Kenmare says capital cost overrun on $106m plant relocation to increase owing to Covid-19

Kenmare's Moma mine

KENMARE Resources, a ilmenite and zircon producer operating in northern Mozambique, estimated a capital cost overrun of about 17% after relocating plant to a higher grade section of its Moma mine.

This compares to a previous forecast of a 10% overrun of the $106m project in which it moved a Wet Concentrator Plant B (WCP B) some 23 kilometres from the mined out Namalope section of its resource to the new site at Pilivili.

Kenmare said in a third quarter trading update today that Covid-19 related border closures in Mozambique – which has declared a State of National Public Calamity – resulted in delivery days of capital cost items, including materials required to build a mine to plant pipeline. The project, however, was ahead of budgeted schedule.

“While the original project scope remains on budget … the additional initiatives required to mitigate the impacts of Covid-19-related delays are anticipated to increase overall project costs,” the company said.

Mining of the higher grade material from Pilivili would set up the fourth quarter to be the company’s best of the year, but material would have to be transported by road to its mineral separation plant. Diesel generators would also supply power on a temporary basis whilst the import of items for an overhead power line was completed.

Operating costs were likely to be higher than planned from initial mining at Pilivili, but in the overall scheme of things, the delays are only passingly important. The move of the WCP B was the third and final capital project undertaken by Kenmare ahead of taking production of heavy minerals up about a fifth to 1.2 million tons annually.

Heavy minerals such as titanium and zircon which Kenmare produces are used in the manufacture of paint and pigments along with a host of other industrial uses. Kenmare said in its trading update today that the ilmenite market, led primarily by China demand, was holding up well. The zircon market was more challenged in the short term.

“It is encouraging to see pigment markets improving more quickly than expected from Covid-19 related restrictions and consequently we believe the outlook for the ilmenite market is robust in Q4 and continuing into 2021,” said Michael Carvill, MD of Kenmare Resources.

Third quarter production totalled 167,900 tons, down 27% year-on-year owing to less heavy minerals production stemming from the WCP B relocation. Shipments of minerals declined 39% to 118,000 tons as a result of the refurbishment of a transshipment vessel and continued unsettled sea conditions.

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