Kenmare Resources plc Jumps On Refinancing And Takover Offer

Kenmare Resources plc (LON: KMR) surges higher but should you buy, sell or hold?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Kenmare Resources (LSE: KMR) is surging higher today after the company issued a deluge of good news. 

Good news

Firstly, the company announced that it had reached a new agreement with its lenders to restructure existing debt and provide additional financing, including:

  • A debt facility of up to $50m for working capital and other corporate purposes;
  • An extension of the final maturity of existing facilities;
  • A reduction in scheduled principal payments on the senior debt;
  • The elimination of scheduled interest and principal on subordinated debt. 

These agreements should provide Kenmare with additional flexibility going forward. 

The second piece of good news from Kenmare came in the form of an interim management statement. This revealed that the company had successfully completed a restructuring program, to yield an annualised $12.5m in cost savings.

Unfortunately, while the company has managed to reduce its cost base, the shipment of ore from the Moma Mine declined by 4% during the first quarter of the year. Still, the cash saved from Kenmare’s lower cost base, and restructured debt pile, should offset some of the decline in volumes.  

And the last piece of good news from Kenmare today was the announcement that the company had received a revised bid from Iluka Resources Ltd

The revised proposal would trade 0.016 share of Iluka for every Kenmare share — far below Iluka’s previous offer of 0.036 per share made during June of last year.

Iluka’s shares currently trade at 8.16 Australian dollars. So, the offer values each Kenmare share at 0.131 Australian dollars, roughly 7p. A premium of 125% to Kenmare’s closing price on Wednesday.

Time to buy? 

If Kenmare chooses to remain independent, the company’s debt restructuring and cost reductions have given it a strong base to grow from in the future.

Indeed, City analysts currently expect the company’s losses to decline by as much as 75% this year as restructuring savings flow through. Further, according to current forecasts Kenmare is set to report a pre-tax profit of £7.1m during 2016. This translates into earnings per share of 0.4p for 2016 and on that basis, Kenmare is trading at a 2016 P/E of 9.5. 

So, if Kenmare’s management decides to turn down Iluka’s offer, based on current figures, the company still has a bright future. 

However, due to the unpredictable nature of the mining industry, these forecasts could change significantly over the next 12 to 24 months.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

If the market shut down for 10 years, I’d be happy to hold these 2 FTSE 100 shares

Our writer reveals a pair of FTSE 100 shares that he reckons are well set up to deliver strong returns…

Read more »

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »