“[Mozambique’s] new mining law does limit the amount of time that [previous agreements are recognized], but it is pre-defined. It is an advantage that the government of Mozambique does not unilaterally make changes to the mining regulations.”
How have Kenmare Resources’ operations in Mozambique performed over the past 18 months?
In terms of production, 2018 was a very decent year, and we came into the mid-range of our targeted production levels. Prices were relatively healthy, especially compared to 2015/2016. In 2018, Kenmare Resources exported just short of 1.1 million tonnes (mt/y) worth of product in total, and had a revenue of approximately US$262 million. We have similar positive expectations for 2019.
Can you elaborate on Kenmare Resources’ plans to relocate the company’s wet concentrator plant to the Pilivili ore zone?
Kenmare Resources currently has two development projects running at its Moma Titanium Minerals Mine in northern Mozambique. We are introducing a new wet concentrator plant C in 2019, which will be commissioned in the final quarter of the year. The new plant is an investment of approximately US$45 million to increase mining capacity. Plant C, with a capacity of 500 mt per hour (mt/h), is a relatively small plant compared to our A plant, which can achieve 3,250 mt/h, and our B plant, which can achieve 2,400 mt/h.
Kenmare Resources’ B plant will exhaust the current ore zone by the end of 2020, and thus we are planning on relocating the plant to the Pilivili ore zone in the third quarter of 2020. The Pilivili ore zone is approximately 23 km south of where we are currently mining. The relocation will involve a capital investment of roughly US$106 million, and the company will use its existing balance sheet to finance the move. We will be building a dedicated road to move the plant, which will be relocated as one unit. We are in the process of finalizing the detailed design of the move, and we are getting the final permits in place.
You have lived in Mozambique for 25 years. What is your opinion on the current state of the country’s mining industry?
In my opinion, Mozambique is quite a stable jurisdiction these days. When Kenmare Resources first started operating in Mozambique in the late 1980s, there was no international interest in mining here. Even when we started construction of the mine in 2004 and operation in 2007, there were no other major mining operations at all. However, the mining legislation has been regularly updated during these years, and we are currently on our fourth revision of the mining law. One of the positive aspects of the updates to the mining act is the inclusion of a clause that recognizes previous agreements. This allows for stability when making agreements with a degree of certainty. The new mining law does, however, limit the amount of time that you get that stability for, but it is pre-defined. It is an advantage that the government of Mozambique does not unilaterally make changes to the mining regulations.
What are the main challenges facing the Mozambican mining industry in 2019/20?
The main challenge currently is Mozambique’s sovereign risk issue. Investors are concerned by Mozambique’s current sovereign rating and the problems caused by corruption resulting in the misuse of international finance. Investors might be interested in opportunities within Mozambique, but there is always that shadow of the current sovereign rating and past corruption scandals that hang over any decision.
Can you explain what the titanium minerals ilmenites and rutile are used for, and where market demand comes from?
Ilmenite is a titanium oxide that ranges from 40% to 65% purity and is used in the pigment industry, which feeds into the production of plastic and paints. It is essentially the product that makes whiteness glow as it has a high refractive value. Rutile, which is a 96% pure titanium oxide, is further refined into titanium metal. Rutile is also used in welding equipment.
Currently, approximately 56% of Kenmare’s product goes to Asia, 25% to Europe and the remaining 19% to the rest of the world. Largely, the international market grows in line with GDP. The company’s biggest growth area is China, but we have also seen increasing demand from India. Our Zircon product typically goes to Europe and China, and our ilmenite typically goes to China and the United States.
Can you elaborate on some of Kenmare Resources’ CSR activities?
Kenmare Resources currently employs approximately 1,450 personnel in Mozambique, and 95.5% of this workforce are locals. We work closely with local communities, and the company has a Development Association that draws up three-year development plans in consultation with the community. We act in the areas of economic development, health and education. Kenmare Resources is currently in the process of completing the second phase of a vocational training center, we have built six primary schools in our local area, we provide scholarships to secondary schools and we have recently started providing university scholarships. We finance community health initiatives and have established a health post in the community. In terms of development, the company provides direct loans and technical advice to local entrepreneurs.
What are Kenmare Resources’ objectives moving forward, and do you have a final message for our international readership?
By 2021 Kenmare Resources objective is to have successfully move our B plant to the Pilivili area and to be producing 1.2 million mt of ilmenite per year. The future of Kenmare Resources is very bright as we have world class resources with great personnel operating the mine. Within our current mining concessions, we have enough deposits to keep the mine operating at current levels for up to 100 years.