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Discovery to Delivery. Moma Titanium Minerals Project Gareth Clifton Mozambique Manager. 31 May 2007. Kenmare Moma Titanium Minerals Mine. THE EARLY DAYS. 1987 - Start exploration at Congolone 1988 - 4.2 Million Tonnes Ilmenite Reserve Proven

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Discovery to Delivery

Moma Titanium Minerals Project

Gareth Clifton

Mozambique Manager

31 May 2007


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Kenmare Moma Titanium Minerals Mine

THE EARLY DAYS

  • 1987 - Start exploration at Congolone

  • 1988 - 4.2 Million Tonnes Ilmenite Reserve Proven

  • 1993 - 1996 - Joint venture with BHP. During this period the Moma deposit was discovered.

  • 1999 – BHP strategic decision to withdraw from Titanium Minerals Industry. Kenmare negotiated purchase of Concentrator and Separator Plants from BHP’s Beenup plant.

  • 1999 – Pre-feasibility study completed

  • 2000 - Kenmare Completes Moma DFS

  • 2001 – NM Rothchild appointed as Financial Advisor


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Kenmare Moma Titanium Minerals Mine

Concentrator Plant in Australia


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Kenmare Moma Titanium Minerals Mine

Separator Plant in Australia



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Competitive Advantages

  • Location on Coast (No Overland Transport)

  • Surface Mineralisation (No Overburden)

  • Low Cost Dredge Mining

  • Limited Infrastructure Requirements

  • Low Cost Hydro Power

  • Significant Co-product Revenue

  • Ilmenite Products Suitable for Sulphate & Chloride Markets Without Further Beneficiation

  • Substantial Additional Resources for Expansion


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Kenmare Moma Titanium Minerals Mine

Next Steps to be Taken

  • Identify potential lenders and present Project details

  • Bring interested parties together to discuss possible financing packages

  • Identify concerns of potential lenders

  • Address those concerns

  • Finalise debt financing package


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Kenmare Moma Titanium Minerals Mine

Lender Concerns

  • Mozambique economic and political environment

  • The small size of Kenmare relative to financing required

  • Marketing commitments

  • Potential cost overruns

  • Supply of Power


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Kenmare Moma Titanium Minerals Mine

Solutions:

Mozambique Economic and Political Situation

  • Mineral Licensing Contract and Implementation Agreement signed 21 January 2002 with the Government of Mozambique defining:

    • Fiscal and Legal stability for the duration of the Project

    • Rights and Obligations of the Project Companies

    • Clear dispute resolution mechanisms

    • Clear rights of assignment


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Kenmare Moma Titanium Minerals Mine

Solutions:

Kenmare’s Size

  • Loan disbursements to be conditional upon:

    • Signing of an acceptable contract for construction of the mine – key elements fixed price.

    • Signing of marketing contracts.

    • Kenmare raising $83m equity, including $30m Contingency Reserve


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Kenmare Moma Titanium Minerals Mine

Solutions:

Marketing Commitments

  • Completion support provided by blue chip customers

  • Long Term Contracts (5 years) as no terminal market

  • Guaranteed offtake volumes

  • Agree prices or pricing mechanisms

  • Direct agreements with lenders


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Kenmare Moma Titanium Minerals Mine

Joint Venture Between

MULTIPLEX

Solutions:

Potential Cost Overruns

  • Contract signed April 2004

  • Base price $220m

  • Provision for cost overrun up to $20m

  • Contractor to share increasing portion of cost overrun

  • Significant delay and performance damages


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Kenmare Moma Titanium Minerals Mine

Solutions:

Supply of Power

  • Power Supply Agreement signed with Electricidade de Moçambique December 2002: supply and price formula guaranteed

  • Power Line Concession Contract signed with Government of Mozambique June 2004 authorizing the construction of privately owned line


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Kenmare Moma Titanium Minerals Mine

Initial Capital Structure

Sources

Equity

US$m

Previously Contributed

90

Project Equity Contribution

53

Senior Debt

200

Subordinated Debt

66

Subordinated Stand-by Facility

7

Overrun Contingency

30

446


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Kenmare Moma Titanium Minerals Mine

Lender & ECA Group

Senior-Debt

Sub-Debt

Total

US$m & € m

US$m & € m

US$m & € m

AfDB

-

$ 40

$ 40

ABSA : ECIC

-

$ 80

$ 80

€ 15

€ 40

€ 55

EIB

-

$ 26

KfW : Hermes

$ 26

-

$ 15

KfW : MIGA

$ 15

€ 7

$ 19

FMO

$ 19 + € 7

$ 10

$ 5

EAIF

$ 15

Total

$10 + € 47

$185 + € 15

$195 + € 62

$4 + €2.7

Subordinated Lender Stand-by Facility


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Kenmare Project Advisors

  • Stockbrokers: Canaccord Capital & Davy Corporate

  • Financial: N M Rothschild

  • Legal: Sullivan & Cromwell

  • Client Engineer: Aker Kvaerner

  • Insurance: AON

Lender Advisors

  • Legal: Milbank Tweed Hadley & McCloy

  • Independent Engineer: SRK Consulting

  • Industry Expert: IBMA Inc.

  • Insurance: Bankrisk / Marsh


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Observations.…

  • Financing Complexity, Time & Cost Greater Than Expected

    • Loan Signing June 04, First Disbursement Nov 04, First Production April 07.

  • Vulnerability Under Financing Structure

    • Common Denominator in Negotiations


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Observations, ctd.…

  • Substantial Completion Support

    • Acceptable EPC Contract with most elements fixed

    • Marketing Contracts

  • DFIs & ECAs Important Role

    • Engage Directly As Early As Possible

  • Good Approach For Long Term Business, but Not for Faint of Heart.


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Moma Annual Production

800k Tonnes - Ilmenite

56k Tonnes - Zircon

21k Tonnes - Rutile


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Kenmare Moma Titanium Minerals Mine

The Entire Plant was transported from Australia

Moma

Bunbury


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Kenmare Moma Titanium Minerals Mine

From Exploration…

Blood, Sweat and Tears and a lot of Money


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Discovery to Delivery

Moma Titanium Minerals Project

31 May 2007


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