"United Mining and Chemical Company" | News | Kenmare restarts Moma operations after strikes end
Kenmare restarts Moma operations after strikes end
07.07.2015The company’s workers have returned to work after embarking on industrial action in response to cost-cutting measures, including retrenchment, implemented by Kenmare. Operations have resumed at the plant and exports of mineral sands restarted last weekend.
Ireland-based mineral sands producer Kenmare Resources Plc has announced that production at its titanium minerals mine in Mozambique have returned to normal, following a temporary suspension of operations as a result of industrial action on 24 June.
The Moma mine contains deposits of heavy minerals which include the titanium minerals ilmenite, rutile and zircon.
The dispute centred on a change in employee work patterns. In February, Kenmare announced that it would retrench between 15 and 20% of employees at the mine, as other efforts to reduce unit costs and conserve cash had been insufficient to offset low mineral sands prices.
In March, after tripartite discussions with the Mozambique Ministry of Labour, the union and management, the parties agreed that shift allowances would be reduced, work patterns would be changed and 162 people would be retrenched.
This was significantly lower than the initially planned retrenchment of 350 people, Kenmare stated. The reductions in shift allowances are being implemented on a graduated basis through the course of this year.
In a statement relating the recommencement of production, Kenmare said that it stands by the tripartite agreement made with the union and Ministry of Labour concerning retrenchment and changes to allowances.
Kenmare Resources’ financial director, Tony McCluskey, told IM that a small number of workers affected by the company’s retrenchment plans instigated the strikes.
"I think this unofficial strike action should be seen in the context of our cost-cutting initiative that we have been embarking on for some time. We have had to cut our cloth according to our means due to a challenging market," he said.
"We are pleased to have the workers back at work and hopefully we will move forward from here."
The company is still in discussions with the unions and the Ministry of Labour to "formally close the issue", McCluskey added.
Commenting on prices, McCluskey said that the titanium industry had gone through a series of price reductions over the last two years, owing to challenging conditions in the mining sector.
McCluskey said that there "was light at the end of the tunnel", due to the current oversupply of titanium minerals coming from China because of the country’s increase in production of iron ore.
He said the by-product of the iron ore production process is titanium magnetite. He also said that iron ore prices are currently "slightly down" and this could mean the supply of titanium drops, resulting in "some signs of recovery" if titanium prices subsequently increase.
McCluskey also said that prices of zircon are relatively stable but ilmenite prices had dropped over the last 18 months.
Kenmare has been plagued by a series of setbacks recently. It has struggled with debt and operating problems, including previous power supply interruptions and a fire at the Moma facility.
The miner reported a loss after tax of $100.8m in 2014, compared with a profit of $44.1m the year before, owing to low prices for its products.
The company also recently announced a restricting of its debt that will see lenders provide up to $50m in additional funding.
Kenmare recorded revenues of $174.3m in 2014, up 26% on the $137.9m recorded in 2013.
Rival mineral sands producer Iluka Resources Ltd attempted to make a bid for Kenmare last year. However, Kenmare rejected the offer on the basis that it undervalued the company’s Moma mine.
In April, Iluka returned to the table with a revised watered-down share offer for the acquisition of Kenmare, valuing it at around $363m.