Kenmare turns to Oman after Australian prospective investor walks

Kenmare Resources hopes to finalise a package of measures to shore up its balance sheet by the end of January, to include a debt deal with its banks and a fundraising of up to $225 million (€207 million).

The company, whose prime operating asset is the Moma mineral mine in Mozambique, made a series of announcements to the stock exchange yesterday.

It first informed investors that Australian outfit Iluka Resources is walking away from a year-long takeover bid for the company. Iluka said it was abandoning its bid because Kenmare's largest shareholder, the insurer Prudential, wouldn't sign up to its offer.

Kenmare, which is run from Ireland by Michael Carvill and listed in London and Dublin, then said SGRF (State General Reserve Fund), a sovereign wealth fund of Oman, had "approved in principle" to invest $100 million in Kenmare.

Mr Carvill later confirmed the cash raised from SGRF, if a deal was concluded, would be used to reduce some of its debts of about $340 million.

The investment is also contingent upon several factors, including the injection of a further $75 million by Kenmare’s biggest shareholders in working capital, which would be used to help tide over production at Moma.

Opportunity

Mr Carvill said the company would also give other shareholders the opportunity to participate in a further fundraising, which he indicated would be for about $50 million. This cash would also be used to fund debt paydown.

If Kenmare fails to rustle up enough cash from this fundraising, it will enter discussions with its lenders on a debt-for-equity swap. A debt deal with its banks, which include a number of development banks such as the European Investment Bank and KfW from Germany, is another key condition of the investment from Oman.

Mr Carvill said discussions with SGRF started “about for months ago”. “Moma is a great project. The problem with Kenmare is the financial structure is totally inappropriate.

“We want to properly fix that structure once and for all. And we want to get our lenders’ support for all of this.”

Kenmare has already begun discussions with its consortium of banks over its plan. The company is hoping their status as development banks with a wide remit, as opposed to normal commercial banks, will help bolster the chances of an agreement.

Mr Carvill did not say how much of Kenmare’s equity would be handed over to SGRF in exchange for its $100 million investment.