Kenmare Resources (KMR) Investor update summary

Implementation Agreement Negotiations and Recent Developments

• Ongoing negotiations with the Mozambican government over the renewal of the Implementation Agreement (IA) have intensified after the Tax Authority imposed higher royalties and revoked Industrial Free Zone (IFZ) status, diverging from prior mutual agreements.

• The IA, signed in 2002 and expiring at the end of 2024, governs processing, export, royalties, and fiscal terms; the government confirmed operations would continue under historical terms during negotiations.

• The company proposed increased royalties (from 1% to 2.5%, rising to 3.5%), additional capital investments, and community contributions in its final proposal.

• The Internal Resolution, adopted in July 2025, accelerates royalty increases, revokes IFZ status, and limits customs and VAT exemptions, creating uncertainty and potential financial impact.

• Only the invoicing for the higher royalty rate has been implemented so far; other impacts remain unclear.

Financial and Operational Impacts

• The higher royalty rate (2.5% vs. 1%) is being invoiced but not yet paid; it aligns with the company's proposal and is accrued in accounts.

• Loss of IFZ status could expose the company to VAT on key inputs, restrictions on offshore banking, and additional taxes, impacting liquidity and working capital.

• Potential additional cash outflows include increased royalties, VAT on domestic purchases (estimated $25–$40 million annually in a worst-case scenario), and possible corporation tax on the processing company.

• Customs officials have begun restricting VAT and customs duty exemptions, following the Internal Resolution, despite ongoing negotiations.

• Mining operations continue under a separate regulatory framework and are unaffected by the IA process.

Negotiation Outlook and Risk Management

• Both parties remain motivated to reach a negotiated solution, with recent meetings indicating willingness to conclude the IA renewal soon.

• Arbitration is considered a last resort if the government unilaterally implements the new terms; interim measures could suspend the resolution during proceedings.

• Arbitration would likely last 18–24 months, with operations expected to continue under legacy terms unless otherwise directed.

• Lenders have been kept informed, and there is no event of default; discussions with lenders may be necessary regarding the impact on the Senior Facilities Agreement.

• The company has strong diplomatic support from Irish, UK, EU, and Omani representatives, emphasizing the importance of a stable investment environment.