KENMARE/media/Files/K/Kenmare-Resources-PL… · In our last annual report, I outlined Kenmare’s ... sufficient ore on a consistent basis to continue the project. Kenmare ... Kenmare

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Kenmare Resources plc

Chatham House, Chatham Street, Dublin 2, Ireland

Tel: + 353 1 671 0411 Fax: + 353 1 671 0810

Email: [email protected]

Web: www.kenmareresources.com

Annual Report and Accounts 2001

KENMARE

KENMARE

Highlights � Sales contract signed with major consumer

� €16 million raised in May 2002 equity funding

� Expressions of Interest, totalling circa US$280

million, received to date from funding institutions

� Mineral Licensing Agreement and Implementation

Agreement signed with Government of Mozambique

� N. M. Rothschild & Sons Ltd. appointed as

Financial Advisors for Moma Project

NAMPULA

MOMA

MOGOVOLASMOGINCUAL

MOSSURIL

NACALAMONAPO

MUECATE

MECO

NTA

NIASSAZAMBIA

ZIMBABWE

MALAWI

MOZAMBIQUE

LICENCE AREAS

CABODELGADO

NAMPULA

MOMA

CONGOLONE

ZAMBEZIA

TETE

GAZA

INHAMBANE

MA

NI

CA

SO

FA

LA

I ND

I AN

OC

E AN

SO

UT

HA

FRIC

A

MA

PU

TO MOMA AREA

CONGOLONE AREA

QUNIGA AREA

Contents

Separator Plant

Concentrator Plant

Chairman’s Statement 2

Review of Operations 4

Senior Personnel 9

General Information 10

Directors’ Report 11

Independent Auditors’ Report 16

Consolidated Profit and Loss Account 18

Consolidated Balance Sheet 19

Company Balance Sheet 20

Group Cash Flow Statement 21

Statement of Total Recognised Gains and Losses 22

Note of Historical Cost Profits and Losses 22

Reconciliation of Movements in Shareholders’ Funds 22

Statement of Accounting Policies 23

Notes to the Financial Statements 24

Shareholder Profile 35

Notice of Annual General Meeting 36

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Chairman’s Statement

In our last annual report, I outlined Kenmare’s focus on

converting the Moma Titanium Minerals Deposit into an

operating mine. The main task areas are the negotiation of

sales contracts and the arranging of the necessary funding.

I am delighted to say that we have had considerable success

in both these areas.

In May 2002 Kenmare signed an offtake agreement with one of the world’s

largest users of TiO2 feedstocks. This contract was signed, despite a generally

soft market following the US economic slowdown. It represents a significant

proportion of the project’s ilmenite output and we anticipate it forming the

cornerstone of our evolving offtake arrangements.

In addition to this contract, we have reached outline agreement with

consumers of zircon. The agreements cover our total anticipated zircon

output. We are working with these parties to develop bankable documents.

We are also in discussion with several other major ilmenite and rutile

consumers although these discussions are not at such an advanced stage.

On funding, we appointed N. M. Rothschild & Sons Ltd. as our financial

advisor in June of last year. Working with Rothschild and the Government of

Mozambique, we have finalised our Mineral Licensing Agreement, signed an

Implementation Agreement covering an Industrial Free Zone from which the

project benefits, and agreed a power tariff formula. These activities were

completed by the end of January 2002, allowing us to approach the

Development Finance Institutions. I am pleased to say that these funders

reacted positively and, subject to due diligence, satisfactory completion of

the offtake negotiations and the raising of additional equity, have provided

expressions of interest to provide senior and/or mezzanine financing

amounting to circa US$280 million. This total exceeds the project’s likely

debt requirement by some US$70 million, providing Kenmare with increased

confidence that these expressions of interest can, in the course of the next

few months, be converted into the required ± US$210 million of firm loan

commitments. The funding institutions are advancing their interest

concurrently with marketing negotiations.

We have appointed an independent engineering company who will work

on behalf of the lenders to assess the project, and legal counsel who will

represent the lenders on project related legal issues such as the drawing up

of documentation. The inaugural meeting of the lenders committee occurred

in June 2002.

Charles CarvillChairman

Chairman’s Statement

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In the meantime, Kenmare has completed the largest equity capital

raising in its history. €16.4 million was raised in May 2002 from

institutions and private shareholders. This money will be used principally

for the due diligence process, and for various aspects of final design

which are still ongoing. Funds will also be used for the dismantling of

the separator plant purchased from BHP and payments on that plant.

When debt arrangements are complete the residual amount will be

contributed to the project as equity.

The loss for 2001 arises largely from the provision for the remaining

value of the Niassa Gold Mineral Interest. As outlined in the 2001

Interim Report, this was due to the low gold price and the decision

to focus Company resources on the Moma Project.

During the year Peter McAleer joined the Board. Peter has worked

in the resource industry for 25 years and has been involved with

the funding of many successful mining projects. He has been a great

help to the executive as they work to structure a very complicated

funding situation.

In summary, we have signed with a major consumer and are advanced

in other market negotiations; we have raised €16.4 million; we have

negotiated the Mineral Licensing and Implementation Agreements; we

have received expressions of interest from lenders; we have appointed

legal counsel and independent engineer to the lenders, and we have

held the inaugural lending meeting. We are dedicated to continuing

to push this project forward with all possible speed.

Charles Carvill

Chairman

His Excellency, Mr. Castigo Langa,Minister of Mineral Resources and Energy,Mozambique and Mr. Tony McCluskey,Financial Director, Kenmare, at thesigning of the key agreements in January 2002.

Review of Operations

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Ilmenite Reserve - Resources Table

Zones Category Million % % % Million Million Million Milliontonnes THM ilmenite ilmenite tonnes tonnes tonnes tonnes

in ore in THM in ore THM ilmenite rutile zircon

Mine ZoneNamalope/ Measured & 1,145 3.8 80 3.0 43.1 34.5* 1.0 2.1Tupuito Indicated Resources

Other ZonesMualadi Inferred Resource 468 3.1 83 2.5 13.6 11.0 0.3 0.7

Pilivili Inferred Resource 263 5.1 80 4.2 13.4 11.0 0.3 0.7

Congolone/ Proved Reserve 257 3.4 77 2.6 8.7 6.7 0.2 0.4

Marrura & Inferred Resource

Sub-Total 988 35.7 28.7 0.8 1.8

Grand-Total 2,133 78.8 63.2 1.8 3.9

* Includes a mining proven and probable reserve of 14.4 Mt ilmenite.

THM: Total Heavy Minerals

The principal activity of Kenmare Resources plc is the development ofthe Moma Titanium Minerals Project in Mozambique. The companyowns 100% of this project. Moma is a deposit of titanium-bearingminerals located near the coast between the towns of Moma and Lardein Nampula province, northern Mozambique. The principal economicmineral present in the deposit is ilmenite, which contains between 50%and 60% titanium dioxide.

The resource is over 2 billion tonnes of ore containing over 60 milliontonnes of ilmenite together with circa 4 million tonnes of zircon and 2 million tonnes of rutile. Kenmare continues to drill new zones withinour licence area and expects to increase this resource level over time.Moma is one of the largest undeveloped resources of titanium mineralsin the world.

GRD Minproc Limited, an independent contractor based in Perth,performed a Definitive Feasibility Study (DFS) on the project. This wascompleted in February 2001. The study concluded that the project wastechnically feasible and economically viable. The DFS details a 20 yearmine plan to mine 407 million tonnes of ore grading 4.3% heavyminerals. It also indicated a non-leveraged internal rate of return of23.3% based on a remaining capital cost of US$160 million. In order to enhance the robustness of the project, a separate DFS has beencompleted on connecting Moma to the national grid of Mozambiquefrom the start of production. This will involve extending the existingpowerline 170km from Nampula to the project site. Kenmare is currentlyin the final stages of agreeing a Power Supply Agreement withElectricidade de Mozambique, the State-owned power utility, and anEnvironmental Impact Assessment and Environmental Management Plan on the powerline are underway.

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RutileZircon

lmenite

Dr. Alastair Brown, Ivanca Sajevic,Laboratory Manager and SolomonManuel, Community Liaison Officer,at Moma camp.

The project DFS defines a dredge mining process, operating at 3,000 tonnesper hour and feeding an ore and water slurry into a floating concentratorplant. The concentrator separates the heavier economic minerals from waste.The waste, mainly sand, is ejected behind the concentrator to re-form theland surface while the heavy mineral concentrate is pumped to a MineralsSeparation Plant (MSP). At the MSP the heavy minerals are separated intofinal products of ilmenite, zircon and rutile by electrostatic and magneticseparation techniques. The final products are stored in an enclosed storagefacility. Customers’ vessels will arrive every one and a half weeks. Productminerals will be conveyored 1.5km to the coast, to a purpose built jetty andinto a company owned self-propelled barge. The barge will self discharge intocustomers’ vessels at a mooring point. The loading rate will be circa 8,000tonnes per day.

Kenmare has already acquired the MSP and the Concentrator Plant for Momafrom BHP’s Beenup titanium mine in Western Australia. This mine was shutdown shortly after opening. Both the MSP and the Concentrator Plant hadperformed well but the mining operation had not been able to supplysufficient ore on a consistent basis to continue the project. Kenmare acquiredthe Plant from BHP at an advantageous price. The Concentrator Plant hasbeen dismantled by Kenmare and moved to a storage facility in Bunbury,Western Australia. Dismantling of the MSP is expected to be undertaken laterthis year.

The main market for ilmenite is the manufacture of titanium pigment. This is a white, opaque, non-toxic material used in the manufacture of various products including paint, plastics, paper, ceramics and fabrics. In full production the mine will produce circa 625,000 tonnes of ilmenite per annum. This ilmenite is divided into two ilmenite products namely, a high TiO2 ilmenite (circa 60% TiO2), and a medium TiO2 ilmenite (circa53.5% TiO2). Similar tonnages of each will be produced. In May 2002Kenmare signed an off-take agreement with one of the world’s largest usersof TiO2 feedstock. This agreement accounts for a significant proportion of the ilmenite to be produced. Kenmare is also in discussion with other majorilmenite consumers.

In addition, 24,000 tonnes of high-grade zircon and 12,500 tonnes of high-grade rutile will be produced per annum as co-products. Outline agreementhas been reached with zircon consumers for the total anticipated zirconoutput.

The project is divided into two operating companies for regulatory purposes. A mining company, Kenmare Moma Mining Ltd. (KMML), is responsible formining and concentration activities. The mining operation moves along adredge path as it mines different areas of the deposit. A heavy mineralconcentrate is pumped from the mining operation to the MSP, which islocated adjacent to the deposit. Minerals separation, final product storage,and export activities are performed by Kenmare Moma Processing Ltd.(KMPL).

KMPL operates within an Industrial Free Zone (IFZ). The rights andobligations of KMML are defined by a Mineral Licensing Contract (MLC),while those of KMPL are defined by an IFZ decree and by an ImplementationAgreement. The MLC covers an initial period of 25 years of mining and isrenewable thereafter. It grants KMML the right to obtain a mining licence.These two agreements, signed with the Government of Mozambique inJanuary 2002, give the project considerable stability and security of tenure.

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Titanium Pigment Industry

FeedstockProducers/Mines

PigmentProducers 91.9%

ChlorideProcess 57%

PigmentConsumers

Sulphate Process 43%

Spirals used in Concentrator Plant

Coatings 59%

Other 9%

Plastics 20%

Paper 12%

PIGMENT CONSUMPTIONBY END USE


“Only footprints left behind”

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MINERAL LICENSING CONTRACT& IMPLEMENTATION AGREEMENT

� Stabilisation of fiscal terms

� Export, sale and foreign exchange rights

� Offshore accounts

� Rights to import and obtain work permits

� Assignment

� Arbitration process

Following the signing of the Mineral Licensing Contract and the ImplementationAgreement, Kenmare and its financial advisors, N. M. Rothschild & Sons Ltd.,approached a set of Development Finance Institutions (DFIs) to solicit interest inproviding the debt funding necessary to develop the project. Their response waspositive, with expressions of interest being received to date amounting to US$280million, which Kenmare is currently seeking to convert into firm commitments ofcirca US$210 million. An inaugural meeting of a committee of lenders was held inJune 2002 in London. At this meeting an Independent Counsel to the lenders wasappointed. An Independent Engineer, whose function is to provide technical back up to the lenders, was also appointed. Both Kenmare and DFIs are working towardsa drawdown of debt early 2003, subject to successful completion of due diligence,suitable loan documentation and the completion of off-take contracts with customers.

The Board of Kenmare sees its mandate as the increase of wealth for shareholders bythe successful development of resource projects. This objective is executed in light ofthe Board’s view that such developments should be performed in a manner thatdoes not adversely influence the quality of life of others. In particular, this meansthat our neighbours in the Moma-Larde area should see the presence of Kenmare,and its activities, as positive. We see that ensuring this positive relationship is bothgood citizenship and good business.

Coastal and Environmental Services (CES), based in Grahamstown, South Africa, hasconducted a comprehensive and independent Environmental Impact Assessment(EIA) on the project. They were involved from an early stage in the developmentprocess and were able to make suggestions at the design stage which led us to alterthe design in order to avoid possible negative impacts. CES concluded in the EIAthat “the ecological issues resulting from the mine do not represent a fatal flaw tothe project”. The EIA was presented to the Government of Mozambique forcomment and subsequent approval. It was also presented to the local people in a suitable manner and their comments were absorbed. An EnvironmentalManagement Plan, based on the approved EIA, has been commissioned and its preparation is underway.

Kenmare currently employs a community liaison officer at the project site. Thisperson ensures that there is close contact with the local community leaders and that the local community is well informed about the project. He also ensures thatproject benefits are spread evenly throughout the surrounding villages.

Other Exploration and Mining Interests

The Ancuabe Graphite Mine, in which Kenmare has an 84% interest through GDAS,is located 100km inland from the port of Pemba in Cabo Delgado, a province ofMozambique. In October, 1999 the mine was placed on care and maintenancefollowing withdrawal by Superior Graphite Inc. of the working capital facility andtermination of the graphite distribution contract which had been in place. Thefinancial results of GDAS are no longer consolidated in the Kenmare Group accountsand the carrying value of the investment has been fully provided for. Kenmarecontinues to seek potential investors who would be interested in reopening the minebut, notwithstanding such activities, the Board believe that the mine is likely toremain on care and maintenance until such investment capital has been secured andgraphite prices improve.

Kenmare also has an exploration licence in Donegal, Ireland with known zinc-lead-silver mineralisation.

1 Overview of proposed mine siteoperations.

3 A concentrator plant separates aheavy mineral concentrate usingspiral separators.

7 The barge transports product tocustomers’ vessels moored at anoffshore mooring point.

5 In the minerals separation plant, theconcentrate is separated into distinctfinal products which are then stored in an enclosed facility.

2 A dredge, floating in an artificialpond, is the primary mining device.

6 Product minerals are conveyored tothe coast, to a purpose built jettyand loaded into a barge.

4 The heavy mineral concentrate ispumped to a minerals separationplant.

8 General overview of mining andprocessing operations.

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Mining & Processing Operations

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Chairman

Charles Carvill has been involved inthe Irish mining industry for over 30years. He served as a Director of TaraExploration and Development Limited,the parent company of Tara Mines, forover 20 years and was a foundingmember and subsequently director ofMinquest plc. He is founder andChairman of Carvill Group Limited andVico Properties plc., a Belfast basedconstruction and development groupwith activities in Ireland, NorthernIreland, Scotland, England andGermany.

Managing Director

Michael Carvill is a chartered Memberof the Institution of Engineers inIreland (MIEI). He holds a BSc inMechanical Engineering (Queen’sUniversity, Belfast) and an MBA(Wharton School, University ofPennsylvania). After working as acontracts engineer in Algeria and as a project engineer at Tara Mines,Ireland, he joined Vico DevelopmentLimited. He has been the ManagingDirector of Kenmare since 1986.

Financial Director

Tony McCluskey has worked withKenmare since 1991 as CompanySecretary and Financial Controller,before being appointed FinancialDirector in 1999. He holds a Bachelorof Commerce degree from UniversityCollege Cork and is a Fellow of theInstitute of Chartered Accountants.Before joining Kenmare, he worked fora number of years with Deloitte &Touche as a manager in Dublin andhas also spent a period of timeworking overseas.

Director of Exploration

Dr. Alastair Brown has almost 40 yearsexperience in geology and mineralexploration. He has worked extensivelyon metallic and industrial mineralexploration in Zambia where hediscovered the Maamba coal field;Australia and in Ireland where hediscovered the Westport talc deposit;and was responsible for the discoveryof significant gold mineralisation inCounty Mayo. Alastair Brown wasresponsible for the orebodydevelopment at Ancuabe and Moma,Kenmare’s two proven reserves. Heholds a BSc in Geology (University of Edinburgh), an MSc in MineralExploration (University of Leicester)and a DIC and PhD in AppliedGeochemistry (Imperial College,University of London). He is a Fellowof the Institute of Mining andMetallurgy. He joined Kenmare in1987.

Financial Controller & Company Secretary

Deirdre Corcoran graduated fromUniversity College Dublin with aBachelor of Commerce degree and aMasters in Accounting. She qualifiedas a Chartered Accountant withDeloitte & Touche in 1995. She thenworked as a Finance Manager withConcern Worldwide, based in Ethiopia,for a number of years before joiningKenmare Resources in 1999 asFinancial Controller. She wasappointed Company Secretary inMarch 2000.

Project Development Manager

Eamonn Keenan holds a Bachelor ofCommerce degree from UniversityCollege Dublin and is a member of theInstitute of Chartered Accountants. Hejoined Kenmare in 1994 as accountantfor the Ancuabe Graphite Mine inMozambique. He returned to Irelandin late 1996 and became the GraphiteMarketing and Logistics Manager. Henow holds the position of ProjectDevelopment Manager for the MomaTitanium Minerals Project.

Area Manager (Mozambique)

Gareth Clifton holds a BA Economicsdegree from University of Exeter and an MSc African Studies from Universityof Edinburgh. He has worked inMozambique for the last 7 years. Hejoined Kenmare from Union TransportLda where he held the position ofGeneral Manager for 2 years. Prior tothat he worked as branch manager fora Mozambican shipping agent, aslogistics manager for Kenmare and asfield co-ordinator for the UNDP.

Senior Personnel

GROUP SECRETARY AND REGISTERED OFFICE

Deirdre Corcoran

Chatham House,

Chatham Street,

Dublin 2.

AUDITORS

Deloitte & Touche,

Chartered Accountants and Registered Auditors,

Deloitte & Touche House,

Earlsfort Terrace,

Dublin 2.

BANKERS

AIB Bank plc.,

North Strand Road,

Dublin 3.

HSBC,

28/34, Hill Street,

St. Helier,

Jersey,

Channel Islands.

Anglo Irish Bank Corporation (I.O.M.) plc.,

St. George’s Court,

Upper Church Street,

Douglas,

Isle of Man.

Irish Nationwide (I.O.M.) Ltd.,

Po Box 188,

5 Hill Street,

Douglas,

Isle of Man.

SOLICITORS

O’Donnell Sweeney,

The Earlsfort Centre,

Earlsfort Terrace,

Dublin 2.

STOCKBROKERS

Davy Stockbrokers,

Davy House,

49, Dawson Street,

Dublin 2.

Canaccord Capital Europe Ltd.,

1st Floor, Brook House,

Brook Street,

London W1Y 1PD.

FINANCIAL ADVISOR

N. M. Rothschild & Sons Ltd.,

New Court,

St. Swithin’s Lane,

London EC4P 4DU.

REGISTRAR

Computershare Services (Ireland) Limited,

Heron House,

Corrig Road,

Sandyford Industrial Estate,

Dublin 18.

WEBSITE

www.kenmareresources.com

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General Information

The Directors present their report and the audited financial statements for the year ended 31st December 2001.

Statement of Results

The loss after tax for the year ended 31st December 2001 amounts to €990,410 (2000 – €868,219). No dividends ortransfers to reserves are proposed.

Principal Activities and Business Review

The principal activities of the Company and its subsidiaries are the exploration for commercial deposits of natural resourcesand the development and operation of mines. A Review of Operations, including future developments, is given on pages 4to 8.

Directors

The Directors who held office at 31st December 2001 were as follows:

C. Carvill Non-Executive (Chairman) ∆

D. Kinsella Non-Executive (Deputy Chairman) ∆

A. Brown Executive

M. Carvill Executive

T. McCluskey Executive

I. Egan Non-Executive ∆

S. Farrell Non-Executive

T. Fitzpatrick Non-Executive ∆

P. McAleer Non-Executive ∆

∆ : Members of the Audit Committee and the Remuneration Committee.

On 29th May 2001 K. Judge resigned from the Board. P. McAleer was appointed to the Board on 9th October 2001.

Under Articles 94 to 102 of the Company Articles of Association, M. Carvill, S. Farrell, T. McCluskey and P. McAleer retirefrom the Board and being eligible offer themselves for re-election.

Directors’ and Secretary’s Shareholdings

The interests of the Directors and Secretary of the Company, their spouses and minor children, in the Ordinary ShareCapital of the Company were as follows:

Shares Held Shares Held Shares Held

20th June 2002 31st Dec. 2001 1st Jan. 2001(or date of appointment

if later)

C. Carvill (Chairman) 5,200,657 5,200,657 5,090,657

D. Kinsella (Deputy Chairman) 741,937 89,500 89,500

A. Brown 99,270 88,240 88,240

M. Carvill 1,584,382 1,584,382 1,509,382

I. Egan 225,000 200,000 200,000

S. Farrell 466,333 466,333 666,333

T. Fitzpatrick 25,613 22,767 22,767

P. McAleer - - -

T. McCluskey 22,680 20,160 20,160

D. Corcoran (Secretary) - - -

At 31st December 2001, C. Carvill held warrants over 800,000 Ordinary €0.06 Shares at an average exercise price of€0.18 per share; M. Carvill held warrants over 160,000 Ordinary €0.06 Shares at an average exercise price of €0.22 pershare and A. Brown held warrants over 40,000 Ordinary €0.06 Shares at an average exercise price of €0.22 per share.

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Directors’ ReportFor The Year Ended 31st December 2001

Directors’ and Secretary’s Share Options

Details of the share options of the Secretary and Directors who held office at 31st December 2001, granted in accordancewith the rules of the Share Option Scheme, are as follows:

1 Jan. Granted 31 Dec. Average

2001 during 2001 2001 option Option price range

price from to

€ € €

C. Carvill (Chairman) 2,196,629 - 2,196,629 20c 6c 32c

D. Kinsella (Deputy Chairman) 360,000 - 360,000 17c 7c 32c

A. Brown 1,621,629 - 1,621,629 19c 6c 32c

M. Carvill 3,346,629 - 3,346,629 21c 6c 32c

I. Egan 1,180,000 - 1,180,000 18c 11c 25c

S. Farrell 680,000 - 680,000 22c 20c 25c

T. Fitzpatrick 760,000 - 760,000 13c 6c 32c

P. McAleer - 750,000 750,000 23c 23c 23c

T. McCluskey 1,410,000 - 1,410,000 18c 6c 25c

D. Corcoran (Secretary) 325,000 - 325,000 20c 13c 25c

The latest exercise date of the above options is October 2008.

Share Option Scheme

It is the policy of the Company, in common with other companies operating in the industry, to award share options tomanagement and employees. Any offer to grant options shall specify the consideration payable on acceptance (whichshall be €6.35), the number of shares comprised in the option, the mode of acceptance together with the latest date foracceptance and for payment of the said consideration. Upon receipt by the Board of such acceptance and consideration,the option will be granted and the Option Certificate delivered. The options generally vest over a three to five year period,in equal annual amounts. At 31st December 2001, there were options in issue that had been granted under the ShareOption Scheme dated 15th May 1987 to persons (other than Directors and the Secretary) to subscribe for a total of4,141,629 shares, exercisable at an average price of €0.21 per share. Of this total, options over 1,101,629 shares hadbeen exercised at 31st December 2001.

Going Concern

The Directors’ review of the accounts, budgets and future plans, together with the internal financial control system, leadthem to believe that the Group has adequate resources to continue for the foreseeable future. For this reason, theDirectors continue to adopt the going concern basis in preparing the financial statements.

Remuneration Committee

The Company has fully complied with the Irish Stock Exchange’s requirement in relation to the disclosure of Directors’remuneration and its Best Practice provisions as contained in Section A of the Listing Rules. Emoluments of ExecutiveDirectors are determined by the Remuneration Committee which comprises the Non-Executive Chairman and Non-Executive Directors as set out on page 11. The philosophy of the Remuneration Committee in determining ExecutiveDirectors’ remuneration is to ensure that individuals are appropriately rewarded relative to their responsibility, experienceand value to the Group.

In framing Remuneration Policy, the Remuneration Committee has had regard to Section B of the provisions of the Codeof Best Practice, published in December 1992 by the Cadbury Committee on the Financial Aspects of CorporateGovernance, annexed to the Listing Rules.

Except for a contract with Vico Properties plc to provide the services of M. Carvill and contracts with A. Brown, I. Eganand T. McCluskey for their services, none of the Directors had a beneficial interest in any contract in which the Companywas a party during the financial year. Notice period on service contracts with Executive Directors is two years.

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Directors’ Responsibilities

Irish company law requires the Directors to prepare financial statements for each financial year which give a true and fairview of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. Inpreparing those financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Companywill continue in business.

The Directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time thefinancial position of the Company and to enable them to ensure that the financial statements are prepared in accordancewith accounting standards generally accepted in Ireland and comply with Irish statute comprising the Companies Acts,1963 to 2001 and the European Communities (Companies: Group Accounts) Regulations, 1992 and the Listing Rules ofthe Irish and London Stock Exchanges. They are also responsible for safeguarding the assets of the Company and theGroup and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Internal Control

The Board of Directors has responsibility for the Group’s system of internal control. This involves an ongoing process foridentifying, evaluating and managing the significant risks faced by the Group and reviewing the effectiveness of theresultant system of internal control that has been in place throughout the year and up to the date of approval of theAnnual Report and Accounts. The Board has delegated to management the planning and implementation of the systemsof internal control throughout the Group. The system of internal control is designed to provide reasonable, but notabsolute, assurance against material misstatement or loss and accords with the guidance in Internal Control: Guidance for Directors on the Combined Code (Turnbull). The key procedures of the system include:

• The Board, in conjunction with management, identifies the major risks faced by the Group and determines theappropriate course of action to manage these risks;

• Risk assessment and evaluation is an integral part of the management process throughout the Group. Risks areidentified, evaluated and appropriate risk management strategies implemented;

• The Board maintains control and direction over appropriate strategic, financial, organisational and complianceissues, and has put in place an organisational structure with defined lines of responsibility and authority;

• An Audit Committee is in operation, whose function includes a review of the financial statements and meeting with the external auditors;

• Capital expenditure is controlled centrally and, subject to predefined levels, approved by the Board.

Steps are being taken to embed internal control and risk management further into the operations of the Group and todeal with areas of improvement which come to management’s and the Board’s attention. Having made appropriateenquiries, the Directors consider that the systems of internal control operated effectively during the year under review.

Corporate Governance

The Directors recognise the importance of good corporate governance and have ensured that appropriate corporategovernance procedures are in place. In the financial year under review they have applied the provisions of the CombinedCode on Corporate Governance (the Code), save that certain share option arrangements are in place between theCompany and the Non-Executive Directors.

The roles of the Chairman and Chief Executive are separate. The Board includes a Non-Executive Chairman and a numberof independent Non-Executive Directors. All Non-Executive Directors are members of the Nomination Committee which isresponsible for the selection and appointment of Directors. All Directors are subject to retirement by rotation and mayoffer themselves for reappointment at the Company’s Annual General Meeting. Directors may take independent advice inthe furtherance of their duties at the Company’s expense and all significant matters are reserved for decision by the Board.

For the year under review the Audit Committee and Remuneration Committee were composed of the Chairman and theNon-Executive Directors as set out on page 11.

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Communication with Shareholders

Communications with shareholders are given high priority and regular meetings take place between institutionalshareholders and senior management. The Company’s Annual General Meeting affords individual shareholders theopportunity to question the Chairman and the Board. Result announcements are sent to shareholder, released through the London and Irish Stock Exchanges and on the Company’s website www.kenmareresources.com

Substantial Interests

The Company is aware that on 17 June 2002, the following held in excess of 3% of the issued ordinary shares of theCompany:

No. of Ordinary % of Issued

Shares Share Capital

Clydesdale Bank 26,000,000 9.9

Chase Nominees Limited 22,765,626 8.7

State Street Nominees Limited 19,426,000 7.4

Nutraco Nominees Limited 12,073,485 4.6

The Bank of New York 10,812,157 4.1

Bank of Ireland Nominees Limited 10,325,200 3.9

Morstan Nominees Limited 9,400,000 3.6

BNY GIL Client Account (Nominees) 8,367,512 3.2

Close Company

As far as the Directors are aware, the Company is not a close company for the purposes of the Corporation Tax Act 1976.

Books of Account

The Directors have employed appropriately qualified accounting personnel and have maintained appropriate accountingsystems, to ensure that proper books and accounting records are kept in accordance with Section 202 Companies Act,1990. The books of account are kept at the Company’s office at Chatham House, Chatham Street, Dublin 2.

Post Balance Sheet Events

Details of post balance sheet events are set out in Note 28 to the financial statements.

Subsidiary Companies

The subsidiaries of the Company at 31st December 2001 are outlined in Note 10 to the financial statements.

Annual General Meeting

Mr. M. Carvill, Mr. S. Farrell, Mr. T. McCluskey and Mr. P. McAleer will be proposed for re-appointment at the AnnualGeneral Meeting.

Mr. S. Farrell has over 20 years experience in the mining industry at senior management and board level, principally in theareas of finance, marketing and general management. He holds a BComm degree from the University of Western Australiaand an MBA from the Wharton School at the University of Pennsylvania. He is a Fellow of both the Australian Society ofAccountants and the Australian Institute of Company Directors. He was appointed to the Board of Kenmare in January2000 and has no service contract with the Company.

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Mr. P. McAleer has over 35 years international experience at board and senior management level in the natural resourcessector. He has been involved in the discovery and/or successful development of more than 10 base and precious metaldeposits and has extensive experience in project development and financing. He holds an honours degree in Commerceand is a Barrister at Law. He has been involved in the management of mining operations in Australia, Chile, Europe andNorth America. More recently as a director of Equational Mining Limited, Peter McAleer participated in the funding of theMinera El Tesoro copper project in Chile which involved raising US$296 million. Peter McAleer is also Chairman ofWestmag Limited (Australia) and a director of Kingsgate Consolidated NL (Australia). He was appointed to the Board ofKenmare in October 2001 and has no service contract with the Company.

Details on Mr. M. Carvill and Mr. T. McCluskey are set out in Senior Personnel on page 9.

The Directors recommend that shareholders vote in favour of all resolutions, as set out in the Notice of Annual GeneralMeeting.

Euro

The Group has assessed the impact of the Euro on its business. The Euro changeover did not give rise to significantproblems and did not have a significant impact on the Group’s current financial position, liquidity or results of operations.

Health & Safety

The Directors are conscious of the requirements and obligations towards the health and safety of their employees underthe provisions of the Safety, Health and Welfare at Work Act 1989.

Political Donations

There were no political contributions which require disclosure under the Electoral Act 1997.

Auditors

The auditors, Deloitte & Touche, Chartered Accountants, continue in office in accordance with Section 160 (2) of theCompanies Act 1963.

On behalf of the Board:

M. Carvill Director

T. McCluskey Director

20 June 2002

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We have audited the financial statements of Kenmare Resources plc for the year ended 31st December 2001 whichcomprise the Consolidated Profit and Loss Account, the Consolidated Balance Sheet, the Company Balance Sheet, theGroup Cash Flow Statement, the Statement Of Total Recognised Gains and Losses, the Statement of Accounting Policiesand the related notes 1 to 29. These financial statements have been prepared under the accounting policies set out in theStatement of Accounting Policies.

Respective responsibilities of Directors and auditors

The Directors are responsible for preparing the Annual Report including, as set out in the Statement of Directors’Responsibilities, the preparation of the financial statements in accordance with applicable Irish law and accountingstandards. Our responsibilities, as independent auditors, are established in Ireland by statute, the Listing Rules of the Irishand London Stock Exchanges, the auditing standards as promulgated by the Auditing Practices Board in Ireland and byour profession’s ethical guidance.

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared inaccordance with Irish statute comprising the Companies Acts, 1963 to 2001, and the European Communities (Companies:Group Accounts) Regulations, 1992. We also report to you whether in our opinion: proper books of account have beenkept by the Company; whether, at the balance sheet date, there exists a financial situation requiring the convening of anextraordinary general meeting of the Company; and whether the information given in the Directors’ Report is consistentwith the financial statements. In addition, we state whether we have obtained all information and explanations necessaryfor the purpose of our audit and whether the Company’s Balance Sheet is in agreement with the books of account.

We also report to you if, in our opinion, any information specified by law or the Listing Rules of the Irish and London StockExchanges regarding Directors’ remuneration and Directors’ transactions is not given and, where practicable, include suchinformation in our report.

We review whether the corporate governance statement reflects the Company’s compliance with the seven provisions ofthe Combined Code specified for our review by the Irish Stock Exchange and we report if it does not. We are not requiredto form an opinion on the effectiveness of the Group’s corporate governance procedures or its internal controls.

We read the other information contained in the Annual Report and considered whether it is consistent with the auditedfinancial statements. The other information comprises only the Chairman’s Statement, the Review of Operations and theDirectors’ Report. We consider the implications for our report if we become aware of any apparent misstatement ormaterial inconsistencies with the financial statements. Our responsibilities do not extend to other information.

Basis of audit opinion

We conducted our audit in accordance with the auditing standards issued by the Auditing Practice Board and generallyaccepted in Ireland. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures inthe financial statements. It also includes an assessment of the significant estimates and judgements made by the Directorsin the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstancesof the Company, and the Group, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessaryin order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free frommaterial misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we evaluated theoverall adequacy of the presentation of information in the financial statements.

Mineral Interests, Tangible Assets and Investment in Subsidiaries

In forming our opinion we have considered the adequacy of the disclosures made in the financial statements concerningthe valuation of Mineral Interests, Tangible Assets and Investment in Subsidiaries. The realisation of Mineral Interests of€12,637,388 and of Tangible Assets of €47,219,811 included in the Consolidated Balance Sheet and Investment inSubsidiaries of €20,078,283 in the Company Balance Sheet is dependent on the successful development of economic orereserves. We draw attention to further details given in notes 8, 9 and 10. Our opinion is not qualified in this respect.

Opinion

In our opinion the financial statements give a true and fair view of the state of the affairs of the Company and the Groupas at 31st December 2001 and of the loss of the Group for the year then ended and have been properly prepared inaccordance with the Companies Acts, 1963 to 2001 and the European Communities (Companies: Group Accounts)Regulations, 1992.

We have obtained all the information and explanations we considered necessary for the purpose of our audit. In ouropinion proper books of account have been kept by the Company. The Company’s Balance Sheet is in agreement with the books of account.

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Independent Auditors’ Report

In our opinion the information given in the Directors’ Report is consistent with the financial statements. The net assets ofthe Company, as stated in the Balance Sheet are more than half of the amount of its called-up share capital and, in ouropinion, on that basis there did not exist at 31st December 2001 a financial situation which, under Section 40(1) of theCompanies (Amendment) Act 1983, would require the convening of an extraordinary general meeting of the Company.

Deloitte & Touche,

Chartered Accountants and Registered Auditors,

Deloitte & Touche House,

Earlsfort Terrace,

Dublin 2.

20 June 2002

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Independent Auditors’ Report

Notes 2001 2000

€ €

Turnover - -

Operating Expenses 2 (1,116,142) (973,004)

Operating Loss (1,116,142) (973,004)

Interest Receivable 125,732 104,785

Loss On Ordinary Activities Before Taxation (990,410) (868,219)

Taxation 3 - -

Loss On Ordinary Activities After Taxation (990,410) (868,219)

Opening Balance - Profit and Loss Account (deficit) (25,086,081) (24,217,862)

Closing Balance - Profit and Loss Account (deficit) (26,076,491) (25,086,081)

Loss and Fully Diluted Loss Per Share 5 (0.53c) (0.58c)

All amounts dealt with above relate to continuing operations.


M. Carvill Director

T. McCluskey Director

The accompanying notes form part of the financial statements.

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Consolidated Profit and Loss AccountFor The Year Ended 31st December 2001

Notes 2001 2000

€ €

Fixed Assets

Mineral Interests 8 12,637,388 9,095,938

Tangible Assets 9 47,248,301 44,764,682

59,885,689 53,860,620

Current Assets

Debtors 11 87,175 63,435

Cash at Bank and In Hand 1,406,505 1,584,177

1,493,680 1,647,612

Creditors:

Amounts falling due within one year 12 (1,684,168) (4,124,286)

Net Current Liabilities (190,488) (2,476,674)

Total Assets Less Current Liabilities 59,695,201 51,383,946

Creditors:

Amounts falling due after one year 13 (1,565,411) (1,215,011)

Provision for liabilities and charges 14 (1,447,331) (1,489,215)

56,682,459 48,679,720

Capital and Reserves

Called Up Share Capital - (Equity & Non-Equity) 16 23,470,869 23,025,358

Share Premium Account 17 18,499,848 14,113,837

Profit and Loss Account - (Deficit) (26,076,491) (25,086,081)

Revaluation Reserve 18 35,799,751 34,905,209

Other Reserve 19 4,132,696 1,721,397

Capital Conversion Reserve Fund 20 855,786 -

Shareholders’ Funds 56,682,459 48,679,720


M. Carvill Director

T. Mc Cluskey Director

The accompanying notes form part of these financial statements.

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Consolidated Balance SheetAs At 31st December 2001

Notes 2001 2000

€ €

Fixed Assets

Mineral Interests 8 - 1,328,570

Tangible Assets 9 28,490 41,548

Investment in Subsidiaries 10 20,078,283 14,300,012

20,106,773 15,670,130

Current Assets

Debtors 11 87,175 63,435

Cash at Bank and In Hand 23,309 43,526

110,484 106,961

Creditors:

Amounts falling due within one year 12 (370,267) (163,248)

Net Current Liabilities (259,783) (56,287)

Total Assets Less Current Liabilities 19,846,990 15,613,843

Creditors:

Amount falling due after one year 13 (5,820) (22,432)

19,841,170 15,591,411

Capital and Reserves

Called Up Share Capital - (Equity & Non-Equity) 16 23,470,869 23,025,358

Share Premium Account 17 18,499,848 14,113,837

Profit and Loss Account - (Deficit) (22,985,333) (21,547,784)

Capital Conversion Reserve Fund 20 855,786 -

Shareholders’ Funds 19,841,170 15,591,411


M. Carvill Director

T. Mc Cluskey Director

The accompanying notes form part of these financial statements.

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Company Balance SheetAs At 31st December 2001

Notes 2001 2000

€ €

Net cash (outflow)/inflow from operating activities 23 (71,685) 1,360,651

Returns on Investments & Servicing of Finance

Interest received 125,732 104,785

Net cash inflow from Returns on Investment &

Servicing of Finance 125,732 104,785

Capital Expenditure & Financial Investment

Addition of Mineral Interests (3,973,937) (3,983,834)

Purchase of Tangible Fixed Assets - (9,259,278)

Net cash outflow from Capital Expenditure &

Financial Investment (3,973,937) (13,243,112)

Net cash outflow before use of liquid resources & financing (3,919,890) (11,777,676)

Financing

Issue of Ordinary Share Capital 6,138,132 9,107,024

Cost of share issues (450,824) (826,480)

Finance Lease (17,481) 37,842

Debt due within one year (2,294,621) 3,572,940

Debt due beyond a year 367,012 1,192,579

Net cash inflow from financing 3,742,218 13,083,905

(Decrease)/Increase in cash 26 (177,672) 1,306,229

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Group Cash Flow StatementFor The Year Ended 31st December 2001

Notes 2001 2000

€ €

Loss attributable to Group shareholders (990,410) (868,219)

Revaluation of Tangible Fixed Assets 9 - 34,905,209

Currency Translation Movement 3,305,841 471,392

Total Recognised Gains and Losses for the year 2,315,431 34,508,382

There is no material difference between the loss on ordinary activities before taxation and the loss retained for the year onan historical cost basis and the amounts shown in the Consolidated Profit and Loss Account on page 18.

2001 2000

€ €

Total Recognised Gains and Losses for the year 2,315,431 34,508,382

Issue of Shares - at par 1,301,297 3,172,627

Share premium, net of costs 4,386,011 5,107,916

Net change in Shareholders’ funds 8,002,739 42,788,925

Opening Shareholders’ funds 48,679,720 5,890,795

Closing Shareholders’ funds 56,682,459 48,679,720

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Statement of Total Recognised Gains and LossesFor The Year Ended 31st December 2001

Note of Historical Cost Profits and LossesFor The Year Ended 31st December 2001

Reconciliation of Movements in Shareholders’ FundsFor The Year Ended 31st December 2001

The significant accounting policies adopted by the Group are as follows:

(a) Basis of Preparation

The financial statements have been prepared in accordance with applicable accounting standards generally accepted inIreland and the United Kingdom and with Irish statue comprising the Companies Acts, 1963 to 2001, the EuropeanCommunities (Companies: Group Accounts) Regulations, 1992 and the Listing Rules of the Irish and London StockExchanges. Accounting standards, generally accepted in Ireland and the United Kingdom in preparing financial statementsgiving a true and fair view, are those issued by the Accounting Standards Board. During the year Financial ReportingStandard (FRS) 18 “Accounting Policies” became effective. The Directors have reviewed the Group’s existing accountingpolicies and consider that they are already consistent with this new standard.

(b) Basis of Accounting

The financial statements are prepared in euro under the historical cost convention, as modified by the revaluation ofcertain fixed assets.

(c) Mineral Interests - Deferred Development Expenditure

Mineral exploration costs are capitalised until the results of the projects, which are based on geographic areas, are known.Mineral exploration costs include an allocation of administration and salary costs as determined by management andincurred by group companies. If the project is successful, then the related exploration costs are written off over the life ofthe estimated ore reserve on a unit of production basis. Where a project is terminated, or an impairment in value hasoccurred, the related exploration costs are written off immediately.

(d) Tangible Fixed Assets and Depreciation

Tangible fixed assets are stated at cost or valuation less accumulated depreciation. Depreciation is calculated by equalannual instalments so as to provide for their cost or valuation over the period of their expected useful lives at the followingannual rates:

Plant & Equipment 5% - 25%

Buildings 5%

Motor Vehicles 20%

Office Equipment & Fixtures 10% - 33.3%

Mining & Processing Plant Unit of production basis

(e) Foreign Currency

Monetary assets and liabilities denominated in foreign currencies are translated into euro at the rate of exchangeprevailing at the balance sheet date. Transactions in foreign currencies are recorded at the rate of exchange prevailing at the date of the transactions.

For the purposes of consolidation, foreign subsidiaries are translated using the closing rate method and any translationgain or loss is transferred directly to reserves.

(f) Leases

Where assets are financed by leasing agreements that give rights approximating to ownership (finance leases) they arerecorded as tangible assets and the corresponding liability is included in creditors. Depreciation on such leased assets ischarged to the profit and loss account on the same basis as other tangible assets. The interest portion of the paymentsmade under such leasing agreements is also charged to the profit and loss account so as to produce a constant periodicrate of charge on the balance of the obligation under each lease.

All other leases are operating leases and the lease rentals are charged to the Profit and Loss Account in the period in whichthey are incurred.

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Statement of Accounting Policies

1. Segmental Reporting

2001 2000

Net Net

Assets Assets

€ €

Europe (141,787) 111,182

Africa & Rest of World 55,417,742 46,984,361

55,275,955 47,095,543

Plus cash & bank deposits 1,406,504 1,584,177

Total Net Assets 56,682,459 48,679,720

2. Operating Costs

Operating costs, excluding those capitalised as Mineral Interests in note 8, comprise:

2001 2000

€ €

Corporate and Exploration Expenses 917,547 631,700

General and Administrative Expenses 198,595 341,304

1,116,142 973,004

3. Taxation

No charge to taxation arises in the year ended 31st December 2001 as there were no taxable profits.

4. Statutory and Other Information

2001 2000

€ €

Auditors’ Remuneration 25,395 25,395

Depreciation 13,058 40,707

Executive Directors’ Emoluments

Remuneration 419,014 302,918

Benefits in kind 11,373 14,080

Pension contributions 7,618 7,618

438,005 324,616

Non-Executive Directors’ Emoluments

Remuneration 50,790 37,975

Executive Directors’ emoluments shown comprise all salaries, pension contributions and other benefits in respect of theDirectors. Details of the Directors’ share options are set out in the Directors’ Report. A portion of Directors’ emoluments is paid to companies in respect of management services provided by Directors. No Directors’ fees were paid by theCompany during the year.

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Notes to the Financial StatementsFor The Year Ended 31st December 2001

5. Loss and Fully Diluted Loss Per Share

The calculation of the loss and fully diluted loss per share is based on the loss after taxation of €990,410 (2000 -€868,219) and the weighted average number of shares in issue during 2001 of 187,405,370 (2000 - 149,961,746shares). The loss per share and the fully diluted loss per share are the same, as the effect of the outstanding share optionsis anti-dilutive.

6. Staff Costs

The average number of persons employed by the Group (including Executive Directors) was 49 and is analysed below:

2001 2000

Management/Administration 6 6

Development and Mining 43 38

49 44

The aggregate payroll costs, including costs capitalised in Mineral Interests, incurred in respect of these employeescomprised:

2001 2000

€ €

Wages and Salaries 805,288 772,526

Social Welfare 31,817 23,670

Pension Costs 7,618 7,618

844,723 803,814

Directors’ Emoluments Basic Taxable Pension Total Total

Salary Benefits 2001 2000

€ € € € €

Executive

A. Brown 100,309 - 7,618 107,927 86,638

M. Carvill 190,461 11,373 - 201,834 149,519

T. McCluskey 120,625 - - 120,625 88,459

411,395 11,373 7,618 430,386 324,616

Non-Executive

S. Farrell 22,951 - - 22,951 -

I. Egan 50,790 - - 50,790 37,975

73,741 - - 73,741 37,975

Further information on the remuneration policy for Directors is set out in the Directors’ Report.

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7. Non-Consolidation of Subsidiary Undertaking

The principal activity of Grafites de Ancuabe, S.A.R.L. (GDAS) is the development and operation of the Ancuabe GraphiteMine. This mine has been on care and maintenance since 1999. Certain restrictions, arising out of agreements undertakenby GDAS, on the Group’s influence over the financial and operating activities of GDAS became effective towards the endof 1999 and remain in place. In accordance with Financial Reporting Standard 2 the undertaking is excluded fromconsolidation. Full provision has been made in the Group Financial Statements for the investment in and debt due byGDAS to other Group Companies.

8. Mineral Interests

Deferred Development Expenditure Analysed by Geographical Area

Group Mozambique Mozambique

Niassa Moma Titanium

Gold Mineral Sands Ireland Total

€ € € €

Opening Balance 1,328,570 7,618,864 148,504 9,095,938

Additions - 3,968,224 5,713 3,973,937

Impairment Provision (1,328,570) - - (1,328,570)

Exchange Movement - 896,083 - 896,083

Closing Balance - 12,483,171 154,217 12,637,388

Expenditures incurred by third parties, under joint venture or other agreement, on the exploration licences held byKenmare are not included in the deferred development expenditures, set out above.

The recovery of deferred development expenditure is dependent upon the successful development of economic orereserves, which in turn depends on the availability of adequate funding from financial institutions, a joint venture party or other source. The Directors are satisfied that deferred expenditure is worth not less than cost less any amounts writtenoff and that the exploration projects have the potential to achieve mine production and positive cash flows. Furtherinformation on the projects for which development expenditure has been deferred is given in the Review of Operations.K

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9. Tangible Fixed Assets

(a) Group Processing Mining Plant & Office Equip TOTALPlant Plant Equipment Vehicles & Fixtures

€ € € € € €

Cost or ValuationOpening Balance 22,287,766 22,435,368 133,738 57,358 134,574 45,048,804Exchange Adjustment 1,244,218 1,252,459 - - - 2,496,677

Closing Balance 23,531,984 23,687,827 133,738 57,358 134,574 47,545,481

Accumulated DepreciationOpening Balance - - 133,738 19,370 131,014 284,122Charge for the year - - - 9,498 3,560 13,058

Closing Balance - - 133,738 28,868 134,574 297,180

Net Book Value31st December 2001 23,531,984 23,687,827 - 28,490 - 47,248,301

Net Book Value31st December 2000 22,287,766 22,435,368 - 37,988 3,560 44,764,682

Processing and Mining Plant are held at valuation. GRD Minproc Limited, an independent Australian engineering group,has appraised the Mining and Processing Plant on a depreciated replacement cost basis of valuation as at 30 June 2000.An inspection of the Mining and Processing Plant was carried out by GRD Minproc Limited in March 2002, concludingthat no material alteration to the Plants had taken place. The recovery of the plant valuation is dependent upon thesuccessful development of the Moma Titanium Minerals Project, which in turn depends on the availability of adequatefunding being made available. The historical cost net book value of these assets at 31 December 2001 is €9,211,790. The surplus arising on revaluation amounts to €35,799,751.

Leased tangible assets amount to €20,362 (2000: €37,988) of the above net book value for the Group.

(b) Company Plant & Office Equip TOTALEquipment Vehicles & Fixtures

€ € € €

Cost Opening and Closing Balance 133,738 57,358 134,574 325,670

Accumulated DepreciationOpening Balance 133,738 19,370 131,014 284,122Charge for year - 9,498 3,560 13,058

Closing Balance 133,738 28,868 134,574 297,180

Net Book Value31st December 2001 - 28,490 - 28,490

Net Book Value31st December 2000 - 37,988 3,560 41,548

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10. Investment in Subsidiaries

2001 2000

€ €

Shares at cost 130 130

Amounts due by Group Companies (net of provisions) 20,078,153 14,299,882

20,078,283 14,300,012

The subsidiaries of the Company as at 31st December 2001 are as follows:

Place of Place of Percentage

Incorporation Operation Ownership

Kenmare UK Company Limited Northern Ireland Northern Ireland 100%

Kenmare Minerals Company Limited Republic of Ireland Republic of Ireland 100%

Kenmare C.I. Limited Jersey Jersey 100%

Congolone Heavy Minerals Limited Jersey Mozambique 100%

Grafites de Ancuabe, S.A.R.L. Mozambique Mozambique 84%

Kenmare Graphite Company Limited Jersey Jersey 100%

Kenmare Moma Mining Limited Jersey Mozambique 100%

Kenmare Moma Processing Limited Jersey Mozambique 100%

Each of the subsidiary companies has issued ordinary shares only. A number of the subsidiary companies are indirectlyowned by Kenmare Resources plc. The activities of the above companies, with the exception of those which are dormant,are mineral exploration, management and development.

The registered office of the Northern Ireland company is Vico House, Derriaghy Industrial Park, Dunmurry Industrial Estate,Belfast. The registered office of the Republic of Ireland company is Chatham House, Chatham Street, Dublin 2. Theregistered office of the Channel Island companies is Lord Coutanche House, 66-68 Esplanade, St. Helier, Jersey. Theregistered office of Grafites de Ancuabe, S.A.R.L. is Rua de Chuindi No.67, Maputo, Mozambique.

The recovery of amounts due by Group Companies is dependent on the successful development of economic ore reservesby the subsidiary companies.

11. Debtors

Group Company

2001 2000 2001 2000

€ € € €

Sundry Debtors 87,175 63,435 87,175 63,435

Amounts included in debtors are due within one year.

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12. Creditors: Amounts falling due within one year

Group Company

2001 2000 2001 2000

€ € € €

Other Creditors (note 13) 1,278,319 3,572,940 - -

Accruals 391,308 535,936 355,726 147,838

Lease Obligation 14,541 15,410 14,541 15,410

1,684,168 4,124,286 370,267 163,248

13. Creditors: Amounts falling due after more than one year

Group Company

2001 2000 2001 2000

€ € € €

Lease Obligations 5,820 22,432 5,820 22,432

Other Creditors 1,559,591 1,192,579 - -

Long term loans 1,565,411 1,215,011 5,820 22,432

Other creditors comprise amounts owing to BHP Titanium Minerals Pty Limited, a subsidiary of BHP, in relation to thepurchase of the Concentrator Plant and Minerals Separation Plant in 2001. The consideration for the acquisitions is subjectto a phased payment procedure, expiring in June 2002, with the exception of A$2 million which is due and payable whenthe installation of the Minerals Separation Plant has been effected and production of mineral product at Moma hasreached 250,000 tonnes. This amount is included in Amounts falling due after more than one year.

14. Provision for Liabilities and Charges

Group Company

2001 2000 2001 2000

€ € € €

Dismantling Provision 1,447,331 1,489,215 - -

Dismantling provision relates to the estimated cost of dismantling the Minerals Separation Plant, purchased in May 2000from BHP and currently located at Beenup in Western Australia.

15. Profit/Loss Attributable to Kenmare Resources plc

As permitted by Section 3(2) of the Companies Amendment Act 1986, the profit and loss account of the holdingcompany is not presented as part of these financial statements. A loss of €1,437,549 (2000 – Profit €3,048,187) has beendealt with in the financial statements of the holding company.


16. Called Up Share Capital

2001 2000

€ €

Authorised:

Equity Share Capital

300,000,000 Ordinary Shares of €0.06 each (2000 –IR5p) 18,000,000 19,046,071

Non-Equity Share Capital

100,000,000 Deferred Shares of €0.25 each (2000 –IR20p) 25,000,000 25,394,762

43,000,000 44,440,833

Allotted, Called Up and Fully Paid:

Equity Share Capital

Opening Balance

170,552,958 Ordinary Shares of €0.06 each (2000 –IR5p) 10,827,882 -

120,579,996 Ordinary Shares of €0.06 each (2000 –IR5p) - 7,655,255

10,827,882 7,655,255

Shares issued during the period



1,301,297 3,172,627

Transfer to Capital Conversion Reserve Fund (666,177) -

Closing Balance



11,463,002 10,827,882

Non-Equity Share Capital

Opening Balance


Transfer to Capital Conversion Reserve Fund (189,609) -

Closing Balance


Total Called Up Share Capital 23,470,869 23,025,358

Share options granted but not exercised are noted in the Directors’ Report.

The Non-Equity Deferred Shares of €0.25 were created in 1991 by subdividing each existing Ordinary Share of IR25p intoone Deferred Share of IR20p and one new Ordinary Share of IR5p. The Deferred Shares are non-voting, carry no dividendrights and the Company may purchase any or all of these shares at a price not exceeding €0.013 for all the deferredshares so purchased.

At 31st December 2001 warrants over 11,946,000 Ordinary €0.06 Shares were in issue. The latest exercise date for thesewarrants is 8th December 2003 and the average exercise price is €0.18 per share.

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17. Share Premium Account2001 2000

€ €

Opening Balance 14,113,837 9,005,921Premium on shares issued during year 4,836,835 5,934,396Costs associated with shares issued during year (450,824) (826,480)

Closing Balance 18,499,848 14,113,837

18. Revaluation Reserve2001 2000

€ €

Opening Balance 34,905,209 -Movement for year 894,542 -Revaluation of Mining & Processing Plant - 34,905,209

Closing Balance 35,799,751 34,905,209

19. Other Reserve

Currency Translation Movement

2001 2000

€ €

Opening Balance 1,721,397 1,250,006

Movement for year 2,411,299 471,391

Closing Balance 4,132,696 1,721,397

The translation movement arises on the translation of overseas subsidiaries using the closing rate method.

20. Capital Conversion Reserve Fund Group & Company

2001 2000€ €

Capital Conversion Reserve Fund 855,786 -

The capital reserve arises from the re-nominalisation of the Company’s share capital.

21. Lease Obligations

Operating Lease Commitments

Annual commitments, which are in respect of Office Buildings, under operating leases as at 31st December 2001 are€71,004 (2000 - €45,253) expiring after more than five years.

22. Pensions

The Group operates an externally funded defined contribution pension scheme for certain employees. The assets of thescheme are held in a fund administered by an insurance company. Contributions to the scheme are charged in the periodin which they are payable to the scheme.

Group & Company

2001 2000€ €

Contributions 7,618 7,618

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23. Reconciliation of Operating Loss to Net Cashflow from Operating Activities

2001 2000

€ €

Operating Activities

Operating Loss (1,116,142) (973,004)

Depreciation 13,058 40,707

(Increase)/Decrease in Debtors (23,740) 1,552

Decrease in operating creditors (144,628) (47,942)

(Decrease)/Increase in Provision for Liabilities & Charges (41,884) 1,489,215

Impairment/Write off of Minerals Interests 1,328,570 971,027

Exchange Gain on translation of Fixed Assets (3,392,760) (592,295)

Exchange Loss on translation of Revaluation Reserve 894,542 -

Exchange Loss on translation of Subsidiaries 2,411,299 471,391

Net Cash Flow from Operating Activities (71,685) 1,360,651

24. Analysis of Net Debt

At 1 Jan 2001 Cash Flow At 31 Dec 2001

€ € €

Cash at Bank and in hand 1,584,177 (177,672) 1,406,505

Debt due after 1 year (1,192,579) (367,011) (1,559,590)

Debt due within 1 year (3,572,940) 2,294,621 (1,278,319)

(3,181,342) 1,749,938 (1,431,404)

25. Reconciliation of Net Cash Flow to Movement in Net Debt

2001 2000

€ €

(Decrease)/Increase in cash during the year (177,672) 1,306,229

Outflow/(Inflow) from movements in debt & lease financing 1,927,610 (4,765,519)

Movement in net debt in the year 1,749,938 (3,459,290)

Net debt at start of year (3,181,342) 277,948

Net debt at end of year (1,431,404) (3,181,342)

26. Analysis of the Balance of Cash Equivalents as Shown in the Consolidated Balance Sheet

Change in Year 2001 2000

€ € €

Cash at Bank and in hand (177,672) 1,406,505 1,584,177

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27. Risk Management

The Group’s financial instruments comprise of cash balances, sundry debtors and liabilities in relation to the developmentof the Moma Titanium Minerals Project in Mozambique.

The Group did not enter into any derivative transactions during the period.

The main financial risk arising from the Group’s financial instruments is foreign currency risk. The Board reviews and agreespolicies for managing this risk as summarised below.

Foreign currency risk

The functional currency of the parent company is the Euro. The Group has subsidiary companies that report in US Dollars,Sterling and Euro. The Group’s policy for dealing with exchange differences is outlined in Accounting Policies on page 23.Details of liabilities, denominated in Australian dollars, relating to plant purchased in 2000 are set out in notes 12, 13 and14.

The Group does not currently utilise swaps or forward contracts to manage its currency exposures, although such facilitiesare considered and will be used where appropriate in the future.

The Group seeks to minimise its exposure to currency risk by closely monitoring exchange rates.

The net foreign currency monetary assets/liabilities at 31st December were as follows:

2001 2000

€ €

Cash at Bank

Currency

Sterling 716,548 978,858

US Dollar 76,839 50,752

Australian Dollar 582,000 83,470

Mozambican Metical 7,743 3,457

1,383,130 1,116,537

Debtors

There are no foreign currency debtors

Creditors

Currency

Australian Dollar 2,323,148 225,130

Sterling 502,654 -

US Dollar 151,411 56,760

South African Rand - 34,960

2,977,213 316,850

Provision for liabilities and charges

Currency

Australian Dollar 1,447,331 -

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27. Risk Management, continued

Interest rate risk

The Group’s exposure to interest rate risk is not considered to be significant. The financial asset, cash deposits, comprisedeposits placed with financial institutions at call, 7-day and monthly rates. At 31 December 2001 the financial liabilities arenon-interest bearing.

Liquidity risk

As regards liquidity, the Group’s policy has been to ensure continuity of funding mainly through the issue of shares.Further information regarding issues during the year is set out in note 16. Short term funding is achieved by utilisingexisting cash balances.

Fair values of financial assets and financial liabilities

The fair value of the financial assets is equal to the book value. The fair value of financial liabilities is equal to book valueexcept other creditors falling due after more than one year. These creditors had a book value of €1,559,591 and a fairvalue of approximately €1,283,000. The fair value has been calculated by discounting cash flows at prevailing rates.

28. Post Balance Sheet Events

On 3 May 2002, an Extraordinary General Meeting (EGM) of the Company took place. At this meeting, shareholdersapproved the placing of 56,950,000 New Ordinary Shares which raised a total of €13,098,500 before expenses. Also atthe EGM shareholders approved an Open Offer, which raised a total of €3,331,389 before expenses.

29. Approval of Financial Statements

The financial statements were approved by the Board on 20 June 2002.

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Size of Holdings

No. of Shareholders No. of Shares Held

1 - 1,000 966 672,376

1,001 - 5,000 2,180 6,222,425

5,001 - 25,000 1,668 18,908,355

25,001 - 100,000 445 22,051,151

100,001 - 250,000 116 18,976,864

250,001 - 500,000 45 16,316,176

500,001 - 750,000 16 9,858,283

over 750,000 39 169,203,493

Total 5,475 262,209,123

Geographic Distribution of Holdings

No. of Shareholders No. of Shares Held

Republic of Ireland 2,050 42,358,937

Northern Ireland & United Kingdom 3,334 217,014,065

Other 91 2,836,121

Total 5,475 262,209,123

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Shareholder ProfileBased on The Register as at 17 June 2002

Notice is hereby given that the Annual General Meeting of Kenmare Resources plc. will be held at the Westbury Hotel,Grafton Street, Dublin 2 on Tuesday July 23rd 2002 at 2.00 p.m. for the following purposes:

ORDINARY BUSINESS

1. To receive and consider the Directors' Report and Audited Accounts for the year ended 31st December 2001.

2. To elect Directors:

The following Directors will be proposed for re-appointment

a) Mr. M. Carvill

b) Mr. S. Farrell

c) Mr. T. McCluskey

d) Mr. P. McAleer

3. To authorise the Directors to fix the remuneration of the Auditors.

By order of the Board,

Deirdre Corcoran

Company Secretary

20 June 2002

Notes

1. A member who is unable to attend and vote at the above Annual General Meeting is entitled to appoint a Proxy to attend, speak and vote in his or her stead. A proxy need not be a member of the Company.

2. In accordance with the requirements of The Stock Exchange, details of the Directors’ service contracts will be available for inspection bymembers at the registered office of the Company during normal business hours from the date of this notice and at the place of the AnnualGeneral Meeting for a period of fifteen minutes prior to the said meeting until the conclusion of the meeting. K

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Notice of Annual General Meeting

Highlights � Sales contract signed with major consumer

� €16 million raised in May 2002 equity funding

� Expressions of Interest, totalling circa US$280

million, received to date from funding institutions

� Mineral Licensing Agreement and Implementation

Agreement signed with Government of Mozambique

� N. M. Rothschild & Sons Ltd. appointed as

Financial Advisors for Moma Project

NAMPULA

MOMA

MOGOVOLASMOGINCUAL

MOSSURIL

NACALAMONAPO

MUECATE

MECO

NTA

NIASSAZAMBIA

ZIMBABWE

MALAWI

MOZAMBIQUE

LICENCE AREAS

CABODELGADO

NAMPULA

MOMA

CONGOLONE

ZAMBEZIA

TETE

GAZA

INHAMBANE

MA

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CONGOLONE AREA

QUNIGA AREA

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Kenmare Resources plc

Chatham House, Chatham Street, Dublin 2, Ireland

Tel: + 353 1 671 0411 Fax: + 353 1 671 0810

Email: [email protected]

Web: www.kenmareresources.com

Annual Report and Accounts 2001

KENMARE

KENMARE

KENMARE/media/Files/K/Kenmare-Resources-PL… · In our last annual report, I outlined Kenmare’s ... sufficient ore on a consistent basis to continue the project. Kenmare ... Kenmare

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