Monday 11 December 2017

Oman wealth fund pledges $100m to Irish firm Kenmare

Michael Carvill, Managing Director of Kenmare Resources
Michael Carvill, Managing Director of Kenmare Resources
John Mulligan

John Mulligan

An Omani sovereign wealth fund has agreed to invest $100m (€92m) in embattled Irish miner Kenmare Resources - as long as existing major shareholders come up with at least another $75m.

The deal is intended to slash Kenmare's $329m (€303m) debt and secure its future.

A subsidiary of Oman's State General Reserve Fund (SGRF) will make the investment in the Irish company.

The $100m will be used to pay Kenmare's lenders - development finance institutions including the European Investment Bank, the African Development Bank and the Emerging Africa Investment Fund.

It's believed that Kenmare's largest shareholders have already indicated they're prepared to stump up the additional $75m.

Speaking to the Irish Independent, Kenmare managing director Michael Carvill said that he hopes as much as $50m more might be raised from the open rights issue, which will be available to every shareholder.

Kenmare revealed the planned investment and capital raising yesterday after Australian firm Iluka Resources finally ditched its long-running attempt to buy Kenmare.

Iluka has been shadowing Kenmare for over a year. In 2014, Iluka made an indicative all-share offer that valued Kenmare at €585m.

Kenmare argued at the time that it didn't reflect the value of its only operational asset - an ilmenite mine in Mozambique. Kenmare's market capitalisation is just under €28m.

Iluka returned in April this year with a €265m indicative offer.

Until last month, that takeover looked set to proceed. Iluka said that it had reached agreement in November with Kenmare's lenders on a number of issues, and agreed tax terms with the Mozambique Tax Authority.

On November 23, Iluka submitted a revised non-binding proposal to Kenmare for the planned offer. The value placed on Kenmare was reduced, due to a continuing fall in ilmenite prices. Ilmenite is used to make titanium. Kenmare is the single biggest ilmenite supplier in the world, accounting for 8pc of global supply. It's also a major supplier of zircon and rutile.

However, it's believed that Iluka couldn't persuade Kenmare's biggest shareholder of the merits of its planned takeover proposal.

Iluka said that "based on recent discussions with the board of Kenmare, which consulted its largest shareholder, Iluka has determined that it is unlikely that Iluka would be able to implement the proposed transaction (which would have been via a scheme of arrangement)".

Kenmare's single biggest shareholder is Prudential, which owns 20pc of the company via various units.

Prudential's M&G unit is also a significant shareholder in Iluka. The Central Bank of Norway owns 4pc of Kenmare, while Blackrock owns 6pc.

Mr Carvill said that he'll begin negotiations with development finance institutions tomorrow to persuade them that the strategic plan Kenmare is presenting is a good deal. Kenmare already had a January deadline to provide those lenders with a strategic plan.

Mr Carvill said he also hopes the institutions may become equity holders in the company.

Analysts at Numis said the Kenmare strategy "is probably ultimately good" for the firm, but pointed out the capital raising could lead to significant dilution.

Irish Independent

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