Dublin-listed mining company Kenmare Resources, operator of the Moma mine in Mozambique, has been forced to revise its accounting valuation criteria following an inspection by the Irish Auditing and Accounting Supervisory Authority (IAASA), which identified gaps in the way the company presented its assets and future financial flows.
The IAASA report, released in March 2025, highlights three main areas of concern: the mining licence agreement in force with the Mozambican government, the long-term financial projections used to justify the value of the mine’s assets and the lack of clear data on the risks associated with climate change.
With regard to the licence agreement, Kenmare based its financial reports on the assumption that it has the automatic right to operate the mine for 40 years, until 2063. This understanding was based on an agreement signed in 2002 under the old Mining Law No. 13/87, which provides for an initial term of 25 years, automatically extendable for a further 15 years until 2042.
The company also considered that it could extend the licence until the end of the mine’s useful life, estimated at 40 years, on the basis of contractual clauses and so-called grandfathering provisions (legal safeguards that keep old contracts valid even after legislative changes).
IAASA acknowledged that the contract appears to allow for these extensions, but warned that such judgements ‘constitute significant elements of judgement’ and, as such, must be clearly disclosed in the company’s financial statements, in accordance with paragraph 122 of the international standard IAS 1 (Presentation of Financial Statements).
Another point raised by the regulator concerns the value-in-use projections, i.e. the estimates of future cash flows that underpin the valuation of the mine’s assets. Kenmare presented a model with monthly projections until 2050, which IAASA considered excessive and unreasonable.
Following the regulator’s intervention, the company agreed to reformulate the accounts using a more conservative model: detailed projections for the next five years, followed by extrapolations based on the fifth year to complete the 40-year horizon. This revision confirmed that it would not be necessary to record any impairment on the assets.
However, IAASA pointed out major flaws in Kenmare’s handling of environmental risks and climate change. Although the company announced its ambition to achieve carbon neutrality by 2040 in areas 1 and 2 (direct emissions and purchased energy), its transition plan was still being evaluated when the 2023 annual accounts were published.
The regulator therefore demanded that the company include this issue as a ‘source of estimation uncertainty’ in future reports and that it expand sensitivity analyses regarding the costs and benefits associated with its climate plan.
‘In response to the audit, Kenmare undertook to improve the quality of its financial disclosures’
In response to the audit, Kenmare has committed to improving the quality of its financial disclosures. Among the measures agreed upon are clarifying the legal status of the mining licence, explaining the assumptions used in impairment tests and incorporating climate risks into economic projections.
These demands come at a delicate time for the company. Kenmare’s founder and former managing director, Michael Carvill, now linked to the Abu Dhabi-based investment company Oryx Global Partners, is studying a new takeover bid for the mining company. At the beginning of March, Kenmare turned down a bid worth 473 million dollars (28.4 billion meticals) from the same consortium.
Meanwhile, the company’s shares have risen by almost 50 per cent in recent weeks on the Irish stock exchange, driven by speculation surrounding the possible operation. Sources in the sector indicate that last year Kenmare also received a preliminary proposal from the multinational Rio Tinto, which ended up not going ahead.
The Moma mine, located in Nampula province, is one of the largest heavy mineral extraction operations in Africa and is responsible for producing titanium and zircon, exported mainly to China, the United States and Europe. The way in which assets are accounted for and disclosed has a direct impact not only on the company’s valuation by investors, but also on the transparency of extractive activity on Mozambican soil.
Source: The Irish Times
