(2015-12-07) After nearly two years of talks to snare a large mineral sands mine in Mozambique, Australia’s Iluka Resources canned a $77 million all-share bid for Kenmare Resources Plc after the Irish group’s top shareholder refused to back the bid.
Kenmare owns the Moma mine in Mozambique, which Iluka wanted to snap up cheaply after a slump in prices for titanium feedstock used in paint pigments battered the debt-laden Irish company.
Under Irish rules, Iluka is blocked from making a fresh offer for 12 months, but it may still be able to grab the Mona mine if Kenmare fails to meet its lenders’ requirements in 2016.
According to Kenmare’s half-year report, lenders have said if a deal fails to go ahead, the company must set out a timetable by the end of January 2016 for cutting debt, which means it may have to sell new shares or convert debt to equity.
“If this is ultimately unsuccessful and the company ends up in the hands of the debt providers, it could provide an opportunity for Iluka to purchase the assets without any equity component,” Citi analysts said in a note on Monday.
Kenmare’s board and management had been in favour of teaming up with Iluka, but top shareholder M & G Investment Management, baulked after Iluka cut its offer in November for the second time to 0.007 Iluka shares for every Kenmare share.
Iluka Chairman Greg Martin said Iluka was “very disappointed” Kenmare’s board had been unable to secure a promise from M&G to support the bid, which was a pre-condition for the deal to go ahead.
Even after being cut by about 80 percent from its original proposal of 0.036 Iluka shares for every Kenmare share, the offer was worth more than four times Kenmare’s closing price of 0.44 pence on Dec. 4.
“Iluka believes that in a heavily pro-cyclical resources industry, value can be generated by acting counter-cyclically, where appropriate,” Managing Director David Robb said in a statement.
The company said it still has its own growth option, with the Puttalam project in Sri Lanka, where it has a large sulphate ilmenite resource similar to Kenmare’s in Mozambique, but that project is still a long way from being built.
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