Kenmare Resources to raise $270m from share offering
Irish mining firm Kenmare Resources is raising $270m (€199m) via a share placing and open offer to finance a previously flagged expansion of its Mozambique ilmenite mine that will boost production there.
The company is offering the 1.5 billion new shares at a heavy 42pc discount to the 22p closing share price of the stock on Thursday.
That dragged the shares down as much as 30pc in early trading in London on substantial volume.
News of the fund raising came as Kenmare Resources also released its annual results for 2009, posting a $30.3m (€22.3m) pre-tax loss for the period as it encountered production delays at its mine and lower demand for its ore. It recorded revenue of $26.7m.
The additional finance being raised will be ploughed into the Moma mine in the east African country that is Kenmare's only operating asset.
Ilmenite is used to manufacture titanium dioxide, which in turn is used to either make the metal titanium, or used as a pigment in other applications such as manufacture of paint, paper and plastics. Titanium is also used to make missile warheads. Chemical giant DuPont is one of Kenmare's biggest customers. The mine also produces zircon and rutile.
Chief executive Michael Carvill said the share placing and open offer was 50pc oversubscribed, and that the discount offered on the shares was not out of sync with terms offered by other companies, such as CRH, which secured nearly €1.3bn last year via a rights issue at a 45pc discount.
"We would have loved to have done it at a tighter discount, but the market is where it is," he said.
Mr Carvill described the deal as "transformational" and claimed it would change the company from one that was a "little bit under-capitalised and a little bit highly leveraged" to one in a stronger financial position. He said he would be disappointed if Moma and Kenmare didn't report a profit this year.
About $200m of the placing proceeds, give or take 25pc, is being used to expand the Moma mine by 50pc. Titanium dioxide demand is expected to grow by up to 10pc per annum for seven years as economic recovery continues, while Moma is likely to account for about 10pc of the world's output.
Mr Carvill said the expansion would be more capital efficient than the original mine construction, which was undertaken for a fixed cost by a joint venture including Australian firm Multiplex and Netherlands-headquartered Bateman Engineering. About $500m (€367m) has been spent to date by Kenmare on the mine.
The contractors shouldered significant cost overruns and paid millions of dollars in a settlement with Kenmare last December.