Kenmare Resources: US$275 million of equity commitments secured, enabling the Capital Restructuring and Open Offer to proceed

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, CANADA, JAPAN, AUSTRALIA, SOUTH AFRICA, HONG KONG OR SWITZERLAND OR ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF APPLICABLE LAW OR REGULATION.

This announcement is not an offer of securities for sale, or an offer to buy or subscribe for, directly or indirectly, securities to any person in the United States, Canada, Japan, Australia, South Africa, Hong Kong or  Switzerland or any other jurisdiction in which such offer or solicitation is unlawful. This announcement is an advertisement and not a prospectus (or prospectus equivalent document). Any offer to acquire shares pursuant to the Capital Restructuring will be made, and investors should only subscribe for or purchase any shares referred to in this announcement and should make any investment decision, solely on the basis of information contained in the prospectus (the “Prospectus”) to be published by Kenmare Resources plc (“Kenmare” or the “Company and, together with its subsidiaries, the “Group”) in connection with the admission of the new ordinary shares in the Company (“New Ordinary Shares”) to be issued under the Capital Restructuring to listing on the secondary  listing segment of the Official List of the Irish Stock Exchange and the premium listing segment of the Official List of the Financial Conduct Authority (“FCA”) and to trading on the respective main market for listed securities of the Irish Stock Exchange and the London Stock Exchange (the “Admission”) and in connection with the making of the Open Offer to the public in Ireland and the United Kingdom.

30 June, 2016

Kenmare Resources plc

US$275 million of equity commitments secured, enabling the Capital Restructuring and Open Offer to proceed

Highlights

• New equity commitments of US$275 million have been secured, enabling the Capital Restructuring and Open Offer to proceed. This comprises US$100 million in the Cornerstone Placing, US$145.7 million cash commitments under the Firm Placing, and US$29.3 million under the Lender Underwriting. The Issue Price is US$3.132 per New Ordinary Share, equivalent to US1.566c before the impact of the proposed 1 for 200 Consolidation and Stg 1.16p based on the US$:Stg exchange rate as of the Latest Practicable Date.
   
• An Open Offer of up to US$122.7 million (approximately Stg£90.8 million) will proceed at the same price as all other funds raised (equivalent to Stg 1.16p before the Consolidation), full subscription under which would reduce gross debt to nil. The Open Offer will have a ratio of 1 New Ordinary Share for every 71 Existing Ordinary Shares held on the Record Date. Subscription under the Open Offer will be in Sterling (Stg£2.317 per New Ordinary Share) or Euro (€2.818 per New Ordinary Share), being the Issue Price converted at the exchange rates as of the Latest Practicable Date.
   
• Based on the agreed terms of the Debt Restructuring announced on 20 June, 2016, completion of the Capital Raise will reduce debt by not less than US$292.5 million to no more than US$100 million and provide the Company with US$75 million for working capital and to cover expenses. All funds raised in the Open Offer in excess of US$29.3 million will discharge US$4 of debt for every US$3 raised. The Lender Underwriting will be eliminated if at least US$29.3 million is raised in the Open Offer.
   
• A Prospectus and Notice of Extraordinary General Meeting and Annual General Meeting are expected to be issued on 1 July, 2016 with the Extraordinary General Meeting and Annual General Meeting to be held on 25 July, 2016. Closing date for subscriptions under the Open Offer will be 22 July, 2016.

             
Commenting on the outcome of the Firm Placing, Michael Carvill, Managing Director of Kenmare stated:

“The Capital Raise and Capital Restructuring provides Kenmare with an excellent platform to deliver strong returns to its shareholders. The strengthening of the balance sheet, allied to falling cash costs and vastly increased power stability, allows Kenmare to benefit from the strong improvement in the titanium feedstock market we are currently experiencing.”

Details of the Firm Placing and Open Offer

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 announce that commitments have been secured in respect of 46,519,505 New Ordinary Shares to be issued under the Firm Placing and up to 9,355,335 New Ordinary Shares to be issued under the Lender Underwriting at the Issue Price of US$3.132 per New Ordinary Share (being equivalent to US1.566c before the impact of the proposed 1 for 200 Consolidation). Total commitments under the Firm Placing, Lender Underwriting and the previously announced Cornerstone Placing with the State General Reserve Fund of the Sultanate of Oman (SGRF), are therefore in respect of US$275 million. Pursuant to the Debt Equitisation, Lenders may be issued with an aggregate maximum of 7,609,371 New Ordinary Shares representing 6.9% of the then Enlarged Issued Share Capital.

Completion of the Capital Raise will achieve the minimum US$275 million necessary to effect the Capital Restructuring on the terms previously announced. This achieves a reduction of the existing debt to US$100 million and provides the Company with US$75 million for working capital and to cover expenses. All funds raised in the Open Offer in excess of US$29.3 million will discharge US$4 of debt for every US$3 raised. Completion of the Capital Raise is conditional, inter alia, on shareholder approval, as more fully described below. 

New Ordinary Shares to be issued pursuant to the Cornerstone Placing and the Firm Placing will, when issued and fully paid, rank pari passu in all respects with the Ordinary Shares, including the right to receive all dividends and other distributions (if any) declared, made or paid by Kenmare after the date of issue of the New Ordinary Shares.

The Company also announces that the proposed Open Offer will be in respect of up to 39,181,767 New Ordinary Shares at an Issue Price of Stg£2.317 or €2.818 (subject to the terms of the Open Offer) (being the Issue Price converted to sterling and euro at the exchanges rates on 29 June, 2016 (“the Latest Practicable Date”)). Total maximum proceeds under the Open Offer (if the Open Offer is subscribed in full) would be approximately US$122.7 million (approximately Stg£90.8 million). Open Offer Shares will be available to Qualifying Shareholders on the following basis:

1 Open Offer Share (reflecting the Capital Reorganisation) for every 71 Existing Ordinary Shares

registered in their name at the Record Date and so in proportion for any other number of Existing Ordinary Shares then held. Fractions of New Ordinary Shares will not be allotted and each Qualifying Shareholder’s entitlement under the Open Offer will be rounded down to the nearest whole number of New Ordinary Shares.

Qualifying Shareholders (including those with a nil Basic Entitlement) may however apply for any whole number of New Ordinary Shares under the Open Offer. The Excess Application Facility will enable Qualifying Shareholders to apply for any whole number of New Ordinary Shares in excess of, equal to or less than their Basic Entitlement which, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Open Offer Entitlements as shown on their Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Open Offer Entitlements standing to the credit of their stock account in CREST. Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their Basic Entitlements under the Open Offer.

Excess applications will be satisfied only to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their Basic Entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be made pro rata to the number of excess New Ordinary Shares applied for.

Application has been made for the Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements will be admitted to CREST at 8.00 a.m. on 4 July, 2016. The Open Offer Entitlements will also be enabled for settlement in CREST at 8.00 a.m. on 4 July, 2016.

Shareholders should note that the Open Offer is not a rights issue. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear’s Claims Processing Unit. Qualifying non-CREST Shareholders should note that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer.

The New Ordinary Shares to be issued pursuant to the Open Offer will, when issued and fully paid, rank pari passu in all respects with the Ordinary Shares, including the right to receive all dividends and other distributions (if any) declared, made or paid by Kenmare after the date of issue of the New Ordinary Shares to be issued pursuant to the Open Offer.

The Open Offer is not underwritten and there are no commitments in place in respect of participation in the Open Offer, save in the case of M&G which has committed to subscribe for such number of Open Offer Shares as would, when added to its holding of its Existing Ordinary Shares and the Firm Placed Shares for which it is subscribing mean that its holding on completion of the Capital Restructuring would represent 19.97% of the then Enlarged Issued Share Capital.

Use of Proceeds

The following table summarises the sources and uses of proceeds of the Capital Raise on the basis of the US$275 million commitments under the Cornerstone Placing, Firm Placing and Lender Underwriting:

1. US$200 million (by cash subscription and, to the extent necessary, the Lender Underwriting of up to US$29.3 million) will repay and discharge US$269 million in debt (including Accrued Interest) under the terms of the Amendment, Repayment and Equitisation Agreement.
2. Expenses of the issue are estimated at US$13.4 million.
3. US$122.72 million (cash proceeds additional to the US$245.7 million of cash proceeds of the Cornerstone Placing and Firm Placing) will replace US$29.3 million of Lender Underwriting and the balance of US$93.4 million will repay and discharge any residual debt under the terms of the Amendment, Repayment and Equitisation Agreement.

Conditions of the Capital Raise

The Cornerstone Placing, the Firm Placing, the Lender Underwriting and the Open Offer are conditional, inter alia, upon:

1. the passing of all of the Capital Restructuring Resolutions;
2. Admission of the New Ordinary Shares to be issued under the Cornerstone Placing, the Firm Placing and the Open Offer becoming effective by not later than 8.00 a.m. on 15 August, 2016 (or such later time and/or date as the Company, the Cornerstone Investor, the Lenders and the Sponsor may agree);
3. the Cornerstone Subscription Agreement having become unconditional in all respects and not having been terminated in accordance with its terms;
4. the placing commitment provided by M&G (see below) in respect of their participation in the Firm Placing, being in respect of 18,712,664 New Ordinary Shares (“Placing Commitment”)  having become unconditional in all respects and not having been terminated in accordance with its terms.
5. the Placing and Open Offer Agreement having become unconditional in all respects and not having been terminated in accordance with its terms; and
6. those conditions to the Admission Effective Date under the Amendment, Repayment and Equitisation Agreement that fall to be satisfied or waived prior to Admission of the New Ordinary Shares to be issued under the Cornerstone Placing, Firm Placing and Open Offer having been satisfied or waived and the Amendment, Repayment and Equitisation Agreement not having been terminated in accordance with its terms.

M&G is a related party of the Company for the purposes of the Listing Rules of the FCA because it is a substantial shareholder in the Company. M&G, as at the Latest Practicable Date, is interested in 555,468,527 Existing Ordinary Shares, representing approximately 19.97% of the Existing Issued Ordinary Share Capital of the Company. Accordingly, the participation by M&G in the Firm Placing requires the approval of Independent Shareholders by way of a simple majority in general meeting. Such approval will be sought at the Extraordinary General Meeting. M&G has also committed to subscribe for such number of Open Offer Shares as would, when added to its holding of its Existing Ordinary Shares and its Placing Commitment, mean that its holding on completion of the Capital Restructuring would represent 19.97% of the then Enlarged Issued Share Capital of the Company.

Prospectus and Notice of Extraordinary General Meeting

The Prospectus is expected to be published on or around 1 July, 2016 containing full details of how Shareholders can participate in the Open Offer and also containing Notice of an Extraordinary General Meeting expected to be held at 10.15 a.m. (or, if later, immediately following the conclusion of the Annual General Meeting convened to be held at 10.00 a.m. on the same day and at the same location) on 25 July 2016. Completion of the Capital Raise is conditional, inter alia, upon the passing of the Capital Restructuring Resolutions set out in the Notice of the Extraordinary General Meeting.

Copies of the Prospectus will be available from the registered office of Kenmare Resources plc at Chatham House, Chatham Street, Dublin 2, D02 VP46, Ireland during normal business hours on any weekday (except Saturdays, Sundays and public holidays) from the date of its publication until Admission. The Prospectus will also be available on the Company’s website, www.kenmareresources.com.

Expected Timetable of Events

The following are the expected date in relation to events under the Capital Restructuring.

Notes:

1. The times and dates set out in the expected timetable of principal events above and mentioned throughout this Announcement are Dublin times and may be adjusted by the Company in consultation with the Sponsor, in which event details of the new times and dates will be notified to the Irish Stock Exchange, the FCA, the London Stock Exchange, and, where appropriate, the revised time and/or date will be notified by announcement to Shareholders through a Regulatory Information Service.

Capitalised terms used in this announcement and not otherwise defined shall have the meaning given to them in the announcement issued by Kenmare dated 20 June, 2016.

In this Announcement, US Dollar amounts have been converted to euro and sterling respectively at rates of US$1: €1.1115 and US$1: Stg£1.352, being the rates prevailing as of 29 June, 2016, being the Latest Practicable Date.

For further information, please contact:

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, Australia, South Africa, Hong Kong or Switzerland 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.