Mozambique Mergers & Acquisitions: Kenmare Resources mulls Iluka bid

London-listed Kenmare Resources has entered into discussions with Australian mineral sands miner Iluka Resources over a potential bid for the Irish miner. The company operatinf Moma rare earths project in Mozambique Nampula province initially rejected the proposed takeover after receiving a nonbinding conditional proposal from Iluka in June, Miningweekly reported.

At the time, Kenmare told its shareholders that its board of directors believed the proposed offer, which had been based on a share for share exchange, with Kenmare shareholders receiving 0.036 Iluka shares for each Kenmare share held, did not recognise the value inherent in the Moma titanium mineral sands project, in Mozambique, as a long-life, low-cost asset.

“Discussions remain at an early stage; there can be no certainty that an offer will be made, nor [are] the terms on which any offer might be made [clear],” warned Kenmare MD Michael Carvill.

Meanwhile, the company had been focusing on conserving cash and controlling costs “against a background of market conditions” adversely impacting cash generation.
During the third quarter of this year, Kenmare renegotiated debt repayments to provide greater financing flexibility.

“Kenmare agreed a project financing amendment, which removed the requirement to make scheduled principal payments of senior debt and payments of interest and principal of subordinated debt falling due in August 2014, February 2015 and August 2015,” the company explained.

An extension to March 2016 for a $20-million corporate loan was also agreed with Absa during the quarter.

The miner, which said it would continue work on optimising its capital structure, had $29.6-million in cash and cash equivalents as at October 16.

QUARTERLY OUTPUT

Kenmare reported a contraction in heavy mineral concentrate output, from 346 200 t in the third quarter of 2013, to 316 500 t in the corresponding period in 2014.
The decline was primarily as a result of a drop in ore grade and lower-than-expected mining volumes.

The company posted a 6% rise in ilmenite production to 220 200 t during the quarter under review, while rutile production rose to 1 600 t.

Total zircon production increased 16% to 14 600 t in the quarter under review, with primary zircon production rising 22% to 12 900 t and secondary zircon output decreasing 10% to 1 800 t.

Sales of total finished products, comprising 166 100 t of ilmenite, 13 800 t of zircon and 3 200 t of rutile, were up 24% to 183 200 t in the third quarter of 2014.