Sierra Rutile and Iluka Resources reached an agreement on Monday on the terms of the acquisition for all of Sierra Rutile’s issued and to be issued shares, and therefore its rutile mining operations.
Sierra Rutile is in the processes of ramping up its Gangama dry mine project in Sierra Leone having recently completed commissioning activities in the run up to achieving commercial scale production in the third quarter.
The acquisition will be implemented by merging Sierra Rutile with Iluka Investments (Iluka Newco), a wholly-owned incorporated subsidiary of Iluka International (West Africa).
As part of the acquisition, Sierra Rutile shareholders will receive 36 pence cash for each Sierra Rutile share.
Moreover, Iluka Resources has agreed to also assume Sierra Rutile’s debt of approximately US$60 million.
The acquisition is expected to approximately double Iluka’s rutile resource base and secure ownership of an operation, with a long history in the minerals sands industry that currently produces approximately 130 000 t of rutile, with expansion potential up to 240 000 tpa.
Iluka chairman Greg Martin says that the transaction is consistent with the company’s approach to act in a counter-cyclical manner where appropriate, including via transactions where strategic.
“The acquisition of Sierra Rutile along with the current Iluka project progress provides the potential for enhanced portfolio flexibility which will in turn determine the level and phasing of Iluka’s future capital expenditure,” he adds.
Moreover, Iluka MD David Robb believes the acquisition will provides Iluka with additional, long life (20 years plus) resources of proven quality, with further potential through resource additions, reserve optimisation and exploration, further enhancing Iluka’s rutile portfolio position as the largest global zircon producer.
Also commenting on the acquisition, Sierra Rutile chief executive John Sisay says that the acquisition demonstrates that Sierra Leone is open for business and able to attract investment from high profile multinational companies such as Iluka that are keen to participate in the development and growth of the country.
It is expected that the merger circular will be published later on this month (August) and that, subject to the satisfaction of all relevant conditions – including a majority vote by Suerra Rutile shareholders – the merger will become effective in September or before 30 November 2016.