NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA OR ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

This announcement is an advertisement and does not constitute a prospectus (or prospectus equivalent document) and is not an offer of securities for sale in any jurisdiction, including in or into the United States, Canada, Japan or Australia or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. Nothing in this announcement should be interpreted as a term or condition of the Capital Restructuring. Investors should not purchase or subscribe for any shares referred to in this announcement except on the basis of information in the prospectus (the “Prospectus”) expected to be published by Kenmare Resources plc (“Kenmare”, or the “Company”) in due course in connection with the proposed Capital Restructuring (as defined below). Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever. A copy of the Prospectus will, following publication, be available for inspection from Kenmare’s website at www.kenmareresources.com.

Defined terms used in this announcement have the meaning set out in the Appendix.

Kenmare Resources plc (“Kenmare” or “the Company”)

 20 June, 2016
               
Update on Proposed Capital Raise and Deleveraging

Highlights

  • Significant progress has been made in preparation for the launch of the Capital Raise and the Company is confident that it will be able to deliver the agreed Debt Restructuring and working capital requirements of the Group.
     
  • All Lender approvals have been received for the Debt Restructuring and underwriting.
     
  • State General Reserve Fund of the Sultanate of Oman (“SGRF”) has, through its subsidiary African Acquisition Sarl, signed a Cornerstone Subscription Agreement for a US$100 million equity investment.
     
  • The Company intends to raise a minimum of US$275 million of new equity by way of a Cornerstone Placing with SGRF and a Firm Placing (by cash subscription and, if necessary, through a Lender Underwriting). Of this US$275 million, US$200 million will repay and discharge US$269 million in debt and Accrued Interest under the terms of the Amendment, Repayment and Equitisation Agreement, leaving no more than US$100 million of residual Group debt and provide the Kenmare Group with additional liquidity by retaining US$75 million for working capital and to cover expenses.
     
  • Certain Lenders will underwrite up to a maximum of US$40.8 million of the Capital Raise by agreeing to equitise a matching amount of debt, in the event that cash proceeds are less than US$275 million.
     
  • All funds raised in excess of US$275 million (including pursuant to the Open Offer) will be applied to reduce or eliminate any Debt Equitisation and reduce or eliminate debt on the basis that every US$3 of cash will discharge US$4 in debt.
     
  • The maximum funds raised, including through a proposed Open Offer, would be approximately US$368 million, a level which would fully extinguish all Group debt of US$392 million (assuming a closing date in early August) and provide US$75 million for working capital and to cover expenses.
     
  • Admission of all shares in the Placing and Open Offer, at which time the transaction will be complete in all respects, is planned for late July or early August following an extraordinary general meeting of the Company, with completion of the Debt Restructuring in late July or early August.
     
  • Three major shareholders have indicated their intention to participate in the Firm Placing for at least US$115 million in aggregate, including M&G which has indicated that it intends to retain its existing percentage interest of 19.97%.
     
  • In light of positive interest from a wide range of institutional investors, and due to potentially significant delays and proposed changes to the terms of investment by King Ally, it has been agreed by mutual consent to terminate the subscription agreement between the Company and King Ally.
     
  • The Capital Raise will be conducted in US Dollars. The Issue Price is US$3.132 per New Ordinary Shares (reflecting a proposed 1 for 200 consolidation which will be implemented as part of the proposals). Based on the US$:Stg exchange rate as of the Latest Practicable Date, the Issue Price is equivalent to USD1.566c (Stg1.09p) before the impact of the proposed consolidation.
     
  • Production and cost guidance remain unchanged for 2016, while ilmenite markets have continued to tighten, particularly in China. Product shipments for Q2 2016 to date, have already made it a record quarter for sales volumes.

Statement from Michael Carvill, Managing Director:

“We are pleased that we have signed an agreement for the investment of US$100 million by SGRF and are encouraged by the level of interest shown by a broad range of investors in the Capital Raise. Early indications of investment from three of the main shareholders of Kenmare, in combination with lender underwriting position the Company well to achieve the minimum target of US$275 million. With the finalisation of key transaction agreements as announced today, we look forward to further engagement with investors and the completion of the Capital Restructuring in the next few weeks.

Production and cost guidance for 2016 remains unchanged and the product market is already showing a long awaited improvement in prices, reversing four years of significant downward pressure. 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.”

Update on Proposed Capital Raise and Deleveraging

Kenmare Resources plc (LSE:KMR, ISE:KMR), one of the leading global producers of titanium minerals and zircon, which operates the Moma Titanium Minerals Mine in northern Mozambique, is pleased to provide the following update on its proposed Capital Raise and Debt Restructuring. This will achieve a reduction in outstanding debt from US$392 million (assuming a closing date in early August), to a maximum of US$100 million, and provide the Kenmare Group with additional liquidity by retaining US$75 million of the proceeds of the Capital Raise to cover expenses and future working capital requirements, and by way of reduced interest rates, increased term and a repayment holiday on residual debt.

Following the announcement on 29 April 2016, significant progress towards the launch of the Capital Raise has been made. In particular, the Company has entered into a Cornerstone Subscription Agreement with the SGRF Investor, a subsidiary of State General Reserve Fund of the Sultanate of Oman (“SGRF”) pursuant to which, subject to applicable conditions, it will invest US$100 million in Kenmare as part of the Capital Raise. All lender approvals have also been received in relation to the terms of the Debt Restructuring and Lender Underwriting; the agreements are now in final form and lenders are in the process of obtaining signatures.

The Company has engaged in positive discussions with existing shareholders and new institutional investors concerning the Capital Raise, under which not less than US$275 million of new equity must be raised in order to secure the Debt Restructuring (whether by way of cash or a combination of cash and the Lender Underwriting). Three of the Company’s major shareholders have indicated their intention to participate, in the Firm Placing, for at least US$115 million in aggregate. In particular, M&G, which currently owns 19.97% of the existing issued share capital of the Company, has indicated its intention to seek to retain that percentage interest in the Company on completion of the Capital Restructuring.

Also, certain of the Lenders have agreed to underwrite the Capital Raise, in the event that cash proceeds of the Capital Raise are up to a maximum of US$40.8 million less than US$275 million, by subscribing for New Ordinary Shares at the Issue Price through equitisation of a matching amount of debt.

In parallel, and as part of the process of de-risking the execution of the transaction, the Company has had ongoing interaction with a second proposed cornerstone investor, King Ally. However, there has been developing uncertainty in relation to the process for King Ally to execute an investment in the Company and the terms on which it would intend to proceed. In light of this and the continued support of major shareholders, SGRF and the Lenders and the positive feedback from other potential investors, the Company and King Ally have terminated the King Ally subscription arrangement by mutual consent.

The Capital Restructuring is based on a minimum of US$275 million of new equity being raised (by cash subscription and, to the extent necessary, the Lender Underwriting). All funds raised in excess of US$275 million will retire additional debt on the basis that every US$3 of cash will discharge US$4 of debt (including debt in excess of US$100 million which would otherwise have been the subject of the Debt Equitisation at the par value of the debt equitised).

The Issue Price at which the Capital Raise will be conducted is US$3.132, after taking account of a proposed 1 for 200 consolidation of the ordinary shares to be implemented as part of the proposals. Based on the US$:Stg exchange rate as of the Latest Practicable Date, the Issue Price is equivalent to USD1.566c (Stg1.09p) before the impact of the consolidation. In the event that the minimum of US$275 million is raised, SGRF’s holding will be 29.18% on completion of the Capital Restructuring. In the event that the maximum US$368 million is raised, SGRF’s holding will be 24.3%. In no circumstances will the holding of SGRF exceed 29.9% once the Capital Restructuring is completed in all respects.

Davy, Canaccord and Mirabaud are acting as joint bookrunners in respect of the Capital Raise and Davy is acting as sponsor. Rothschild and Hannam & Partners are acting as financial advisers to the Company. Further detail in relation to the terms of the Debt Restructuring and the terms of the SGRF Cornerstone Subscription Agreement is set out below, together with additional information on the Capital Raise.

Details of the Capital Raise

The Company intends to raise a minimum of US$275 million of new equity (approximately £192 million) (by cash subscription and, to the extent necessary, the Lender Underwriting) and a maximum of approximately US$368 million (approximately £257 million) under the Capital Raise. The maximum will be the amount that, if raised, would reduce total outstanding Group debt to nil.

Funds will be raised through a combination of the Cornerstone Placing, the Firm Placing and the Open Offer at a price of US$3.132 (Stg£2.188) per New Ordinary Share. The Capital Raise will be conditional, amongst other things, on Shareholder approval, including independent shareholder approval in respect of the proposed participation of M&G.

In order for the Capital Raise to proceed, that is for the Prospectus and Notice of Extraordinary General Meeting to be issued, commitments in respect of a minimum of US$234.2 million (approximately £163.6 million) must be secured (that is, to total US$275 million including Lender Underwriting).

To the extent that debt exceeds US$100 million following application of funds raised in the Capital Raise (including by way of the Lender Underwriting), New Ordinary Shares will be issued to Lenders at the Issue Price, as an equitisation of debt above US$100 million. The precise amount of debt for equitisation is dependent on the timetable for execution of the Capital Restructuring, as interest on the Project Debt accrues. The amount of debt the subject of the Debt Equitisation will be approximately US$23.5 million in the event that US$275 million is raised under the Capital Raise (including by way of the Lender Underwriting) and the Capital Restructuring is completed at the beginning of August, 2016. Accordingly, the completion of the Capital Restructuring is not dependent on any funds being raised other than US$275 million (including through the Lender Underwriting).

Cornerstone Placing by State General Reserve Fund of the Sultanate of Oman (SGRF)

African Acquisition Sarl, the SGRF Investor, a subsidiary of SGRF, as the Cornerstone Investor will subscribe for 31,928,480 New Ordinary Shares at the Issue Price of US$3.132 per New Ordinary Share on and subject to the terms of the Cornerstone Subscription Agreement. The Cornerstone Placing represents approximately 229% of Kenmare’s Existing Issued Ordinary Share Capital (adjusted for the consolidation). In the event that the minimum of US$275 million is raised, the SGRF Investor’s holding will be 29.2% on completion of the Capital Restructuring. In the event that the maximum of approximately US$368 million is raised, the SGRF Investors holding will be 24.3%.

SGRF and Key Terms of the SGRF Cornerstone Subscription Agreement

SGRF is a sovereign wealth fund of the Sultanate of Oman. It was established in 1980 by Royal Decree 1/80 with the objective of achieving long term sustainable returns on revenues generated from oil and gas that are surplus to the Sultanate’s budgetary requirements. On behalf of the Sultanate of Oman, SGRF manages the reserves placed in its care to achieve best possible long term returns with acceptable risks, through investing in a diversified portfolio of asset classes in more than 25 countries worldwide. SGRF is regulated and supervised by the Financial Affairs and Energy Resources Council (FAERC) of Oman. The SGRF Investor, is a Luxembourg private limited company incorporated at the direction of SGRF for the purpose of investing in the Company.

Under the Cornerstone Subscription Agreement, the Company and the SGRF Investor have agreed the terms on which the SGRF Investor will invest in the Company and regulate their relationship following completion of that investment.

Under the terms of the Cornerstone Subscription Agreement, the SGRF Investor (or other member of the SGRF Group that holds Ordinary Shares) will, from Admission, have certain rights and entitlements including an entitlement to appoint two directors to the Board (subject to the SGRF Group holding or controlling the exercise of 20% or more of the total voting rights of the Company) and to appoint one Director (subject to the SGRF Group holding or controlling the exercise of 10% or more but less than 20% of the total voting rights of the Company). Any such director nominated by SGRF shall be required to retire and seek re-election by the shareholders at the next and succeeding general meetings of the Company following his appointment. In the Cornerstone Subscription Agreement, the SGRF Investor has confirmed that it has no current intention to appoint more than one director to the Board. The SGRF Investor shall (subject to the SGRF Group holding Ordinary Shares representing more than 10% of the total voting rights of the Company) also be entitled to appoint its nominated Director as an observer to attend meetings of any committee of the Board. The SGRF Investor can appoint an observer to the Board if at any time it has the right appoint a director but no such director is appointed.

Each of SGRF and the SGRF Investor has agreed to procure insofar as it can lawfully so procure:

  • that no member of the Kenmare Group is prevented from carrying on its business independently of any member of the SGRF Group;
  • that no member of the SGRF Group will take any action that would have the effect of preventing the Company from complying with its obligations under the Listing Rules;
  • that no member of the SGRF Group will propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules;
  • that all transactions and arrangements between any member of the Group and any member of the SGRF Group will be, conducted at arm’s length and on normal commercial terms; and
  • that the members of the SGRF Group that are holders of New Ordinary Shares shall abstain from voting on any shareholder resolution in relation to any proposed transaction between any member of the Group and any member of the SGRF Group which is a related party transaction for the purpose of the Listing Rules.

The SGRF Investor has agreed to not sell any of its shares for a period of 12 months from Admission. This lock-up is subject to certain customary exceptions including disposals pursuant to a court order, acceptance of a takeover offer or participation in a scheme of arrangement.

The SGRF Investor has agreed to a standstill agreement, pursuant to which it has agreed not to (and to procure that none of the members of the SGRF Group will) make an offer (as defined in Irish Takeover Rules) for all or any part of the share capital of the Company for the period of 12 months from Admission.

The Company has undertaken to the SGRF Investor to offer it the right, conditional upon the SGRF Group holding or controlling the exercise of 10% or more of the total voting rights of the Company, to participate in any proposed allotment or issue of debt or equity securities that the Company proposes to make in the same proportion that the number of New Ordinary Shares held by the SGRF Group at that time has to the total number of Ordinary Shares in issue at that time.

The Company and the SGRF Investor have agreed that the SGRF Investor shall be provided with a range of specified information and shall, upon reasonable notice to the Company, have access to the books and records of the Company. The SGRF Investor shall also be entitled to inspect the properties of the Company and consult with the management of the Company and its subsidiaries for the purpose of, and as required for, the monitoring of the SGRF Investor’s investment in the Company, provided that the SGRF Investor holds or controls the exercise of 10% or more of the total voting rights of the Company, and subject to such access being permitted by law.

The SGRF Investor’s subscription obligation under the Cornerstone Subscription Agreement is subject to a number of conditions including there being no material adverse change, in the opinion of the SGRF Investor, before publication of the final Prospectus and all conditions to the effectiveness of the other principal agreements for the implementation of the Capital Restructuring that have to be satisfied or waived before Admission having been satisfied or waived. The SGRF Subscription Agreement may also be terminated by the SGRF Investor if changes are incorporated into the final Prospectus that it determines are adverse in a material respect to its investment and, until 7.00 a.m. on the day of Admission, for mistakes or inaccuracies in the Prospectus, breach of warranty and breach of obligation under the agreement, in each case, which the SGRF Investor determines to be material in the context of the Kenmare Group, the subscription or the proposed Capital Restructuring.

Firm Placing

The Firm Placing will be such as to bring the total committed funds to at least US$275 million (as a result of cash subscriptions and to the extent necessary, the Lender Underwriting) required to effect the Capital Restructuring. On the basis of a US$175 million Firm Placing, 55,874,840 New Ordinary Shares will be available to placees at the Issue Price of US$3.132 per New Ordinary Share (equivalent to USD1.566c or Stg1.09p per Ordinary Share before the Capital Reorganisation, based on the US$:Stg exchange rate as of the Latest Practicable Date).

The Issue Price represents a 56% premium to the Closing Price of Stg0.70p per Ordinary Share on 17 June 2016 (being the last Business Day before this announcement, based on the exchange rate prevailing on the Last Practicable Date). While a sterling equivalent and a euro equivalent Issue Price are intended to be made available under the Open Offer, both the Cornerstone Placing and the Firm Placing are priced in US Dollars and will be settled in US dollars. This means that the Company is assured receipt of a minimum amount of US Dollar proceeds (being the functional currency of the Group and the currency in which it has been agreed that debt will be discharged by the Group). This, together with the FX Arrangements, provides the Group with greater certainty as to its ability to achieve the required outcome in terms of outstanding debt and available working capital proceeds on completion of the Capital Restructuring.

Neither the Cornerstone Placing nor the Firm Placing will be subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer.

The New Ordinary Shares to be issued under the Cornerstone Placing and the Firm Placing will not carry an entitlement to participate in the Open Offer.

As further referred to below, certain of the Lenders have agreed to underwrite the Capital Raise to the extent that cash proceeds of the Capital Raise are up to US$40.8 million less than US$275 million, by subscribing for New Ordinary Shares at the Issue Price through equitisation of a matching amount of Project Debt.

Open Offer

The Company will also seek to raise funds through an Open Offer with the size of the Open Offer being such amount as would, when added to the equity raised under the Cornerstone Placing and the Firm Placing (including cash subscriptions, and to the extent necessary, the Lender Underwriting), reduce total outstanding debt on completion of the Capital Restructuring to nil. The precise amount of this debt is dependent on the timetable for execution of the Capital Restructuring (as interest on the Project Debt continues to accrue) but, in the event that the minimum US$175 million is raised in the Firm Placing and the completion of the Capital Restructuring is, as estimated, the beginning of August, 2016, the Open Offer will be for approximately US$93 million.

The Open Offer will be conducted at the Issue Price (but with sterling or euro payment being provided for) and will be of New Ordinary Shares (that is on the basis that the Capital Reorganisation has occurred).

An excess applications facility is also intended to be provided for under the Open Offer.

Use of Proceeds of the Capital Raise

The proceeds of the Capital Raise comprising not less than US$275 million (approximately £192.1 million) (by result of cash subscription, and to the extent necessary, through the Lender Underwriting) will be applied as follows:

  • US$75 million (approximately £52.4 million) will be available to meet the working capital needs of the business and the expenses of the transaction. Total expenses are estimated at US$15 million (approximately £10.5 million) in the event of a US$275 million cash Capital Raise.
     
  • US$200 million (approximately £139.7 million) will be applied to repay approximately US$269 million Project Debt and Accrued Interest.

Additional net cash proceeds of the Capital Raise (if any) in excess of US$275 million will be applied to further reduce Project Debt with every US$3 of cash raised discharging US$4 in Project Debt. To the extent that the retained level of the Project Debt following application of the gross proceeds of the Capital Raise on that basis is in excess of US$100 million, the excess will be equitised into New Ordinary Shares and issued to Lenders at the Issue Price so as to discharge that excess (being the Debt Equitisation).

The net effect of these arrangements will be that the amount of debt remaining outstanding following the completion of the Capital Restructuring will not be more than US$100 million and (in the event of full subscription under the Open Offer) will be nil.

The following table summarises the sources and uses of proceeds of the Capital Raise on the basis of US$275 million being raised under the Cornerstone Placing and Firm Placing:

Sources Uses
Capital Raise
(by cash subscription and to the extent necessary the Lender Underwriting)

  		Maximum of US$368 million
Minimum of US$275 million 		Applied to repay and discharge debt US$200 million (1)
Working capital and expenses of the issue (2) US$75 million
Maximum additional amount applied to repay and discharge debt
Minimum additional amount applied to repay and discharge debt 		US$93 million(3)
US$0 million (3)
Gross Total Raised Maximum of US$368 million
Minimum of US$275 million 		Total maximum amount applied to repay and discharge debt
Total minimum amount applied to repay and discharge debt
Total gross proceeds retained by the Company 		US$293 million
US$200 million
US$75 million
  1. US$200 million (by cash subscription and, to the extent necessary, the Lender Underwriting) will repay and discharge US$269 million in debt and Accrued Interest under the terms of the Amendment, Repayment and Equitisation Agreement.
  2. Expenses of the issue are estimated at US$15 million on the basis of US$275 million cash raised under the Capital Raise.
  3. US$93 million (cash proceeds additional to US$275 million under the Capital Raise) will repay and discharge US$124 in debt under the terms of the Amendment, Repayment and Equitisation Agreement. In the event that that the value of the total number of New Ordinary Shares subscribed for at the Issue Price under the Capital Raise is equal to but not more than US$275 million in aggregate (by cash subscription and, to the extent necessary, the Lender Underwriting), a maximum of 7,503,193 New Ordinary Shares will be issued to Lenders at the Issue Price pursuant to the Debt Equitisation (discharging US$23.5 million of Project Debt).
  4. All data is provided on the basis of an estimated date for completion of the Capital Restructuring of the beginning of August, 2016. To the extent that this timetable is not the actual timetable, the level of debt would be subject to change due to the accrual of interest until completion of the Capital Restructuring. The timetable therefore impacts on the precise level of debt the subject of the Equitisation and the size of the Open Offer. Movements in exchange rates would also impact on certain of the figures stated in this announcement.

Capital Reorganisation

Kenmare intends, as part of the Proposals, to implement a Capital Reorganisation by sub-division and consolidation of its issued and authorised but unissued Ordinary Share capital in order to ensure that it is in a position to issue Ordinary Shares pursuant to the Capital Restructuring. The nominal value of each of the Ordinary Shares following the Capital Reorganisation will be €0.001 each. Other than with respect to fractional entitlements, the proportional interest of Shareholders in the issued Ordinary Share capital of the Company will remain unchanged as a consequence of the Capital Reorganisation. Resolutions necessary for implementation of the Capital Reorganisation will be proposed at the Extraordinary General Meeting to be convened for the purpose of seeking authority for implementation of the Capital Restructuring.

Current Trading

The Group has continued to experience a considerable improvement in power quality and reliability through the quarter to date, as a result of the additional transmission capacity commissioned by Electricidade de Moçambique in December, 2015. Power should, we believe, no longer be a fundamental constraint on Moma’s ability to produce.

In Q2 2016 (April and May, 2016), Kenmare produced 220,714 tonnes of heavy mineral concentrate (HMC), exceeding the equivalent part Q1 2016 production of 184,000 tonnes. This was largely as a result of realising the planned increase in head feed grades from 4.32% in Q1 to 5.14%. HMC supply is expected to continue to increase as head feed grades continue to increase in 2016 and mining capacity is bolstered by dry mining supplementing capacity.

The additional HMC supply has allowed ilmenite production rates to increase by 17% to 145,500 tonnes produced versus an equivalent part Q1 2016 production of 124,000 tonnes.

Zircon volumes improved by 49%, as feed increased and plant recoveries improved, with 11,600 tonnes of zircon produced, compared with 7,800 tonnes in an equivalent part Q1 2016. 7,600 tonnes of primary zircon were produced, compared to 5,600 tonnes in equivalent part Q1 2016, and 4,000 tonnes of secondary grade zircon were produced, compared to 2,200 tonnes in an equivalent part Q1 2016. Zircon recoveries are required to continue to improve through the year, as expected, to achieve full year guidance.

As a result of completing delayed Q1 2016 shipments and increasing product demand, shipments of total finished products have increased significantly, amounting to 219,200 tonnes to the end of May, compared to 132,652 tonnes in the full Q1 2016. Further shipments in June 2016 have already made it a record quarter for product shipments. Finished product stocks reduced from 302,600 tonnes at the end of Q1 2016 to 241,800 tonnes at the end of May, 2016.

Market Update

Chinese ilmenite production reduced by an estimated 500,000 tonnes in 2015, as iron ore production in China, of which ilmenite is a by-product, continued to decline through the year. Chinese ilmenite production has continued to reduce during 2016 as a structural oversupply in the iron ore industry persists. Ilmenite production has also reduced in other regions, notably Australia and USA, following the closure of depleted mines, and in Russia due to iron ore related market dynamics. Declining ilmenite production is also evident in Vietnam, as is titanium concentrate production in Mozambique and other regions.

Supply and demand analyses on the sulphate ilmenite sector to 2020 show that without supply from new projects, or from re-incentivised higher cost capacity that has been idled, there will be a deficit of supply. In the short term, excess inventory above the normal working level is expected to be fully absorbed over the course of 2016. Increased consumption of ilmenite for pigment and chloride slag production, coupled with reduced supply from ilmenite producers, and the absorption of the inventory overhang, are creating tightening supply/demand conditions. In the last month, the increasing tightness in the market has become more pronounced with price increases in the Chinese spot market for both domestic and imported ilmenite.

The fundamentals of continued growth in pigment demand, based on increased economic activity driven by urbanisation trends in emerging markets and resumption of growth in the more traditional markets, such as North America and Europe, still apply and should support solid offtake of Moma ilmenite production in the future.

As with TiO2 pigment demand, zircon demand is closely correlated to GDP growth and construction activity. Urbanisation trends and per capita income growth in emerging economies are the principal drivers of growth in demand for products such as ceramic tiles that consume zircon. While consumption of zircon for refractory and foundry applications is expected to be relatively stable, faster growth is expected in consumption of zircon for application in specialty chemicals, zirconium metal and chemical zirconia.

Despite the positive outlook for growth in zircon demand, excess supply in the market is expected to result in subdued pricing for zircon in the coming years.

Other Matters

Government of Mozambique Participation

In order to facilitate the long standing objective of the Government of Mozambique to have an interest in the Moma Mine (which is a flagship project in Mozambique), in line with stated government policy, and in the context of reflecting and consolidating the strong relationship that the Company has enjoyed with the Government of Mozambique, the Company has agreed in principle with EMEM (a state owned minerals holding company) subject to the completion of the Capital Restructuring, to allow EMEM the opportunity to subscribe for warrants to subscribe for New Ordinary Shares in return for a payment of US$1 million for the warrants.

The warrants will not be listed but will be exercisable into New Ordinary Shares (on the basis of one new Ordinary Share for every warrant exercised) at a price of US$3.84 per New Ordinary Share (representing a 22.5% premium to the Issue Price) for a period of five years the date of grant. The total number of New Ordinary Shares to which these warrants relate will be such as would represent 5% of the enlarged issued Ordinary Share capital following completion of the Cornerstone Placing, the Firm Placing and the Debt Equitisation (excluding the issue of New Ordinary Shares pursuant to the Open Offer (if any)). The consideration for the exercise of these warrants, based on the minimum capital raise of US$275 million, would be US$21 million.

Absa fees

The Company has also agreed to discharge US$800,000 of fees due to Absa that were to be settled in warrants by way of the issue of US$600,000 of New Ordinary Shares at the Issue Price. This issue will occur in conjunction with completion of the Capital Restructuring.

Director’s Retirement and Directors’ intentions in relation to participation in the Firm Placing

Mr. T. Lowrie (non-executive director) has indicated his intention to retire at the Annual General Meeting of the Company, and will not offer himself for re-appointment.

Certain of the Directors have indicated an intention to participate in the Firm Placing. The amount of such participation in aggregate is approximately US$1.8 million.

Details of the Debt Restructuring

On completion of the Capital Restructuring, the terms of any residual Project Debt will be amended to provide, inter alia, that principal repayments in respect of outstanding Project Debt following completion of the Restructuring will be in fixed semi-annual instalments, beginning in February, 2018, with final maturity of February, 2022. Up to and including 1 February, 2021 each repayment will represent approximately 9.52% of outstanding Project Debt as at the completion of the Debt Restructuring, increasing to approximately 11.11% and 22.22% on 1 August 2021 and 1 February 2022 respectively. Interest on outstanding Project Debt in the period up to 1 February, 2020 will be LIBOR plus a margin of 4.75% per annum, increasing to LIBOR plus 5.50% thereafter.

Timing

Kenmare expects to complete the Capital Restructuring on or around the beginning of August, 2016, including holding an extraordinary general meeting at which resolutions necessary for implementation of the Capital Restructuring will be proposed. The Open Offer subscription period will run in parallel with the notice period for the Extraordinary General Meeting.

Kenmare Resources plc
Michael Carvill, Managing Director                                    
Tel: +353 1 671 0411                                                             
Mob: + 353 87 674 0110                                                      

Tony McCluskey, Financial Director
Tel: +353 1 671 0411                                                             
Mob: + 353 87 674 0346

Jeremy Dibb, Corporate Development and Investor Relations Manager
Tel: +353 1 671 0411
Mob: + 353 87 943 0367

Murray Consultants                                                              
Joe Heron                                                                                 
Tel: +353 1 498 0300                                                             
Mob: +353 87 690 9735                                                       

Buchanan
Bobby Morse
Tel: +44 207 466 5000

Note regarding amount of debt and size of Capital Raise as referred to in this Announcement

Information in this Announcement as to monetary amounts which are not sourced from the audited consolidated financial statements of the Company or which are not prescribed in agreements entered, or being entered into, with respect to the Capital Restructuring, is provided on the basis of an estimated date for completion of the Capital Restructuring of the beginning of August, 2016. To the extent that this timetable is not the actual timetable, the level of outstanding debt would be subject to change due to accrual of interest until completion of the Capital Restructuring. The timetable therefore impacts on the precise level of debt the subject of the Equitisation and the size of the Open Offer. Movements in exchange rates would also impact on certain of the figures stated in this announcement.

This announcement is not for release, publication or distribution, in whole or in part, directly or indirectly, in, into or from the United States, Canada, Japan or Australia or any other jurisdiction where to do so would constitute a violation of the relevant securities laws (the “Excluded Territories“). This announcement is for information purposes only and shall not constitute or form part of any offer to buy, sell, issue or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for, any securities mentioned herein (the “Securities“) in the United States (including its territories and possessions, any State of the United States and the District of Columbia) or any other Excluded Territory.

The Securities have not been and will not be registered under the US Securities Act of 1933, as amended (the “Securities Act“), and may not be offered or sold in the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. No public offering of the Securities is being made in the United States.

This announcement has been issued by, and is the sole responsibility of, Kenmare. None of Canaccord Genuity Ltd, J&E Davy and Mirabaud Securities (the “Joint Bookrunners“) or any of their respective directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever and makes no representation or warranty, express or implied, in relation to the contents of this announcement, including its truth, accuracy, completeness or verification (or whether any information has been omitted from this announcement) or for any other statement made or purported to be made by it, or on its behalf, in connection with Kenmare, the Securities, the Capital Raise or the Debt Restructuring, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available. Each of the Joint Bookrunners accordingly disclaims, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of any loss howsoever arising from any use of this announcement, its contents or any such statement or otherwise arising in connection therewith.

Each of NM Rothschild & Sons Ltd, Hannam & Partners (Advisory) LLP, Canaccord Genuity Ltd and Mirabaud Securities (each of whom is authorised and regulated in the United Kingdom by the FCA) and J&E Davy (who is regulated in Ireland by the Central Bank) are acting exclusively for Kenmare and no one else in connection with the Capital Raise. They will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Capital Raise and will not be responsible to anyone other than Kenmare for providing the protections afforded to their respective clients nor for giving advice in relation to the Capital Raise or any transaction or arrangement referred to in this announcement and accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might have in respect of this announcement or any such statement.

This announcement includes statements that are, or may be deemed to be, forward-looking statements. These forward looking statements can be identified by the use of forward looking terminology, including the terms “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “should” or “will”, or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include, but are not limited to, statements regarding Kenmare’s intentions, beliefs or current expectations concerning, amongst other things, Kenmare’s results of operations, financial position, liquidity, prospects, growth, strategies and expectations for its Mine and the titanium mining industry.

By their nature, forward looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of Kenmare’s operations, financial position and liquidity, and the development of the markets and the industry in which Kenmare operates may differ materially from those described in, or suggested by, the forward-looking statements contained in this announcement. Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this announcement reflect Kenmare’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to Kenmare’s operations, results of operations, financial position and growth strategy.

Appendix

Definitions

“€” or “EUR” or “euro” the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the Treaty establishing the European Community as amended;

 
“£” or “Sterling” or “Stg” or “pounds” or “pence”

  		the lawful currency of the United Kingdom;

 
“$” or “US$” or “US Dollars” or “c” the lawful currency of the United States;

 
“Absa” Absa Bank Limited, a South African bank;

 
“Absa Shares” 191,570 New Ordinary Shares to be issued to Absa Bank Limited in discharge of fees;

 
“Accrued Interest Amount” or “Accrued Interest” US$18.6 million being the amount of interest accrued on the Project Debt other than the super senior loans in the period from 25 November, 2015 to 3 June, 2016;

 
“Admission”

  		the admission of the New Ordinary Shares issued under the Cornerstone Placing, Firm Placing and Open Offer (and, where the context so requires, and, to the extent necessary, admission of New Ordinary Shares to Lenders on the Debt Equitisation and/or pursuant to the Lender Underwriting) to the Official Lists becoming effective in accordance with the Listing Rules and the admission of such shares to trading on the London Stock Exchange and Irish Stock Exchange’s main markets for listed securities becoming effective in accordance with the Admission and Disclosure Standards;

 
“Amendment, Repayment and Equitisation Agreement” the agreement being entered into between, inter alia, the Company, the Project Companies and the Lenders for the implementation of the Capital Restructuring and the Debt Equitisation;

 
“Australia”

  		the Commonwealth of Australia, its states, territories and possessions;

 
“Board” the board of Directors of the Company;

 
“Canaccord Genuity” Canaccord Genuity Ltd;

 
“Canada” Canada, its provinces and territories and all areas subject to its jurisdiction and any political subdivision thereof;

 
“Capital Raise” the Cornerstone Placing, the Firm Placing and the Open Offer, pursuant to which, in aggregate, not less than US$275 million (gross) (through cash subscriptions and to the extent necessary the Lender Underwriting) and up to approximately US$368 million (gross) may be raised as part of the Capital Restructuring;

 
“Capital Raise Announcement” or “Announcement” the announcement dated 20 June, 2016 issued by the Company and setting out the principal elements of the Capital Raise;

 
“Capital Reorganisation” a proposed subdivision of the existing issued and authorised but unissued Ordinary Shares of €0.06 each into one Ordinary Shares of €0.000005 each and one Deferred Share of €0.059995, and the consolidation of all such Ordinary Shares that are in issue into Ordinary Shares of €0.001 each, on a one for 200 basis;

 
“Capital Restructuring” the Capital Raise and the Debt Restructuring;

 
“Cornerstone Investor” the SGRF Investor;

 
“Cornerstone Subscription Agreement”

  		 the SGRF Subscription Agreement;
“Cornerstone Placing” the placing in which the Cornerstone Investor is, subject to the terms of the Cornerstone Subscription Agreement, participating, being in respect of US$100 million;

 
“Davy” J&E Davy (trading as Davy);

 
“Debt Restructuring” the restructuring of the Group’s debt as part of the Capital Restructuring, on and subject to the terms of the Amendment, Repayment and Equitisation Agreement;

 
“Directors” the directors of the Company;

 
“Debt Equitisation” or “Equitisation” the issue of New Ordinary Shares at the Issue Price to the Lenders in satisfaction of the release, satisfaction and discharge of an amount of debt owed under the Project Loans on the terms contained in the Amendment, Repayment and Equitisation Agreement (being that amount which exceeds US$100 million following application of funds raised in the Capital Raise (including by way of the Lender Underwriting), (together with the potential issue of New Ordinary Shares on equitisation of Project Debt under the F/X Arrangements);

 
 “Enlarged Issued Ordinary Share Capital”

  		the Existing Issued Ordinary Share Capital (as adjusted pursuant to the Capital Reorganisation) and the New Ordinary Shares;

 
“EMEM” Empresa Mozambicana de Exploracao Mineira, SA, a Government of Mozambique development entity;

 
“Excluded Territory” United States, Australia, Canada, Hong Kong and Japan an any other jurisdiction where the extension of availability of the Capital Raise would breach any applicable law or any one of them as the context requires;

 
“Existing Ordinary Shares” the Ordinary Shares of €0.06 each in issue at the Last Practicable Date;

 
“Existing Issued Ordinary Share Capital”

  		the aggregate number of issued Ordinary Shares as at the Latest Practicable Date being 2,781,905,503 Ordinary Shares;

 
“Existing Shareholders” holders of Existing Ordinary Shares;

 
“Extraordinary General Meeting” an extraordinary general meeting of Kenmare to be convened in due course in connection with the Capital Reorganisation and the Capital Restructuring;
“Firm Placees” those persons with whom Firm Placed Shares are to be placed;

 
“Firm Placing” the proposed placing of the Firm Placed Shares with the Firm Placees;

 
“Firm Placed Shares” or “Firm Placing Shares” the New Ordinary Shares which will be the subject of the Firm Placing;

 
“F/X Arrangements” those arrangements under the Amendment, Repayment and Equitisation Agreement, to deal with the two currencies (US$ and euro) in which the Project Debt is denominated in connection with the Capital Restructuring, which, if the US$/euro exchange rate to be applied under such agreement exceeds 1.19205, would increase the amount of Debt Equitisation and/or the residual debt of the Group after the Capital Restructuring (although such residual debt will not in any circumstance exceed US$100 million) and/or require the making of an adjusting payment to Lenders;

 
“Government of Mozambique“

  		the Government of the Republic of Mozambique;

 
“Government of Mozambique Participation Arrangement”

  		the arrangement between the Company and EMEM for the subscription by EMEM for the Government of Mozambique Warrants;

 
“Government of Mozambique Warrants”

  		the warrants to subscribe for Ordinary Shares to be issued under the Government of Mozambique Participation Arrangement to EMEM;

 
“Hannam & Partners” Hannam & Partners (Advisory) LLP;

 
“Ireland” Ireland other than the counties of Antrim, Armagh, Derry, Down, Fermanagh, Tyrone, and the word Irish shall be construed accordingly;

 
“Issue Price” US$3.132 per New Ordinary Share (being equivalent to US$0.01566 per Existing Ordinary Share before the Capital Reorganisation) or, at the exchange rate on the Latest Practicable Date, Stg£2.188 per New Ordinary Share (being equivalent to Stg1.09p before the Capital Reorganisation);

 
“Joint Bookrunners” or “Brokers”  Davy, Canaccord and Mirabaud;

 
“Kenmare” or “the Company” Kenmare Resources plc;

 
“Kenmare Group” or “the Group” Kenmare and its subsidiaries, subsidiary undertakings and associate undertakings;

 
“King Ally” King Ally Holdings Limited, a BVI business company incorporated in the British Virgin Islands;

 
“Latest Practicable Date” the latest practicable date for the purposes of certain information contained in this Announcement, being 17 June, 2016;

 
“Lender Group” or “Lenders” or “Project Lenders” the group of lenders which have provided Senior Loans and Subordinated Loans to the Group for the Mine being EIB, AfDB, FMO, KfW, EAIF and Absa;

 
 “Lender Underwriting” or “Lender Underwriting Equitisation” the underwriting by certain lenders of the Capital Raise to the extent that cash proceeds of the Capital Raise are less than US$275 million, to a maximum of US$40.77 million, through their agreement to subscribe for New Ordinary Shares at the Issue Price by equitisation of a matching amount of Project Debt, as provided for in the Amendment, Repayment and Equitisation Agreement;

 
“Lender Underwriting Shares” New Ordinary Shares (if any) which would be issued to certain of the Lenders pursuant to the Lender Underwriting, being a maximum of 13,017,244 New Ordinary Shares;

 
“Lender Shares” or “Lender Share Issue” the New Ordinary Shares which may be issued to Lenders as part of the Debt Equitisation pursuant to the terms of the Amendment, Repayment and Equitisation Agreement;

 
“Listing Rules” the listing rules issued by the Financial Conduct Authority in its capacity as the competent authority for the purposes of Part VI of UK Financial Services and Markets Act 2000 and/or where appropriate the listing rules issued by the Irish Stock Exchange;

 
 “M&G”

 

 

 

  		M&G Group Limited (a wholly-owned subsidiary of Prudential plc), together with M&G Limited, M&G Investment Management Limited and M&G Securities Limited (each a wholly owned subsidiary of M&G Limited);
“Mine” or “Moma Mine” the Moma titanium minerals mine consisting of a heavy mineral sands mine, processing facilities and associated infrastructure, which mine is located in the north east coast of Mozambique under licence to the Project Companies;

 
“Mirabaud” Mirabaud Securities;

 
“Moma” a series of heavy mineral sands deposits on the north east coast of Mozambique that have been incorporated into an integrated operation with each individual deposit individually named;

 
 “Mozambique” the Republic of Mozambique;

 
“Notice of Extraordinary General Meeting” a notice (to be issued in due course) of an Extraordinary General Meeting to be held in connection with the Capital Restructuring;

 
“New Ordinary Shares” the Ordinary Shares of €0.001 each to be issued pursuant to the Capital Raise and, where the context requires, the Debt Equitisation;

 
“Open Offer” an offer to Qualifying Shareholders which will constitute an invitation to apply for the Open Offer Shares;

 
“Open Offer Shares” New Ordinary Shares which will be available for subscription under the Open Offer;

 
“Ordinary Shares”

  		ordinary shares of €0.06 each in the capital of the Company or, on the Capital Reorganisation becoming effective, ordinary shares of €0.001 each in the capital of the Company, including, if the context requires, the New Ordinary Shares;

 
“Project Companies” Kenmare Moma Mining (Mauritius) Limited and Kenmare Moma Processing (Mauritius) Limited;

 
“Project Loans” or “Project Debt” loans of the Kenmare Group being senior loans, subordinated loans, standby subordinated loans and the additional standby subordinated loans;

 
“Prospectus” the document to be issued by the Company in relation to the Capital Raise and the Debt Equitisation;

 
“Qualifying Shareholders” Shareholders in Kenmare on the register of members of the Company on the record date in connection with the Open Offer, with the exclusion (subject to exceptions) of persons with a registered address or located in or resident in any Excluded Territory;

 
“SGRF” The State General Reserve Fund of the Sultanate of Oman;

 
“SGRF Group” means collectively the entities comprising the SGRF Investor and SGRF and any subsidiary company of the SGRF Investor or SGRF;

 
“SGRF Investor” African Acquisition Sarl, an entity incorporated at the direction of SGRF;

 
“SGRF Subscription Agreement” the subscription agreement dated 18 June, 2016 entered into between the Company and the SGRF Investor providing for the subscription by the SGRF Investor for New Ordinary Shares pursuant to the Cornerstone Placing in respect of US$100 million at the Issue Price;

 
“Shareholders” holders of Ordinary Shares of the Company from time to time;

 
“Sultanate of Oman” or “Oman” the Sultanate of Oman in Southwest Asia, on the southeast coast of the Arabian Peninsula including the enclaves of Madha, and Musandam;

 
“subsidiary” shall be construed in accordance with the 2014 Act;

 
“subsidiary undertakings” shall be construed in accordance with the 2014 Act;

 
“UK” or “United Kingdom” the United Kingdom of Great Britain and Northern Ireland; and

 
“US”, “USA” or “United States” the United States of America, its territories and possessions, any state of the United States of America, the District of Columbia and all other areas subject to the jurisdiction of the United States of America.

 

Notes:
(i)            Unless otherwise stated in this Announcement, all reference to statutes or other forms of legislation shall refer to statutes or forms of legislation of Ireland. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.
(ii)           Words importing the singular shall include the plural and vice versa and words importing the masculine gender shall include the feminine or neuter gender.
(iii)          The Issue Price has, unless otherwise stated, been converted to sterling at a rate of US$1: Stg£1.4313 being the rate prevailing on the Latest Practicable Date;



This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Kenmare Resources via Globenewswire
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