Committee after my retirement in May.
Gabriel Smith
Chairman of the Audit & Risk Committee
31 March 2021
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DIRECTORS’ REMUNERATION REPORT
GRAHAM MARTIN
Chairman of the
Remuneration Committee
Chairman’s Overview
On behalf of the Board, I am pleased to present
the Remuneration Committee’s Report for 2020
on Directors’ remuneration.
This report is divided into three main sections:
this statement, which provides a summary
of the year under review and, together
with the annual report on remuneration,
describes how the Committee has fulfilled
its responsibilities during the year under
its Terms of Reference and under the
relevant requirements of the UK Corporate
Governance Code 2018;
the 2020 annual report on remuneration
which provides details of the remuneration
earned by the Directors in the year ended
31 December 2020 and how the 2020
Policy will operate for the year ending 31
December 2021; and
a summary of the Directors’ remuneration
policy which was approved by shareholders at
the 2020 AGM, and which applies for the three-
year period commencing 1 January 2020.
Summary of the work of the
Committee in 2020
In early 2020 most of the Committee’s work
focused on assessing and agreeing with
the Executive Directors the outcome of the
key performance metrics (“KPIs”) under
their bonus scheme for 2019, and agreeing
some modifications to those metrics for
the application of the scheme in 2020. We
also continued our dialogue with our major
shareholders in finalising the details of the
new Directors’ remuneration policy which was
approved by shareholders at the 2020 AGM.
We reviewed benchmarking reports prepared
by PwC (the Company’s remuneration
advisors) on the salaries, benefits and fees
of the Executive Directors, the Company
Secretary and the Chairman and set their 2020
levels appropriately, while also reviewing and
discussing with the Executive Directors the
remuneration of the executive committee and
senior Mine management.
We had no sooner agreed with the Executive
Directors the KPIs and associated weightings
for their annual bonus scheme for 2020,
and published a summary of these in our
2019 annual report, when the full scale and
possible consequences for Kenmare of the
global COVID-19 crisis began to unfold. It was
immediately obvious to the Remuneration
Committee and to the Board that a very large
part of the time and attention of the Executives
would now have to be devoted to ensuring the
health and safety of our staff and otherwise
minimising the effect of the pandemic on the
Mine and all our stakeholders. We therefore
took the decision to communicate to the
Executives a discretionary change to the KPIs
by incorporating a 25% allocation dealing
with the COVID-19 crisis as a priority, and
re-weighting the other metrics accordingly.
Details of the Committee’s rationale for this
approach, and its effect on the outcome of the
performance metrics, are set out below.
During the remainder of the year, the
Committee monitored the performance of the
Group against the KPIs on a quarterly basis,
paying particular attention to the measures
taken to minimise the effect of the COVID-19
crisis, and we provided regular feedback to the
Executives.
The Committee also kept under review during
the year the remuneration and benefits of
the Executive Directors in the context of
the remuneration of the Group’s workforce
as a whole. We received presentations from
Mine management on the structure of the
remuneration of the different categories of
workers at the Mine, and satisfied ourselves
that our staff receive pay and benefits which
are benchmarked appropriately, took account
of local employment regulations and conditions
as well as seniority, and afforded our workers
the opportunity to share in the benefits from
the success of the Group. We are particularly
pleased to note that it has now been possible
to extend the benefits of the Group’s long-term
share plan, the Kenmare Restricted Share Plan
(KRSP), to certain categories of employee at
the Mine in Mozambique. The Committee also
notes that there is no discrimination between
our male and female workers at the Mine in
their pay and benefits for similar jobs.
With regard to our Dublin office, where our
staff numbers increased slightly in 2020,
the Committee satisfied itself that the
remuneration and benefits of our employees
remained appropriately benchmarked and that
they also had opportunities through a bonus
scheme and the KRSP to share in the success
of the Group.
The Committee formally met four times during
the year but there were also a number of less
formal communications throughout the year on
remuneration issues between me and members
of the Committee, and with the Executive
Directors. In November, the Committee
received a presentation from PwC with an
update on current remuneration matters with
particular focus on the impact of COVID-19
on natural resource companies, the outcome
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of the AGM season on Kenmare and its peers,
and the evolving views of investors and proxy
agencies.
Performance and reward for 2020
Under the newly approved 2020 Directors’
remuneration policy, the Executive Directors
receive a base salary (which, apart from
inflationary adjustments, has not been
increased since 2010), pension contributions in
line with market levels, certain other benefits,
an award of shares under the Kenmare
Restricted Share Plan (“KRSP”) and the
opportunity to earn a bonus depending on the
outcome of the KPIs.
As noted by the Chairman and the Managing
Director in their respective reports, 2020
marked a culmination of our multi-year
development projects, with the move of
WCP B from Namalope to Pilivili. Despite the
significant challenges posed by COVID-19, we
safely completed the move in Q4 2020, and
it is already delivering significant value for
the Group.
Given the considerable uncertainties following
the emergence of COVID-19, Kenmare
withdrew and then instated revised production
guidance for the year and achieved the
midpoint or above of the revised guidance for
all products in 2020. Following the move of
WCP B, production increased 7% compared
to Q4 2019 and a 30% increase compared to
Q3 2020.
Total operating costs came within original
guidance but unit costs were negatively
impacted by the lower production volumes.
Prices for the commodities we produce
remained strong, despite the significant and
materially negative, impact of COVID-19 on
global growth. Demand for ilmenite, our primary
product, remained robust buoyed by strong
demand for home DIY.
In 2020, we achieved a LTIFR of 0.25 per
200,000 man-hours worked which represents
an improvement compared to 2019 (0.27).
This is testament to Kenmare’s continuing
improvements in safety leadership and risk
assessment practices.
Through these turbulent times we remain
committed to our dividend policy, paying an
interim dividend following our half-yearly
results and recommending a final dividend
payment for 2020 of US$c7.69 per share.
These results are reflected in the outcome of
the KPIs and consequently the bonus earned
by the Executive Directors.
The performance criteria set by the Committee
under the bonus scheme, before the COVID-19
related adjustment described below, reflected
a mix of quantitative targets and qualitative
targets and were set at stretching levels for
the maximum award. The quantitative targets
for 2020 comprised 67.5% (2019: 75%) of the
maximum 100% opportunity and the qualitative
targets 32.5% (2019: 25%).
The quantitative targets covered metrics
reflecting mineral production, financial results
and certain of the environmental, social and
governance (ESG) targets. The qualitative
targets included matters such as the timely
and on-budget execution of the move of WCP
B to Pilivili, the other ESG targets and certain
key corporate matters. The corporate targets
were assessed individually, which leads to
slightly different bonus outcomes for each
Executive.
COVID-19 adjustment
As noted above, the original set of KPIs for
2020 were adjusted for a COVID-19 factor.
The COVID-19 crisis which arose in early
2020, soon after we had set the KPIs, clearly
had the potential to materially affect the
Group’s operations, our workforce and all our
stakeholders, particularly so when the Group
was implementing the move of the WCP B
plant and infrastructure to Pilivili.
The Committee therefore determined that safe
management of the COVID-19 crisis should
merit the largest weighting within the 2020
bonus. We therefore agreed the following KPI
with the Directors, with a 25% weighting (with
the weightings on the other KPIs reduced
pro-rata, but the original pre- COVID-19 targets
retained without adjustment):
“Proactively and safely mitigate the impact
of COVID-19 on the business with a view to
ensuring the health and safety of personnel,
minimising disruption to production and
shipping and ensuring the long-term future of
the Mine, while taking account of the interests
of all stakeholders.” After full consideration
of all the relevant issues, the Remuneration
Committee awarded 100% achievement against
this objective, noting the following in particular:
the focus of the Group throughout the
COVID-19 crisis remained at all times on the
health and safety of our personnel and on
continued, safe operations;
the Mine remaining operational with
disruption to the business minimised;
COVID-19 isolation and treatment facilities
were quickly established;
CORPORATE GOVERNANCE
we maintained the full support of our
workforce throughout, including the
management and union groups;
good relations and communications with
the Government of Mozambique, and all
local agencies were maintained at all times;
the Government approved and monitored
the COVID-19 protocols we had put in
place and unlike some other operations
in Mozambique and adjacent countries, at
no point were our operations required to
close down;
the WCP B move would have been
challenging in any circumstances but was
made considerably more complicated by
the effect of the COVID-19 crisis on the
related supply chain and other logistics; and
clearly extras costs were incurred in
managing the crisis, particular in the
purchase of PPE and medical equipment,
the costs of disruption to our supply chain,
and additional travel costs, but these
were all considered by the Remuneration
Committee to be appropriate in managing
our operations and ensuring the health
and safety of our personnel, and in making
substantial donations of such equipment to
our local communities.
The successful management of the COVID-19
crisis last year would not have been possible
without considerable additional effort and
contribution in very stressful circumstances
on the part of all of our employees and the
Committee was pleased to note that in
recognition of this appropriate additional
bonuses have also been paid to all of our
workforce.
Outcome
The outcome of the Committee’s assessment
of performance against the quantitative and
qualitative criteria, and after applying the
COVID-19 factor, resulted in the Executive
Directors receiving a bonus of 61.72% of
salary in the case of the Managing Director
and 59.47% in the case of the Financial
Director, of which, and in accordance with our
remuneration policy, 50% of salary was paid in
cash and the balance was paid in nil-cost share
options granted under the KRSP which will
vest in 3 years. The Committee considers these
outcomes a fair reflection of the corporate
performance for the year and the respective
individual performances of the Executives, in
the face of unprecedented challenges.
The Committee confirms that no malus and
clawback provisions were used during the year.
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DIRECTORS’ REMUNERATION REPORT CONTINUED
Implementation of the remuneration
policy for 2021
The Committee believes that the current
Directors’ remuneration policy remains
appropriate for 2021. While this newly approved
policy has introduced some changes (such as
the underpin on the KRSP awards) we believe
it remains easy to understand, is relatively
simple, and remains motivating. It also allows
sufficient discretion to the Committee to
take account of all relevant matters affecting
the Group or its performance in the year.
Accordingly, for 2021 we are proposing to
retain the existing structure subject to some
changes to the performance metrics to reflect
corporate priorities for the year including a
greater weighting to environmental, social
and governance metrics. Further details of the
intended implementation of the remuneration
policy for 2021 are set out on page 110.
Shareholder dialogue
Shareholders’ views on executive remuneration
are very important to the Board, and I was
especially grateful to those shareholders
who engaged with me while we were
formulating the new remuneration policy, and
subsequently, and of course for the support
of all shareholders who voted to support the
policy at the AGM where the advisory vote on
Directors’ remuneration policy received a 91%
vote in favour. Further details of this vote are
set out on page 111.
Whether or not you voted in favour of the
new policy, I hope you will now vote in
support of the Remuneration Report at
the forthcoming AGM. Should you have
any questions, comments or feedback on
remuneration matters at Kenmare I would be
very pleased to hear from you. I can be reached
via the Company Secretary at dcorcoran@
kenmareresources.com.
Conclusion
The Committee continues to believe that the
current Directors’ remuneration policy with
its blend of short, medium and long-term
aspects remains appropriate for the Group and
in our view clearly aligns the interests of the
Executives with those of the shareholders. In
addition, it gives discretion to the Committee
to look back over each three-year period
in determining the ultimate KRSP vesting
outcomes.
I would like to thank our employees and
contractors for all their efforts and hard work
in highly challenging circumstances. As ever, I
am very grateful for the support and guidance
given to me throughout the year by my fellow
members of the Remuneration Committee and
the Company Secretarial support team led by
Deirdre Corcoran, the Committee Secretary.
Graham Martin
Chairman of the Remuneration
Committee
31 March 2021
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ANNUAL REPORT ON REMUNERATION
CORPORATE GOVERNANCE
Principal responsibilities of
the Committee
The role of the Committee is to assist the
Board to fulfil its responsibility to shareholders
to ensure that:
Remuneration policy and practices of the
Group are designed to support strategy
and promote long-term sustainable
success, reward fairly and responsibly, with
a clear link to corporate and individual
performance, having regard to statutory and
regulatory requirements; and
Executive remuneration is aligned to Group
purpose and values and linked to delivery of
the Group’s long-term strategy.
The primary responsibilities of the Committee
are to:
Determine and agree with the Board the
Group’s policy on executive remuneration;
Within the terms of the agreed policy,
determine the total individual remuneration
package of the Chair, Executive
Directors, Company Secretary and such
other members of the senior executive
management as it is designated to consider;
Review workforce remuneration, related
policies and the alignment of incentives and
rewards with culture; and
Oversee the preparation of the Directors’
Remuneration Report.
See the Committee’s terms of reference
at www.kenmareresources.com/about-us/
corporate-governance/remuneration-
committee.
The Committee gives full consideration to legal
and regulatory requirements, to the principles
and provisions of the 2018 UK Corporate
Governance Code and to related guidance.
The Committee also seeks to ensure that risk
is properly considered in the setting of the
remuneration policy, by ensuring that targets
are appropriately stretching but do not lead to
the taking of excessive risk.
The Committee reviews remuneration and
related policies applicable to the wider
workforce, ensuring that this is taken into
account when setting the policy for executive
remuneration. The aim across the Group is
to provide a reward package that is aligned
to shareholders’ interests, supports the
achievement of the Company’s annual and
strategic objectives, is competitive against the
appropriate market and is consistent with our
focus on performance and our core values. This
means:
base salaries are set in line with the market
recognising the individual’s skill, knowledge,
experience levels and contribution to the
role;
high performance and exceptional
contribution are recognised through in-year
incentives;
packages for leadership roles have an
increased emphasis on longer-term share-
based reward;
providing employees with competitive post-
retirement benefits in line with practices
applicable in relevant jurisdictions; and
ensuring access to a competitive and cost-
effective package of other benefits as part
of the total reward offering.
The Company Secretary acts as Secretary to
the Committee. The Managing Director and
Financial Director may be invited to attend
meetings of the Committee, except when
their own remuneration is being discussed. No
Director is involved in consideration of his or
her own remuneration.
The Remuneration Committee seeks
independent advice when necessary from
external remuneration consultants. In 2019, the
Committee conducted a competitive tender
process following which PwC, which has no
other connection with the Group, Company or
the Directors, were retained as independent
external remuneration advisors. In 2020, the
Committee renewed their appointment. PwC
is paid a fixed fee for a fixed scope of work
and charges fees on a time and materials
basis for work outside of the agreed scope.
During the year ended 31 December 2020 the
total fees payable to PwC in respect of these
services was £67,000. PwC is a member of
the Remuneration Consultants Group and a
signatory of that Group’s Code of Practice for
remuneration consultants. The Committee
reviews the services and advice provided by
PwC each year and is satisfied that the advice
it receives is independent and objective.
Activities during 2020
The Remuneration Committee’s main activities
and decisions during 2020 were:
Area of focus
Remuneration Committee action
Annual Bonus
The Committee assessed performance outcomes for the 2019 annual bonus.
The Committee determined performance metrics and targets for the 2020 annual bonus and the impact of the
COVID-19 pandemic on these.
KRSP
The Committee approved the KRSP awards granted in May 2020.
Remuneration
Policy
The Committee developed the new Directors’ remuneration policy (which was approved at the AGM held on 13 May
2020) and engaged with shareholders and various investor associations in relation thereto.
Workforce Salary
The Committee reviewed pay and benefits of the Group’s overall workforce.
Other
The Committee approved PwC’s fees as independent external advisors.
The Committee considered its terms of reference to ensure they remain appropriate for the Group’s needs.
The terms of reference are available on the Kenmare website at www.kenmareresources.com/application/
files/3115/7009/5818/2019-10-02_Terms_of_Reference_-_Remuneration_Committee.pdf
The Committee reviewed its own performance as a Committee.
The Committee also considered and approved the 2019 Directors’ Remuneration Report.
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101
ANNUAL REPORT ON REMUNERATION CONTINUED
Membership and meetings
The Remuneration Committee consists of its Non-Executive Chairman, Mr. G. Martin, and Non-Executive Directors Mr. P. Bacchus and Mr. G. Smith.
Mr. S. McTiernan stepped down from his position as a member of the Committee on 13 May 2020. He attended all Committee meetings held in 2020
during his period of membership. Biographical details for each of the Committee members and a description of their respective skills, expertise and
experience are set out on pages 80 and 81.
The Committee formally met four times during the year but there were also a number of less formal communications throughout the year on
remuneration issues between members of the Committee and with the Executive Directors.
Name
Mr. G. Martin
Mr. P. Bacchus
Mr. G. Smith
Role
Chairman
Member
Member
Independent
Date of Appointment to Committee
Meetings Attended
Yes
Yes
Yes
14/10/2016
25/05/2017
12/03/2013
Link between remuneration and long-term performance
The Committee is satisfied that remuneration delivered to the Directors is consistent with the Company’s adopted Directors’ remuneration policy, and
within the prescribed limits. The performance metrics used under the 2020 annual bonus feature several key performance indicators, ensuring a clear
alignment between remuneration and the execution of the Company’s long-term business strategy, which is reinforced by the delivery of a substantial
portion of remuneration in shares under the KRSP. The Committee believes that the Policy has operated as intended during the year, noting that the
introduction of the COVID-19 management KPI to the annual bonus, authorised by the Committee’s discretionary powers under the Policy, ensured that
the remuneration outcomes for the year reflected Company and individual performance.
Directors’ remuneration (audited)
The following tables set out the remuneration for Directors for the year ended 31 December 2020 and the prior year. There was no increase in the base
salary of Executive Directors during 2020 (differences in amounts in the table reflect movements in conversion rates between Euro and US Dollars at
the relevant dates).
Executive Directors’
Remuneration
2020
US$’000
M.Carvill
2020
%
2019
US$’000
2019
%
2020
US$’000
T.McCluskey
2020
%
2019
US$’000
2019
%
Fixed Pay
Basic salary
Benefits
Pension
Total Fixed Pay
Variable Pay
Bonus (i)
Long-term incentives
-KRSP (ii)
Total Variable Pay
Total Single Figure
619
7
62
688
382
-
382
1,070
616
8
62
686
291
467
758
1,444
64%
36%
48%
52%
409
4
41
454
243
-
243
697
65%
35%
407
7
41
455
200
308
508
963
47%
53%
i. The 2020 performance outcome of Mr. M. Carvill and Mr. T. McCluskey is 61.72% and 59.47% of salary respectively of which 50% of salary is awarded as a cash bonus.
The balance of 11.72% and 9.47% of salary respectively is awarded in restricted shares which will vest three years from grant.
ii. The KRSP awards granted in 2020 include a performance underpin and will be included at the end of the three-year vesting period.
The KRSP shown for 2019 is the value of KRSP incentives earned in the year. Awards under the KRSP in this table are made 100% in shares which vest, subject to continued employment,
60% on the third anniversary of grant and 20% on each of the fourth and fifth anniversary of grant.
iii. The underlying currency of the Executive Directors’ emoluments is Euros.
iv. This disclosure forms an integral part of the financial statements.
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CORPORATE GOVERNANCE
Basic Fee
Committee Chair &
Membership Fee
Non-Executive Directors’
Remuneration
2020
US$’000
2019
US$’000
2020
US$’000
2019
US$’000
Senior Independent
Director Fee
2020
US$’000
2019
US$’000
Audited
Total
2020
US$’000
2019
US$’000
P. Bacchus
E. Dorward-King
C. Fonseca
E. Headon (i)
T. Keating
G. Martin
S. McTiernan
G. Smith
D. Somers (ii)
Total
68
68
68
32
68
68
214
68
25
679
64
11
64
64
64
64
213
64
–
608
13
25
10
13
3
22
–
24
2
112
13
1
2
15
2
21
–
28
–
82
6
–
–
4
–
–
–
–
–
10
–
–
–
10
–
–
–
–
–
10
87
93
78
49
71
90
214
92
27
801
77
12
66
89
66
85
213
92
–
700
(i) Ms. E. Headon stepped down from the Board on 13 May 2020. The fees set out in the table above relate to the period of her directorship.
(ii) Ms. D. Somers was appointed to the Board as a Non-Executive Director on 19 August 2020. The fees set out in the table above relate to the period of her directorship.
(iii) The Non-Executive Directors’ remuneration is 100% fixed and there has been no increase in basic fees since 2011.
(iv) This disclosure forms an integral part of the financial statements.
Total Directors’ Remuneration
Executive Directors
Salary
Benefits
Bonus
Pension
LTIP
Total Executive Directors' remuneration
Non-Executive Directors
Fees
Total remuneration
Audited Total
2020
US$’000
2019
US$’000
1,028
11
625
103
–
1,767
801
2,568
1,023
15
491
103
775
2,407
700
3,107
Executive and Non-Executive Directors’ remuneration and fees for services as Directors provided to the Company and the entities controlled by
the Company are US$1.8 million (2019: US$2.4 million) and US$0.8 million (2019: US$0.7 million) respectively. These figures have been calculated
based on the requirements of the UK’s Large and Medium-sized Companies and Groups (Accounts and Report) (Amendment) Regulations 2013 (the
“Regulations”), to which the Company has regard.
2020 annual bonus award (audited)
The performance metrics for the 2020 annual bonus award sought to deliver continuous and stretching progress in relation to operational
performance, cost efficiency and capital expenditure management, health and safety initiatives, and corporate objectives. Different performance
targets for project execution and corporate performance were set for each Executive Director according to their roles. The maximum opportunity
under the annual bonus award for 2020 was 100% of base salary for the Managing Director and Financial Director.
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ANNUAL REPORT ON REMUNERATION CONTINUED
Performance targets and outcomes for the 2020 financial year were as follows:
2020 annual bonus outcome
Weighting %
Ilmenite production (tonnes)
Zircon (Standard & Special)
production (tonnes)
Rutile production (tonnes)
Concentrates production
(tonnes)
EBITDA (US$m)
Production cash costs (US$m)
Cost per tonne (US$/t)
TSR (£ per share)
LTIFR per 200,000 man-hours
Community safety
Environment: Incidents/
Emissions
Environment: Strategic review
of rehab
Environment: Hectares
rehabilitated (ha)
Supply Chain: Policy compliance
capacity building
Social: Gender diversity (%)
WCP B move
Operational
Financial
HSE
Project Execution
Corporate, Leadership,
People
COVID-19
Management
Total
79.9
172
182
2.83
0.30
94.0
163
172
3.07
0.25
13.5
3.375
0.75
1.125
7.5
7.5
3.75
3.75
3.75
2.25
108.1
153
162
3.30
0.20
No community fatalities being the responsibility of Kenmare
Performance needed for pay out at
Threshold
(25% of
maximum vests)
Target
(50% of maximum
vests)
Stretch
(100% of
maximum vests)
800,000
44,500
7,700
34,700
850,000
47,300
8,200
36,850
900,000
50,100
8,700
39,000
M. Carvill
T. McCluskey
Formulaic level
Formulaic level
Proportion of
of award
Proportion of
of award
% maximum
element vesting
% maximum
Performance achieved
element
vesting %
755,976
43,220
5,957
35,174
76.7
158
188
3.19(ii)
0.25
180
10.64%
0.0
0.0
0.0
30.5
0.0
75.7
0.0
76.1
50.0
50.0
75.2
100.0
100.0
50.0
100.0
93.3
% (i)
0.00
0.00
0.00
0.34
0.00
5.68
0.00
2.85
1.88
1.13
1.41
1.50
1.50
0.94
2.25
10.50
%
0.0
0.0
0.0
30.5
0.0
75.7
0.0
76.1
50.0
50.0
75.2
100.0
100.0
50.0
100.0
93.3
% (i)
0.00
0.00
0.00
0.34
0.00
5.68
0.00
2.85
1.88
1.13
1.41
1.50
1.50
0.94
2.25
10.50
90.0
6.75
60.0
4.50
Four community incidents involving community motorbikes recorded in
2020, none of which Kenmare was responsible for but focus will be placed
on this area in 2021.
compliance.
No reportable incidents/emissions recorded. A new landfill site
with effluent management was built and there was continued EMP
Rehabilitation and land use strategy review was developed and approved
by the Sustainability Committee. Community engagement took place and
public reporting standards for land use were finalised.
plan developed and rolled out
Performance achieved was close to the stretch target. There were some
cost over-runs but these were minimal when COVID-19 related costs
were excluded. The delays to the full commissioning and operation of
the project as specified, such as the pumping system, can be largely
attributed to COVID-19 factors.
Personal performance against the criteria was considered, especially
in the context of the COVID-19 crisis, and noted in particular that:
certain key additional roles had been added to the organisation; local
management in Mozambique had been strengthened; and good
communications and relationships had been maintained with all
key stakeholders. Above target performance was achieved by both
Executives; the difference in award levels reflecting the Committee’s view
of the additional contribution of each to the corporate scorecard and
1.875 No reportable incidents or emissions
1.5
Delivery of a strategic review of Kenmare's rehabilitation
1.5
140
160
175
1.875 Action plan to be presented to Sustainability Committee and
Target performance with a strategic review undertaken and an action
2.25
11.25
a workshop held
8.0
8.5
9.0
Stretch performance was WCP B move commissioned,
performance tests completed and plant fully operational by
the end of 2020 and cost is on or below budget
7.5
Performance in leadership, strategic vision & planning,
business development, succession planning and alignment
with company's vision and values.
Proactively & safely mitigate the impact of COVID-19 on the
business with a view to ensuring the health and safety of
personnel, minimising disruption to production and shipping
and ensuring the long-term future of the Mine, while taking
into account the interests of all stakeholders.
25
100
objectives.
engagement.
Stretch performance was considered as achieved across all areas of
100.0
25.00
100.0
25.00
the business particularly comprehensive health & safety enforcement,
workforce engagement, financial management and extensive stakeholder
61.72
59.47
(i) Formulaic level of award equates to the weighting multiplied by the proportion of element vesting.
(ii) Year end share price adjusted for dividends paid in 2020.
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Performance targets and outcomes for the 2020 financial year were as follows:
Performance needed for pay out at
Threshold
Target
(25% of
(50% of maximum
Operational
Financial
Ilmenite production (tonnes)
Zircon (Standard & Special)
production (tonnes)
Rutile production (tonnes)
Concentrates production
(tonnes)
EBITDA (US$m)
Production cash costs (US$m)
Cost per tonne (US$/t)
TSR (£ per share)
13.5
3.375
0.75
1.125
7.5
7.5
3.75
3.75
3.75
800,000
44,500
7,700
34,700
79.9
172
182
2.83
0.30
850,000
47,300
8,200
36,850
94.0
163
172
3.07
0.25
HSE
LTIFR per 200,000 man-hours
Community safety
2.25
No community fatalities being the responsibility of Kenmare
Environment: Incidents/
1.875 No reportable incidents or emissions
Environment: Strategic review
1.5
Delivery of a strategic review of Kenmare's rehabilitation
Emissions
of rehab
Environment: Hectares
rehabilitated (ha)
1.5
140
160
Supply Chain: Policy compliance
1.875 Action plan to be presented to Sustainability Committee and
capacity building
a workshop held
Social: Gender diversity (%)
2.25
8.0
8.5
Project Execution
WCP B move
11.25
Stretch performance was WCP B move commissioned,
performance tests completed and plant fully operational by
the end of 2020 and cost is on or below budget
Stretch
(100% of
900,000
50,100
8,700
39,000
108.1
153
162
3.30
0.20
175
9.0
Corporate, Leadership,
People
7.5
Performance in leadership, strategic vision & planning,
business development, succession planning and alignment
with company's vision and values.
COVID-19
Management
25
Proactively & safely mitigate the impact of COVID-19 on the
business with a view to ensuring the health and safety of
personnel, minimising disruption to production and shipping
and ensuring the long-term future of the Mine, while taking
into account the interests of all stakeholders.
Total
100
(i) Formulaic level of award equates to the weighting multiplied by the proportion of element vesting.
(ii) Year end share price adjusted for dividends paid in 2020.
2020 annual bonus outcome
Weighting %
maximum vests)
vests)
maximum vests)
Performance achieved
755,976
43,220
5,957
35,174
76.7
158
188
3.19(ii)
0.25
Four community incidents involving community motorbikes recorded in
2020, none of which Kenmare was responsible for but focus will be placed
on this area in 2021.
No reportable incidents/emissions recorded. A new landfill site
with effluent management was built and there was continued EMP
compliance.
Rehabilitation and land use strategy review was developed and approved
by the Sustainability Committee. Community engagement took place and
public reporting standards for land use were finalised.
180
Target performance with a strategic review undertaken and an action
plan developed and rolled out
10.64%
Performance achieved was close to the stretch target. There were some
cost over-runs but these were minimal when COVID-19 related costs
were excluded. The delays to the full commissioning and operation of
the project as specified, such as the pumping system, can be largely
attributed to COVID-19 factors.
Personal performance against the criteria was considered, especially
in the context of the COVID-19 crisis, and noted in particular that:
certain key additional roles had been added to the organisation; local
management in Mozambique had been strengthened; and good
communications and relationships had been maintained with all
key stakeholders. Above target performance was achieved by both
Executives; the difference in award levels reflecting the Committee’s view
of the additional contribution of each to the corporate scorecard and
objectives.
Stretch performance was considered as achieved across all areas of
the business particularly comprehensive health & safety enforcement,
workforce engagement, financial management and extensive stakeholder
engagement.
CORPORATE GOVERNANCE
M. Carvill
T. McCluskey
Proportion of
element
vesting %
Formulaic level
of award
% maximum
% (i)
Proportion of
element vesting
%
Formulaic level
of award
% maximum
% (i)
0.0
0.0
0.0
30.5
0.0
75.7
0.0
76.1
50.0
50.0
75.2
100.0
100.0
50.0
100.0
93.3
0.00
0.00
0.00
0.34
0.00
5.68
0.00
2.85
1.88
1.13
1.41
1.50
1.50
0.94
2.25
10.50
0.0
0.0
0.0
30.5
0.0
75.7
0.0
76.1
50.0
50.0
75.2
100.0
100.0
50.0
100.0
93.3
0.00
0.00
0.00
0.34
0.00
5.68
0.00
2.85
1.88
1.13
1.41
1.50
1.50
0.94
2.25
10.50
90.0
6.75
60.0
4.50
100.0
25.00
100.0
25.00
61.72
59.47
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ANNUAL REPORT ON REMUNERATION CONTINUED
The COVID-19 crisis which arose in early 2020,
soon after the KPIs had been set, clearly had
the potential to materially affect the Group’s
operations, workforce and all stakeholders,
particularly so when the Group was
implementing the move of the WCP B plant
and infrastructure to Pilivili.
The Committee therefore determined that safe
management of the COVID-19 crisis should
merit the largest weighting within the 2020
bonus at 25% with the weightings for the other
KPIs reduced pro-rata.
After full consideration of all the relevant
issues, the Remuneration Committee awarded
100% achievement against this objective,
noting in particular the factors set out on page
99 of the Chairman’s letter.
Overall, the outcome of the scorecard and
therefore outcome for Mr. M. Carvill was 61.72%
of maximum. The outcome for Mr. T. McCluskey
was 59.47%. The Committee believes this
appropriately reflects the Executive Directors’
performance during the year and the Group’s
results, and therefore has not applied further
discretion to this outcome. 81% and 84%
respectively of the 2020 annual bonus award
was delivered in cash i.e. 50% of base salary
and the balance of 19% and 16% respectively
was deferred in shares for three years (as
restricted shares under the KRSP), consistent
with the Directors’ remuneration policy.
Total pension entitlements
Pension provision for the Executive Directors
was made in 2020 based on 10% of base
salary, in line with the remuneration policy
and the contributions for the Irish workforce.
Fees paid to Non-Executive Directors are not
pensionable. No Director has a prospective
entitlement to a defined benefit pension by
reference to their service as a Director.
Payments for loss of office (audited)
No payments for loss of office were made
during the year.
Payments to past Directors (audited)
Ms. E. Headon stepped down as a Director
on 13 May 2020 and her appointment as a
Director terminated on that date. Pursuant to
a contract for services with Erzulie Limited (a
company wholly owned by her), effective from 1
June 2020, Erzulie Limited was paid €2,917 for
the period from 1 June 2020 to 31 December
2020 for consulting services provided to the
Sustainability Committee.
Mr. T. Fitzpatrick stepped down as a Director
on 1 July 2018. During the year he was paid
US$420,155 (2019:US$440,453) comprised
of salary US$304,495 (2019: US$304,495),
cash bonus U$85,210 (2019:US$105,508) and
pension US$30,450 (2019: US$30,450). He also
received share awards under the KRSP valued
at £111,618 (2019: £103,423).
Directors’ and Secretary’s shareholdings (audited)
The interests of the Secretary and Directors who held office during 2020, their spouses and minor children, in the ordinary share capital of the
Company, other than pursuant to share options or share awards, were as set out below:
P. Bacchus
M. Carvill (i)
C. Fonseca
E. Dorward-King
E. Headon
T. Keating
G. Martin
T. McCluskey
S. McTiernan
G. Smith
D. Somers
D. Corcoran (Secretary)
Shares held
26 March
2021
Shares held
31 December
2020
Shares held
1 January
2020
–
263,444
–
3,600
4,746
–
100,000
144,109
228,607
30,078
3,940
16,383
–
251,844
–
3,600
4,746
–
84,135
134,953
216,353
30,078
–
16,383
–
135,347
–
–
4,990
–
84,135
68,720
169,845
30,078
–
6,334
(i) 99,385 shares held by Rostrevor One Limited, a company controlled by Mr M. Carvill are included in his holding.
Directors’ and Secretary’s share options and share awards (audited)
Share option scheme (audited)
Details of the share options of the Secretary and Executive Directors, granted in accordance with the rules of the share option scheme, are as follows:
Name
M. Carvill
T. McCluskey
D. Corcoran (Secretary)
1 Jan 2020
Granted
during 2020
Exercised or
transferred
during 2020
Lapsed
during
2020 31 Dec 2020
Average
option price
£
Option price
range
From £
Option price
range
To £
–
–
3,750
–
–
–
–
–
–
–
–
3,750
–
–
–
N/A
N/A
54.40
N/A
N/A
54.40
N/A
N/A
54.40
All share options granted under the share option scheme have now lapsed and the Board does not currently intend to make any further awards under
the scheme. The share price at the year end was £3.13 and the share price range for the year was between £1.69 and £3.17.
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CORPORATE GOVERNANCE
Share awards scheme (audited)
Number of nil cost options
Name
M. Carvill
Share
Plan
At 1 Jan
2020 Awarded
Vested &
Exercised
Lapsed
At 31 Dec
2020
Date of grant
KIP
258,635
–
(64,659)
(193,976)
–
31 March 2017
Exercise period
31 March 2020
KRSP
KRSP
KRSP
KRSP
KIP
KRSP
KRSP
KRSP
KRSP
KRSP
KRSP
KRSP
KRSP
134,466
149,362
152,074
–
694,537
170,689
88,743
98,574
100,364
–
458,370
20,343
31,094
33,519
–
84,956
2,352(i)
–
–
157,206
159,558
–
1,552(i)
–
–
103,750
105,302
593(i)
–
–
36,530
37,123
(83,032)
–
–
–
(147,691)
–
–
–
–
(193,976)
53,786
149,362
152,074
157,206
512,428
26 May 2017
15 March 2018
15 March 2019
13 May 2020
26 May 2020–26 May 2022
15 March 2021–15 March 2023
15 March 2022–15 March 2024
13 May 2023–13 May 2025
(42,672)
(54,798)
–
–
–
(97,470)
(20,936)
–
–
–
(20,936)
(128,017)
–
–
–
–
(128,017)
–
35,497
98,574
100,364
103,750
338,185
31 March 2017
26 May 2017
15 March 2018
15 March 2019
13 May 2020
31 March 2020
26 May 2020–26 May 2022
15 March 2021–15 March 2023
15 March 2022–15 March 2024
13 May 2023–13 May 2025
–
–
–
–
–
26 May 2017
–
17 April 2018
31,094
23 March 2019
33,519
36,530 26 March 2020
101,143
26 May 2020
17 April 2021
23 March 2022
26 March 2023
T.McCluskey
D.Corcoran
Market
price at
exercise £
1.75
2.20
1.75
2.20
2.20
(i) Dividend equivalent entitlements relating to share awards vesting.
The aggregate gain on awards that vested during the year for Executive Directors was US$0.5 million (2019: US$0.2 million)
In the case of the Executive Directors, the KRSP awards made prior to 2020 vest, subject to continued employment, 60% on the third anniversary of
grant date, 20% on fourth anniversary and 20% on fifth anniversary.
The 2020 awards for Mr. M. Carvill and Mr. T. McCluskey represent 75% of base salary based on a share price of £2.32; the open offer price from the
2016 capital raise as the actual share price at the date of award was lower.. The value of these awards totalled £0.36 million for Mr. M. Carvill and £0.24
million for Mr. T. McCluskey.
The Executive Directors’ 2020 KRSP awards vest, subject to continued employment and to the Remuneration Committee’s assessment against
a discretionary underpin, on the third anniversary of grant date. The vested KRSP awards are subject to a two-year holding period which may
extend beyond an Executive Director’s cessation of employment in accordance with the post-employment holding requirements of the 2020
remuneration policy.
In the case of the Secretary, the above KRSP awards vest, subject to continued employment, on the third anniversary of grant date. No awards have
been made under the KIP since March 2017. Non-Executive Directors do not receive awards under share awards plans.
Executive Directors’ shareholding requirement
In accordance with the current Remuneration Policy, the Executive Directors are required to build up shareholdings equal to 250% of their respective
salaries by 25 May 2022. This requirement can be met both by shareholdings held by the Executive Directors (directly or indirectly) and, on a
net-of-tax basis, by unvested share awards that are not subject to performance or underpin conditions. As of 26 March 2021, and taking into account
prevailing exchange rates and the basis of the information disclosed in the table on page 106, each of Mr. M. Carvill and Mr. T. McCluskey met this
requirement.
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ANNUAL REPORT ON REMUNERATION CONTINUED
Performance graph and table
The value at 31 December 2020 of US$100 invested in the Group in 2010 compared with the value of US$100 invested in the FTSE All Share Mining
Index is shown in the graph below.
Value at 31 December 2020 of $100 investment at 31 December 2010
$160
$140
$120
$100
$80
$60
$40
$20
$0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Kenmare Resources PLC
FTSE All Share Mining Index
The remuneration paid to the Managing Director in the past 10 years is set out below:
Single figure of
total remuneration
US$’000
Bonus pay-out
(as % maximum opportunity)
Long-term
incentive vesting rates
(as % maximum opportunity)
Year
2020
2019
2018
2017
2016
2015
2014
2013
Name
M. Carvill
M. Carvill
M. Carvill
M. Carvill
M. Carvill
M. Carvill
M. Carvill
M. Carvill
1,070
1,444
1,652
1,528
1,340
744
967
809
62%
47%
58%
59%
66% (i)
22% (i)
26% (i)
0%
0%
37%
N/A
25%
83.3%
0%
N/A
N/A
N/A
0%
N/A
N/A
2012
2011
(i) Amount shown reflects the cash and deferred share award under the KIP, part of which is conditional on long-term performance.
M. Carvill
M. Carvill
783
1,035
In line with the European Union (Shareholders’ Rights) Regulations 2020 and with the regulations set out in the UK’s Large and Medium-sized
Companies and Groups (Accounts and Report) (Amendment) Regulations 2013, to which the Group has regard, figures shown in the table above relate
to remuneration for performance each year.
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CORPORATE GOVERNANCE
Percentage change in remuneration and Company performance
Annual change
Directors' remuneration
Executive Directors
M. Carvill, Managing Director (i)
T. McCluskey, Financial Director (i)
Non-Executive Directors
P. Bacchus (ii)
E. Dorward-King (ii)
C. Fonseca
E. Headon (ii)
T. Keating
G. Martin
S. McTiernan
G. Smith
D. Somers
Group performance
Net Profit
Employee average remuneration on a full-time equivalent basis
Employees of the Company
(i) The reduction is driven by the introduction of the underpin in the KRSP which means the 2020 award will be reflected in the single figure table at the time of vesting.
(ii) The increase results from changes to Board and/or Committee responsibilities during 2020.
(iii) The annual change has been calculated based on annualised figures.
2020 v 2019
%
(26%)
(28%)
13%
29%
18%
47%
8%
6%
0%
0%
N/A
(63%)
7%
Relative importance of spend on pay
Overall spend on pay including Directors
Profit distributed by way of dividend
Group cash operating costs
2020
US$’000
40,518
8,594
158,000
2019
US$’000
41,994
3,026
156,600
Change
US$’000
-1,476
5,568
1,400
Employee numbers throughout the Group increased from 1,497 in 2019 to 1,499 in 2020.
Group cash operating costs have been included in the table in order give a context to spend on pay relative to the overall cash operating costs.
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ANNUAL REPORT ON REMUNERATION CONTINUED
Statement of implementation of policy in 2021 (audited)
Base salary
The base salaries for the forthcoming year are due to increase by 1.5% reflecting an inflation adjustment for the period from 2014 to 2020 and are set
out below:
Executive Director
M. Carvill
T. McCluskey
2021
US$’000
2020
US$’000
% Change
628
415
619
409
1.5
1.5
The underlying currency of Mr. M. Carvill and Mr. T. McCluskey’s base salaries is Euro. The US Dollar figures shown above for 2021 have been calculated
using the average 2020 Euro to US Dollar exchange rate. The final US Dollar figure for 2021 will vary depending on exchange rate movements.
Annual bonus
The incentive opportunity for the Executive Directors under the incentive scheme for 2021 will be as follows:
Executive Director
M. Carvill
T. McCluskey
The performance metrics for 2021 annual bonuses and their associated weightings are as follows:
On-target
incentive
(% of salary)
Maximum
incentive
(% of salary)
50
50
100
100
Measure
Weight (i)
Ilmenite, zircon, rutile and concentrates production volume
EBITDA
Total cash operating costs
Cash cost per tonne
Total shareholder return
Safety – LTIFR and community
Environment
Social and other
30%
10%
10%
5%
5%
25%
5%
5%
5%
Area
Operational
Financial
Environment, Social and Governance (ESG)
Project execution
Corporate
COVD-19 management
(i) The respective weightings for the Managing Director and Financial Director will be the same for all metrics except for Corporate where the Remuneration Committee will determine
appropriate splits reflecting their respective responsibilities and challenges in these areas in 2021.
The performance metrics as set out above seek to deliver ongoing progress in relation to operational performance, cost efficiency, ESG, and strategic
corporate objectives. The performance targets associated with the quantitative measures are in line with guidance issued in January 2021 and the
targets for qualitative measures are in line with 2020 targets.
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CORPORATE GOVERNANCE
Kenmare Restricted Share Plan (KRSP)
The maximum award level for the Executive Directors under the KRSP for 2021 will be 100% of base salary. For the current Executive Directors only,
the share price used to determine the award levels will not be less than £2.32, the open offer price for the 2016 capital raise. Vesting of awards will
be subject to a performance underpin based on a number of corporate indicators. The underpin has no pre-determined targets and will be assessed
retrospectively based on performance over the three-year vesting period.
In addition to the assessment of the appropriate award level prior to grant, the Remuneration Committee will also undertake a discretionary underpin
performance assessment prior to vesting. The assessment of the underpin will consider Company and individual performance over the three-year
vesting period. This provides the Committee with the ability to take a holistic view of the Company’s performance to ensure that the vesting level
is appropriate.
The following four core elements will be considered as part of the underpin assessment, although the Committee may consider other factors in
addition to these:
operational performance outcomes under the annual bonus scorecard over the three-year period;
share price performance since grant;
environmental, social and governance performance; and
major strategic or project decisions and return on investment.
The Committee does not intend to set fixed, quantitative underpins in respect of these factors. Instead, in completing its assessment, the Committee
may consider the following questions:
Has operational performance been below threshold in any year during the vesting period? If so, has this been offset by performance in a prior or
subsequent year?
Has there been a material decline in the share price or failure to meet shareholder expectations for growth?
Have there been any adverse environmental, social or governance issues arising during the vesting period, or any significant health and
safety incidents?
For major projects which have commenced during the vesting period, what progress has been made? For major projects that have been completed
during the vesting period, what were the outcomes against original expectations and how do these translate to returns to shareholders?
In making an adjustment to vesting levels, the Committee will also consider the extent to which the matter has already been reflected in the annual
bonus scheme outcomes. Furthermore, the Committee will consider these factors in both an individual and collective context, meaning that there may
be different vesting levels for each participant.
Malus and clawback provisions will apply, as set out in the Directors’ remuneration policy. Awards will be subject to malus during the vesting period.
Clawback will apply for two years post-vesting.
Statement of voting at Annual General Meeting
The table below shows the outcome of the advisory vote on the Directors’ Remuneration Report and Directors’ remuneration policy at the 2020 AGM.
Item
Advisory vote on 2019 Directors’ Remuneration Report
Advisory vote on Directors’ remuneration policy
Votes
for
76,182,597
70,960,538
%
97.76
91.02
Votes
against
1,742,125
6,997,155
%
2.24
8.98
Votes
withheld
44,412
11,440
This report was approved by the Board of Directors and signed on its behalf by:
Graham Martin
Chairman of the Remuneration Committee
31 March 2021
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DIRECTORS’ REMUNERATION POLICY REPORT
CORPORATE GOVERNANCE
Introduction
The Directors’ remuneration policy (the “policy”) as summarised below was approved by a shareholder vote at the Annual General Meeting on 13 May
2020 and applies for the period of three years from the date of approval. For clarity, a summary of the policy is included in this report. The full policy
can be found in the 2019 Annual Report, which is available under the Investors section of our website, www.kenmareresources.com.
Principles
Kenmare’s remuneration policy is designed to support the business strategy, long-term interests and sustainability by providing levels of remuneration
that attract, motivate and retain Executive Directors of the highest calibre who can contribute their experience to the Group’s operations. The Board
seeks to align the long-term interests of Executive Directors with those of shareholders, within the framework set out in the UK Corporate Governance
Code (the “Code”).
The Remuneration Committee seeks to ensure:
that Executive Directors are rewarded in a fair and balanced way for their individual and team contribution to the Group’s performance;
that Executive Directors receive a level of remuneration that is appropriate to their scale of responsibility and individual performance;
that the overall approach to remuneration has regard to the sector within which the Group operates and the markets from which it draws its
Executive Directors; and
that risk is properly considered in setting remuneration policy and in determining remuneration packages, with a focus on simplicity, transparency
and the promotion of long-term alignment with shareholders.
Remuneration policy for 2020 onwards
The remuneration policy set out on pages 113 to 119 covers the three-year period between the 2020 AGM and the 2023 AGM and it complies with the
European Union (Shareholders’ Rights) Regulations 2020 and, on a voluntary basis, with the regulations set out in the UK’s Large and Medium-sized
Companies and Groups (Accounts and Report) (Amendment) Regulations 2013 (together the “Regulations”).
The main components of the remuneration policy and how they are linked to and support the Group’s business strategy are summarised in the table
below. The policy covers all remuneration payments to Directors, and includes no provisions for derogations.
Element of
remuneration
How the element supports our
strategic objectives
Base salary
Supports the recruitment
and retention of Executive
Directors recognising the
scope and responsibility of
the roles and the individual’s
skills and experience.
Performance metrics,
weighting, minimum payout
and time period (where
applicable)
None.
Operation of the element
including any provision for
malus or clawback
Reviewed annually with
increases generally
effective from 1 January.
When determining levels,
consideration is given to:
Group performance;
the performance of the
Executive Director over the
previous 12 months;
the salary review budget
for all employees for the
coming year;
retention risk and the
ability to replace higher
value skills if needed in the
market;
benchmarking data of
other UK and Irish listed
companies of similar
market capitalisation and
practice in the global
mining sector;
inflation; and
the rewards, incentives and
conditions available to the
Group’s workforce.
Maximum potential value
Base salary reviews for
Executive Directors are at the
discretion of the Remuneration
Committee but will generally
be increased with the cost of
living and with consideration
to general Group increases.
The only exceptions to this
rule are where:
there is a significant
movement in the
benchmarking data for that
role; or
an individual is brought in
below market level with a
view to increasing base pay
over time to reflect proven
competence in role; or
there is a material increase
in scope or responsibility
of the Executive
Director’s role.
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Element of
remuneration
How the element supports our
strategic objectives
Benefits
Provides market competitive
benefits to support Executive
Directors in carrying out
their duties.
Pension
To provide a market
competitive remuneration
package by facilitating long-
term saving for retirement.
Performance metrics,
weighting, minimum payout
and time period (where
applicable)
None.
Maximum potential value
Set at a level appropriate
to the individual’s role and
circumstances.
The maximum opportunity will
depend on the type of benefit
and cost of its provision,
which will vary according to
the market and individual
circumstances.
The maximum pension
contribution for Executive
Directors is 10% of salary
None.
Operation of the element
including any provision for
malus or clawback
Benefits include holiday
and sick pay, family health
insurance, permanent health
insurance, life assurance and
an annual health check.
The Managing Director has a
company car.
The Group also reimburses the
Executive Directors in respect
of all expenses reasonably
incurred by them in the proper
performance of their duties.
The Group may introduce new
benefits that are, or become,
prevalent in a jurisdiction in
which it operates and in which
a Director is located.
Each Executive Director is
entitled to receive a payment
into the Company’s group
personal pension plan or their
private pension arrangements,
or alternatively a salary
supplement in lieu of such a
contribution.
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Element of
remuneration
How the element supports our
strategic objectives
Annual bonus
To ensure a market
competitive package and
to incentivise Executive
Directors to achieve the
Group’s business objectives.
Maximum potential value
The maximum annual
opportunity is 100% of
base salary.
Operation of the element
including any provision for
malus or clawback
Based on the level of
performance over the financial
year, the annual bonus will be
paid in cash shortly after the
end of the relevant financial
year up to a maximum cash
payment of 50% of base salary.
Where the annual bonus
achieved exceeds 50% of base
salary, Executive Directors will
be granted restricted shares
under the KRSP in respect of
the excess outcome above
this level, which will vest three
years from grant date.
If the Remuneration
Committee, in exceptional
circumstances, believes
that payment in cash is not
appropriate it will instead
be able to make an award
of shares under the KRSP
of equivalent value. Such
restricted shares would not be
subject to forfeiture but would
be subject to a minimum
retention period.
Clawback will apply to cash
annual bonus awards for
two years from the date of
payment.
Annual bonus awards made in
the form of restricted shares
will be subject to malus during
the vesting period. Clawback
will apply to these for two
years post-vesting.
CORPORATE GOVERNANCE
Performance metrics,
weighting, minimum payout
and time period (where
applicable)
Performance is measured
over the financial year.
Performance metrics and
targets are determined
at the start of each year
by the Remuneration
Committee and will consist
of a balanced scorecard
of financial and non-
financial measures. The
Remuneration Committee
has the discretion to
vary the weighting of the
metrics or to substitute
different measures over
the lifetime of the policy to
take account of changes in
business strategy and/or
external market conditions,
but a significant proportion
of the bonus scorecard
will be weighted towards
financial and operational
metrics.
The targets and actual
levels of performance
will be disclosed
retrospectively within the
implementation section of
the Company’s Directors’
Remuneration Report.
The Remuneration
Committee will have the
discretion to adjust the
results of the outcome of
the scorecard if it believes
this does not accurately
reflect the underlying
performance or align
with the experience of
shareholders.
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Element of
remuneration
How the element supports our
strategic objectives
Operation of the element
including any provision for
malus or clawback
Maximum potential value
Share awards
under the
Kenmare
Restricted
Share Plan
(“KRSP”)
To increase shareholder
alignment by providing
Executive Directors with
longer-term interests
in shares.
Annual awards of shares will
be made under the Kenmare
Restricted Share Plan.
The maximum award level
in any year is 100% of
base salary.
The awards will vest on
the third anniversary of
grant subject to continued
employment and the
Remuneration Committee’s
assessment against a
discretionary underpin. Vested
shares are then subject to
a further two-year holding
period. Participants may sell
sufficient shares at the point
of vesting to cover their tax
liabilities.
Awards will be subject to
malus during the vesting
period. Clawback will apply for
two years post-vesting.
Awards made under the KRSP
may carry an entitlement
to dividend equivalents in
respect of dividends paid
between grant and vesting.
Performance metrics,
weighting, minimum payout
and time period (where
applicable)
The Remuneration
Committee will use its
discretion to consider
the appropriate level of
award (including making
no award) if it believes this
is appropriate in light of
the Group’s performance
and that of the individual
Executive Director at
the time of making of
the award.
The share price used to
determine the award levels
will normally be the share
price shortly before the
date of grant. However,
for the current Executive
Directors only, the share
price used will not be
less than the open offer
price for the 2016 capital
raise (£2.32).
Vesting of the award will be
subject to a performance
underpin based on a
number of corporate
indicators.
The Committee will
consider whether
performance against
such indicators has been
adequately adjusted for
under the annual bonus
outcome when considering
their use of discretion.
The underpin has no
predetermined targets
and will be assessed
retrospectively based
on performance over the
three-year vesting period.
The Committee will provide
a full disclosure of their
assessment within the
Directors’ Remuneration
Report.
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CORPORATE GOVERNANCE
Maximum potential value
Performance metrics,
weighting, minimum payout
and time period (where
applicable)
Shareholding requirement
during employment of 250%
of salary.
N/A
Post-cessation shareholding
requirement of 100% of the
in-employment shareholding
requirement (or actual
shareholding on departure
if lower) for two years
post-employment.
Unvested shares which are
not subject to performance or
underpin conditions will count
towards the shareholding
requirement on a net of
tax basis.
The post-cessation
shareholding requirement
applies to awards granted
after the 2020 AGM. This does
not apply to shares purchased
voluntarily from an Executive
Director’s own funds.
The fees paid to the Non-
Executive Directors are
set at a level to attract
individuals with the necessary
experience and ability to make
a significant contribution
to the Group’s activities,
while also reflecting the time
commitment and responsibility
of the role.
None.
Element of
remuneration
How the element supports our
strategic objectives
Shareholding
requirement
To strengthen the alignment
between the interests of
Executive Directors and those
of shareholders.
Operation of the element
including any provision for
malus or clawback
Executive Directors’
shareholding measured after
the five-year period from
the 2017 AGM (or date of
appointment if later).
Non-Executive
Director fees
To provide a level of fees
to support recruitment
and retention of Non-
Executive Directors with the
necessary experience and
ability to make a significant
contribution to the Group’s
activities.
The Non-Executive Directors
are remunerated entirely
through fees and associated
benefits. They are not eligible
to receive any performance-
related remuneration nor do
they hold share options.
Notes to the future policy table
Performance measures and targets
The Remuneration Committee selects performance conditions for the Annual Bonus which reflect the Group’s overall strategy and are the key metrics
used by the Executive Directors to oversee the operation of the business. They are determined annually. They typically include both production,
financial and non-financial performance criteria. In the past, they have, for example, related to areas such as mineral production targets, EBITDA,
production costs, community safety, environmental compliance and health and safety (both workforce and community related). The performance
criteria for 2020 are described on pages 104 and 105 and those for 2019 are described on pages 92 and 93 of the 2019 Annual Report. The
performance metrics for 2021 are set out on page 110.
The Committee believes that the KRSP will continue to provide an opportunity for the Executive Directors to build meaningful shareholdings in the
Company and therefore further align the longer-term experience of shareholders and management. The introduction of a performance underpin
ensures that the Committee has the ability to reduce vesting outcomes if Group or individual performance does not warrant full vesting of the award.
The underpin will not be assessed based on pre-determined targets; it will be a discretionary retrospective assessment and the Committee will provide
a full disclosure of its assessment. The Remuneration Committee intends to use a broad range of corporate indicators which are intended to reflect
overall performance of the Group during the vesting period.
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DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
Consideration of employment conditions
elsewhere in the Group
The Committee does not directly consult
with employees when formulating Executive
Director pay policy, nor does it apply
strict numerical pay ratios. However, the
Committee does take into consideration
information on pay arrangements for the
wider employee population when determining
the pay of Executive Directors. This includes
consideration of the salary increases awarded
across the Group when determining salary
increases for the Executive Directors each year.
The Group aims to provide a remuneration
package for employees that is market
competitive and follows the same core
structure as for the Executive Directors,
including cascade of the KRSP where
appropriate, participation in an annual bonus
scheme and pension provision.
Consideration of employment conditions
outside the Group
The Committee reviews the remuneration
of the Executive Directors in light of the
remuneration of the Executive Directors of
other appropriate quoted companies.
Consideration of shareholder views
The Remuneration Committee considers
shareholder feedback received in relation
to the AGM each year and guidance from
shareholder representative bodies more
generally. This feedback, together with
additional feedback received during meetings
from time to time and the results of recent
votes on the Remuneration Report, is then
considered as part of the Company’s review
of policy.
In formulating the 2020 remuneration policy,
the Committee consulted with a number of the
Company’s significant shareholders regarding
their views on remuneration practice and
policies. The views expressed during these
consultations were taken into consideration
when setting the remuneration structure.
In order to avoid any conflict of interest, no
Executive Director is present when his or her
own remuneration is being discussed.
Policy on payment for loss of office
When determining any loss of office or change
of control payment for a departing individual,
the Committee will protect the Company’s
interests and reflect the circumstances in place
at the time, having taken into consideration
terms of Executive Directors’ service
agreements. In the event of a compromise
or settlement agreement, the Committee
may make payments it considers reasonable
in settlement of potential legal claims. The
Committee may also include in such payments
reasonable reimbursement of professional
fees in connection with such agreements. The
reimbursement of repatriation costs or fees
for professional or outplacement advice may
also be included in the termination package, as
deemed reasonable by the Committee, as may
the continuation of benefits for a limited period.
Other Remuneration Committee discretions
In addition to assessing and making
judgements on the meeting of performance
targets and the appropriate incentives payable,
the Remuneration Committee has certain
operational discretions available that can be
exercised in relation to Executive Directors’
remuneration including but not limited to:
Amending the outcome of the relevant
scorecard if the Committee believes the
formulaic outcome of the scorecard does
not reflect the true underlying performance
of the Group or the experience of
shareholders;
Deciding whether some or all cash bonus
amounts should be settled in restricted
shares;
Deciding whether to apply malus or
clawback to an award;
Deciding to what extent if any the
performance underpin should apply to the
vesting of an applicable KRSP award;
Determining whether a leaver is a “good
leaver” under the Company’s incentive
plans; and
Amending performance conditions following
a major corporate event or in circumstances
in which the Committee considers that
the impact of external influences is such
that the original metrics are no longer
appropriate.
Where such discretion is exercised, it will
be explained in the subsequent Directors’
Remuneration Report.
Approach to recruitment remuneration
The Committee’s approach to recruitment
remuneration is to pay competitively to attract
the appropriate high-calibre candidate to
the role. Our principle is that the pay of any
new recruit would be assessed following
the same principles as for the existing
Executive Directors.
Service contracts
The Company’s policy is that Executive
Directors should have a notice period of no
more than 12 months. Other than in the case
of termination by an Executive Director on
change of control, the notice periods are 12
months’ notice from the Company and three
months’ notice from the Executive Director.
As a listed company, all of the Executive
Directors and Non-Executive Directors are
subject to annual re-election at the AGM. The
Executive Directors’ service contracts have no
fixed duration save for a retirement age of 65.
In the event of termination, the Remuneration
Committee will agree an appropriate
termination payment for the relevant individual
reflecting the circumstances, service and
existing contractual terms and conditions.
The Company has the right, or may be required
in certain circumstances, to make a payment
in lieu of notice of termination, the amount of
that payment being base salary and benefits
that would have accrued to the Executive
Director during the contractual notice period.
In addition, the Remuneration Committee
reserves the right to allow continued
participation in the Company’s incentive
arrangements during the notice period.
Upon a change of control, each Executive
Director has the right to terminate his
employment by notice and be entitled to
receive an amount equal to 12 months’ salary,
cash equivalent of benefits and pension
contributions, subject to such amount being
reduced by the equivalent amounts in respect
of any months worked by the Executive
Director after his giving of notice. Such
payment would be in settlement of all claims
that the Executive Director may have against
the Group, but shall not affect the Executive
Director’s entitlement to accrued but unpaid
salary, deferred bonus or similar incentive
payments and certain other amounts.
Mr. M. Carvill serves as a Director for a number
of private companies but receives no fee for his
services. Mr. T. McCluskey does not serve as a
Non-Executive Director elsewhere.
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CORPORATE GOVERNANCE
Non-Executive Directors’ remuneration
Non-Executive Directors’ contracts may be
terminated by either party giving to the other
one month’s prior written notice. The Non-
Executive Directors are remunerated entirely
through fees. They are not eligible to receive
any performance-related remuneration nor
do they hold share options. The fees paid
to the Non-Executive Directors are set at a
level to attract individuals with the necessary
experience and ability to make a significant
contribution to the Group’s activities, while
also reflecting the time commitment and
responsibility of the role. Additional per diem
rates may be paid to Non-Executive Directors
when the meeting load has significantly
exceeded what would be expected in the
normal course of business.
None of the Non-Executive Directors had a
beneficial interest in any contract to which the
Company or any of its subsidiary undertakings
was a party during the financial year.
Non-Executive Directors are not entitled to
any compensation on the termination of their
appointment. All Directors are subject to
annual re-election. No compensation is payable
to Non-Executive Directors if they are not
re-elected.
Other considerations in developing
the policy
In developing the 2020 remuneration policy,
the Remuneration Committee considered the
following factors set out in the Code:
Clarity and simplicity – We believe that
the remuneration package for our Executive
Directors is clear and transparent, in
particular the KRSP is a simple structure
which cascades where appropriate down
the organisation. The operation of the KRSP
was simplified in 2020 by adjusting the
vesting schedule so that all awards vest
after three years subject to a further two-
year employment period.
Risk – The Remuneration Committee
has a number of tools at its disposal to
ensure that reputational and other risks
are identified and mitigated. These include
malus and clawback provisions on both the
annual bonus and the KRSP (which have
been extended in the new policy to cover
a wider range of scenarios), the use of a
minimum share price when determining
KRSP awards and the introduction of a
discretionary underpin on the vesting
of KRSP awards. Furthermore, the
Remuneration Committee has the discretion
to amend the formulaic outcome of the
annual bonus if the Committee believes
this does not reflect the true underlying
performance of the Group or the experience
of shareholders.
Predictability and proportionality
A range of potential remuneration outcomes
under the policy can be calculated including
a share price appreciation scenario. This
enables shareholders to assess the impact
of performance outcomes and share price
appreciation on the value of remuneration
for individual Directors.
Alignment to culture – The introduction
of a discretionary underpin assessment
ensures that the vesting level of KRSP
awards takes into account the overall
business performance, including non-
financial factors such as environmental,
social and governance considerations.
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Job number 1 April 2021 5:24 pm V9I joined the Environmental, Health and Safety team at Kenmare in 2016. I’m grateful for the support I’ve had to study for professional qualifications and attend courses. Some of the things I enjoy most are that I feel my work is valued by management and that women are valued in the company.”Azelina Cuamba, Environmental, Health and Safety OfficerKenmare-AR-2020-Financials.indd 120Kenmare-AR-2020-Financials.indd 12001/04/2021 17:28:4801/04/2021 17:28:48 FINANCIAL STATEMENTS
GROUP
FINANCIAL
STATEMENTS
Directors’ report
Directors’ responsibilities statement
Independent auditor’s report
Consolidated statement of financial position
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
122
127
128
134
135
136
137
138
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Job number
1 April 2021 5:24 pm
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DIRECTORS’ REPORT
The Directors present their report and the audited financial statements for the financial year ended 31 December 2020.
Non-financial reporting statement
In compliance with the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations
2017, the table below sets out the relevant sections in this Annual Report to understand the Group’s approach to these non-financial matters.
Reporting Requirements
Environmental matters
Page Reference
Pages 76 to 78
Our Policies
Environmental
Social and employee matters
Page 73
Page 72
Page 70
Human rights
Page 70
Anti-bribery and corruption
Page 70
Page 70
Description of business model Pages 26 and 27
Non-Financial key
performance indicators
Included in KPIs on pages 18 to
20 and Sustainability report on
pages 66 to 77
Diversity
Health and safety
Whistleblowing
Conflicts of
interest
Employment
Community
engagement
and investment
Human rights
Freedom of
association
Anti-bribery
Business ethics
Risk Assessment
Environmental risk is included in the risk entitled “Health,
Safety and Environment (“HSE”) described in the “Principal
risks and uncertainties” section on page 63.
Health and safety risk is included in the risk entitled
“Health, Safety and Environment (“HSE”) described in
the “Principal risks and uncertainties” section on page 63.
Community engagement and investment is relevant to the
risk entitled “Grant and maintenance of licences”, described
in the “Principal risk and uncertainties” section on page 60.
Otherwise, although the risks associated with social and
employee matters are actively monitored, the Group does not
believe these risks meet the threshold of a principal risk for
our business.
Although the risks associated with human rights abuses are
actively monitored, the Group does not believe these risks
meet the threshold of a principal risk for our business.
Although the risks associated with bribery and corruption are
actively monitored, the Group does not believe these risks
meet the threshold of a principal risk for our business.
Principal activities
The principal activity of Kenmare Resources plc
and its subsidiary undertakings is the operation
and further development of the Moma Titanium
Minerals Mine in Mozambique.
Strategic report
The Strategic Report, including a financial and
risk review and a review of the likely future
developments of the Group, set out on pages 10
to 78, forms part of the Directors’ Report and is
incorporated by reference.
Key performance indicators
The Group’s key performance indicators are
detailed on pages 18 to 20 and a glossary of
alternative performance measures is detailed
on pages 177 and 178. These are hereby
incorporated by reference.
Statement of results
During 2020, the Group sold 853,100 tonnes
(2019: 1,029,300 tonnes) of ilmenite, zircon,
rutile and concentrates to customers at a sales
value of US$243.7 million (2019: US$270.9
million). Despite an increase in average
prices, the combination of lower volumes
shipped and lower zircon sales contributed
to a reduction in revenue in the year. Cost of
sales for the financial year was US$179.1 million
(2019: US$178.4 million) as a result of higher
production and depreciation costs, resulting in
a gross profit of US$64.6 million (2019: US$92.5
million).
Other operating costs totalling US$30.3 million
(2019: US$33.3 million), comprised distribution
costs for the financial year of US$9.8 million
(2019: US$9.4 million), freight and demurrage
costs of US$14.2 million (2019: US$17.6 million)
and administration costs of US$6.3 million
(2019: US$6.3 million).
Finance income of US$0.6 million (2019: US$1.5
million), consisting of deposit interest, was
received.
Loan interest and finance fees amounted to
US$11.3 million (2019: US$8.9 million) during the
financial year.
A foreign exchange loss for the financial year
of US$1.0 million (2019: loss US$1.9 million) as a
result of losses on the retranslation of the non-
US Dollar-denominated cash and bank deposits
and trade payables and accruals.
The resultant profit before tax for the financial
year was US$22.8 million (2019: US$50.0
million).
During the year the KMML Mozambique Branch
had taxable profits of US$16.4 million (2019:
US$15.9 million) resulting in an income tax
expense of US$5.7 million (2019: US$5.6 million)
being recognised. Kenmare Resources plc had
taxable profits of US$4.2 million (2019: US$20.2
million) which were offset against prior year
tax losses. At the reporting date, the Parent
Company has unused tax losses of US$1.6
million (2019: US$3.8 million) resulting in the
recognition of a deferred tax asset of US$0.2
million at 31 December 2020 (2019: US$0.5
million). In aggregate this resulted in a tax
expense for the financial year of US$6.0 million
(2019: US$5.2 million), resulting in a profit after
tax for the financial year of US$16.7 million
(2019: US$44.8 million).
An interim dividend of USc2.31 per share
was paid in October 2020. The Board is
recommending a final dividend of USc7.69 per
share, which is subject to shareholder approval
at the AGM.
Additions to property, plant and equipment
amounted to US$141.5 million (2019: US$68.5
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FINANCIAL STATEMENTS
only where there is a high degree of confidence
in its economic extraction. Production levels for
the purpose of the forecast are approximately
1.2 million tonnes per annum of ilmenite plus
co-products, zircon, concentrates and rutile,
over the next three years. Assumptions for
product sales prices are based on contract
prices as stipulated in marketing agreements
with customers or, where contract prices are
based on market prices or production is not
presently contracted, prices are forecast taking
into account independent titanium mineral
sands expertise and management expectations.
Operating costs are based on approved budget
costs for 2021, taking into account the current
running costs of the Mine and escalated by 2%
per annum thereafter. Capital costs are based
on the capital plans and include escalation at
2% per annum.
Sensitivity analysis is applied to the
assumptions above to test the robustness
of the cash flow forecasts for changes in
market prices, shipments and operating
and capital cost assumptions. Changes
in these assumptions affect the level of
sales and profitability of the Group and the
amount of capital required to deliver the
projected production levels. As a result of
this assessment, the Board has a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities as
they fall due over the aforementioned three-
year period.
The Group also recognises the uncertainty
surrounding potential global impacts from
the COVID-19 virus. The Group will closely
monitor impacts on its operations and develop
appropriate response plans.
The Group has also performed a range of
scenario analysis which supports the viability
statement.
million). There was an increase in the mine
closure provision of US$11.0 million (2019:
US$5.5 million) during the year, principally as
a result of an updated estimated mine closure
cost and a change in the discount rate from
2.6% to 2.0%. Depreciation increased to US$42.3
million (2019: US$33.4 million) during the
financial year.
Trade and other receivables amounted to
US$29.9 million (2019: US$41.2 million), of
which US$23.1 million (2019: US$32.2 million)
were trade receivables from the sale of mineral
products and US$6.8 million (2019: US$9.0
million) was comprised of prepayments and
other miscellaneous debtors. The reduction in
trade receivables at the year end was mainly
due to invoice discounting of sales in December
2020. All trade receivables are current and an
expected credit loss of US$0.2 million (2019:
US$0.2 million) was recognised at the year end.
Cash and cash equivalents increased by US$4.6
million (2019: decrease of US$15.8 million)
during the year and at 31 December 2020
amounted to US$87.2 million (2019: US$81.2
million).
Lease liabilities amounted to US$3.4 million
(2019: US$4.5 million) at year end.
Tax liabilities and trade and other payables
amounted to US$1.6 million (2019: US$4.4
million) and US$50.1 million (2019: US$36.0
million) respectively at year end. The increase
in trade and other payables is due to the
increased level of capital projects creditors and
timing of payments at the year end.
At year end bank debt amounted to US$145.8
million (2019: US$60.9 million). This consists
of debt drawn of US$150.0 million and loan
interest of US$1.2 million, net of transaction
costs of US$5.4 million. The weighted average
interest rate on Group debt at year end was
5.8% (2019: 7.3%).
Directors
The Directors who held office during 2020 were as follows:
Going concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position are
set out in the Strategic Report on pages 10 to
78. The financial position of the Group, its cash
flows and liquidity position are described in the
Finance Review on pages 52 to 56. Note 28 to
the financial statements includes the Group’s
policy for managing its capital.
Based on the Group’s cash flow forecast
(the “Group Forecast”), the Directors have a
reasonable expectation that the Group has
adequate resources for the foreseeable future
and continue to adopt the going concern basis
of accounting in preparing the annual financial
statements.
Viability statement
The Directors have assessed the prospects of
the business and have a reasonable expectation
that the Group can meet its liabilities as they
fall due over the three-year period 2021 to 2023.
The Directors concluded that three years is
an appropriate period for the assessment as
they have reasonable clarity over the cash flow
forecast assumptions over this period. The
Directors have carried out a robust assessment
of the principal risks facing the Group, including
those that would threaten its business model,
future performance, solvency and liquidity and
taking into account the potential impact of the
COVID-19 pandemic.
The Group Forecast has been prepared by
management with best estimates of production,
pricing and cost assumptions over the period.
Key assumptions upon which the Group
Forecast is based include a mine plan covering
production using the Namalope, Nataka, Pilivili
and Mualadi reserves and resources as set out
in the mineral reserves and resources table on
page 47. Specific resource material is included
S. McTiernan (Chairman)
P. Bacchus
M. Carvill
E. Dorward-King
C. Fonseca
E. Headon
T. Keating
G. Martin
T. McCluskey
G. Smith
D. Somers
Non-Executive
Non-Executive
Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Executive
Non-Executive
Non-Executive
A
A
A
A
A
A Member of the Audit and Risk Committee, chaired by Mr. G. Smith
R Member of the Remuneration Committee, chaired by Mr. G. Martin
N Member of the Nomination Committee, chaired by Mr. P. Bacchus
S Member of the Sustainability Committee, chaired by Dr. E. Dorward-King
R
R
R
N
N
N
N
S
S
S
S
S
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DIRECTORS’ REPORT CONTINUED
On 10 March 2020, the Company acquired
and cancelled all of the 2,781,905,503 deferred
shares of €0.059995 each in the capital of the
Company in issue by transfer otherwise than
for valuable consideration in accordance with
Section 102(1)(a) and Section 106(1) of the
Companies Act 2014 and Article 3(b)of the
Articles of Association of the Company. At the
Annual General Meeting of the Company, held
on 13 May 2020, all of the unissued deferred
shares of €0.059995 each in the capital of the
Company were cancelled.
In March 2020, the Company issued 78,902
ordinary shares to the Kenmare Employee
Benefit Trust for their nominal value in
connection with the settlement of certain share
awards under the KRSP.
Save for the foregoing, the Company did not
hold, purchase, sell or cancel any of its own
shares (ordinary shares or deferred shares)
during the year.
Authority to allot
The Directors have been given the authority by
shareholders to allot shares up to an aggregate
nominal amount equal to €36,552.
This authority will expire at the conclusion of
this year’s Annual General Meeting at which
shareholders will be asked to grant a new
authority to the Directors.
Authority to make market purchases
At the Annual General Meeting held on 13 May
2020, the Company was granted an authority
to make market purchases, within a set price
range, of up to 10% of its own shares. This
authority will also expire at the conclusion of
this year’s Annual General Meeting at which
shareholders will be asked to grant a new
authority to the Company.
Takeover directive
In the event of a change in control, directly
or indirectly, of the Company, the Project
Companies or any other subsidiary which
is a borrower under the debt facilities, such
facilities will be cancelled and all outstanding
amounts together with accrued interest shall
become immediately due and payable. The
share award schemes all contain change of
control provisions that provide for accelerated
crystallisation of awards and vesting of shares
(including by way of exercise of nil-paid
options) in the event of a change of control of
the Company.
Other than as described in the Annual report
on remuneration on pages 101 to 112, there
are no agreements between the Company
and its Directors or employees providing for
predetermined compensation for loss of office
or employment that would occur in the event
of a bid for the Company, save that certain
employees, not being Directors, have service
contracts that either provide for extended
notice periods and/or fixed payments on
termination following a change in control of the
Company.
Corporate Governance Statement
For the purpose of Section 1373 of the
Companies Act 2014, the following disclosures
form part of the Corporate Governance
Statement in respect of the financial year
ended 31 December 2020.
The annual Corporate Governance Report
on pages 84 to 89 , and the section headed
“Diversity and Inclusivity” on page 91 of the
Nomination Committee Report are incorporated
by reference.
Substantial interests
As at 26 March 2021 and 31 December 2020, the Company had been notified of the following
shareholdings in excess of 3% of the issued ordinary shares of the Company:
African Acquisition Sarl
M&G plc
Premier Miton Group plc
FIL Limited
Nortrust Nominees Ltd,
London UK
J O Hambro
Capital Management Ltd
As at 26 March 2021
As at 31 December 2020
No. of
ordinary shares
31,928,480
21,375,798
8,210,726
6,583,078
% of issued
share capital
29.10%
19.48%
7.48%
6.00%
No. of
ordinary shares
31,928,480
21,489,170
8,210,726
7,672,445
% of issued
share capital
29.10%
19.58%
7.48%
6.99%
4,769,632
4.35%
4,769,632
4.35%
3,660,756
3.34%
N/A
N/A
In May 2020 Ms. E. Headon retired from
the Board as her nine year tenure as a
Non-Executive Director had come to an end.
In August 2020, Ms. D. Somers was appointed
to the Board as a Non-Executive Director and
was appointed as a member of the Audit and
Risk Committee.
Dr. E. Dorward-King was appointed Chair of the
Sustainability Committee and Mr. P. Bacchus
was appointed Chair of the Nomination
Committee during the year.
Directors’ and Secretary’s
shareholdings and share awards
The interests of the Directors and Secretary
of the Company, their spouses and minor
children in the ordinary share capital of the
Company, and details of the share awards
granted in accordance with the rules of the
Kenmare Incentive Plan (KIP) and the Kenmare
Restricted Share Plan (KRSP), are detailed in
the Annual report on remuneration on pages
101 to 112.
Share option and share award schemes
It was the policy of the Company to award share
options to certain employees and consultants.
In the past, share options were also awarded
to Executive Directors but this practice ceased
with the introduction of the KIP in 2014. In 2017,
the KIP was replaced by the KRSP together
with an annual bonus scheme and there are no
outstanding interests under the KIP.
At 31 December 2020, there were options in
issue that had been granted under the 1987
share option scheme to persons to subscribe
for a total of 11,500 ordinary shares. These
options are exercisable at an average price of
US$36 per share.
At 31 December 2020, there were outstanding
nil cost options (inclusive of dividend
equivalents) in respect of 2,040,151 ordinary
shares, there are no outstanding interests
under the KIP.
Share capital
As at 1 January 2020, the Company’s share
capital consisted of ordinary shares of €0.001
and deferred shares of €0.059995. As at 31
December 2020, the Company’s share capital
consisted of ordinary shares of €0.001 only.
The Company’s ordinary shares of €0.001 rank
equally in all respects and carry no special
rights. They carry voting and dividend rights.
There are no restrictions on the transfer of
the Company’s shares or voting rights and
the Company has not been notified of any
agreements between holders of securities in
this regard.
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Powers of the Directors
Under the Articles of Association of the
Company, the business of the Company is
to be managed by the Directors who may
exercise all the powers of the Company subject
to the provisions of the Companies Act, the
Memorandum of Association of the Company
and the Articles of Association of the Company
and to any directions given by resolution of
a General Meeting not being inconsistent
with the Companies Acts and the Articles of
Association. The Articles of Association permit
the Directors to delegate any of their powers,
authorities and discretions for such time, upon
such terms and subject to such conditions and
with such restrictions as they think fit to any
committee consisting of one or more Directors
and (if thought fit) one or more other persons,
provided that a majority of the members of a
committee shall be Directors.
The Directors may also, from time to time
appoint any company, firm or person or body of
persons, to be the attorney(s) of the Company
for such purposes and with such powers,
authorities and discretions (not exceeding
those vested in or exercisable by the Directors
under the Articles of Association) and for such
period and subject to such conditions as they
may think fit.
The Articles of Association also provide
that the Directors may establish any local or
divisional boards or agencies for managing any
of the affairs of the Company in any specified
locality, either in Ireland or elsewhere, and may
delegate to any such board or agent any of the
powers, authorities and discretions vested in
the Directors upon such terms and subject to
such conditions as the Directors may think fit.
Appointment and removal of Directors
The Articles of Association empower the
Board to appoint Directors but also require
Directors to retire and submit themselves
for re-election at the first Annual General
Meeting following their appointment. Under
the Articles of Association, a third of the Board
must retire annually but may offer themselves
for re-election. However, in accordance with
the provisions contained in the UK Corporate
Governance Code, the Board has decided
that all Directors should retire annually at the
Annual General Meeting and offer themselves
for re-election.
Directors are appointed and removed by the
shareholders in a General Meeting of the
Company and may be co-opted by the Board.
Memorandum of association and articles of
association
The Company’s Memorandum of Association
and Articles of Association set out the objects
and powers of the Company and may be
amended by shareholders at a General Meeting
of the Company by special resolution (requiring
the resolution to be passed by 75% of the
eligible votes).
General meetings and shareholders’ rights
Under the Articles of Association, the power
to manage the business of the Company is
generally delegated to the Directors. However,
the shareholders retain the power to pass
resolutions at a General Meeting of the
Company which may give directions, not being
inconsistent with the Companies Act and the
Articles of Association, to the Directors as to
the management of the Company.
The Company must hold a General Meeting
each year as its Annual General Meeting, in
addition to any other meetings in that year. The
Annual General Meeting will be held at such
time and place as the Directors determine. All
General Meetings, other than Annual General
Meetings, are called Extraordinary General
Meetings. The Directors may at any time call an
Extraordinary General Meeting. Extraordinary
General Meetings shall also be convened by
the Directors on the requisition of members
holding, at the date of the requisition, not less
than 5% of the paid-up capital carrying the right
to vote at General Meetings.
No business may be transacted at any General
Meeting unless a quorum is present at the time
when the meeting proceeds to business. Three
persons entitled to attend and to vote upon
the business to be transacted, each being a
member or a proxy for a member, constitutes a
quorum.
The shareholders have the right to receive
notice of a General Meeting. In the case of an
Annual General Meeting or of a meeting for
the passing of a special resolution, twenty-one
clear days’ notice at the least, and in any other
case fourteen clear days’ notice at the least,
needs to be given in writing in the manner
provided for in the Articles to all the members
(subject to any restrictions imposed on any
shares), to the Directors, the Secretary and
the Auditors and any other person entitled to
receive notice under the Companies Act. The
shareholders also have the right to attend,
speak, vote and ask questions at General
Meetings. In accordance with Irish company
law, the Company specifies record dates for
General Meetings, by which date shareholders
must be registered in the Register of Members
of the Company to be entitled to attend. Record
dates are specified in the notes to the Notice of
a General Meeting. Shareholders may exercise
their right to vote on some or all of their shares
by appointing a proxy or proxies, by electronic
means or in writing. The requirements for the
receipt of valid proxy forms are set out in the
notes to the notice convening the meeting.
FINANCIAL STATEMENTS
A shareholder, or a group of shareholders,
holding at least 3% of the issued share capital
of the Company has the right to put an item
on the agenda of the Annual General Meeting
or to table a draft resolution for inclusion in
the agenda of a General Meeting, subject to
certain timing requirements prescribed by the
Companies Act and any contrary provision of
Irish company law.
All business that is transacted at an
Extraordinary General Meeting is deemed
special. All business that is transacted at
an Annual General Meeting is also deemed
special, with the exception of declaring a
dividend, the consideration of the Company’s
statutory financial statements and reports
of the Directors and Auditor, the review by
the members of the Company’s affairs, the
appointment of Directors in the place of those
retiring, the fixing of the remuneration of the
Directors, subject to sections 380 and 382
to 385 of the Act, the appointment or re-
appointment of the Auditor and the fixing of
their remuneration and the consideration of a
special resolution reducing the period of notice
for the calling of an Extraordinary General
Meeting (other than such a meeting called for
the passing of a special resolution) to 14 days.
Voting at any General Meeting is by a show of
hands unless a poll is properly demanded. On
a show of hands, every member who is present
in person or by proxy has one vote regardless
of the number of shares they hold. On a poll,
every member who is present in person or by
proxy has one vote for each share they hold.
A poll may be demanded by the Chairman
of the meeting or by at least three members
having the right to vote at the meeting or by
a member or members representing not less
than one-tenth of the total voting rights of all
the members having the right to vote at the
meeting or by a member or members holding
shares in the Company conferring a right to
vote at the meeting, being shares on which an
aggregate sum has been paid up equal to and
not less than one-tenth of the total sum paid up
on all shares conferring that right.
Deadlines for exercising voting rights
Voting rights at General Meetings of the
Company are exercised when the Chairman
puts the resolution at issue to a vote of the
meeting. Where a person is appointed to vote
for a shareholder as proxy, the instrument of
appointment must be received by the Company
not later than the latest time approved by the
Directors.
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UK Listing Rule 9.8.4
No information is required to be disclosed in
respect of Listing Rules 9.8.4 (1), (2), (4), (5), (6),
(7), (8), (9), (10), (11), (12), (13) and (14).
Political donations
There were no political donations that require
disclosure under the Electoral Act 1997 (as
amended).
Secondary listing
Kenmare Resources plc has a secondary
listing on Euronext Dublin. For this reason, the
Company is not subject to the same ongoing
listing requirements as those which would apply
to an Irish company with a primary listing on
Euronext Dublin, including the requirement
that certain transactions require the approval
of shareholders. For further information,
shareholders should consult their own financial
adviser.
Kenmare Resources plc has a premium listing
on the Main Market of the London Stock
Exchange. The Company is subject to the
Listing Rules of the UK Listing Authority and
the Listing Rules of Euronext Dublin.
On behalf of the Board:
M. Carvill
Director
31 March 2021
T. McCluskey
Director
31 March 2021
DIRECTORS’ REPORT CONTINUED
c. during the financial year to which this
report relates, conducted a review of
the arrangements or structures that the
Directors have put in place to ensure
material compliance with the Company’s
Relevant Obligations.
Dividends
In October 2018, the Company announced a
dividend policy as part of its strategy to create
and deliver shareholder value. The dividend
policy is to return a minimum of 20% of annual
profit after tax to shareholders, subject to
prevailing product market conditions. An
interim dividend of USc2.31 (2019: USc2.66)
per share was paid in October 2020. The Board
is recommending a final dividend of USc7.69
(2019: USc5.52) per share. This would give a
total dividend in respect of 2020 of USc10.00
(2019: USc8.18) per share. Basic earnings per
share in 2020 were US$0.15 (2019: US$0.41). It
is proposed to pay the final dividend on 19 May
2021 to shareholders registered at the close of
business on 16 April 2021.
Events since the financial year end
Details of events since the financial year end
are set out in Note 34 to the consolidated
financial statements.
Notice of Annual General Meeting and
special business
Notice of the Annual General Meeting,
together with details of special business to
be considered at the meeting, is set out in a
separate circular to be sent to shareholders and
will also be available on the Group’s website,
www.kenmareresources.com.
Other disclosures
Risk exposure
The exposure of the Group to credit, liquidity,
market, currency and cash flow risk is detailed
in Note 27. Capital management is detailed in
Note 28.
Branches
The Company established and maintains a
branch in the United Kingdom. This branch was
registered with the UK Companies House with
registration number FC031738.
Subsidiary undertakings
The subsidiary undertakings of the Company
at 31 December 2020 are outlined in Note 4
to the Company financial statements. Each
of the subsidiary undertakings KMML, KMPL
and Mozambique Minerals Limited operates
branches in Mozambique.
Accounting records
The Directors have employed appropriately
qualified accounting personnel and have
maintained appropriate accounting systems to
ensure that proper accounting records are kept
in accordance with Sections 281 to 285 of the
Companies Act 2014. The books of account are
kept at the Company’s office at 4th Floor, Styne
House, Hatch Street Upper, Dublin 2, Ireland.
Audit & Risk Committee
The Board of the Company has established an
Audit & Risk Committee. See pages 94 to 97
for the Audit & Risk Committee Report for the
financial year under review.
Auditors
KPMG, Chartered Accountants was first
appointed statutory auditor on 14 May 2019
and has been reappointed annually since that
date and pursuant to Section 383(2), of the
Companies Act 2014 will continue in office. The
financial statements on pages 122 to 173 have
been audited by KPMG.
Disclosure of information to statutory
auditor
In accordance with the provisions of Section
330 of the Companies Act 2014, each of the
persons who are Directors of the Company at
the date of approval of this report confirms that:
so far as the Director is aware, there is no
relevant audit information (as defined in the
Companies Act 2014) of which the statutory
auditor is unaware; and
the Director has taken all the steps that he/
she ought to have taken as a Director to
make himself/herself aware of any relevant
audit information (as defined) and to ensure
that the statutory auditors are aware of such
information.
Statutory compliance statement
The Directors acknowledge that they are
responsible for securing the Company’s
compliance with the Company’s “relevant
obligations” within the meaning of Section 225
of the Companies Act 2014 (described below as
“Relevant Obligations”).
The Directors confirm that they have:
a. drawn up a compliance policy statement
setting out the Company’s policies
(that are, in the opinion of the Directors,
appropriate to the Company) in respect of
the Company’s compliance with its Relevant
Obligations;
b. put in place appropriate arrangements
or structures that, in the opinion of the
Directors, provide a reasonable assurance of
compliance in all material respects with the
Company’s Relevant Obligations; and
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DIRECTORS’ RESPONSIBILITIES STATEMENT
FINANCIAL STATEMENTS
The Directors are responsible for preparing
the Annual Report and the Group and Parent
Company financial statements, in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare Group and Parent Company financial
statements for each financial year. Under that
law, the Directors are required to prepare the
Group financial statements in accordance
with IFRS as adopted by the European Union
and applicable law including Article 4 of the
IAS Regulation. The Directors have elected
to prepare the Parent Company financial
statements in accordance with IFRS as
adopted by the European Union as applied in
accordance with the provisions of Companies
Act 2014.
Under company law the Directors must not
approve the Group and Parent Company
financial statements unless they are satisfied
that they give a true and fair view of the assets,
liabilities and financial position of the Group
and Parent Company and of the Group’s
profit or loss for that year. In preparing each
of the Group and Parent Company financial
statements, the Directors are required to:
select suitable accounting policies and then
apply them consistently;
make judgements and estimates that are
reasonable and prudent;
state whether applicable Accounting
Standards have been followed, subject
to any material departures disclosed and
explained in the financial statements;
assess the Group and Parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related to
going concern; and
use the going concern basis of accounting
unless they either intend to liquidate the
Group or Parent Company or to cease
operations, or have no realistic alternative
but to do so.
The Directors are also required by the
Transparency (Directive 2004/109/EC)
Regulations 2007 and the Transparency Rules
of the Central Bank of Ireland to include a
management report containing a fair review of
the business and a description of the principal
risks and uncertainties facing the Group.
The Directors are responsible for keeping
adequate accounting records which disclose
with reasonable accuracy at any time the
assets, liabilities, financial position and profit or
loss of the Company and which enable them
to ensure that the financial statements comply
with the provision of the Companies Act 2014.
The Directors are also responsible for taking
all reasonable steps to ensure such records
are kept by its subsidiaries which enable
them to ensure that the financial statements
of the Group comply with the provisions of
the Companies Act 2014 including Article 4
of the IAS Regulation. They are responsible
for such internal controls as they determine
is necessary to enable the preparation of
financial statements that are free from material
misstatement, whether due to fraud or error,
and have general responsibility for safeguarding
the assets of the Group, and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities. The
Directors are also responsible for preparing
a Directors’ report that complies with the
requirements of the Companies Act 2014.
The Directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the Group’s
and Company’s website. Legislation in the
Republic of Ireland concerning the preparation
and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement as required
by the transparency directive and UK
corporate governance code:
Each of the Directors, whose names and
functions are listed on pages 80 and 81 of this
Annual Report, confirm that, to the best of each
person’s knowledge and belief:
The Group financial statements, prepared
in accordance with IFRS as adopted by the
European Union and the Company financial
statements prepared in accordance with
IFRS as adopted by the European Union as
applied in accordance with the provisions
of Companies Act 2014, give a true and fair
view of the assets, liabilities, and financial
position of the Group and Parent Company
at 31 December 2020 and of the profit of the
Group for the year then ended;
The Directors’ report contained in the
Annual Report includes a fair review of
the development and performance of the
business and the position of the Group and
Parent Company, together with a description
of the principal risk and uncertainties that
they face; and
The Annual Report and financial
statements, taken as a whole, provides the
information necessary to assess the Group’s
performance, business model and strategy
and is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the Parent
Company’s position and performance,
business model and strategy.
On behalf of the Board:
M. Carvill
Director
31 March 2021
T. McCluskey
Director
31 March 2021
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127
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KENMARE RESOURCES PLC
Report on the audit of the financial
statements
Opinion
We have audited the financial statements of
Kenmare Resources plc (‘the Company’) and
its consolidated undertakings (together ‘the
Group’) for the year ended 31 December 2020
set out on pages 122 to 173, which comprise the
Consolidated Statement of Financial Position,
Consolidated Statement of Comprehensive
Income, Consolidated Statement of Changes in
Equity, Consolidated Statement of Cash Flows,
Company Statement of Financial Position,
Company Statement of Changes in Equity,
Company Statement of Cash Flows and related
notes, including the summary of significant
accounting policies set out in note 1. The
financial reporting framework that has been
applied in their preparation is Irish Law and
International Financial Reporting Standards
(IFRS) as adopted by the European Union and,
as regards the Company financial statements,
as applied in accordance with the provisions of
the Companies Act 2014.
In our opinion:
the financial statements give a true and fair
view of the assets, liabilities and financial
position of the Group and Company as at
31 December 2020 and of the Group’s profit
for the year then ended;
the Group financial statements have been
properly prepared in accordance with IFRS
as adopted by the European Union;
the Company financial statements have
been properly prepared in accordance with
IFRS as adopted by the European Union, as
applied in accordance with the provisions of
the Companies Act 2014; and
the Group and Company financial
statements have been properly prepared
in accordance with the requirements of the
Companies Act 2014 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(Ireland) (ISAs (Ireland)) and applicable law.
Our responsibilities under those standards
are further described in the Auditor’s
Responsibilities section of our report. We
believe that the audit evidence we have
obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is
consistent with our report to the Audit and Risk
Committee.
We were appointed as auditor by the
shareholders on 14 May 2019. The period of
total uninterrupted engagement is the two
years ended 31 December 2020. We have
fulfilled our ethical responsibilities under,
and we remained independent of the Group
in accordance with, ethical requirements
applicable in Ireland, including the Ethical
Standard issued by the Irish Auditing and
Accounting Supervisory Authority (IAASA) as
applied to public interest entities. No non-audit
services prohibited by that standard were
provided.
Conclusions relating to going concern
In auditing the financial statements, we have
concluded that the directors’ use of the going
concern basis of accounting in the preparation
of the financial statements is appropriate.
We evaluated the directors’ assessment of the
Group’s and Company’s ability to continue to
adopt the going concern basis of accounting.
In our evaluation of the directors’ conclusions,
we considered the inherent risks to the Group’s
and Company’s business model and analysed
how those risks might affect the Group’s and
Company’s financial resources or ability to
continue operations over the going concern
period. We incorporated additional downside
sensitivities to management’s underlying cash
flow models to consider the potential future
impact of COVID-19. There were no risks
identified that we considered were likely to
have a material adverse effect on the Group’s
and Company’s available financial resources
over this period.
Based on the work we have performed, we
have not identified any material uncertainties
relating to events or conditions that,
individually or collectively, may cast significant
doubt on the Group or the Company’s ability
to continue as a going concern for a period of
at least twelve months from the date when the
financial statements are authorised for issue.
In relation to the Group and the Company’s
reporting on how they have applied the UK
Corporate Governance Code, we have nothing
material to add or draw attention to in relation
to the directors’ statement in the financial
statements about whether the directors
considered it appropriate to adopt the going
concern basis of accounting.
Key audit matters: our assessment of
risks of material misstatement
Key audit matters are those matters that, in
our professional judgement, were of most
significance in the audit of the financial
statements and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) identified by us,
including those which had the greatest effect
on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts
of the engagement team. These matters were
addressed in the context of our audit of the
financial statements as a whole, and in forming
our opinion thereon, and we do not provide a
separate opinion on these matters.
In arriving at our audit opinion above, the key
audit matters, in decreasing order of audit
significance, which were unchanged from the
prior year audit, were as follows:
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FINANCIAL STATEMENTS
Group key audit matters
Impairment of property, plant and equipment US$961.7 million (2019 - US$852.0 million)
Refer to page 141 (accounting policy) and pages 150 to 151 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
The Directors have developed an
impairment assessment model which
they use to determine if the net
present value of future cash flows will
be sufficient to recover the Group’s
carrying value of Property, Plant &
Equipment (‘PP&E’), principally the
Group’s mine in Mozambique.
Significant assumptions used in the
model include the useful life of the
mine, future sales prices, costs of
production and sustaining capital
expenditure and the discount rate,
including the country risk premium.
There is a risk that incorrect inputs
or inappropriate assumptions could
be included in the impairment model
leading to an impairment charge
not being correctly identified and
recognised in the Group financial
statements.
Our audit procedures in this area included:
We obtained an understanding and documented the process used by management to calculate the
recoverable amount of PP&E, in particular understanding the significant assumptions made, including
any changes in the model from prior periods.
We assessed the significant assumptions used by management for reasonableness including the useful
life of the mine, future sales prices, costs of production, sustaining capital expenditure and the discount
rate applied (including applicable country risk premium), considering the COVID-19 pandemic.
We engaged an internal KPMG valuation specialist in assessing the reasonableness of the Group’s
significant assumptions in determining the Weighted Average Cost of Capital which is applied in the
impairment model.
We considered the appropriateness of the country risk premium used in determining the discount
rate used by assessing how the Group determined the country risk premium and confirming that the
approach taken in this regard was consistent with prior periods.
We compared significant inputs, including the discount and inflation rates applied, to external industry
specific and general economic data sources.
We performed sensitivity analysis by changing significant assumptions and considering the results
and the likelihood of such changes arising and their impact on the carrying value of the assets. We
considered the impact of the COVID-19 pandemic through applying additional downside sensitivities to
the forecasted cash flows.
We considered the gap between the market capitalisation of the Group and its consolidated net asset
position and its impact on the carrying value of PP&E.
We assessed the appropriateness of the disclosures set out in the financial statements with respect to
their compliance with the requirements of IAS 36 Impairment of Assets.
We found that management’s significant judgements were appropriate and supported by reasonable
assumptions and we did not identify any material misstatements. We found the disclosures to be adequate
in providing an understanding of the basis of impairment.
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129
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KENMARE RESOURCES PLC
Revenue recognition US$243.7 million (2019 - US$270.9 million)
Refer to page 139 (accounting policy) and pages 145 to 146 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
The Group sells products under
a variety of contractual terms.
Revenue is recognised when control
is transferred to customers which is
generally when mineral products have
been delivered, in line with the terms
of the individual customer contracts.
There is a risk that revenue has not
been reported in the consolidated
financial statements in line with IFRS
15 and related contractual terms.
This area has been identified as a key
audit matter because an element of
judgement is required in determining
the timing of revenue recognition and
revenue is a significant balance for
the Group.
Our audit procedures in this area included:
We obtained an understanding and documented the Group’s process for recording revenue in the
context of the five step model set out in IFRS 15.
We tested the design and implementation of key controls within the Group’s revenue recognition
process.
We assessed whether sales transactions on both sides of the year end date as well as credit notes
issued after year end were recognised in the correct period.
We examined significant new contractual arrangements entered into and considered whether terms
have changed with any significant customer, where there could be a judgement applied on the timing of
revenue recognition.
We considered whether contractual arrangements had been amended as a result of the COVID-19
pandemic.
We assessed the adequacy of the Group’s disclosures in respect of revenue.
We found the process for recognising revenue to be appropriate, and we did not identify any material
misstatements. We found the disclosures in respect of revenue to be appropriate.
Company key audit matter
Investment in subsidiaries US$798.4 million (2019 - US$798.3 million)
Refer to page 169 (accounting policy) and page 171 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
The investment in subsidiary
undertakings is carried by the
Company at cost less impairment.
There is a risk in respect of the
carrying value of these investments if
future cash flows and performance of
these subsidiaries is not sufficient to
support the Company’s investment.
This area has been identified as a key
audit matter due to the significance
of the balance to the Company and
the inherent uncertainty involved in
forecasting and discounting future
cash flows, having particular regard to
the economic uncertainty arising from
the impact of COVID-19.
Our audit procedures in this area included:
We obtained and documented the process surrounding impairment considerations and tested the
design and implementation of the relevant key controls therein.
We considered management’s assessment of impairment indicators.
We compared the carrying value of investments to the net assets of the subsidiary companies.
We considered the gap between the market capitalisation and Company net asset position and its
impact on the carrying value of investments in subsidiaries.
We considered the audit work performed in respect of the subsidiaries, including the valuation of
Property, Plant & Equipment.
We found management’s assessment of the carrying value of the investment in subsidiary undertakings
and related disclosures to be appropriate, and we did not identify any material misstatements.
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FINANCIAL STATEMENTS
Disclosures of principal risks and longer-
term viability
Based on the knowledge we acquired during
our financial statements audit, we have nothing
material to add or draw attention to in relation
to:
the Principal Risks disclosures describing
these risks and explaining how they are
being managed and mitigated;
the Viability Statement in the Directors’
Report on page 123 that they have carried
out a robust assessment of the principal
risks facing the Group, including those that
would threaten its business model, future
performance, solvency and liquidity; and
the directors’ explanation in the Viability
Statement in the Directors’ Report of how
they have assessed the prospects of the
Group, over what period they have done
so and why they considered that period to
be appropriate, and their statement as to
whether they have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they fall
due over the period of their assessment,
including any related disclosures drawing
attention to any necessary qualifications or
assumptions.
Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements
as a whole was set at US$9.0 million (2019:
US$8.7 million), determined with reference to a
benchmark of net assets (of which it represents
1%) (2019: 1%). Materiality for the Company
financial statements as a whole was set at
US$8 million (2019: US$5.8 million), determined
with reference to a benchmark of net assets (of
which it represents approximately 1%) (2019:
1%). We concluded that net assets was the
most appropriate benchmark as it best reflects
the operations of the Group and Company.
We reported to the Audit and Risk Committee
any corrected or uncorrected identified
misstatements exceeding US$0.45 million for
the Group and Company financial statements
(2019: US$0.5 million), in addition to other
identified misstatements that warranted
reporting on qualitative grounds.
We applied materiality to assist us in
determining the overall audit strategy, what
risks were significant risks of misstatement and
key audit matters, and the audit procedures to
be performed in response.
The Group’s principal activity, its mining
operation in Mozambique, is carried out
through two components. These components
were subject to full scope audits for Group
audit purposes, using materiality levels of
US$3 million each (2019: US$4.8 million to
US$6.4 million). The Group team instructed
our component auditor in Mozambique as to
the significant areas to be addressed, including
the relevant risks detailed above, and the
information to be reported.
Taken together, the Company and the mine
components accounted for 100% of Group
revenue (2019: 100%) and 97% of Group net
assets (2019: 98%).
Other information
The directors are responsible for the
preparation of the other information presented
in the Annual Report together with the financial
statements. The other information comprises
the information included in the Directors’
Report, the Business Overview, Strategic
Report and Governance sections of the Annual
Report, as well as the Directors’ Responsibility
Statement, Shareholder profile, Glossary –
alternative performance measures, Glossary –
terms, and General information.
The financial statements and our auditor’s
report thereon do not comprise part of
the other information. Our opinion on the
financial statements does not cover the other
information and, accordingly, we do not express
an audit opinion or, except as explicitly stated
below, any form of assurance conclusion
thereon.
Our responsibility is to read the other
information and, in doing so, consider whether,
based on our financial statements audit work,
the information therein is materially misstated
or inconsistent with the financial statements or
our audit knowledge.
Based solely on that work we have not
identified material misstatements in the other
information. Based solely on our work on
the other information undertaken during the
course of the audit, we report that, in those
parts of the Directors’ Report specified for our
consideration:
we have not identified material
misstatements in the Directors’ Report;
in our opinion, the information given in the
Directors’ Report is consistent with the
financial statements; and
in our opinion, the Directors’ Report has
been prepared in accordance with the
Companies Act 2014.
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131
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF KENMARE RESOURCES PLC
Other corporate governance disclosures
We are required to address the following
items and report to you in the following
circumstances:
In addition, as required by the Companies Act
2014, we report, in relation to information given
in the Corporate Governance Report on pages
84 to 89, that:
Fair, balanced and understandable: if we
have identified material inconsistencies
between the knowledge we acquired
during our financial statements audit
and the directors’ statement that they
consider that the Annual Report and
financial statements taken as a whole is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Group’s position and
performance, business model and strategy;
Report of the Audit and Risk Committee: if
the section of the Annual Report describing
the work of the Audit and Risk Committee
does not appropriately address matters
communicated by us to the Audit and Risk
Committee;
Statement of compliance with UK Corporate
Governance Code: if the directors’
statement does not properly disclose
a departure from provisions of the UK
Corporate Governance Code specified by
the Listing Rules of Euronext Dublin and
the UK Listing Authority for our review; and
if the directors’ statement relating to Going
Concern required under the Listing Rules
of Euronext Dublin and the UK Listing
Authority set out on page 123 is materially
inconsistent with our audit knowledge.
We have nothing to report in these respects.
based on the work undertaken for our
audit, in our opinion, the description of
the main features of internal control and
risk management systems in relation
to the financial reporting process, and
information relating to voting rights and
other matters required by the European
Communities (Takeover Bids (Directive
2004/EC) Regulations 2006 and specified
for our consideration, is consistent with the
financial statements and has been prepared
in accordance with the Act;
based on our knowledge and understanding
of the Company and its environment
obtained in the course of our audit, we have
not identified any material misstatements in
that information; and
the Corporate Governance Report contains
the information required by the European
Union (Disclosure of Non-Financial and
Diversity Information by certain large
undertakings and groups) Regulations 2017.
We also report that, based on work undertaken
for our audit, the information required by the
Act is contained in the Corporate Governance
Report.
Our opinions on other matters prescribed
by the Companies Act 2014 are
unmodified
We have obtained all the information and
explanations which we consider necessary for
the purpose of our audit.
In our opinion, the accounting records of the
Company were sufficient to permit the financial
statements to be readily and properly audited
and the financial statements are in agreement
with the accounting records.
We have nothing to report on other
matters on which we are required to
report by exception
The Companies Act 2014 requires us to report
to you if, in our opinion:
the disclosures of directors’ remuneration
and transactions required by Sections 305
to 312 of the Act are not made;
the Company has not provided the
information required by Section 1110N in
relation to its remuneration report for the
financial year 31 December 2020; and
the Company has not provided the
information required by section 5(2) to
(7) of the European Union (Disclosure of
Non-Financial and Diversity Information
by certain large undertakings and
groups) Regulations 2017 for the year
ended 31 December 2020 as required
by the European Union (Disclosure of
Non-Financial and Diversity Information
by certain large undertakings and groups)
(amendment) Regulations 2018.
We have nothing to report in this regard. The
Listing Rules of Euronext Dublin and the UK
Listing Authority require us to review:
the Directors’ Statement, set out on
page 123, in relation to going concern and
longer-term viability;
the part of the Corporate Governance
Report on page 84 relating to the
Company’s compliance with the provisions
of the UK Corporate Governance Code
specified for our review; and
certain elements of disclosures in the report
to shareholders by the Board of Directors’
remuneration committee.
We have nothing to report in this regard.
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FINANCIAL STATEMENTS
The purpose of our audit work and to
whom we owe our responsibilities
Our report is made solely to the Company’s
members, as a body, in accordance with
Section 391 of the Companies Act 2014. Our
audit work has been undertaken so that we
might state to the Company’s members those
matters we are required to state to them in
an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone
other than the Company and the Company’s
members, as a body, for our audit work, for our
report, or for the opinions we have formed.
David Meagher
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place
St. Stephen’s Green
Dublin 2
31 March 2021
Respective responsibilities and
restrictions on use
Directors’ responsibilities
As explained more fully in their statement set
out on page 127, the directors are responsible
for: the preparation of the financial statements
including being satisfied that they give a
true and fair view; such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error; assessing the Group
and Company’s ability to continue as a going
concern, disclosing, as applicable, matters
related to going concern; and using the going
concern basis of accounting unless they either
intend to liquidate the Group or the Company
or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue our opinion in an auditor’s
report. Reasonable assurance is a high level
of assurance, but does not guarantee that
an audit conducted in accordance with
ISAs (Ireland) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud, other irregularities or
error and are considered material if, individually
or in aggregate, they could reasonably be
expected to influence the economic decisions
of users taken on the basis of the financial
statements. The risk of not detecting a
material misstatement resulting from fraud
or other irregularities is higher than for one
resulting from error, as they may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of internal
control and may involve any area of law and
regulation and not just those directly affecting
the financial statements.
A fuller description of our responsibilities is
provided on IAASA’s website at www.iaasa.ie/
Publications/Auditing-standards/International-
Standards-on-Auditing-for-use-in-Ire/
Description-of-the-auditor-s-responsibilities-for.
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133
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Capital and reserves attributable to the
Company’s equity holders
Called-up share capital
Share premium
Other reserves
Retained earnings
Total equity
Liabilities
Non-current liabilities
Bank loans
Lease liabilities
Provisions
Current liabilities
Bank loans
Lease liabilities
Trade and other payables
Tax liabilities
Provisions
Total liabilities
Total equity and liabilities
The accompanying notes form part of these financial statements.
On behalf of the Board:
M. Carvill
Director
31 March 2021
T. McCluskey
Director
31 March 2021
Notes
2020
US$’000
2019
US$’000
13
14
15
16
17
18
19
20
21
22
23
24
22
23
26
24
961,728
202
961,930
63,670
29,915
87,244
180,829
1,142,759
120
545,950
231,350
123,083
900,503
144,554
2,028
40,430
187,012
1,217
1,360
50,122
1,631
914
55,244
242,256
1,142,759
852,035
469
852,504
51,846
41,177
81,177
174,200
1,026,704
215,046
545,729
37,202
93,851
891,828
60,736
3,091
28,351
92,178
167
1,363
36,044
4,381
743
42,698
134,876
1,026,704
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
FINANCIAL STATEMENTS
Revenue
Cost of sales
Gross profit
Other operating costs
Operating profit
Finance income
Finance costs
Foreign exchange loss
Profit before tax
Income tax expense
Profit for the financial year and total comprehensive income for the financial year
Attributable to equity holders
Profit per share: Basic
Profit per share: Diluted
The accompanying notes form part of these financial statements.
Notes
2
4
5
8
9
10
11
11
2020
US$’000
243,746
(179,103)
64,643
(30,250)
34,393
642
(11,301)
(980)
22,754
(6,015)
16,739
16,739
2019
US$’000
270,944
(178,432)
92,512
(33,289)
59,223
1,536
(8,920)
(1,884)
49,955
(5,152)
44,803
44,803
US$ per share
US$ per share
0.15
0.15
0.41
0.40
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Balance at 1 January 2019
Total comprehensive income for the year
Capital reduction (Note 19)
Profit for the financial year
Total comprehensive income for the year
Transactions with owners of the Company
Share-based payments
Shares issued
Dividends paid (Note 21)
Total contributions and distributions
Balance at 1 January 2020
Total comprehensive income for the year
Profit for the financial year
Total comprehensive income for the year
Transactions with owners of the Company
Share-based payments
Unvested and expired share-based payments
(Note 31)
Shares issued
Deferred shares cancelled
Dividends paid (Note 21)
Total contributions and distributions
Balance at 31 December 2020
Called-Up
Share
Capital
US$’000
215,046
–
–
–
–
–
–
–
215,046
–
–
–
–
–
(214,926)
–
(214,926)
120
Share
Premium
US$’000
730,897
(185,253)
–
(185,253)
–
85
–
85
545,729
–
–
–
–
221
–
–
221
545,950
Retained
Earnings
US$’000
(133,179)
185,253
44,803
230,056
–
–
(3,026)
(3,026)
93,851
16,739
16,739
–
21,087
–
–
(8,594)
12,493
123,083
Undenominated
Capital
US$’000
Share-Based
Payment
Reserve
US$’000
11,336
24,335
Total
US$’000
848,435
–
44,803
44,803
1,787
(171)
(3,026)
(1,410)
891,828
16,739
16,739
–
–
–
1,787
(256)
–
1,531
25,866
–
–
530
530
(21,087)
(221)
–
–
(20,778)
5,088
–
–
–
(8,594)
(8,064)
900,503
–
–
–
–
–
–
–
11,336
–
–
–
–
–
214,926
–
214,926
226,262
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
FINANCIAL STATEMENTS
Operating activities
Profit for the financial year after tax
Adjustment for:
Foreign exchange movement
Share-based payments
Finance income
Finance costs
Income tax expense
Depreciation
Change in:
Financial liabilities
Provisions
Inventories
Trade and other receivables
Trade and other payables
Cost of equity-settled share based payments
Cash generated from operating activities
Income tax paid
Interest received
Interest paid
Net cash from operating activities
Investing activities
Additions to property, plant and equipment
Net cash used in investing activities
Financing activities
Debt commitments and other fees paid
Dividends paid
Repayment of debt
Drawdown of debt
Debt transaction fees paid
Payment of lease liabilities
Net cash generated from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
Notes
2020
US$’000
2019
US$’000
16,739
44,803
980
1,759
(642)
11,301
6,015
42,294
78,446
–
614
(11,824)
10,536
9,955
(1,229)
86,498
(8,498)
642
(7,474)
71,168
(139,347)
(139,347)
(317)
(8,594)
–
82,742
–
(1,065)
72,766
4,587
81,177
1,480
87,244
1,884
1,616
(1,536)
8,920
5,152
33,381
94,220
(1)
(654)
2,027
(20,228)
7,873
-
83,237
(2,310)
1,536
(6,094)
76,369
(64,750)
(64,750)
-
(3,026)
(84,168)
67,258
(6,522)
(967)
(27,425)
(15,806)
97,030
(47)
81,177
8
9
10
13
25
24
15
16
26
8
13
21
22
22
22
22
17
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
1. Statement of accounting policies
Kenmare Resources plc (the “Company”) is domiciled in the Republic of Ireland. The Company’s registered address is Styne House, Hatch Street
Upper, Dublin 2. The Company has a premium listing on the Main Market of the London Stock Exchange and a secondary listing on Euronext Dublin.
These consolidated financial statements comprise the Company and its subsidiary undertakings (the “Group”). The principal activity of the Group is the
operation and further development of the Moma Titanium Minerals Mine in Mozambique.
The significant accounting policies adopted by the Group are set out below.
Adoption of new and revised standards
Standards adopted in the current financial year
The following new and revised standards and interpretations, all of which are effective for accounting periods beginning on or after 1 January 2020,
have been adopted in the current financial year.
Amendments to References to Conceptual Framework in IFRS Standards
Definition of a Business (Amendments to IFRS 3)
Definition of Material (Amendments to IAS 1 and IAS 8)
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
None of the new and revised standards and interpretations listed above have a material effect on the Group’s financial statements.
Standards to be adopted in future accounting periods
At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial
statements were in issue but not yet effective. The Group will apply the relevant standards from their effective dates. The standards are mandatory for
future accounting periods but are not yet effective and have not been early-adopted by the Group.
COVID-19 Related Rent Concession (Amendment to IFRS 16) effective 1 June 2020
Interest Rate Benchmark Reform - Phase 2 (Amendment to IFRS9, IAS39, IFRS7, IFRS4 and IFRS16) effective 1 January 2021
Onerous Contracts - Cost of Fulfilling a Contract (Amendment to IAS 37) effective 1 January 2022
Annual Improvements to IFRS Standards 2018-2020 effective 1 January 2022
Property, Plant and Equipment: Proceeds before Intended Use (Amendment to IAS 16) effective 1 January 2022
Reference to the Conceptual Framework (Amendments to IFRS 3) effective 1 January 2022
Classification of Liabilities as Current or Non-current (Amendment to IAS 1) effective 1 January 2023
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts effective for accounting periods on or after 1 January 2023
The Directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements
of the Group in future periods.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European
Union and therefore the Group financial statements comply with Article 4 of the IAS Regulation. The financial statements have also been prepared in
accordance with the Companies Act 2014.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have or will have
adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of
accounting in preparing the financial statements.
Basis of accounting
The financial statements are presented in US Dollars under the historical cost convention except for certain trade receivables and share-based
payments which are recorded at fair value.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries)
made up to 31 December each financial year. Control is achieved where the Company: has the power over the investee; is exposed, or has the right, to
variable return from its involvement with the investee; and has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the
elements of control listed above.
The results of subsidiaries acquired or disposed of during the financial year are included in the Consolidated Statement of Comprehensive Income from
the date the Company gains control until the date when the Company ceases to control the subsidiary.
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1. Statement of accounting policies continued
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated
on consolidation.
When the Group loses control of a subsidiary, the gain or loss on disposal recognised in profit or loss is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets,
less liabilities of the subsidiary. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if
the Group had directly disposed of the related assets and liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category
of equity as permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is
regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments, or when applicable, the costs on initial
recognition of an investment in an associate or a joint venture.
Determination of ore reserve estimates
The Group estimates its ore reserves and mineral resources based on information compiled by a Competent Person as defined in accordance with the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 Edition (the “JORC Code”). Ore reserves and mineral
resources determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the assessment of life of mine
and for forecasting the timing of the payment of close-down costs, restoration costs and clean-up costs. In assessing the life of a mine for accounting
purposes, mineral resources are taken into account only where there is a high degree of confidence of economic extraction. There are numerous
uncertainties inherent in estimating ore reserves and mineral resources, and assumptions that are valid at the time of estimation may change
significantly when new information becomes available. Changes in the forecast prices of final products, production costs or recovery rates may change
the economic status of ore reserves and mineral resources and may ultimately result in the reserves being revised.
Revenue recognition
Revenue is measured as the fair value of the consideration received or receivable and represents amounts receivable for mineral products provided
in the normal course of business, net of discounts and related sales taxes. Sales of mineral products are recognised when mineral products have been
delivered. The risk of loss or damage to the mineral products passes from the Group to customers on delivery. Typically, delivery takes place when the
product is loaded on the ocean-going vessel chartered by either the customer or the Group, with most sales being made on either a “free on board”
(FOB), “cost, insurance and freight” (CIF) or a “cost and freight” (CFR) basis. For FOB sales the customer is responsible for the cost of shipping and
handling. For CIF and CFR sales amounts billed to customers in respect of shipping and handling are classed as sales revenue where the Group is
responsible for shipping and handling. All shipping and handling costs incurred by the Group are recognised as operating costs. If the Group is acting
solely as an agent for a customer in respect of shipping and handling, amounts billed to customers for shipping and handling are offset against the
relevant costs.
The Group has a mixture of long-term contracts and spot contracts with customers for the sale of mineral products ilmenite, zircon, concentrates
and rutile. The contracts stipulate price and/or quantity commitments. The long-term contracts range for periods from one to three years. The spot
contracts are in respect of one-off sales. The performance obligations in relation to the sale of mineral products are similar under all the contracts and
stipulate that the Group deliver the specified product to the customer. Delivery takes place when the product is loaded on the ocean-going vessel
chartered by either the customer or the Group at the offshore loading point of the mine. Control of the mineral products passes from the Group to the
customer on delivery. Sales of mineral products are recognised when the products are delivered.
Finance income
Finance income represents deposit interest earned. Deposit interest is accrued on a time basis by reference to the principal outstanding and at the
effective interest rate applicable.
Finance costs
Finance costs consist of interest on bank borrowing, interest on lease liabilities, trade receivables facilities fees, debt commitment fees and the
unwinding of the mine closure provision. The accounting policies applicable for these finance costs are set out in borrowing costs, leases, financial
assets and provisions. Debt commitment fees are recognised in the period to which they relate for undrawn facilities.
Leases
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost
(being the present value of the lease liabilities), and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for
certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the future lease payments, discounted using the Group’s incremental borrowing rate. The
Group has applied judgement to determine the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable
under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be
exercised or a termination option is reasonably certain not to be exercised.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
1. Statement of accounting policies continued
The Group has applied judgement to determine the lease term for some lease contracts that include renewal options. The assessment of whether the
Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use
assets recognised.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases including heavy
mobile rental at the Mine. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease
term.
Retirement benefit costs
Payments to defined contribution retirement schemes are charged as an expense as they fall due.
Foreign currency
The individual financial statements of each Group entity are prepared in its functional currency, which in each case is US Dollars. The presentation
currency for the consolidated financial statements is also US Dollars.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded
at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are
retranslated at rates prevailing on such reporting date.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the Statement of
Comprehensive Income for the financial year in foreign exchange gain/loss and are not part of the operating profit or loss.
Borrowing costs
All borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use, are added to the cost of those assets until such time as the assets are substantially ready
for their intended use.
Taxation
The tax expense represents the sum of the current tax and deferred tax.
Current tax payable is based on the best estimate of the tax amount expected to be paid and reflects uncertainty related to income taxes, if any.
Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are
taxable or deductible in other financial years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using the tax rates that have been enacted or substantively enacted at the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the Statement of Financial Position
liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against deductible temporary differences which can be utilised.
Deferred tax liabilities are not recognised for taxable temporary differences arising on investments in subsidiary undertakings, if the Group is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the asset to be recovered.
Deferred tax is measured at the tax rates that are expected to apply in the period when the liability is settled or the asset is released and reflects
uncertainty related to income taxes, if any. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to
items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when
they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and tax liabilities on a net basis.
Operating profit/loss
Operating profit or loss is stated after charging all costs arising from continuing operations, other than those permitted to be capitalised, but before
finance income, finance costs, foreign exchange gain or loss and taxation.
Property, plant and equipment
The cost of property, plant and equipment comprises any costs directly attributable to bringing an asset to the location and condition necessary for it
to be capable of operating in the manner intended by management, and the estimated closure costs associated with the asset. This includes the cost
of moving plant and associated infrastructure to the orebodies under the Group’s mining concessions which form part of the Group’s life of mine plan.
In 2020, the Group moved the WCP B plant, Deirdre dredge and its mining infrastructure from the Namalope orebody where it has finished mining to
the Pilivili orebody. The costs associated with this move are capitalised in property, plant and equipment and depreciated over the life of the Mine.
Construction in progress expenditures for the construction and commissioning of property, plant and equipment are deferred until the facilities are
operational, at which point the costs are transferred to property, plant and equipment and depreciated at the applicable rates.
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1. Statement of accounting policies continued
Property, plant and equipment are depreciated over their useful life on a straight-line basis, or over the remaining life of the Mine if shorter, or on a units
of production basis. The major categories of property, plant and equipment are depreciated as follows:
Plant and equipment
Right-of-use asset
Other assets
Buildings and airstrip
Mobile equipment
Fixtures and equipment
Units of production basis
Lease term
Twenty years
Three to five years
Three to ten years
Units of production depreciation is calculated using the quantity of heavy mineral concentrate extracted from the Mine for processing in the period
as a percentage of the total quantity of heavy mineral concentrate planned to be extracted in current and future periods based on the mining reserve.
The mining reserve is updated on an annual basis for results of drilling programmes carried out, mining activity during the year, and other relevant
considerations. The unit of production depreciation rate is adjusted as a result of this update and applied prospectively.
Capital spares consist of critical plant spares with estimated useful lives greater than one year and are included in property, plant and equipment.
Capital spares are stated at cost less accumulated depreciation.
Residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Changes to the estimated residual values or useful
lives are accounted for prospectively.
Development expenditure
Project development costs for a mine, including finance costs and lender and adviser fees incurred during the period before such mine is capable
of operating at production levels in the manner intended by management, are deferred and included in property, plant and equipment. In addition,
expenses including depreciation net of revenue earned during commissioning of the Mine in the period before it is capable of operating in the manner
intended by management are deferred. These costs include an allocation of costs, including share-based payments, as determined by management
and incurred by Group companies. Interest on borrowings relating to the Mine construction and development projects are capitalised until the point
when the activities that enable the Mine to operate in its intended manner are complete. Once the Mine is operating in the manner intended by
management, the related costs are written off over the life of the estimated ore reserve of such mine on a unit of production basis. Where the Mine
project is terminated or impairment of value has occurred, related costs are written off immediately.
Development expenditure is depreciated on a unit of production basis over its useful life, or the remaining life of the Mine, if shorter.
Exploration and evaluation expenditure
Exploration and evaluation expenditure activity involves the search for mineral resources, the determination of technical feasibility and the assessment of
commercial viability of an identified resource. Exploration and evaluation expenditure is charged to the Statement of Comprehensive Income as incurred,
except where the existence of a commercially viable mineral deposit has been established and it is expected that the deposit will be mined. Capitalised
exploration and evaluation expenditure considered to be tangible is recognised as a component of property, plant and equipment at cost less impairment
charges. Until such an asset is available for use, it is not depreciated. All capitalised exploration and evaluation expenditure is monitored for indications
of impairment as part of development expenditure. To the extent that capitalised expenditure is not expected to be recovered, it is charged to the
Statement of Comprehensive Income.
Impairment of non-current assets
At each reporting date, the Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value less costs to sell is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As the fair value for the Mine
is difficult to determine the Group uses its value in use in estimating the recoverable amount. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset (or cash-generating unit) in prior financial years. A reversal of an impairment loss is recognised as
income immediately.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
1. Statement of accounting policies continued
Inventories
Product inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour costs and overheads,
including depreciation, incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average
method. Net realisable value represents the estimated selling price less all estimated costs necessary to make the sale. Quantities are assessed
primarily through surveys and assays.
Consumable spares are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method and comprises the
purchase price and related costs incurred in bringing the inventories to their present location and condition. Consumable spares identified as obsolete
are recognised as an expense immediately.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial assets
The financial assets of the Group consist of cash and cash equivalents and trade receivables.
Classification of financial assets
Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that are readily convertible to a
known amount of cash and are subject to an insignificant risk of change in value. Cash and cash equivalents are initially measured at fair value and are
subsequently measured at amortised cost. They are held by the Group to collect deposit interest and to meet the liquidity requirements of the Group.
The Group has trade finance facilities with Absa Bank and Barclays Bank and may elect to receive early payment in respect of invoices issued to
certain customers by factoring the receivable in the case of the facility with Absa Bank, or by confirming and discounting a letter of credit issued by the
customer’s bank in the case of the facility with Barclays Bank. These facilities assist the Group in managing its liquidity for funding of operations. Trade
receivables which are not factored are initially measured at fair value and subsequently measured at amortised cost as they are held by the Group in
order to collect receipts under the credit terms of the sales contracts i.e. solely payment of principal and interest (SPPI). Trade receivables which are
factored or letters of credit which are always confirmed and discounted are initially measured at fair value and subsequently measured at fair value
through profit or loss (“FVTPL”). Trade receivables or letters or credit where it is not known at initial recognition if they will be factored or confirmed
and discounted as the case may be are classified as fair value through other comprehensive income (“FVOCI”). This is because their cash flows are
generated through a combination of collection and sales (by factoring or confirming and discounting letters of credit).
Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost. For financial assets
interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset. Interest income is recognised in
profit or loss and is included in the “finance income” line item.
Equity instruments
The Group does not hold any equity financial assets.
Foreign exchange gains and losses
The carrying amount of financial assets that are denominated in a foreign currency is determined in that foreign currency and translated at the spot
rate at the end of each reporting period. For financial assets measured at amortised cost, exchange differences are recognised in profit or loss in the
“foreign exchange gains and losses” line. All trade receivables are denominated in US Dollars and so there are no foreign exchange gains or losses to
be determined at the end of the reporting periods.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on trade receivables. The amount of expected credit losses is updated at each
reporting date to reflect changes in credit risk since initial recognition of the trade receivable. When determining whether the credit risk of a trade
receivable has increased the Group considers credit risk ratings where available, the Group’s historical credit loss experience, adjusted for factors that
are specific to the customers, general economic conditions and an assessment of both the current as well as the forecast conditions at the reporting
date. Sales to certain customers are undertaken on a letter of credit basis thereby reducing the credit risk of these customers.
The Group considers a trade receivable to be in default when there is information indicating that the debtor is in severe financial difficulty and there is
no realistic prospect of recovery, e.g. when the debtor has been placed in liquidation or has entered into bankruptcy proceedings. The Group considers
a trade receivable to be credit-impaired when there is evidence that the customer is in significant financial difficulty and the debt is more than 90 days
past due.
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FINANCIAL STATEMENTS
1. Statement of accounting policies continued
Financial liabilities and equity
The financial liabilities of the Group consist of bank borrowings, leases, trade payables and the warrants. The equity of the Group consists of share
capital issued by the Company.
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements
and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Company are recognised at the proceeds received, net of direct issue costs. The only equity instrument of the Company are ordinary
shares.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on
the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Financial liabilities
The financial liabilities of the Group consist of bank borrowings, leases, and trade payables which are measured at fair value and subsequently at
amortised cost using the effective interest method.
Financial liabilities measured subsequently at amortised cost
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees, transaction costs and other
premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial
liability.
Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign
exchange gains and losses are determined based on the amortised cost of the instruments. These foreign exchange gains and losses are recognised in
profit or loss in the “foreign exchange gains and losses” line for financial liabilities that are not part of a designated hedging relationship.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference
between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
When the Group exchanges with an existing lender one debt instrument for another one with substantially different terms, such exchange is accounted
for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial
modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It
is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid
net of any fees received and discounted using the original effective rate is at least 10% different from the discounted present value of the remaining
cash flows of the original financial liability. If the modification is not substantial, the difference between the carrying amount of the liability before the
modification and the present value of the cash flows after modification is recognised in profit or loss as the modification gain or loss within other gains
and losses.
Derivative financial instruments
The Group has not entered into any derivative financial instruments during the financial year.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as
an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
1. Statement of accounting policies continued
Mine closure provision
The Mine closure provision represents the Directors’ best estimate of the Group’s liability for close-down, dismantling and restoration of the mining
and processing site, but excluding reclamation of areas disturbed by mining activities, which is covered under the Mine rehabilitation provision. A
corresponding amount equal to the provision is recognised as part of property, plant and equipment and depreciated over its estimated useful life.
The costs are estimated on the basis of a formal closure plan and are subject to regular review. The Mine closure provision is determined as the net
present value of such estimated costs discounted at a risk-free rate. The Group uses rates as provided by the US Treasury extrapolated to the duration
of the Mine life. This is deemed the best estimate to reflect the current market assessment of the time value of money on a risk-free basis. Risks
specific to the liability are included in the cost estimate. Changes in the expected costs or estimated timing or costs are recorded by an adjustment
to the provision and a corresponding adjustment to property, plant and equipment. The unwinding of the discount on the Mine closure provision is
recognised as a finance cost.
Mine rehabilitation provision
The Mine rehabilitation provision represents the Directors’ best estimate of the liability for reclaiming areas disturbed by mining activities. Reclamation
costs are recognised in each period in the Statement of Comprehensive Income based on the area disturbed in such period.
Share-based payments
The Group makes share awards to certain employees and consultants.
Share options
The last award under the share option scheme was in 2014. Share options are measured at fair value at the date of grant. The fair value determined at
the grant date is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest and
adjusted for the effect of non-market-based vesting conditions. Fair value is measured using a Black-Scholes pricing model.
Kenmare Incentive Plan (KIP)
Awards under the KIP have a cash element and a share element. Both the cash element and the share element are based on a number of in-year
performance targets. Based on the level of achievement against these targets, the cash element will be paid shortly after the end of the relevant year.
The share element will vest, subject to certain vesting conditions, after a further three years with part of the shares subject to a further two-year
holding period. The value of the shares is measured as fair value at the date of grant, based on the Group’s estimate of the shares that will eventually
vest, and adjusted for the effect of non-market-based vesting conditions. The fair value at the grant date is expensed on a straight-line basis over the
vesting period. Fair value is measured using a Monte Carlo pricing model.
Kenmare Restricted Share Plan (KRSP)
In the case of the Executive Directors and certain employees, the KRSP awards made prior to 2020 vest, subject to continued employment, 60% on
the third anniversary of grant date, 20% on fourth anniversary and 20% on fifth anniversary. The Executive Directors and certain employees’ 2020
KRSP awards vest, subject to continued employment and to the Remuneration Committee’s assessment against a discretionary underpin, on the third
anniversary of grant. For other Group employees, awards under the KRSP vest, subject to continued employment, on the third anniversary of award.
The share price used to determine the award levels will normally be the share price shortly before the date of grant.
Where a share-based payment is directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use, its fair value is added to the cost of those assets until such time as the
assets are substantially ready for their intended use.
Segmental reporting
Information on the operations of the Moma Titanium Minerals Mine in Mozambique is reported by the Executive Committee to the Group’s Board for
the purposes of resource allocation and assessment of segment performance. The principal categories for disaggregating revenue are by product type
and by country of the customer’s location. The product types are ilmenite, zircon, rutile and concentrates. Concentrates includes secondary zircon and
mineral sands concentrates.
Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, the Directors have made the following judgements that have the most significant effect on
the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).
Property, plant and equipment
The recovery of property, plant and equipment is dependent upon the successful operation of the Mine. The realisation of cash flow forecast
assumptions would result in the recovery of such amounts. During the financial year the Group carried out an impairment review of property, plant
and equipment. In performing the impairment review, a significant level of judgement is required in determining the key assumptions which have a
significant impact on the impairment model. The assumptions are set out in Note 13. As a result of the review, no impairment provision is required in
the financial year.
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FINANCIAL STATEMENTS
1. Statement of accounting policies continued
Key sources of estimation uncertainty
The preparation of financial statements requires the Directors to make estimates and assumptions that affect the amounts reported for assets and
liabilities as at the reporting date. The nature of estimation means the actual outcomes could differ from those estimates. The main areas subject to
estimation uncertainty are detailed below.
Provisions
The Mine closure provision represents the Directors’ best estimate of the Group’s liability for close-down, dismantling and restoration of the mining and
processing site, but excluding reclamation of areas disturbed by mining activities, which is covered under the Mine rehabilitation provision. The costs
are estimated on the basis of a formal closure plan and are subject to regular review. The Mine closure provision is estimated based on the net present
value at the risk-free rate of estimated future Mine closure costs. Mine closure costs are a normal consequence of mining, and the majority of such
costs are incurred at the end of the life of mine.
The Mine rehabilitation provision represents the Directors’ best estimate of the Group’s liability for reclaiming areas disturbed by mining activities.
Reclamation costs are recognised in each period based on the area disturbed in the period and an estimated cost of rehabilitation per hectare which
is reviewed regularly against actual rehabilitation cost per hectare. Actual rehabilitation expenditure is incurred approximately twelve months after the
area has been disturbed.
Units of production depreciation
Units of production depreciation is calculated using the quantity of heavy mineral concentrates extracted from the Mine for processing in the period as
a percentage of the total quantity of heavy mineral concentrates planned to be extracted in current and future periods based on the mining reserve.
The Group estimates its ore reserves and mineral resources based on information compiled by a Competent Person as defined in accordance with the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 Edition (the “JORC Code”). There are numerous
uncertainties inherent in estimating ore reserves, and assumptions that are valid at the time of estimation may change significantly when new
information becomes available. Changes in the forecast prices of final products, production costs or recovery rates may change the economic status of
reserves and may ultimately result in the reserves being revised.
2. Revenue
Sale of mineral products
2020
US$’000
243,746
2019
US$’000
270,944
During the financial year, the Group sold 853,100 tonnes (2019: 1,029,300 tonnes) of finished products ilmenite, rutile, zircon and concentrates to
customers at a sales value of US$243.7 million (2019: US$270.9 million). The principal categories for disaggregating revenue are by product type and by
country of the customer’s location. The product types are ilmenite, zircon, rutile and concentrates. Concentrates includes secondary zircon and mineral
sands concentrates.
Revenue from major products
Ilmenite
Zircon
Concentrates
Rutile
Total
Geographical information
Revenue from external customers
China
Italy
USA
Rest of the world
Total
2020
US$’000
175,587
45,708
16,320
6,131
243,746
2020
US$’000
107,824
19,645
19,955
96,322
243,746
2019
US$’000
182,980
60,545
19,372
8,047
270,944
2019
US$’000
127,333
31,177
27,500
84,934
270,944
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
2. Revenue continued
The Group’s revenue from external customers is generated by the Moma Titanium Minerals Mine in Mozambique, the non-current assets of which are
US$959.7 million (2019: US$847.5 million). Sales to and from Ireland were US$nil (2019: US$nil) in the year.
Information about major customers
Revenue from external customers
Largest customer
Second largest customer
Third largest customer
Fourth largest customer
Total
2020
US$’000
2019
US$’000
40,299
32,979
30,179
24,725
128,182
36,522
29,564
29,316
29,235
124,637
All revenues are generated by the Moma Titanium Minerals Mine.
3. Segment reporting
Information on the operations of the Moma Titanium Minerals Mine in Mozambique is reported to the Group’s Board for the purposes of resource
allocation and assessment of segment performance. Information regarding the Group’s operating segment is reported below.
Segment revenues and results
Moma Titanium Minerals Mine
Revenue
Cost of sales
Gross profit
Other operating costs
Segment operating profit
Other corporate operating costs
Group operating profit
Finance income
Finance expenses
Foreign exchange loss
Profit before tax
Income tax expense
Profit for the financial year
Segment assets
Moma Titanium Minerals Mine assets
Corporate assets
Total assets
Segment liabilities
Moma Titanium Minerals Mine liabilities
Corporate liabilities
Total liabilities
Other segment information
Depreciation
Moma Titanium Minerals Mine
Corporate
Total
Additions to non-current assets
Moma Titanium Minerals Mine
Corporate
Total
2020
US$’000
2019
US$’000
243,746
(179,103)
64,643
(24,441)
40,202
(5,809)
34,393
642
(11,301)
(980)
22,754
(6,015)
16,739
1,101,808
40,951
1,142,759
236,695
5,561
242,256
41,958
336
42,294
141,466
–
141,466
270,944
(178,432)
92,512
(28,260)
64,252
(5,029)
59,223
1,536
(8,920)
(1,884)
49,955
(5,152)
44,803
976,077
50,627
1,026,704
129,808
5,068
134,876
33,045
336
33,381
68,466
18
68,484
Corporate assets consist of the Company’s and other subsidiary undertakings’ property, plant and equipment including right-of-use assets, cash and
cash equivalents and prepayments at the reporting date. Corporate liabilities consist of trade and other payables at the reporting date.
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4. Cost of sales
Opening stock of mineral products
Production costs
Depreciation
Closing stock of mineral products
Total
FINANCIAL STATEMENTS
2020
US$’000
26,493
146,431
37,552
(31,373)
179,103
2019
US$’000
31,037
145,058
28,830
(26,493)
178,432
Mineral products consist of finished products and heavy mineral concentrate as detailed in Note 15. Mineral stock movement in the year was an
increase of US$4.9 million (2019: US$4.5 million decrease). Included in production costs are US$0.1 million (2019: US$nil) share-based payments
relating to staff of the mine.
5. Other operating costs
Distribution costs
Freight and demurrage costs
Administration costs
Total
2020
US$’000
9,820
14,185
6,245
30,250
2019
US$’000
9,398
17,603
6,288
33,289
Distribution costs of US$9.8 million (2019: US$9.4 million) represent the cost of running the Mine’s finished product storage, jetty and marine fleet.
Included in distribution costs is depreciation of US$4.4 million (2019: US$4.1 million). Freight costs of US$12.2 million (2019: US$15.3 million) arise from
sales to customers on a CIF or CFR basis. Demurrage costs were US$2.0 million (2019: US$2.3 million) during the financial year. Administration costs
of US$6.2 million (2019: US$6.3 million) include depreciation of US$0.3 million (2019: US$0.3 million) and a share-based payment expense of US$1.7
million (2019: US$1.6 million).
6. Profit for the financial year
The profit for the financial year has been arrived at after charging/(crediting) items detailed below.
Staff costs
Repairs and maintenance
Power and fuel
Other production and operating costs
(Increase)/decrease in value of mineral products inventory
Depreciation of property, plant and equipment
Finance income
Finance costs
Foreign exchange loss
Total
7. Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Audit fees
Audit of the Company’s financial statements
Audit of the Company’s subsidiary undertakings
Total audit fee
Non-audit fees
Audit related assurance services
Taxation compliance services
Other non-audit services
Total non-audit fees
Total fees
2020
US$’000
40,518
37,927
27,414
66,080
(4,880)
42,294
(642)
11,301
980
220,992
2019
US$’000
41,994
37,150
29,318
65,334
4,544
33,381
(1,536)
8,920
1,884
220,989
2020
US$’000
2019
US$’000
15
149
164
61
10
11
82
246
15
140
155
61
10
10
81
236
US$94,500 of the audit fee was paid to KPMG Dublin and US$151,100 of the fee was paid to KPMG Maputo.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
8. Finance income
Interest on bank deposits
9. Finance costs
Interest on bank borrowings
Fees on debt redemption
Interest on lease liabilities
Trade finance fees
Commitment and other fees
Unwinding of discount on mine closure provision
Total
All interest has been expensed in the financial year.
10. Income tax expense
Corporation tax
Deferred tax
Total
Reconciliation of effective tax rate
Profit before tax
Profit before tax multiplied by the applicable tax rate (12.5%)
Non-deductible expenses
Differences in effective tax rates on overseas earnings
Recognition of deferred tax asset
Total
2020
US$’000
642
2019
US$’000
1,536
2020
US$’000
2019
US$’000
9,288
–
312
720
317
664
11,301
2020
US$’000
5,748
267
6,015
5,031
1,555
378
1,496
–
460
8,920
2019
US$’000
5,621
(469)
5,152
22,754
2,844
315
49,955
6,244
330
2,589 (953)
(469)
5,152
267
6,015
During the year, KMML Mozambique Branch had taxable profits of US$16.4 million (2019: US$15.9 million) resulting in an income tax expense of US$5.7
million (2019: US$5.6 million) being recognised. The income tax rate applicable to taxable profits of KMML Mozambique Branch is 35% (2019: 35%).
KMML Mozambique Branch has elected, and the fiscal regime applicable to mining allows for, the option to deduct, as an allowable deduction,
depreciation of exploration and development expense and capital expenditure over the life of mine. Tax losses may be carried forward for three years.
During the year, Kenmare Resources plc had taxable profits of US$4.2 million (2019: US$20.2 million) which were offset against tax losses. At the
reporting date, the Company has unused tax losses of US$1.6 million (2019: US$3.8 million) resulting in the recognition of a deferred tax asset of US$0.3
million (2019: US$0.5 million) at 31 December 2020.
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FINANCIAL STATEMENTS
11. Earnings per share
The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the Company is based on the following data:
Profit for the financial year attributable to equity holders of the Company
Average number of issued ordinary shares
Weighted number of shares issued during the financial year
Weighted average number of issued ordinary shares for
the purpose of basic earnings per share
Effect of dilutive potential ordinary shares:
Share awards
Weighted average number of ordinary shares for
the purposes of diluted earnings per share
Earnings per share: basic
Earnings per share: diluted
2020
US$’000
16,739
2019
US$’000
44,803
2020
Number of
shares
2019
Number of
shares
109,657,480
51,523
109,601,551
18,541
109,709,003
109,620,092
1,993,422
1,554,807
111,702,425
111,174,899
US$ per share
US$ per share
0.15
0.15
0.41
0.40
12. Employee numbers and benefits
The average number of persons employed by the Group (including Executive Directors) in 2020 was 1,499 (2019: 1,497) and is analysed below:
Management and administration
Operations
The aggregate payroll costs incurred in respect of these employees comprised:
Wages and salaries
Share-based payments
Social insurance costs
Retirement benefit costs
2020
Number
246
1,253
1,499
2020
US$’000
35,903
1,759
2,287
569
40,518
2019
Number
241
1,256
1,497
2019
US$’000
37,261
1,799
2,237
697
41,994
All costs disclosed above were expensed in the Statement of Comprehensive Income in the current and prior financial years.
Included in wages and salaries are payroll taxes of US$8.4 million (2019: US$8.6 million) payable to the Government of Mozambique, US$2.5 million
(2019: US$2.5 million) payable to Irish Revenue and US$0.3 million (2019: US$0.2 million) payable to Her Majesty’s Revenue & Customs of the UK.
Included in the social insurance costs is US$1.6 million (2019: US$1.5 million) payable to the Government of Mozambique, US$0.6 million (2019: US$0.6
million) payable to Irish Revenue, and US$0.1 million (2019: US$0.1 million) payable to Her Majesty’s Revenue & Customs of the UK.
Included in the payroll cost above are Executive and Non-Executive Director emoluments (inclusive of share-based payments) of US$3.3 million (2019:
US$3.3 million).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
13. Property, plant and equipment
Cost
At 1 January 2019
Transfer from construction in progress
Additions during the financial year
Additions of right-of-use asset under lease
Disposals
Adjustment to mine closure cost
At 31 December 2019
Transfer from construction in progress
Additions during the financial year
Disposals
Adjustment to mine closure cost
At 31 December 2020
Accumulated Depreciation
At 1 January 2019
Charge for the financial year
Disposals
At 31 December 2019
Charge for the financial year
Disposals
At 31 December 2020
Carrying Amount
At 31 December 2020
At 31 December 2019
Plant &
Equipment
US$’000
Development
Expenditure
US$’000
Construction
In Progress
US$’000
Other
Assets
US$’000
799,192
12,158
829
–
(92)
5,492
817,579
171,004
1,831
(2,209)
10,972
999,177
186,999
22,429
(92)
209,336
26,823
(2,057)
234,102
765,075
608,243
250,326
–
–
–
–
–
250,326
(355)
–
–
–
249,971
126,523
4,103
–
130,626
4,527
–
135,153
114,818
119,700
41,638
(20,779)
67,311
–
–
–
88,170
(175,389)
139,635
–
–
52,416
–
–
–
–
–
–
–
52,416
88,170
65,173
8,621
344
386
(5,167)
–
69,357
4,740
–
(8,875)
–
65,222
31,753
6,849
(5,167)
33,435
10,944
(8,576)
35,803
29,419
35,922
Total
US$’000
1,156,329
–
68,484
386
(5,259)
5,492
1,225,432
–
141,466
(11,084)
10,972
1,366,786
345,275
33,381
(5,259)
373,397
42,294
(10,633)
405,058
961,728
852,035
Included in property, plant and equipment are right-of-use assets totalling US$3.9 million (2019: US$4.9 million). There were no additions to right-of-use
assets in the year (2019:US$0.4 million) and depreciation of US$1.0 million (2019: US$ 1.1 million) was incurred.
At each reporting date, the Group assesses whether there is any indication that property, plant and equipment may be impaired. The Group considers
the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators for impairment. As at
31 December 2020, the market capitalisation of the Group was below the book value of net assets which is considered an indicator of impairment of
assets. The Group carried out an impairment review of property, plant and equipment as at 31 December 2020. As a result of the review and given the
performance and outlook of the Group no impairment provision was recognised in the current financial year. No impairment was recognised in the
prior financial year. Given the recent past volatility, sensitivities of the forecast to the discount rate, pricing and to a lesser extent operating costs, the
impairment loss of US$64.8 million which was recognised in the Consolidated Statement of Comprehensive Income in 2014 is not reversed.
The cash-generating unit for the purpose of impairment testing is the Moma Titanium Minerals Mine. The basis on which the Mine is assessed is
its value-in-use. The cash flow forecast employed for the value-in-use computation is from a life of mine financial model. The recoverable amount
obtained from the financial model represents the present value of the future discounted pre-tax, pre-finance cash flows discounted at 10.0%.
Key assumptions include the following:
The discount rate is based on the Group’s weighted average cost of capital. This rate is a best estimate of the current market assessment of the
time value of money and the risks specific to the Mine, taking into consideration country risk, currency risk and price risk. The factors making up
the cost of equity, cost of debt and capital structure have changed from the prior year review resulting in a discount rate of 10.0% (2019: 11.5%).
As noted in principal risks and uncertainties, the Group’s assessment of the country risk trend has increased due to the new underlying risk of
insurgency in the north of Mozambique. To date, this increased risk has not impacted the Mine. The Group’s estimation of the country risk premium
included in the discount rate has remained unchanged from the prior year. The Group does not consider it appropriate to apply the full current
country risk premium for Mozambique to the calculation of the Group’s weighted average cost of capital as it believes the specific circumstances
which have resulted in the risk premium increase this year and over the past number of years are not relevant to the specific circumstances of the
Moma Mine. Hence, country risk premium applicable to the calculation of the cost of equity has been adjusted accordingly. Using a discount rate of
10.0%, the recoverable amount is greater than the carrying amount by US$260.2 million (2019: US$139.0 million). The discount rate is a significant
factor in determining the recoverable amount. A 3.0% increase in the discount rate to 13.0% reduces the recoverable amount by US$260.2 million.
The increase in the recoverable amount from the prior year is a result of increased cash flows over the life of mine due to the factors detailed below
and the reduction in the discount rate from 11.5% to 10.0%.
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13. Property, plant and equipment continued
A mine plan based on the Namalope, Nataka, Pilivili and Mualadi proved and probable reserves and resources. Specific resource material is included
only where there is a high degree of confidence in its economic extraction. The Mine life assumption of 40 years has not changed from the prior
year review. Average annual production is approximately 1.2 million tonnes (2019: 1.1 million tonnes) of ilmenite and co-products zircon, rutile and
concentrates over the life of the Mine. This mine plan does not include investment in additional mining capacity. Certain minimum stocks of final
and intermediate products are assumed to be maintained at period ends. The average annual production of final products has increased from the
prior year due to additional production from WCP C plant and update of the production forecast from the other mining plants.
Product sales prices are based on contract prices as stipulated in marketing agreements with customers, or where contracts are based on market
prices or production is not currently contracted, prices are forecast by the Group taking into account independent titanium mineral sands expertise
provided by TiPMC Solutions and management expectations including general inflation of 2% per annum. Forecast prices provided by TiPMC
Solutions have been reviewed and found to be consistent with other external sources of information. Average forecast product sales prices have
decreased slightly over the life of mine from the prior year end review as a result of revised forecast pricing. An 8% reduction in average sales prices
over the life of mine reduces the recoverable amount by US$260.2 million.
Operating costs are based on approved budget costs for 2021 taking into account the current running costs of the Mine and escalated by 2%
per annum thereafter. Average forecast operating costs have increased from the prior year end review as a result of increased production and the
need to transport WCP B’s HMC production from Pilivili, which is a greater distance than the previous mining area of Namalope, to the MSP. A 13%
increase in operating costs over the life of mine reduces the recoverable amount by US$260.2 million.
Capital costs are based on a life of mine capital plan including inflation at 2% per annum from 2021. Average forecast capital costs have increased
from the prior year end review based on updated sustaining and development capital plans required to maintain the existing plant over the life of
mine. The forecast takes into account reasonable cost increases and therefore a sensitivity to this assumption which would give rise to a reduction
in the recoverable amount has not been applied.
An adjustment to the mine closure cost of US$11.0 million (2019: US$5.5 million) was made during the year as a result of an update in the estimated
closure costs to and a reduction in the related discount rate.
14. Deferred tax asset
Deferred tax asset
2020
US$’000
202
2019
US$’000
469
At the reporting date, Kenmare Resources plc had estimated unutilised tax losses of US$1.6 million (2019: US$3.8 million) available for offset against
future profits. A deferred tax asset of US$0.2 million (2019: US$0.5 million) has been recognised in respect of these losses.
15. Inventories
Mineral products
Consumable spares
2020
US$’000
31,373
32,297
63,670
2019
US$’000
26,493
25,353
51,846
At 31 December 2020, total final product stocks were 145,500 tonnes (2019: 159,000 tonnes). Closing stock of heavy mineral concentrate was 50,200
tonnes (2019: 7,000 tonnes).
Net realisable value is determined with reference to forecast prices of finished products expected to be achieved. There is no guarantee that
these prices will be achieved in the future, particularly in weak product markets. During the financial year there was a write-down of US$0.4 million
(2019: US$nil) to mineral products to value them at net realisable value.
16. Trade and other receivables
Trade receivables
Other receivables
Prepayments
2020
US$’000
23,112
–
6,803
29,915
2019
US$’000
32,245
682
8,250
41,177
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
17. Cash and cash equivalents
Cash and cash equivalents
2020
US$’000
87,244
2019
US$’000
81,177
Cash and cash equivalents comprise cash balances held for the purposes of meeting short-term cash commitments and investments which are
readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Where investments are categorised as cash
equivalents, the related balances have a maturity of three months or less from the date of investment.
18. Called-up share capital
Authorised share capital
181,000,000 ordinary shares of €0.001 each
Nil (2019: 4,000,000,000) deferred shares of €0.059995 each
Allotted, called up and fully paid
Opening balance
109,657,480 (2019: 109,601,551) ordinary shares of €0.001 each
2,781,905,503 deferred shares of €0.059995 each
Total called-up share capital
Issued during the year
78,902 (2019: 55,929) ordinary shares of €0.001 each
Acquired and cancelled
2,781,905,503 deferred shares of €0.059995 each
Closing balance
109,736,382 (2019: 109,657,480) ordinary shares of €0.001 each
Nil (2019: 2,781,905,503) deferred shares of €0.059995 each
Total called-up share capital
2020
€’000
181
–
181
2020
US$’000
120
214,926
215,046
–
(214,926)
2019
€’000
181
239,980
240,161
2019
US$’000
120
214,926
215,046
–
–
120
–
120
120
214,926
215,046
78,902 (2019: 55,929) ordinary shares were issued during the year as detailed in Note 31.
On 10 March 2020, the Company acquired and cancelled all of the 2,781,905,503 deferred shares of €0.059995 each in the capital of the Company in
issue by transfer otherwise than for valuable consideration in accordance with Section 102(1)(a) and Section 106(1) of the Companies Act 2014 and
Article 3(b) of the Articles of Association of the Company. At the Annual General Meeting of the Company held on 13 May 2020, all of the unissued
deferred shares of €0.059995 each in the capital of the Company were cancelled.
19. Share premium
Opening balance
Capital reduction
Shares issued during the year
Closing balance
2020
US$’000
545,729
-
221
545,950
2019
US$’000
730,897
(185,253)
85
545,729
On 5 December 2018, shareholders approved a resolution to reduce the capital of the Company in order to eliminate historic losses. On 1 February 2019,
the High Court of Ireland confirmed this resolution. The reduction of capital and elimination of losses took effect on 5 February 2019 which resulted in
share premium being reduced by US$185.3 million and retained earnings being increased by US$185.3 million.
Additions to share premium of US$0.2 million (2019: US$0.085 million) relates to shares issued during the year as detailed in Note 31.
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20. Other reserves
Balance at 1 January 2019
Recognition of share-based payments
Shares issued during the year
Balance at 1 January 2020
Recognition of share-based payments
Cost of equity-settled share-based payments
Shares issued during the year
Unvested and expired share-based payments
Deferred shares cancelled
Balance at 31 December 2020
FINANCIAL STATEMENTS
Undenominated
Capital
US$’000
Share-Based
Payment
Reserve
US$’000
11,336
–
–
11,336
–
–
–
–
214,926
226,262
24,335
1,787
(256)
25,866
1,759
(1,229)
(221)
(21,087)
–
5,088
Total
US$’000
35,671
1,787
(256)
37,202
1,759
(1,229)
(221)
(21,087)
214,926
231,350
Share-Based Payment Reserve
The share-based payment reserve arises on the grant of share options and shares under the Group share-based payment schemes as detailed in
Note 31.
Undenominated Capital
Capital Conversion Reserve Fund
The Capital Conversion Reserve Fund totalling US$0.8 million arose from the renominalisation of the Company’s share capital from Irish Punts to Euros.
Capital Redemption Reserve Fund
The Capital Redemption Reserve Fund totalling US$225.5 million arose from the issue and subsequent redemption of deferred shares. The deferred
shares of €0.059995 were created in 2016 by subdividing each existing ordinary share of €0.06 pence into one deferred share of €0.059995 and one
intermediate ordinary share of €0.000005 (such intermediate ordinary shares were subsequently consolidated into new ordinary shares of €0.001
each). The deferred shares were non-voting, carried no dividend rights, and the Company had the right to purchase any or all of these shares otherwise
than for valuable consideration in accordance with the Companies Act 2014 and without the sanction of the holders thereof.
On 10 March 2020, the Company acquired and cancelled all of the 2,781,905,503 deferred shares of €0.059995 each in the capital of the Company in
issue by transfer otherwise than for valuable consideration in accordance with Section 102(1)(a) and Section 106(1) of the Companies Act 2014 and
Article 3(b) of the Articles of Association of the Company. At the Annual General Meeting of the Company held on 13 May 2020, all of the unissued
deferred shares of €0.059995 each in the capital of the Company were cancelled.
21. Retained earnings
2020
US$’000
2019
US$’000
Opening balance
Capital reduction (Note 19)
Profit for the financial year attributable to equity holders of the Parent
Unvested and expired share-based payments
Dividends paid
Closing balance
Retained earnings comprise the accumulated profit and losses in the current and prior financial years net of dividends paid and funding of market
purchases of the Company’s shares by the employee benefit trust and after adjustments relating to share-based payment reserves.
93,851
–
16,739
21,087
(8,594)
123,083
(133,179)
185,253
44,803
–
(3,026)
93,851
In October 2019, the Group paid a 2019 interim dividend of USc2.66 per ordinary share, totalling US$3.0 million. In May 2020, the Company paid a final
2019 dividend of US$6.0 million representing USc5.52 per share. In October 2020, the Group paid a 2020 interim dividend of USc2.31 per ordinary
share, totalling US$2.6 million.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
22. Bank loans
Borrowings
The borrowings are repayable as follows:
Less than one year
Between two and five years
More than five years
Transaction costs
Amount due for settlement
2020
US$’000
145,771
1,217
150,000
–
151,217
(5,446)
145,771
2019
US$’000
60,903
167
57,651
9,608
67,426
(6,523)
60,903
Borrowings
On 11 December 2019, the Group entered into debt facilities with Absa Bank Limited (acting through its Corporate and Investment Banking Division)
(“Absa”), The Emerging Africa Infrastructure Fund (part of the Private Infrastructure Development Group) (“EAIF”), Nedbank Limited (acting through
its Nedbank Corporate and Investment Banking division) (“Nedbank”), Rand Merchant Bank and Standard Bank Group (“Standard Bank”). Rothschild &
Co. acted as financial adviser to the Group on the transaction.
The debt facilities comprise a US$110 million Term Loan Facility and a US$40 million Revolving Credit Facility. The debt facilities accommodate a future
Mine Closure Guarantee Facility of up to US$40 million. The total debt facility over which security is in place is up to US$190 million. The transaction
costs for arrangement of the new debt facilities amounted to US$6.5 million.
The Term Loan Facility has a final maturity date of 11 March 2025. Interest is at LIBOR plus 5.40% per annum. Repayment is in seven equal semi-annual
instalments, beginning 11 March 2022.
The Revolving Credit Facility has a final maturity date of 11 December 2022 extendable by up to 24 months at the lenders’ discretion. Interest is at
LIBOR plus 5.00% per annum.
In addition, the facilities accommodate the later inclusion of a Mine Closure Guarantee Facility of up to US$40 million (increasing from US$3 million
to a maximum of US$40 million over five years), which will share the security package with the Term Loan Facility and Revolving Credit Facility on a
pro rata and pari passu basis. The security package consists of a pledge of the shares of Kenmare Moma Processing (Mauritius) Limited and Kenmare
Moma Mining (Mauritius) Limited, a pledge of intercompany loans, a security interest in Group bank accounts located outside of Mozambique and
China, and conditional assignments of certain contractual rights of the borrowers.
At 31 December 2020 total debt of US$145.8 million (2019: US$60.9 million) was recognised by the Group, being the drawdown of US$150.0 million
before transaction costs of US$5.4 million (2019: US$6.5 million) plus interest amortised of US$1.2 million (2019: US$0.1 million).
Reconciliation of movements of debt to cashflows arising from financing activities
Bank Loans
Balance at 1 January
Cash movements
Loan interest paid
Principal paid
Loan drawn down
Transaction costs
Non-cash movements
Loan interest accrued
Balance at 31 December
Lease liabilities
Balance at 1 January
Cash movements
Lease interest paid
Principal paid
Non-cash movements
Initial application of IFRS 16 Leases
Recognition of lease liabilities
Lease interest accrued
Balance at 31 December
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2020
US$’000
2019
US$’000
60,903
83,463
(7,162)
–
82,742
–
9,288
145,771
4,454
(312)
(1,065)
–
–
311
3,388
(5,716)
(82,613)
67,258
(6,522)
5,033
60,903
–
(378)
(967)
5,043
386
370
4,454
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FINANCIAL STATEMENTS
22. Bank loans continued
Covenants
All covenants have been complied with during the year. The key financial covenants as at 31 December 2020 are detailed below:
Interest Coverage Ratio
Net Debt to EBITDA
Debt Service Coverage Ratio
Liquidity
Reserve Tail Ratio
As at
31 December
2020
Covenant
Not less than
4.00:1
9.75:1
0.83:1 Not greater than
2.00:1
1.20:1
Not less than
11.55:1
Not less than US$15,000,000
US$87,244,000
Not less than 30%
79%
The definition of the covenants under the debt facilities are set out below:
Interest Coverage Ratio is defined as the ratio of EBITDA to Net Interest Cost.
Net Debt is defined as total financial indebtedness excluding leases less consolidated cash and cash equivalents.
The Debt Service Coverage Ratio is the ratio of cash and cash equivalents at the beginning of a reporting period plus available facilities plus cash
generated in the period to debt repayments in the period.
Liquidity is defined as consolidated cash and cash equivalents plus undrawn amounts of the Revolving Credit Facility.
Reserve Tail Ratio means the reserve tail ratio, expressed as a percentage of the termination date reserves (estimated remaining reserves in March
2025) divided by the initial reserves. (estimated reserves in December 2019)
23. Lease liabilities
Lease liabilities fall due as follows:
Less than one year
Between two and five years
More than five years
Future finance charge
Total
2020
US$’000
2019
US$’000
1,360
2,245
427
4,032
(644)
3,388
1,363
3,259
785
5,407
(953)
4,454
On 1 January 2019, the Group recognised lease liabilities of US$5.0 million in respect of right-of-use assets being its head office at Styne House, Dublin
and the electricity generators at the Mine. The Styne House lease has a term of ten years commencing August 2017 and rental payments are fixed for
five years. This lease obligation is denominated in Euros.
The lease for the electricity generators was renewed in November 2017 for a five-year period and rental payments are fixed for the five years. This lease
obligation is denominated in US Dollars.
In February 2019, the Group recognised a lease liability of US$0.4 million for its Mozambican country office in Maputo. The lease has a seven-year
term commencing February 2019 and rental payments are fixed for seven years. This lease obligation is denominated in US Dollars. The Group has
discounted lease payments using its incremental borrowing rates. The weighted average rate applied is 7%.
The currency profile of the leases at the period end was as follows:
US Dollars
Euro
2020
US$’000
1,975
1,413
3,388
2019
US$’000
2,880
1,574
4,454
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
24. Provisions
Mine closure provision
Mine rehabilitation provision
Current
Non-current
At 1 January 2019
Additional provision in the financial year
Provision utilised in the financial year
Provision released in the financial year
Unwinding of the discount
At 1 January 2020
Additional provision in the financial year
Provision utilised in the financial year
Unwinding of the discount
At 31 December 2020
2020
US$’000
37,451
3,893
41,344
914
40,430
41,344
2019
US$’000
25,815
3,279
29,094
743
28,351
29,094
Mine Closure
Provision
US$’000
Mine
Rehabilitation
Provision
US$’000
Legal Provision
US$’000
Total
US$’000
19,863
5,492
–
–
460
25,815
10,972
–
664
37,451
2,776
933
(430)
–
–
3,279
1,406
(792)
–
3,893
1,157
–
–
(1,157)
–
–
–
–
–
–
23,796
6,425
(430)
(1,157)
460
29,094
12,378
(792)
664
41,344
The Mine closure provision represents the Directors’ best estimate of the Project Companies’ liability for close-down, dismantling and restoration of
the mining and processing site. A corresponding amount equal to the provision is recognised as part of property, plant and equipment. The costs are
estimated on the basis of a formal closure plan, are subject to regular review and are estimated based on the net present value of estimated future
cost. Mine closure costs are a normal consequence of mining, and the majority of close-down and restoration expenditure is incurred at the end of the
life of the Mine. The unwinding of the discount is recognised as a finance cost and US$0.7 million (2019: US$0.5 million) has been recognised in the
statement of comprehensive income for the financial year.
The main assumptions used in the calculation of the estimated future costs include:
a discount rate of 2.0% (2019: 2.6%);
an inflation rate of 2% (2019: 2%);
an estimated life of mine of 40 years (2019: 40 years). It is assumed that the land licences will be extended on expiry in 2058; and
an estimated closure cost of US$34.1 million (2019: US$30.2 million) and an estimated post-closure monitoring provision of US$3.9 million (2019:
US$3.9 million).
The life of mine plan is based on the Namalope, Nataka, Pilivili and Mualadi reserves and resources as set out in the Reserve and Resources table.
Specific resource material is included only where there is a high degree of confidence in its economic extraction. The Mine closure provision has been
increased by US$11.0 million to reflect the change in the estimated closure cost and a change in the discount rate from 2.6% to 2.0%.
The discount rate is a significant factor in determining the Mine closure provision. The Group uses US Treasury rates. Thirty-year US Treasury yields
are the longest period for which yields are quoted. A forty-year rate to align with the estimated life of mine has been calculated by taking the average
of the increase in yield from ten to twenty years and the increase in yield from twenty to thirty years and adding this average to the thirty-year treasury
rate to arrive at an estimated extrapolated rate for forty years. This discount rate is deemed to provide the best estimate of the current market
assessment of risk-free time value of the money. Risks specific to the liability are included in the cost estimate. A reasonable possible increase of 1% in
the estimated discount rate results in the Mine closure provision decreasing to US$25.1 million. A 1% decrease in the estimated discount rate results in
the Mine closure provision increasing to US$55.3 million.
The Mine rehabilitation provision represents the Directors’ best estimate of the Company’s liability for rehabilitating areas disturbed by mining
activities. Rehabilitation costs are recognised based on the area disturbed and estimated cost of rehabilitation per hectare which is reviewed regularly
against actual rehabilitation cost per hectare. Actual rehabilitation expenditure is incurred approximately twelve months after the area has been
disturbed. During the financial year there was a release of US$0.8 million (2019: US$0.4 million) to reflect the actual mine rehabilitation costs incurred,
and an addition to the provision of US$1.4 million (2019: US$0.9 million) for areas newly disturbed.
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25. Other financial liabilities
Warrants – equity
Warrants – corporate facility
FINANCIAL STATEMENTS
2020
US$’000
2019
US$’000
–
–
–
–
–
–
On 16 November 2019, 50,060,000 warrants over ordinary shares issues on 16 October 2013 expired without being exercised.
On 1 September 2014, the Group issued warrants over ordinary shares at an exercise price of Stg11.00 pence to a then lender. The warrants are
exercisable for a period of seven years.
As a result of a subsequent share division and consolidation, these warrants were adjusted in line with the relevant terms of the related warrant
instrument to 36,289 warrants and an exercise price of Stg£22.00. The adjustment did not result in an alteration to any other terms of the warrants
including, in particular, the subscription period.
A financial liability of US$ nil (2019: US$ nil) based on the fair value of the warrants at the reporting date has been recorded as the cost of issuing the
warrants with the reduction in value of US$nil million (2019: US$0.0007 million) included in finance income in the statement of comprehensive income.
26. Trade and other payables
Trade payables
Accruals
2020
US$’000
24,352
25,770
50,122
2019
US$’000
16,030
20,014
36,044
Included in accruals at the financial year end is an amount of US$1.0 million (2019: US$1.0 million) for payroll and social insurance taxes.
27. Financial Instruments
Carrying
amount
US$’000
2020
Fair value
US$’000
2019
Carrying amount
US$’000
Fair value
US$’000
Financial assets measured at fair value
Trade receivables
Financial assets not measured at fair value
Trade receivables
Cash and cash equivalents
Financial liabilities not measured at fair value
Bank loans
15,073
15,073
Level 2
18,585
18,585
Level 2
8,039
87,244
110,356
8,039
87,244
110,356
Level 2
Level 2
13,660
81,177
113,422
13,660
81,177
113,422
Level 2
Level 2
145,771
146,247
Level 2
60,903
60,903
Level 2
The carrying amounts and fair values of financial assets and financial liabilities including their levels in fair value hierarchy are detailed above. The table
does not include fair value information for prepayments, trade payables and accruals as these are not measured at fair value as the carrying amount
is a reasonable approximation of their fair value. Trade receivables measured at fair value are receivables which the Group may elect to receive early
payment through its trade finance facilities with Absa Bank and Barclays Bank. Trade receivables not measured at fair value are receivables whose
payment is received under the sale contract credit terms.
The valuation technique used in measuring Level 2 fair values is discounted cash flows which considers the expected receipts or payments discounted
using adjusted market discount rates or where these rates are not available estimated discount rates.
The Group has exposure to credit risk, liquidity risk and market risk arising from financial instruments.
Risk management framework
The Board is ultimately responsible for risk management within the Group. It has delegated responsibility for the monitoring of the effectiveness of the
Group’s risk management and internal control systems to the Audit & Risk Committee. The Board and Audit & Risk Committee receive reports from
executive management on the key risks to the business and the steps being taken to mitigate such risks. The Audit & Risk Committee is assisted in its
role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are
reported to the Committee.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
27. Financial Instruments continued
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instrument fails to meet it contractual obligations, and
arises principally from the Group’s trade receivables from customers.
The carrying amount of financial assets represents the maximum credit exposure. During the year, impairment losses on financial assets were US$nil
(2019: US$nil).
Trade receivables
The Group’s exposure to credit risk is influenced by the individual circumstances of each customer. The Group also considers the factors that may
influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate. Details of
concentration of revenue are included in Note 2.
Before entering into sales contracts with new customers, the Group uses an external credit scoring system to assess the potential customer’s credit
quality and defines credit limits by customer. Limits attributed to customers are reviewed regularly during the year.
The Group’s customers have been transacting with the Group for a significant number of years, and no customers’ balances have been written off or
are credit-impaired at the financial year end. In monitoring customer credit risk, customers are reviewed individually and the Group has not identified
any factors which would merit reducing exposure to any particular customer.
The Group does not require collateral in respect of trade and other receivables.
At the 31 December 2020, the exposure to credit risk for trade receivables by geographic region was as follows:
China
Italy
USA
Rest of the world
Total
At 31 December 2020, US$7.2 million (2019: US$16.9 million) is due from the Group’s three largest customers.
A summary of the Group’s exposure to credit risk for trade receivables is as follows:
External credit ratings at least Baa3 (Moody’s)
Other
Total gross carrying amount
Loss allowance
2020
US$’000
8,625
7,180
1,583
5,724
23,112
2020
US$’000
2,595
20,716
23,311
(199)
23,112
2019
US$’000
10,743
6,278
1,434
13,790
32,245
2019
US$’000
7,642
24,818
32,460
(215)
32,245
Expected credit loss assessment of trade receivables
The Group allocates to each customer a credit risk grade based on data that is determined to be predictive of the risk of loss (including but not limited
to external ratings, financial statements and available market information about customers) and applying experienced credit judgement. The Group
has a trade facility with Barclays Bank for customers which it sells to under letter of credit terms. Under this facility, Barclays Bank confirms the letter
of credit from the issuing bank and therefore takes the credit risk that the issuing bank will not pay. This is taken into account in allocating a credit risk
grade to these customers.
The following table provides information about the exposure to credit risk and expected credit losses for trade receivables as at 31 December 2020.
Equivalent to Moody’s credit rating
Baa3 to AAA
Ba3 to Ba1
Other
158 Kenmare Resources plc
Annual Report and Accounts 2020
Weight average
loss rate
Gross carrying
amount
US$’000
Impairment loss
allowance
US$’000 Credit impaired
0.35%
0.77%
1.40%
11,249
1,595
10,467
23,311
39
12
148
199
No
No
No
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27. Financial Instruments continued
The following table provides information about the exposure to credit risk and expected credit losses for trade receivables as at 31 December 2019.
Equivalent to Moody’s credit rating
Baa3 to AAA
Ba3 to Ba1
Other
Weight average
loss rate
Gross carrying
amount
US$’000
Impairment loss
allowance
US$’000
Credit impaired
0.35%
0.78%
1.42%
18,421
7,533
6,506
32,460
64
59
92
215
No
No
No
Cash and cash equivalents
The credit risk on cash and cash equivalents is limited because funds available to the Group are deposited with banks with high credit ratings
assigned by international credit rating agencies. For deposits in excess of US$50 million the Group requires that the institution has an A (S&P)/A2
(Moody’s) long-term rating. For deposits in excess of US20 million or South African Rand-denominated deposits, the Group requires that the institution
has a BBB+ (S&P)/Baa1 (Moody’s) long-term rating.
At 31 December 2020 and 2019 cash was deposited with the following banks:
Barclays Bank plc
FirstRand Bank Limited
Nedbank Limited
HSBC Bank plc
2020
Long-term credit rating
2019
Long-term credit rating
US$ million
S&P
Moody’s
US$ million
S&P
Moody’s
60.0
15.0
10.0
1.7
A-1 Stable
A Negative
BBB- Stable Ba2 Negative
BB-Stable Ba2 Negative
A1 Stable
A+ Stable
50.9
–
–
A Stable
–
–
26.8 AA– Negative
A–1 Stable
–
–
Aa3 Negative
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled in cash
payments. The Group’s objective when managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when
they are due.
The Group monitors mine payment forecasts, both operating and capital, which assist it in monitoring cash flow requirements and optimising its cash
return on investments. The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash outflows on
financial liabilities. The Group monitors the level of expected cash inflows on trade receivables together with expected cash outflows on trade and
other payables.
The Group has a trade finance facility with Absa Bank for three of the Group’s largest customers. In accordance with this facility the bank purchases
80% of the receivable without recourse and so the bank takes on the credit risk. The facility is US$30 million with limits on the maximum amount that
can be factored for each of the customers named in the facility. At the year end, trade receivables amounting to US$6.4 million (2019: US$5.1 million)
may be factored under this facility.
The Group has a trade facility with Barclays Bank for customers which it sells to under letter of credit terms. Under this facility, Barclays Bank confirms
the letter of credit from the issuing bank and therefore takes the credit risk that the issuing bank will not pay. Barclays Bank can also discount these
letters of credit thereby providing early payment of receivables to the Group. There is no limit under the Barclays Bank facility. At the year end, trade
receivables amounting to US$8.7 million (2019: US$10.8 million) may be discounted under this facility.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities as at 31 December 2020. The amounts are gross and undiscounted.
Financial liabilities
Bank loans
Lease liabilities
Trade & other payables
Carrying
amount
US$’000
151,217
4,032
50,122
205,371
Less than
one year
US$’000
Between
2 and 5 years
US$’000
More than
5 years
US$’000
1,217
1,360
50,122
52,699
150,000
2,245
–
152,245
–
427
–
427
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
27. Financial Instruments continued
The following are the remaining contractual maturities of financial liabilities as at 31 December 2019. The amounts are gross and undiscounted.
Financial liabilities
Bank loans
Lease liabilities
Trade & other payables
Carrying amount
US$’000
Less than
one year
US$’000
Between
2 and 5 years
US$’000
More than
5 years
US$’000
67,426
5,407
36,044
108,877
167
1,363
36,044
37,574
57,651
3,259
–
60,910
9,608
785
–
10,393
As disclosed in Note 22, the Group has bank loans that contain loan covenants. A future breach of covenant may require the Group to repay the loan
earlier than indicated in the above table. Under the loan agreement, the covenants are monitored on a regular basis by Group finance and regularly
reported to management and the lenders to ensure compliance with the agreement.
Market risk
Market risk is risk that changes in market prices for foreign exchange rates and interest rates will affect the Group’s income statement. The objective of
market risk management is to manage and control market risk exposures while optimising returns.
Currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales, purchases,
receivables and borrowings are denominated and the respective functional currencies of the Group. The presentational currency of the Group is US
Dollars. Sales and bank loans are denominated in US Dollars which significantly reduces the exposure of the Group to foreign currency risk. Payables
transactions are denominated in Mozambican Metical, South African Rand, Euro, Sterling Australian Dollar and Renminbi.
The Group’s risk management policy is to match the estimated foreign currency exposure in respect of forecast purchases over the following six
months at any point in time to the extent that funds are available to do so.
Exposure to currency risk
The Group’s exposure to currency risk as at 31 December 2020 is as follows.
Mozambican
Metical
US$’000
South African
Rand
US$’000
Euro
US$’000
Sterling
US$’000
Australian
Dollar
US$’000
Renminbi
US$’000
Trade and other receivables
Cash and cash equivalents
Bank loans
Leases
Trade & other payables
Net exposure
US Dollar
US$’000
28,059
81,969
(151,217)
(2,217)
(31,185)
(74,591)
–
130
–
–
(8,371)
(8,241)
444
4,406
–
–
(8,186)
(3,336)
740
441
–
(1,815)
(712)
(1,346)
38
256
–
–
(62)
232
The Group’s exposure to currency risk as at 31 December 2019 is as follows.
Trade and other receivables
Cash and cash equivalents
Bank loans
Leases
Trade & other payables
Net exposure
US Dollar
US$’000
38,003
77,777
(67,426)
(3,331)
(25,116)
19,907
Mozambican
Metical
US$’000
South African
Rand
US$’000
Euro
US$’000
Sterling
US$’000
250
1,062
–
–
(4,604)
(3,292)
969
2,056
–
–
(2,959)
66
375
121
–
(2,076)
(1,540)
(3,120)
258
101
–
–
(357)
2
634
21
–
–
(1,606)
(951)
Australian
Dollar
US$’000
1,322
19
–
–
(1,468)
(127)
–
21
–
–
–
21
Renminbi
US$’000
–
41
–
–
–
41
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27. Financial Instruments continued
Sensitivity analysis
A reasonably possible strengthening or weakening of the Mozambique Metical, South African Rand, Euro, Sterling, Australian Dollar and Renminbi by
1% against US Dollar would have affected profit or loss by the amounts shown below. The analysis assumes that all other variables remain constant.
Profit or loss
31 December 2020
Strengthening
Weakening
31 December 2019
Strengthening
Weakening
Mozambican
Metical
US$’000
South African
Rand
US$’000
Euro
US$’000
Sterling
US$’000
Australian
Dollar
US$’000
Renminbi
US$’000
(82)
82
(32)
32
(33)
33
–
–
(13)
13
(31)
31
2
2
–
–
(9)
9
(1)
1
–
–
–
–
Interest rate risk
The loan facilities are arranged at variable rates and expose the Group to cash flow interest rate risk. Variable rates are based on six-month LIBOR. The
borrowing rate at financial year end was 5.8% (2019: 7.3%). The interest rate profile of the Group’s loan balances at the financial year end was as follows:
Variable rate debt
2020
US$’000
151,217
2019
US$’000
67,426
Under the assumption that all other variables remain constant, a reasonable possible change of 1% in the six-month LIBOR rate results in a US$1.5
million (2019: US$0.7 million) change in finance costs for the financial year.
The above sensitivity analyses are estimates of the impact of market risks assuming the specified change occurs. Actual results in the future may
differ materially from these results due to developments in the global financial markets, which may cause fluctuations in interest rates to vary from the
assumptions made above and therefore should not be considered a projection of likely future events.
28. Capital management
The Group’s capital management objective is to ensure that entities in the Group will be able to continue as a going concern while maximising the
return to shareholders through the optimisation of the debt and equity balances.
The principal activity of the Group is the operation of the Mine. The Group therefore manages its capital to ensure existing operations are adequately
funded and, based on planned mine production levels, that the Mine will continue to achieve positive cash flows allowing returns to shareholders.
At 31 December 2020, the Group had total debt facilities in place of US$150 million (2019: US$150 million), details of which are set out in Note 22.
The Board periodically reviews the capital structure of the Group, including the cost of capital and the risks associated with each class of capital. The
Group manages and, if necessary, adjusts its capital structure taking account of the underlying economic conditions. Any material adjustments to the
Group’s capital structure in terms of the relative proportions of debt and equity are approved by the Board. The Group is not subject to any externally
imposed capital requirements.
The definition of capital/capital structure of the Group consists of debt (which includes bank borrowings as disclosed in Note 22 and leases as
disclosed in Note 23) and equity attributable to equity holders of the Company, comprising issued capital, reserves, retained profits and other reserves
as disclosed in Notes 18 to 21.
29. Capital commitments
Contracts for future expenditure authorised by the Board:
Capital authorised and contracted
Capital authorised and not contracted
2020
US$’000
2019
US$’000
25,921
4,300
58,542
58,331
Capital authorised and contracted represents the amount authorised and contracted at 31 December of the relevant financial year to be spent on mine
operations-related approved capital projects.
Capital authorised not contracted represents the amount not contracted but authorised at 31 December of the relevant financial year to be spent on
mine operations-related approved capital projects.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
30. Retirement benefit plans
The Company contributes to individual pension schemes on behalf of certain employees. Contributions to the schemes are charged in the period in
which they are payable to the scheme.
Contributions
31. Share-based payments
The Group has various share-based payment schemes for employees and consultants.
2020
US$’000
569
2019
US$’000
697
Share option scheme
The last award under the share option scheme was in 2014. Options are exercisable at a price equal to the quoted market price of the Company’s
shares on the date of grant. The options generally vest over a three-year period in equal annual amounts, or, if performance related, in the year the
performance criteria are met. If options remain unexercised after a period of seven years from the date of grant, the options expire. Option expiry
periods may be extended at the discretion of the Board of Directors.
Details of the share options outstanding during the financial year are as follows:
Outstanding at the beginning of the financial year
Expired/lapsed during the financial year
Outstanding at the end of the financial year
Exercisable at the end of the financial year
2020
2019
Weighted
average
exercise price
US$
62.71
74.45
35.53
Number of
share options
40,000
(28,500)
11,500
11,500
Number of
share options
75,833
(35,833)
40,000
40,000
Weighted
average
exercise price
US$
86.65
103.16
62.71
The options outstanding at the end of the financial year have exercise prices which range from US$29.93 to US$72.89 and a weighted average
remaining contractual life of 0.5 years (2019: 0.7 years).
During the financial year the Group recognised a share-based payment in respect of the share option scheme of US$ nil (2019: US$ nil).
Kenmare Incentive Plan (KIP)
From 2014 to 2017 the Company operated an incentive plan under which annual awards had a cash element and a separate share element. Both the
cash element and the share element were based on a number of in-year performance targets. Based on the level of achievement against these targets,
the cash element was paid shortly after the end of the relevant year. The share element vests after a further three years with part of the shares subject
to a further two-year holding period. The share element is subject to performance vesting conditions. The value of the shares is measured at fair value
at the date of grant based on the management’s estimate of the number of shares that will eventually vest and adjusted for the effect of non-market-
based vesting conditions. The fair value determined at the grant date is expensed on a straight-line basis over the remaining estimated vesting period.
In 2017 the KIP ceased and was replaced by the Kenmare Restricted Share Plan (KRSP).
Outstanding at the beginning of the financial year
Exercised during the financial year
Expired during the financial year
Outstanding at the end of the financial year
Exercisable at the end of the financial year
Number of
shares
2020
629,140
(157,285)
(471,855)
–
–
Number of
shares
2019
757,147
(105,893)
(22,114)
629,140
–
During the financial year, the Group recognised a share-based payment expense of US$0.1 million (2019: US$0.5 million) as a result of the KIP awards.
In March 2020, 157,285 shares vested and were exercised under the 2016 KIP award. 78,902 shares at a value of US$0.2 million were issued as detailed
in Note 18. The value of the remaining 78,383 shares was settled in cash to pay the employees’ tax liability on the award (US$0.2 million). The final
vesting date for awards under this scheme was 31 March 2020. Shares with a value of US$1.8 million did not vest and have been transferred to retained
earnings.
In July 2019, 105,893 shares vested under the 2014 and 2015 KIP awards. Instead of receiving 49,964 shares the individuals opted to have these shares
pay the tax liability of the award (US$0.171 million). As a result, 55,929 shares at a value of US$0.085 million were issued as detailed in Note 18.
162 Kenmare Resources plc
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31. Share-based payments continued
Kenmare Restricted Share Plan (KRSP)
In 2017, the Company introduced an incentive plan under which annual awards have a cash element and a separate long-term share award. Share
awards under the KRSP vest, subject to continued employment on the third anniversary or, in the case of awards to Executive Directors and certain
other staff prior to 2020, on each of the third, fourth and fifth anniversaries of award. Awards made to the Executive Directors and certain other staff
following approval of the 2020 Remuneration Policy, will vest, subject to continued employment and to the Remuneration Committee’s assessment
against a discretionary underpin, on the third anniversary of grant.
Outstanding at the beginning of the financial year
Issued during the financial year
Exercised during the financial year
Lapsed
Outstanding at the end of the financial year
Exercisable at the end of the financial year
Number of
shares
2020
1,528,376
895,551
(374,618)
(9,158)
2,040,151
15,744
Number of
shares
2019
967,815
570,821
(10,260)
–
1,528,376
–
In 2020, 853,074 shares were granted to employees under the 2020 KRSP award. The estimated fair value of the shares awarded is US$2.2 million. In
2019, 558,396 shares were granted to employees under the 2019 KRSP award. The estimated fair value of the shares awarded is US$1.6 million. There
was an adjustment of 42,477 (2019: 12,425) for dividend equivalents in the year at a fair value of US$0.2 million (2019: US$0.04 million).
During the financial year, the Group recognised a share-based payment expense of US$1.6 million (2019: US$1.3 million) as a result of the KRSP awards.
32. Related party transactions
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures.
Short-term employee benefits
Post-employment benefits
Share-based payments
Total benefits
2020
US$’000
2,465
103
–
2,568
2019
US$’000
2,229
103
775
3,107
Further information about the remuneration of individual Directors and payments to former Directors is provided in the Directors’ annual report on
remuneration on pages 101 to 112 and is deemed to be incorporated in this note to the financial statements.
33. Kenmare Resources plc
Kenmare Resources Public Company Limited is a public limited company. The place of registration is Ireland and the registered office address is Styne
House, Hatch Street Upper, Dublin 2. The registered number is 37550.
34. Events after the statement of financial position date
Proposed dividend
On 23 March 2021, the Board proposed a final dividend of USc7.69 per share. This proposed dividend is subject to approval by the shareholders at the
Annual General Meeting. These financial statements do not reflect this dividend.
35. Approval of financial statements
The financial statements were approved by the Board on 31 March 2021.
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Job number 1 April 2021 5:24 pm V9I joined Kenmare in 2007, almost straight from school. I started in the automobile workshop without knowing how to use a spanner but with the company’s help and training I’m now a shift supervisor. As an employee of the company, I always feel protected and supported when I need it. In 2014 I had an accident and the way the company looked after me was just exceptional. There are so many opportunities at Kenmare for those who want to take them. At the moment I am studying for a degree in HR Management.”Ussene Augusto, WCP B Shift SupervisorKenmare-AR-2020-Financials.indd 164Kenmare-AR-2020-Financials.indd 16401/04/2021 17:28:5401/04/2021 17:28:54 FINANCIAL STATEMENTS
COMPANY
FINANCIAL
STATEMENTS
Parent company statement of financial position
Parent company statement of changes in equity
Parent company statement of cash flows
Notes to the parent company financial statements
166
167
168
167
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PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Investments in subsidiary undertakings
Current assets
Loans due from subsidiary undertakings
Amounts due from subsidiary undertakings
Prepayments
Cash and cash equivalents
Total assets
Equity
Capital and reserves attributable to the
Company’s equity holders
Called-up share capital
Share premium
Other reserves
Retained earnings
Total equity
Non-current liabilities
Lease liabilities
Amounts due to subsidiary undertakings
Current liabilities
Amounts due to subsidiary undertakings
Lease liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
The accompanying notes form part of these financial statements.
On behalf of the Board:
M. Carvill
Director
31 March 2021
T. McCluskey
Director
31 March 2021
Notes
2020
US$’000
2019
US$’000
2
3
4
5
6
7
7
7
8
9
9
8
10
1,980
202
798,370
800,552
13,000
12,255
342
36,692
62,289
862,841
120
545,950
231,350
27,028
804,448
1,139
53,106
54,245
1,486
274
2,388
4,148
58,393
862,841
2,316
469
798,293
801,078
–
23,781
335
20,482
44,598
845,676
215,046
545,729
37,202
13,355
811,332
1,300
30,907
32,207
–
274
1,863
2,137
34,344
845,676
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PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
FINANCIAL STATEMENTS
Balance at 1 January 2019
215,046
730,897
(187,588)
11,336
24,335
Called-Up
Share
Capital
US$’000
Share Premium
US$’000
Retained
Earnings
US$’000
Undenominated
Capital
US$’000
Share-Based
Payment
Reserve
US$’000
Total comprehensive income for the year
Capital reduction
Profit for the financial year
Total comprehensive income for the year
Transactions with owners of the Company
Share-based payments
Shares issued
Dividends paid
Total contributions and distributions
Balance at 1 January 2020
Total comprehensive income for the year
Profit for the financial year
Total comprehensive income for the year
Transactions with owners of the Company
Share-based payments
Unvested and expired share-based payment
Shares issued
Deferred shares cancelled
Dividends paid
Total contributions and distributions
Balance at 31 December 2020
–
–
–
–
–
–
–
215,046
–
–
–
–
–
(185,253)
–
(185,253)
–
85
–
85
545,729
–
–
–
–
221
(214,926)
-
(214,926)
120
–
–
221
545,950
185,253
18,716
203,969
–
–
(3,026)
(3,026)
13,355
1,180
1,180
–
21,087
–
–
(8,594)
12,493
27,028
–
–
–
–
–
–
–
11,336
–
–
–
–
–
214,926
–
214,926
226,262
–
–
–
1,787
(256)
–
1,531
25,866
–
–
530
(21,087)
(221)
–
–
(20,778)
5,088
Total
US$’000
794,026
–
18,716
18,716
1,787
(171)
(3,026)
(1,410)
811,332
1,180
1,180
530
–
–
(8,594)
(8,064)
804,448
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167
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
Operating activities
Profit for the financial year after tax
Adjustment for:
Foreign exchange movement
Share-based payments
Finance income
Finance cost
Income tax credit
Depreciation
Change in:
Financial liabilities
Provisions
Receivables
Trade and other payables
Amounts due from subsidiary undertakings
Amounts due to subsidiary undertakings
Cost of equity share based payments
Cash generated from operating activities
Interest received
Interest paid
Net cash from operating activities
Investing activities
Additions to property, plant and equipment
Net cash used in investing activities
Financing activities
Dividends paid
Payment of obligations under leases
Loans advanced to subsidiary undertakings
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
Notes
2020
US$’000
2019
US$’000
1,180
18,716
3
2
10
6
9
2
11
8
5
68
1,682
(142)
110
267
336
3,501
–
–
(7)
526
11,526
23,684
(1,229)
38,001
142
(110)
38,033
–
–
(8,594)
(161)
(13,000)
(21,755)
16,278
20,482
(68)
36,692
74
1,616
(552)
(469)
121
336
19,842
(1)
(1,157)
192
(674)
(27,556)
–
–
(9,354)
552
(121)
8,923
(18)
(18)
(3,026)
(148)
–
(3,174)
(12,115)
32,671
(74)
20,482
168 Kenmare Resources plc
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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
FINANCIAL STATEMENTS
1. Statement of accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2014. The separate financial statements have been
prepared in accordance with IFRSs as applied in accordance with the Companies Act 2014.
In accordance with Section 304(2) of the Companies Act 2014, the Company is availing of the exemption from presenting its individual Statement of
Comprehensive Income to the Annual General Meeting and from filing it with the Companies Registration Office. The Company’s profit for the financial
year determined in accordance with IFRSs is US$1.2 million (2019: profit US$3.18.7 million). The profit is due to marketing and management services
income net of administration and other costs.
The principal accounting policies adopted are the same as those set out for the Group financial statements except as noted below.
Changes in accounting policies
A number of other new standards are effective from 1 January 2020 but they do not have a material effect on the Company’s financial statements.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are accounted for under IAS 27 Separate Financial Statements as these are equity investments in subsidiary
undertakings in the Company and equity instruments in the subsidiary undertakings. They are recognised at cost less impairment.
At each reporting date, the Company reviews the carrying amount of its non-current assets to determine whether there is any indication that those
assets have suffered an impairment. As at 31 December 2020, the management reviewed and assessed the investments in subsidiary undertakings for
impairment using reasonable and supportable information. The recovery of amounts due from subsidiary undertakings is dependent on the realisation
of cash flow assumptions as set out in Note 13 of the consolidated financial statements. The loss allowance identified from this review is immaterial.
Amounts due from and to subsidiary undertakings
Loan amounts due from subsidiary undertakings are amounts due to the Company from its subsidiary undertakings KMML and KMPL under an
affiliated company loan agreement. The amounts are repayable six months after the disbursement date, together with accrued interest, subject to a
right of prepayment in whole or in part prior to the repayment date.
Amounts due from subsidiary undertakings are amounts due to the Company from its subsidiary undertakings KMML and KMPL under management
and marketing service agreements. These amounts are due within one year.
Amounts due to subsidiary undertakings within one year are amounts due by the Company to Kenmare C.I. Limited and Mozambique Minerals Limited
under a group cost agreement. Amounts due to subsidiary undertakings after one year are amounts due by the Company to Kenmare C.I. Limited
under a Novation and Subscription Deed entered into in 2019, receipt by Kenmare C.I. Limited of management service fees on behalf of Kenmare
Resources plc and other funding. The amounts due are interest free, unsecured and are repayable after one year.
The Company recognises a loss allowance for expected credit losses on intercompany receivables. The amount of expected credit losses is updated at
each reporting date to reflect changes in credit risk since initial recognition of the intercompany loan. The expected credit losses are estimated based
on the ability of the subsidiary undertaking to fulfil its obligations.
The Company writes off an intercompany receivable when there is information indicating that the subsidiary undertaking is in severe financial difficulty
and there is no realistic prospect of recovery.
As at 31 December 2020, the management reviewed and assessed the amounts due from subsidiary undertakings for impairment using reasonable and
supportable information. The recovery of amounts due from subsidiary undertakings is dependent on the realisation of cash flow assumptions as set
out in Note 13 of the consolidated financial statements. The loss allowance identified from this review is immaterial.
The Company is party to guarantees on Group borrowings. These guarantees require the Company to make specified payments to reimburse the
Lenders for a loss it incurs if the Group subsidiary undertakings fail to make payments when due in accordance with the terms of the debt.
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169
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
1. Statement of accounting policies continued
Share-based payments
Share-based awards granted to employees of subsidiary undertakings of the Company are recognised as an expense in the Statement of
Comprehensive Income of the subsidiary undertaking and as a capital contribution in its Statement of Financial Position.
Critical judgements in applying the Company’s accounting policies
In the process of applying the Company’s accounting policies, the Directors have made the following judgements that have the most significant effect
on the amounts recognised in the financial statements.
Investments in and amounts due from subsidiary undertakings
The recovery of investments in and amounts due from subsidiary undertakings is dependent upon the successful operation of the Mine. The realisation
of cash flow forecast assumptions as set out in Note 13 to the consolidated financial statements would result in the recovery of such amounts.
2. Property, plant and equipment
Cost
At 31 December 2018
Adjustment on initial application of IFRS 16 Leases
At 1 January 2019
Additions
At 31 December 2019
Additions
At 31 December 2020
Accumulated Depreciation
At 1 January 2019
Charge for the financial year
At 1 January 2020
Charge for the financial year
At 31 December 2020
Carrying Amount
At 31 December 2020
At 31 December 2019
Total
US$’000
1,047
1,722
2,769
18
2,787
-
2,787
135
336
471
336
807
1,980
2,316
Assets of the Company consist principally of leasehold property and related improvements.
Included in property, plant and equipment are right-of-use assets totalling US$1.5 million (2019: US$1.6 million). There were no additions to right-of-use
assets in the year (2019:US$ nil million) and depreciation of US$0.1 million (2019: US$0.1 million) was incurred.
170 Kenmare Resources plc
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3. Deferred tax asset
Relevant disclosures on the Company’s deferred tax asset are provided in Note 14 to the consolidated financial statements.
4. Investments in subsidiary undertakings
Opening balance
Investments during the year
Share awards
Closing balance
FINANCIAL STATEMENTS
2020
US$’000
798,293
–
77
798,370
2019
US$’000
268,520
529,773
–
798,293
The investment balance of US$798.4 million (2019: US$798.3 million) comprises an investment in the Project Companies of US$792.5 million, initial
investments of less than US$500 in the other subsidiary undertakings of the Group and share awards of US$5.9 million (2019: US$5.8 million) relating
to staff of subsidiary undertakings.
The subsidiary undertakings of the Company as at 31 December 2020 are as follows:
Kenmare Minerals Limited
Kenmare C.I. Limited
Congolone Heavy Minerals Limited
Kenmare Moma Mining (Mauritius) Limited
Kenmare Moma Processing (Mauritius)
Mozambique Minerals Limited
Place of incorporation
Place of operation
Percentage Ownership
Ireland
Jersey
Jersey
Mauritius
Mauritius
Jersey
Ireland
Jersey
Mozambique
Mozambique
Mozambique
Mozambique
100%
100%
100%
100%
100%
100%
Each of the subsidiary undertakings has issued ordinary shares only. The activities of the above subsidiary undertakings are mining, mineral
exploration, management and development.
The registered office of the Irish company is Styne House, Hatch Street Upper, Dublin 2, D02 DY27. The registered office of the Jersey companies is
Zedra Trust Company (Jersey) Limited, 50 La Colomberie, St. Helier, Jersey. The registered office of the Mauritian companies is 10th Floor, Standard
Chartered Tower, 19 Cybercity, Ebene, Mauritius.
The Company carried out an impairment review of investments in subsidiary undertakings. The recoverability of the investments is dependent on the
realisation of cash flow forecast assumptions as set out in Note 13 of the consolidated financial statements. As a result of the review no impairment
provision was recognised in the current financial year.
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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020
5. Loan amounts due from subsidiary undertakings
Non-current
Current
Closing balance
2020
US$’000
–
13,000
13,000
2019
US$’000
–
–
–
In December 2020, the Project Companies drew down US$13.0 million from the Company under an affiliated company loan agreement. The amounts
are repayable six months after the disbursement date, together with accrued interest, subject to a right of prepayment in whole or in part prior to that
date and the applicable interest rate on the loan is 0.21% per annum.
6. Amounts due from subsidiary undertakings
Non-current
Current
Closing balance
2020
US$’000
–
12,255
12,255
2019
US$’000
–
23,781
23,781
Under the terms of a management services agreement with the Company, management services costing US$6.8 million (2019: US$7.1 million) were
provided during the financial year to the Project Companies.
Under the terms of the marketing services agreement with the Company, marketing services costing US$6.9 million (2019: US$21.0 million) were
provided during the financial year to KMPL.
The carrying amount due from subsidiary undertakings represents the maximum credit exposure. Amounts due from subsidiary undertakings are
current (i.e. not overdue). The expected credit losses provided against amounts due from subsidiary undertakings was immaterial in 2020 and 2019. In
assessing the expected credit loss, the recovery of amounts due from subsidiary undertakings is dependent on the successful operation of the Moma
Titanium Minerals Mine. The realisation of cash flow forecast assumptions as set out in Note 13 of the consolidated financial statements would result in
the recovery of such amounts.
7. Share capital, share premium and other reserves
Relevant disclosures on the Company’s share capital, share premium and other reserves are given in Notes 18, 19 and 20 to the consolidated financial
statements.
8. Lease liabilities
Lease liabilities fall due as follows:
Less than one year
Between two and five years
More than five years
Future finance charges
Total
2020
US$’000
2019
US$’000
274
1,095
445
1,814
(401)
1,413
274
1,095
707
2,076
(502)
1,574
On 1 January 2019 the Company recognised leases of US$1.7 million for its head office at Styne House, Dublin. The Styne House lease has a term of ten
years commencing August 2017 and rental payments are fixed for five years. This lease obligation is denominated in Euros.
The Company has discounted lease payments using its incremental borrowing rates. The weighted average rate applied is 7% (2019: 7%).
9. Amounts due to subsidiary undertakings
Opening balance
Inter-group debt restructuring
Group costs
Inter-group funding during the year
Closing balance
Non-current
Current
Closing balance
172 Kenmare Resources plc
Annual Report and Accounts 2020
2020
US$’000
30,907
–
1,486
22,199
54,592
53,106
1,486
54,592
2019
US$’000
–
36,636
–
(5,729)
30,907
30,907
–
30,907
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FINANCIAL STATEMENTS
9. Amounts due to subsidiary undertakings continued
The amount due to Kenmare C.I. Ltd is US$53.7 million (2019: US$30.9 million) at the year end. US$36.6 million is a result of the Novation and
Subscription Deed entered into in 2019. During the year the Company and Kenmare C.I. Limited entered into a group cost agreement whereby costs
incurred by Kenmare C.I. Limited on behalf of the Company are recharged to the Company at cost. During the year costs of US$1.1 million (2019: US$nil)
were recharged to the Company by Kenmare C.I. Limited. During the year there Kenmare C.I. Limited received management services fees on behalf
of Kenmare Resources plc and other funding of US$3.3 million (2019: US$5.7 million). During the year, the Group deposited funds of US$25.0 million
previously held by Kenmare C.I. Ltd into the Company deposit accounts details of which are set out in Note 27 to the consolidated financial statements.
The amount due to Mozambique Minerals Ltd is US$0.4 million (2019: US$nil) at the year end. During the year, the Company and Mozambique Minerals
Limited entered into a group cost agreement whereby costs incurred by Mozambique Minerals Limited on behalf of the Company are recharged to the
Company at cost. During the year costs of US$0.4 million (2019: US$nil) were recharged to the Company by Mozambique Minerals Limited.
The amounts due to subsidiary undertakings are interest free and unsecured.
10. Trade and other payables
Trade payables
Accruals
11. Dividends
The dividends paid in respect of ordinary share capital were as follows:
Dividends
2020
US$’000
93
2,295
2,388
2020
US$’000
8,594
2019
US$’000
63
1,800
1,863
2019
US$’000
3,026
An interim dividend for 2020 of USc2.31 per share (2019: USc2.66 per share) was paid on 25 October 2020.
On 23 March 2021, the Board proposed a final dividend of USc7.69 per share (2019: USc5.52 per share). This proposed dividend is subject to approval
by the shareholders at the Annual General Meeting. These individual financial statements do not reflect this dividend.
12. Financial instruments and risk management
The carrying value of the Company’s financial assets and liabilities are a reasonable approximation of their fair value.
Relevant disclosures on the Group’s financial instruments and risk management policies are given in the notes to the consolidated financial statements.
13. Company related party transactions
Under IAS 24 Related Party Disclosures, the Company has related party relationships with Directors of the Company and with its subsidiary
undertakings as detailed in Note 32 to the consolidated financial statements.
Remuneration of key management
Key management is defined as the Directors of the Company. The compensation of key management personnel is set out in the Directors’ annual
report on remuneration on pages 101 to 112 and Note 32 to the consolidated financial statements.
Transactions with related parties
Under the terms of a management services agreement with the Company, management services costing US$6.8 million (2019: US$7.1 million) were
provided during the financial year to the Project Companies.
Under the terms of the marketing services agreement with the Company, marketing services costing US$6.9 million (2019: US$21.0 million) were
provided during the financial year to KMPL.
During the year, the Company and Kenmare C.I. Limited entered into a group cost agreement whereby costs incurred by Kenmare C.I. Limited on behalf
of the Company are recharged to the Company at cost. During the year, costs of US$1.1 million (2019: US$nil) were recharged to the Company by
Kenmare C.I. Limited.
During the year, the Company and Mozambique Minerals Limited entered into a group cost agreement whereby costs incurred by Mozambique
Minerals Limited on behalf of the Company are recharged to the Company at cost. During the year, costs of US$0.4 million (2019: US$nil) were
recharged to the Company by Mozambique Minerals Limited.
14. Events after the statement of financial position
Proposed dividend
On 23 March 2021, the Board proposed a final dividend of USc7.69 per share. This proposed dividend is subject to approval by the shareholders at the
Annual General Meeting. These financial statements do not reflect this dividend.
15. Approval of financial statements
The financial statements were approved by the Board on 31 March 2021.
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Job number 1 April 2021 5:28 pm V9“I’ve been at Kenmare for nearly 3 years. Working here has been a challenging but very positive experience. The best thing about my job is that it gives me the opportunity to contribute and grow professionally, building further experience in Mining Engineering, my chosen field of study.Mercia Banze, WCP B Dry Mining SupervisorKenmare-AR-2020-Financials.indd 174Kenmare-AR-2020-Financials.indd 17401/04/2021 17:28:5601/04/2021 17:28:56 FINANCIAL STATEMENTS
OTHER
INFORMATION
Shareholder profile
Glossary – alternative performance measures
Glossary – terms
General information
176
177
179
180
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SHAREHOLDER PROFILE
BASED ON THE REGISTER AS AT 26 MARCH 2021
Size of holdings
1–1,000
1,001–5,000
5,001–25,000
25,001–100,000
100,001–250,000
250,001–500,000
500,001–750,000
Over 750,000
Total
Geographic distribution of holdings
Republic of Ireland
Northern Ireland and Great Britain
Other
Total
No. of
shareholders
4,001
64
16
1
1
-
-
2
4,085
No.
of shares held
222,250
126,204
167,668
42,179
143,318
-
-
109,034,763
109,736,382
No. of
shareholders
1,571
2,396
118
4,085
No.
of shares held
334,977
77,438,565
31,962,840
109,736,382
176 Kenmare Resources plc
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GLOSSARY – ALTERNATIVE PERFORMANCE MEASURES
FINANCIAL STATEMENTS
Certain financial measures set out in the Annual Report to 31 December 2020 are not defined under International Financial Reporting Standards
(IFRSs), but represent additional measures used by the Board to assess performance and for reporting both internally and to shareholders and other
external users. Presentation of these Alternative Performance Measures (APMs) provides useful supplemental information which, when viewed
in conjunction with the Group’s IFRS financial information, allows for a more meaningful understanding of the underlying financial and operating
performance of the Group.
These non-IFRS measures should not be considered as an alternative to financial measures as defined under IFRSs.
Descriptions of the APMs included in this report, as well as their relevance for the Group, are disclosed below.
APM
Revenue (FOB)
EBITDA
EBITDA margin
Capital costs
Cash operating cost per tonne of
finished product produced
Cash operating cost per tonne of
ilmenite net of co-products
Net cash/debt
Mining – HMC produced
Processing – finished products
produced
Marketing – finished products
shipped
LTIFR
Description
Revenue excluding freight
Operating profit/loss before
depreciation and amortisation
Percentage of EBITDA to Revenue
(FOB)
Additions to property, plant and
equipment in the period
Total costs less freight and other
non-cash costs, including inventory
movements, excluding movements in
provisions, divided by final product
production (tonnes)
Cash operating costs less FOB revenue
of zircon, rutile and mineral sands
concentrates, divided by ilmenite
production (tonnes)
Bank loans before transaction costs,
loan amendment fees and expenses net
of cash and cash equivalents
Heavy mineral concentrate extracted
from mineral sands deposits and
which include ilmenite, zircon, rutile,
concentrates and other heavy minerals
and silica
Finished products produced by the
mineral separation process
Finished products shipped to customers
during the period
Lost time injury frequency rate
AI
All injuries
Relevance
Eliminates the effects of freight to provide the product price
Eliminates the effects of financing, tax and depreciation to allow
assessment of the earnings and performance of the Group
Provides a group margin for the earnings and performance of
the Group
Provides the amount spent by the Company on additions to
property, plant and equipment in the period
Eliminates the non-cash impact on costs to identify the actual cash
outlay for production and, as production levels increase or decrease,
highlights operational performance by providing a comparable cash
cost per tonne of product produced over time
Eliminates the non-cash impact on costs to identify the actual cash
outlay for production and, as production levels increase or decrease,
highlights operational performance by providing a comparable cash
cost per tonne of ilmenite produced over time
Measures the amount the Group would have to raise through
refinancing, asset sale or equity issue if its debt were to fall due
immediately, and aids in developing an understanding of the
leveraging of the Group
Provides a measure of heavy mineral concentrate extracted from
the Mine
Provides a measure of finished products produced from the
processing plants
Provides a measure of finished products shipped to customers
Measures the number of injuries causing lost time per 200,000
man hours worked on site
Provides the number of injuries at the Mine in the year
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177
GLOSSARY – ALTERNATIVE PERFORMANCE MEASURES
Revenue
Revenue
Freight
Revenue (FOB)
EBITDA
Operating profit/(loss)
Depreciation
EBITDA
EBITDA margin
EBITDA
Revenue (FOB)
EBITDA margin (%)
Cash operating cost per tonne of finished product
Cost of sales
Other operating costs
Total operating costs
Freight charges
Total operating costs less freight
Non-cash costs
Depreciation and amortisation
Share-based payments
Mineral product inventory movements
Total cash operating costs
Final product production tonnes
Cash operating cost per tonne of finished product
Cash operating cost per tonne of ilmenite
Total cash operating costs
Less FOB revenue from co-products zircon,
rutile and mineral sands concentrate
Total cash costs less co-product revenue
Ilmenite product production tonnes
Cash operating cost per tonne of ilmenite
Net cash/debt
Bank debt
Transaction costs
Gross debt
Cash and cash equivalents
Net cash/(debt)
178 Kenmare Resources plc
Annual Report and Accounts 2020
2016
US$m
141.5
(5.3)
136.2
2016
US$m
(25.4)
30.6
5.2
2016
US$m
5.2
136.2
4
2016
US$m
144.0
22.8
166.8
(5.4)
161.4
(30.6)
(0.4)
3.0
133.4
979,300
US$136
2016
US$m
133.4
(36.6)
96.8
903,300
US$107
2016
US$m
(102.6)
–
(102.6)
57.8
(44.8)
2017
US$m
208.3
(5.4)
202.9
2017
US$m
28.5
32.0
60.5
2017
US$m
60.5
202.9
30
2017
US$m
156.6
23.2
179.8
(5.5)
174.3
(32.0)
(1.0)
0.3
141.6
1,081,300
US$131
2017
US$m
141.6
(50.4)
91.2
998,200
US$91
2017
US$m
(102.9)
–
(102.9)
68.8
(34.1)
2018
US$m
262.2
(16.3)
245.9
2018
US$m
62.9
30.4
93.3
2018
US$m
93.3
245.9
38
2018
US$m
168.3
31.0
199.3
(16.3)
183.0
(30.4)
(1.4)
0.1
151.3
1,043,300
US$145
2018
US$m
151.3
(75.1)
76.2
958,500
US$79
2018
US$m
(83.5)
–
(83.5)
97.0
13.5
2019
US$m
270.9
(15.4)
255.5
2019
US$m
59.2
33.4
92.6
2019
US$m
92.6
255.5
36
2019
US$m
178.4
33.3
211.7
(15.4)
196.3
(33.4)
(1.8)
(4.5)
156.6
988,300
US$158
2019
US$m
156.6
(84.5)
72.1
892,900
US$81
2019
US$m
(60.9)
(6.6)
(67.5)
81.2
13.7
2020
US$m
243.7
(12.2)
231.5
2020
US$m
34.4
42.3
76.7
2020
US$m
76.7
231.5
33
2020
US$m
179.1
30.3
209.4
(12.2)
197.2
(42.3)
(1.8)
4.9
158.0
840,500
US$188
2020
US$m
158.0
(63.2)
94.8
756,000
US$125
2020
US$m
(145.8)
(5.4)
(151.2)
87.2
(64.0)
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GLOSSARY – TERMS
FINANCIAL STATEMENTS
Term
CIF
CFR
the Company or Parent Company
DFS
EdM
EPCM
FOB
Free Cash Flow
Group or Kenmare
HMC
KMML Mozambique Branch
KMPL Mozambique Branch
Lenders
Moma, Moma Mine or the Mine
Mine Closure Guarantee Facility
MTA
MSP
Mtpa
OIA
PFS
PM
Project Companies
Projecto Oitenta
Revolving Credit Facility
TSR
Term Loan Facility
THM
WCP
WCP A
WCP B
WCP C
WHIMS
Description
The seller delivers when the goods pass the ship’s rail in the port of shipment. Seller must pay the cost and freight necessary
to bring goods to named port of destination. Risk of loss and damage are the same as CFR. Seller also has to procure marine
insurance against buyer’s risk of loss/damage during the carriage. Seller must clear the goods for export. This term can only
be used for sea transport.
This term means the seller delivers when the goods pass the ship’s rail in port of shipment. Seller must pay the costs
and freight necessary to bring the goods to the named port of destination, but the risks of loss or damage, as well as any
additional costs due to events occurring after the time of delivery, are transferred from seller to buyer. Seller must clear goods
for export. This term can only be used for sea transport.
Kenmare Resources plc.
Definitive feasibility studies are the most detailed and will determine definitively whether to proceed with the project. A
definitive feasibility study will be the basis for capital appropriation, and will provide the budget figures for the project.
Detailed feasibility studies require a significant amount of formal engineering work and are accurate to within approximately
10-15%.
Electricidade de Moçambique.
Engineering, Procurement and Construction Management.
Free on Board means that the seller delivers when the goods pass the ship’s rail at the named port of shipment. This means
the buyer has to bear all costs and risks to the goods from that point. The seller must clear the goods for export. This term
can only be used for sea transport.
Free Cash Flow is the cash generated by the Group in a reporting period before distributions to shareholders.
Kenmare Resources plc and its subsidiary undertakings.
Heavy mineral concentrate extracted from mineral sands deposits and which include ilmenite, zircon, rutile and other heavy
minerals and silica.
Mozambique branch of Kenmare Moma Mining (Mauritius) Limited (KMML).
Mozambique branch of Kenmare Moma Processing (Mauritius) Limited (KMPL).
Absa Bank Limited (acting through its Corporate and Investment Banking Division) (“Absa”), The Emerging Africa
Infrastructure Fund (part of the Private Infrastructure Development Group (“PIDG”)) (“EAIF”), Nedbank Limited (acting
through its Nedbank Corporate and Investment Banking division) (“Nedbank”), Rand Merchant Bank and Standard Bank
Group (“Standard Bank”).
The Moma Titanium Minerals Mine consisting of a heavy mineral sands, processing facilities and associated infrastructure,
which mine is located in the north east coast of Mozambique under licence to the Project Companies.
US$40 million debt facility dated 11 December 2019 between the Lenders and KMML Mozambique Branch and KMPL
Mozambique Branch.
Mozambique Ministry of Land and Environment
Mineral Separation Plant.
Million tonnes per annum.
Oman Investment Authority formerly the State General Reserve Fund of the Sultanate of Oman.
A feasibility study is an evaluation of a proposed mining project to determine whether the mineral resource can be mined
economically. Pre-feasibility study is used to determine whether to proceed with a detailed feasibility study and to determine
areas within the project that require more attention. Pre-feasibility studies are done by factoring known unit costs and by
estimating gross dimensions or quantities once conceptual or preliminary engineering and mine design has been completed.
Pre-feasibility studies have an accuracy within approximately 20-30%.
Atmospheric particulate matter – also known as particulate matter (PM) or particulates – are microscopic solid or liquid
matter suspended in the Earth's atmosphere.
Kenmare Moma Mining (Mauritius) Limited and Kenmare Moma Processing (Mauritius) Limited, wholly owned subsidiary
undertakings of Kenmare Resources plc, which are incorporated in Mauritius.
A utilisation improvement programme aimed at increasing operating times throughout the mine and processing plants to
80%.
US$40 million debt facility dated 11 December 2019 between the Lenders and KMML Mozambique Branch and KMPL
Mozambique Branch.
Total Shareholder Return is Kenmare Resources plc share price at the end of a reporting period adjusted for dividends paid in
the period compared to share price at the beginning of the reporting period.
US$110 million debt facility dated 11 December 2019 between the Lenders and KMML Mozambique Branch and KMPL
Mozambique Branch.
Total heavy minerals in the ore of which ilmenite (typically 82%), rutile (typically 2.0%) and zircon (typically 5.5%) total
approximately 90%.
Wet Concentrator Plant.
The original WCP which started production in 2007.
The second WCP which started production in 2013.
The third WCP which started production in 2020.
Wet High Intensity Magnetic Separation Plant.
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Kenmare Resources plc
Annual Report and Accounts 2020
179
GENERAL INFORMATION
Company Secretary
Deirdre Corcoran
Registered office
Kenmare Resources plc
Styne House
Hatch Street Upper
Dublin 2
D02 DY27
Registered number
37550
Independent auditor
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place
St. Stephen’s Green
Dublin 2
D02DE03
Solicitors
McCann FitzGerald
Riverside One
Sir John Rogerson’s Quay
Dublin 2
DO2 X576
Bankers
AIB Bank plc
140 Lower Drumcondra Road
Dublin 9
D09 YY61
Barclays Capital
1 Churchill Place
London
E14 5HP
FirstRand Bank Limited
Austin Friars House
2-6
Austin Friars
London
EC2N 2HD
HSBC
PO Box 14
27 Halkett Street
St Helier
Jersey
JE4 8NJ
Nedbank Limited
7th Floor
12 Arthur Street
London
EC4R 9AB
Registrar
Computershare Investor Services (Ireland)
Limited
3100 Lake Drive
Citywest Business Campus
Dublin 24
D24 AK82
Website
www.kenmareresources.com
180 Kenmare Resources plc
Annual Report and Accounts 2020
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This Annual Report is printed by an FSC® (Forest Stewardship Council),
certified printer using vegetable based inks.
This report has been printed on Magno silk, a white coated paper and
board using 100% EFC pulp.
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30316 1 April 2021 5:56 pm V9Annual Report and Accounts 2020Kenmare Resources plc4th FloorStyne HouseHatch Street UpperDublin 2IrelandT: +353 1 671 0411F: +353 1 671 0810E: info@kenmareresources.comwww.kenmareresources.comKenmare-AR-2020.indd 3Kenmare-AR-2020.indd 301/04/2021 17:57:0201/04/2021 17:57:02
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