Kenmare talks on Iluka takeover

Irish mining firm Kenmare Resources is in discussions that could lead to the company being taken over by Australian player, Iluka Resources.

In a trading update, yesterday, the Dublin-based firm, whose chief asset is the Moma titanium mine in Mozambique, said that it is in discussions with Iluka, regarding a potential offer.

“Discussions remain at an early stage; there can be no certainty that an offer will be made, nor as to the terms on which any offer might be made,” the company said.

Iluka initially made an approach for Kenmare in June, after which the Dublin firm’s share price soared by nearly 30% when it rejected the proposal on the grounds of it not recognising the inherent value of the Moma mine. It is unclear if Iluka has tabled a higher offer.

The Dublin company’s trading update — covering the third quarter — showed a solid increase in production levels, from Moma, with ilmenite production up by 6% to 220,200 tonnes and zircon up by 239% to 12,900 tonnes.

“During the quarter we have continued to focus on previously stated plans of conserving cash and controlling costs against a backdrop of market conditions that have adversely impacted cash generation,” managing director, Michael Carvill said.

While market demand conditions for zircon remains stable, ilmenite price levels are weak, although demand is picking up.

“In the circumstances, we are not surprised that specific reference is made to the fact that Kenmare continues to engage with Iluka regarding the potential offer outlined in June….protracted mineral sands price weakness may lead the parties involved to negotiate at a serious level,” said Gerry Hennigan of Goodbody Stockbrokers.

“Apparently new mineral sands producers have concentrated on the Chinese market, thus depressing prices. Kenmare believe that two market dynamics will be positive for them in China; demand for their sulphate route ilmenite is set to increase as new plants come on stream, while the collapsing iron ore price should reduce supply from Chinese titano-magnetite producers,” noted London brokerage, Whitman-Howard, which also viewed positively the fact that talks with Iluka are ongoing.

Kenmare’s share price was up by around 9% in London yesterday.