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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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slide1
Discovery to Delivery

Moma Titanium Minerals Project

Gareth Clifton

Mozambique Manager

31 May 2007

slide2
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
slide3
Kenmare Moma Titanium Minerals Mine

Concentrator Plant in Australia

slide4
Kenmare Moma Titanium Minerals Mine

Separator Plant in Australia

slide6
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
slide7
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
slide8
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
slide9
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
slide10
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
slide11
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
slide12
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
slide13
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
slide14
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

slide15
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

slide16
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
slide17
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
slide18
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.
slide19
Moma Annual Production

800k Tonnes - Ilmenite

56k Tonnes - Zircon

21k Tonnes - Rutile

slide20
Kenmare Moma Titanium Minerals Mine

The Entire Plant was transported from Australia

Moma

Bunbury

slide21
Kenmare Moma Titanium Minerals Mine

From Exploration…

Blood, Sweat and Tears and a lot of Money

slide22
Discovery to Delivery

Moma Titanium Minerals Project

31 May 2007

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