Kenmare rejects takeover approach

Shares in mining firm Kenmare Resources jumped by almost 30% yesterday following its rejection of a takeover approach from Australia’s Iluka Resources.

In a brief statement posted on the Irish Stock Exchange yesterday, Kenmare’s management said it had rejected Iluka’s proposal on grounds that it believes the approach didn’t recognise the inherent value of its sole asset — the Mozambique-based Moma titanium mine — as a long-life, low-cost asset.

The Perth firm — whose chief assets are in Australia, the US, and Sri Lanka — was offering a share-for-share, non-cash takeover, with Kenmare’s shareholders set to receive 0.036 new Iluka shares for each Kenmare one they own.

The Iluka offer would have increased Kenmare’s value from around €520m to closer to €590m.

The company’s share price closed at 19c yesterday, up by nearly 30% on the previous day’s close, representing its biggest daily climb for five years.

Kenmare’s largest independent shareholder, M&G Investment Management — which owns just over 19% of the firm — said it supported the Irish company’s decision to reject the approach.

“The approach from Iluka was preliminary in nature and was subject to various pre-conditions, including due diligence, and there can be no certainty that an offer will ultimately be forthcoming or on the terms on which any offer might be made,” Kenmare stated.

The move by the Australian firm — a world-leading producer of zircon — has been viewed by some as an effort by it to inject longer-life assets (such as the Moma mine) into its portfolio. Others see it as a bid to expand at a time of falling valuations in the sector.

“Iluka’s production is geared towards zircon and high-grade titanium dioxide feedstock, for which it needs ilmenite. Kenmare’s key product is ilmenite,” Davy Stockbrokers noted.

At Kenmare’s AGM last month, managing director Michael Carvill said while market conditions have yet to fully recover and mineral pricing remains unsustainably low, management is pleased at the ongoing “solid progress” being made at Moma.