PHOTO
22 June 2016
Muscat - A deal between Oman's State General Reserve Fund (SGRF) and the Irish mining group Kenmare Resources for a $100-million equity injection into the latter is in the final stages, it is learnt.
The proposed deal with the SGRF is part of a new $275-million capital raising by the London-listed miner, which has a net debt that is far in excess of its market capitalisation.
Following talks about the deal, shares in Kenmare jumped almost 30 per cent on Tuesday.
According to analysts, the Omani involvement highlights the potential for alternative sources of finance to snap up mining assets at a low point in the commodities cycle.
A report in Financial Times said the investment will give the sovereign wealth fund up to 29.2 per cent of Kenmare.
Kenmare accumulated its debt while developing the Moma mine in Mozambique, where it extracts mineral sands used to make pigments. Kenmare has invested $1.2 billion in Mozambique, producing mineral sands, including ilmenite, that are processed into titanium dioxide and subsequently used in products such as pigment for paint.
"The goal of Kenmare's new capital plan is to 'materially deleverage' the miner's balance sheet to provide a 'sustainable platform for future operations, with an enhanced working capital position'," the Irish Times said in a report.
It's expected that this will see the gross outstanding debt substantially reduced, it added. Earlier, Iluka Resources, an Australian mineral sands producer, had held talks with Kenmare over a possible all-share takeover.
But the miner pulled out of the acquisition plan after Kenmare indicated its largest shareholder wouldn't support the deal.
Since Iluka's long-running interest in a potential takeover came to an end, Kenmare has put forward alternative plans to deal with its $392 million of debt. Most recently, the company had said it would raise at least $275 million in equity to allow it to cut its debt to $100 million while providing more working capital.
According to Financial Times, three existing shareholders have said they will subscribe for a combined $115 million in new equity.
These investors include fund manager M&G, which already owns almost 20 per cent of Kenmare.
Some bank lenders will also underwrite up to $41 million of the capital raising, Kenmare was quoted as saying. Michael Carvill, Kenmare's managing director, said the market for mineral sands was improving after four years of pressure on prices.
"With increased power stability at the mine, a recapitalised balance sheet, a new strategic investor and a higher free float than would have existed with two strategic investors, we believe that the completion of the capital restructuring will leave Kenmare in a strong position in an industry with expectations of a growing supply deficiency," Michael said.
Mozambique's government has also indicated that it is keen to invest in Kenmare.
EMEM, the country's state-owned miner, will pay $1 million for warrants that can convert into up to 5 per cent of the company's equity within five years.
Muscat - A deal between Oman's State General Reserve Fund (SGRF) and the Irish mining group Kenmare Resources for a $100-million equity injection into the latter is in the final stages, it is learnt.
The proposed deal with the SGRF is part of a new $275-million capital raising by the London-listed miner, which has a net debt that is far in excess of its market capitalisation.
Following talks about the deal, shares in Kenmare jumped almost 30 per cent on Tuesday.
According to analysts, the Omani involvement highlights the potential for alternative sources of finance to snap up mining assets at a low point in the commodities cycle.
A report in Financial Times said the investment will give the sovereign wealth fund up to 29.2 per cent of Kenmare.
Kenmare accumulated its debt while developing the Moma mine in Mozambique, where it extracts mineral sands used to make pigments. Kenmare has invested $1.2 billion in Mozambique, producing mineral sands, including ilmenite, that are processed into titanium dioxide and subsequently used in products such as pigment for paint.
"The goal of Kenmare's new capital plan is to 'materially deleverage' the miner's balance sheet to provide a 'sustainable platform for future operations, with an enhanced working capital position'," the Irish Times said in a report.
It's expected that this will see the gross outstanding debt substantially reduced, it added. Earlier, Iluka Resources, an Australian mineral sands producer, had held talks with Kenmare over a possible all-share takeover.
But the miner pulled out of the acquisition plan after Kenmare indicated its largest shareholder wouldn't support the deal.
Since Iluka's long-running interest in a potential takeover came to an end, Kenmare has put forward alternative plans to deal with its $392 million of debt. Most recently, the company had said it would raise at least $275 million in equity to allow it to cut its debt to $100 million while providing more working capital.
According to Financial Times, three existing shareholders have said they will subscribe for a combined $115 million in new equity.
These investors include fund manager M&G, which already owns almost 20 per cent of Kenmare.
Some bank lenders will also underwrite up to $41 million of the capital raising, Kenmare was quoted as saying. Michael Carvill, Kenmare's managing director, said the market for mineral sands was improving after four years of pressure on prices.
"With increased power stability at the mine, a recapitalised balance sheet, a new strategic investor and a higher free float than would have existed with two strategic investors, we believe that the completion of the capital restructuring will leave Kenmare in a strong position in an industry with expectations of a growing supply deficiency," Michael said.
Mozambique's government has also indicated that it is keen to invest in Kenmare.
EMEM, the country's state-owned miner, will pay $1 million for warrants that can convert into up to 5 per cent of the company's equity within five years.
© Oman Daily Observer 2016
