Australian company Iluka still interested in Kenmare’s prime asset
Irish mining firm says Moma site has minerals potentially worth up to $1.2 billion
Michael Carvill, managing director of Kenmare Resources, said if it cannot raise the extra portion to pay down debt, it would seek a debt-for-equity swap. Photograph: Bryan O’Brien
Some analysts have speculated it could be sold off if the company fails to strike a deal with its lenders.
Kenmare, which operates the potentially lucrative Moma mine in Mozambique, responded to Iluka’s departure this week by announcing it has secured agreement from a state fund in Oman to invest $100 million (€90 million). That deal is contingent upon Kenmare’s main shareholders also stumping up cash, as well a debt deal with its banks.
In a note this week, Citi said that if Kenmare fails to get a debt writedown or conclude a debt-for-equity swap “it could provide an opportunity for Iluka to buy the assets without any equity component . . .”
When asked if it would buy the Moma asset were it to become available separately or be sold off by Kenmare’s banks, Iluka said: “The Kenmare assets currently retain a strategic logic for Iluka.”
The Australian company added that under stock market rules, it is precluded from making another bid for Kenmare for 12 months after it walked away. Any other type of bid, such as for the assets directly, would be a “matter for the board” it said.
If those talks fail, it is possible that it could spark a process that might lead to the assets being sold off to pay its debts. Kenmare, however, says it is confident it can do a deal with its banks, and said it is funded mostly by development banks that have a wide social remit.
“Kenmare has outlined a clear plan for the business, including securing approval in principle for a significant new equity investment,” it said yesterday. “We are focused on executing this plan in line with our announcement on Monday and believe it is in the best interests of all the company’s stakeholders.”
SGRF (State General Reserve Fund), a sovereign wealth fund of Oman, has “approved in principle” to invest $100 million in Kenmare, it was revealed this week. That cash would be used to fund debt paydown, while a further $75 million for working capital would have to come from its other major shareholders as a condition of the deal.
Kenmare would also seek to raise an extra $50 million in a placing for other shareholders, which would also go towards paying off its debts.
Managing director Michael Carvill said if it cannot raise the extra portion to pay down debt, it would seek a debt-for-equity swap.