Kenmare rejects Iluka approach

Kenmare Resources has rejected a paper-based takeover approach pitched at £470m from its larger Sydney-listed rival, Iluka Resources.

Shares in the Mozambique mineral sands miner, which is dual-listed in Dublin and London, jumped jumped nearly 30 per cent to 15.50p on Thursday.

But the advance still left the stock trading towards the bottom end of its 52-week range following a protracted fall in price commanded for titanium oxide and zircon produced at its Moma mine in northern Mozambique.

The chemicals are used in the manufacturing of paints and ceramics, which since 2012 have been hit by a downturn in global demand.

Iluka Resources’ all-share approach was pitched at 0.036 of its own shares for one Kenmare share. The current trading price of A$8.45 for the Perth-based miner equated to 17p a share for Kenmare.

On Thursday Kenmare Resources, which is led by managing director Michael Carvill, rejected the approach, stating it “does not recognise the value inherent in Moma as a long-life, low-cost asset”.

It added that M&G Investment Management, which controls funds owning 19 per cent of Kenmare, had confirmed that it supported the board’s decision to reject the approach.

Other leading shareholders include BlackRock, which holds 8.5 per cent, JPMorgan Asset Management (6 per cent), Capital Research and Management (6 per cent) and Norges Bank (4 per cent).

Jonathan Williams, broker at RFC Ambrian, pointed to Rio Tinto as another possible suitor for Kenmare, commenting: “Blood, sweat and tears have gone into this project over many, many years and the management will not want to cave in to what will be seen as an opportunistic bid at a time when there could be light at the end of the tunnel.”

Formal rejection of the approach came two days after the lossmaking miner announced the retirement of Justin Loasby, its chairman, because of ill health. He has been replaced by Steven McTiernan, who until last year was senior non-executive director at FTSE 100 oil explorer Tullow Oil and a non-executive director at Canadian miner First Quantum Minerals.

In March, Mr Carvill predicted a return to profit this year amid signs of an end to the slump in the price of titanium oxide and the completion of spending at a mine extension at Moma.

The company has also invested in tackling the unreliable power supply at its site and in February completed a debt restructuring, following an equity raising of $106m in October at 26.5p a share.

Iluka, which is valued at A$3.5bn, is the world’s top producer of zircon and also a major supplier of titanium oxide derived from mineral sands. Its main production base is in Australia, although it also has mining and processing operations in Virginia, US.

Iluka said its approach for Kenmare was “consistent with exploring transactions where financial merit and strategic rationale may exist”.

It too has seen its share price more than halve since 2012 amid subdued demand for its output.