Ireland -domiciled miner Kenmare Resources has technically been in default since January 31, the Mozambique News Agency AIM has reported. As a result, the company’s shares fell in value by almost 20% on February 1. Kenmore owns and operates the Moma Titantium Minerals Mine, on Mozambique’s north east coast, which is a dredging operation. However, the company’s creditors have agreed to allow Kenmare to defer payments to the end of this month. According to the company itself, as of December 31, it had bank loans totalling $341.9-million (up from $337.3-million in 2014), while it held cash and cash equivalents worth $14.3-million (down from $21.8-million in 2014).

“Kenmare has delivered a deleveraging plan to lenders,” stated the company in its Q4 2015 Trading Update, issued on February 1. “While lenders are still considering this plan, it had not been agreed by the deadline of the 31 January, resulting in an event of default.” Central to this plan is an investment of $100-million by State General Reserve Fund (SGRF) of the sultanate of Oman. (The SGRF is Oman’s sovereign wealth fund, owned by the country and administered by its Ministry of Finance.) Another key element, AIM reported, was a further $75-million investment by existing shareholders.

“The company continues to monitor and manage its liquidity position very carefully,” the company stated in the update. “In addition, Kenmore and lenders continue to discuss potential accommodations in relation to events of default (including relating to the deleveraging plan) and conditions to further disbursement of super senior debt and no event of default has been declared by lenders to date.”

The company, which produces heavy mineral concentrate (HMC), ilmenite, zircon (both primary and secondary) and rutile, has been hit by a variety of events and developments over the past couple of years. “Power interruptions and instability have been the key bottleneck to production at the Moma Mine in recent years and acutely felt in Q1 (first quarter) 2015, when flooding [resulted] in a prolonged outage,” noted Kenmare MD Michael Carvill in the update. “However, the investment by [Mozambique national electricity utility] EdM to enhance the transmission infrastructure has resulted in a step change in the quality and consistency of our power supply since coming on line in late December. Prices of ilmenite, our major product, have remained under pressure in Q4 2015. However, the recent closures of titanomagnetite mines in Russia and China and the reduction of feedstock inventories at Chinese ports are encouraging.” The supply from Australia and Vietnam has also reduced.

According to AIM, the company lost 57 days of production last year owing to storm-related power cuts. It was also hit by an unofficial strike last June, triggered by cost cutting actions. According to the company, it significantly reduced its cost-per-ton operating costs in the second half of last year, compared with the first half. Kenmore carried out a retrenchment programme last year, which reduced the workforce by 14%. This, coupled with other savings, achieved a cut of 24% in labour costs. A programme to improve the efficiency of plant maintenance saw engineering costs fall by 24%.

Ore production fell by 19% last year, compared with 2014, owing to these problems, with HMC output falling 15%, ilmenite production down 11% and rutile down by 2%. However, zircon production rose by 2% and, although primary zircon production fell by 10%, secondary zircon production rocketed 72%. Moreover, the primary zircon produced was of higher quality. In numbers, ore production in 2015 totalled 27 532 000 t and HMC production 1 100 600 t. The output of ilmenite was 763 500 t, of zircon 51 800 t and of rutile 6 000 t.