Kenmare Resources has expressed its openness to a revised takeover proposal from Australian mineral exploration company Iluka Resources.
The Perth-based company resurrected negotiations with Kenmare late last year. Yesterday, Dublin-based Kenmare — which operates the Moma titanium mine in Mozambique — said that it had recieved a revised and non-binding proposal from Iluka and said it would be open to further discussions. The terms of the proposal would value a deal at around €265m.
While the proposal does not currently represent an offer nor a bid and Kenmare’s openness does not mean a recommendation to shareholders, the Dublin company did say that — in the interest of shareholders — it will continue to work with Iluka towards satisfaction of the pre-conditions to the proposal.
Gerry Hennigan, exploration analyst at Goodbody Stockbrokers, noted, however, that the proposal is subject to a significant number of pre-conditions.
“While agreement on an offer has yet to be reached, commentary in the statement that the Kenmare board ‘believes that it is in Kenmare’s shareholders’ interests to work with Iluka’ would suggest that underlying market conditions and elevated debt levels have forced the issue,” he added.
Kenmare’s share price was up by well over 20% on yesterday’s news. The company also updated on recent trading and debt management. Regarding the latter, it said that it has reached agreement with its lenders that will provide the company with “a more stable and flexible debt structure”.
As part of its new lending terms, Kenmare will have access to a new money commitment of up to $50m — $30m of which will cover working capital purposes — and will benefit from an extension of the final maturity date of existing facilities, as well as a reduction in scheduled principal payments on its senior debt. Scheduled interest on subordinated debt will also be eliminated.
In its trading update, Kenmare said that power outages had “severely impacted” first-quarter production, but the company remains well-placed for a rebound in markets.
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