Capital Raising

RNS Number : 1426I

Kenmare Resources PLC

05 March 2010

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, HONG KONG, JAPAN OR SWITZERLAND

5 March 2010

Kenmare Resources plc

Firm Placing of 748,515,033 New Ordinary Shares at 12p (€0.132) each

and

Placing and Open Offer of 748,515,033 New Ordinary Shares at 12p (€0.132) each

to raise in aggregate £179.6m

The Board of Kenmare Resources plc ("Kenmare" or the "Company") today announces a fully underwritten share issue by way of a Firm Placing and Placing and Open Offer to raise gross proceeds of approximately £179.6 million through the issue of 1,497 million New Ordinary Shares at 12 pence per New Ordinary Share.

·      £89,821,804 million will be raised, gross of expenses, through a Firm Placing of 748,515,033 million New Ordinary Shares; and

·      £89,821,804 million will be raised, gross of expenses, through a 19 for 23 Placing and Open Offer resulting in the issue of 748,515,033 million New Ordinary Shares

The Issue Price of 12 pence per New Ordinary Share represents a 41.8% discount to the closing mid-market price of 20.625 pence per Ordinary Share on the London Stock Exchange on 4 March 2010 and a 45.7% discount to the closing mid-market price of 24.3 cents per Ordinary Share on the Irish Stock Exchange on 4 March 2010.

Summary

·      Funding with gross proceeds of £179.6 million (approximately £170.8 million net of expenses) by way of a Firm Placing and Placing and Open Offer (the "Capital Raising").

·      Principal purpose of the Capital Raising is to enable Kenmare to implement an expansion of its existing mining operation at Moma in Mozambique (the "Expansion") in order to significantly increase production, at a relatively low cost per incremental tonne of annual production, take advantage of projected favourable market conditions, and generate a substantially expanded revenue base with which to pay down debt, thereby significantly improving the financial performance and value of the Group.

·      Expansion study completed in January 2010:

o  Provides for an expected 50% increase in design capacity of the Moma mine, taking design capacity of ilmenite production to 1.2 million tonnes;

o  Expected to be completed in 2012 and full production at the expanded design capacity to be achieved by the end of 2012;

o  Estimated cost of US$200 million, which includes a contingency of approximately US$18 million.  This estimated cost, excluding the contingency, is stated to an accuracy limit of +/- 25%; and

o  Allows the Company to optimise the productivity of the Mine and exploit the potential market opportunity presented by the projected shortage of  titanium dioxide feedstock resulting primarily from increased demand - expected supply deficit by 2012.

·      £133.1 million (US$200 million) of the net proceeds from the Capital Raising is intended to be used to fund the engineering, procurement and construction costs of the Expansion. The Expansion entails the upgrade of the existing dredges and wet concentrator plant, a new third dredge and a second wet concentrator plant and the upgrade of the mineral separation plant.

·      The balance of the net proceeds of approximately £37.7m (US$56.7 million) from the Capital Raising will be available to the extent necessary for any increase in costs of the Expansion and general corporate purposes, including potentially meeting any debt service payments which cannot be met from operating cash flows;

·      Kenmare has also agreed certain amendments to the Group's Financing Facilities, which will take effect upon completion of the Capital Raising and the deposit of US$200 million into the Contingency Reserve Account.  These funds may then immediately be contributed by Kenmare to the Project Accounts controlled by the Project Companies, from where they may be spent on, amongst other things, the Expansion.

Kenmare has also today released its preliminary results for the full year ending 31 December 2009, details of which are set out in a separate announcement.

A prospectus, also comprising a shareholder circular, containing details of the Capital Raising and associated proposed shareholder resolutions is expected to be posted to shareholders later today and will be available on the Company's website, www.kenmareresources.com. An Extraordinary General Meeting to approve the Capital Raising is expected to be held at 11.00am on 29 March 2010 at the Westbury Hotel, Grafton Street, Dublin 2, Ireland.

Michael Carvill, Managing Director of Kenmare, said:

"During a challenging period in the markets in which we operate, we ramped up production of heavy mineral concentrates in 2009, with production of ilmenite and zircon at full design capacity expected to be achieved by the end of H1 2010.

"End markets in the titanium minerals industry are now anticipated to be favourable in the upcoming years. Demand growth at rates above the average historic trend growth rate driven by cyclical recovery and increased demand from China and other developing countries, coupled with constrained supply are expected to result in a shortage of titanium minerals production developing during 2012.

"The expansion of our Moma mine, due to be completed in 2012 under our Expansion Plan, will allow Kenmare to capitalise on these favourable conditions.  We have a world class asset in Moma, boasting a large, long life resource in a favourable location. Kenmare is already producing high quality ilmenite and we expect to produce significant quantities of valuable co-products. In addition, the Moma mine's existing infrastructure means we can readily expand in a capital efficient manner.

"We are excited about the opportunity to expand our capacity at Moma and to take advantage of the market supply deficit expected to develop by 2012, seize first mover advantage and deliver increased financial returns while maximising the utilisation of existing facilities, infrastructure and technology."

J.P. Morgan Cazenove is acting as Global Co-ordinator, Bookrunner and Joint Broker. Davy is acting as Sponsor, Co-Bookrunner and Joint Broker. Canaccord Adams and Mirabaud are acting as Co-Bookrunners and Joint Brokers.

Rothschild is acting as financial adviser to Kenmare.

For further information, please contact:

Kenmare Resources plc

Michael Carvill, Managing Director Tel: [phone] Mob: + 353 87 674 0110

Tony McCluskey, Financial Director Tel: [phone] Mob: + 353 87 674 0346

J.P. Morgan Cazenove Laurence Hollingworth Neil Passmore Tel: [phone]

Davy Hugh McCutcheon Eugenee Mulhern Tel: [phone]

Murray Consultants Joe Heron Tel: [phone] Mob: + 353 87 690 9735

Conduit PR Ltd Leesa Peters/Charlie Geller Tel: [phone] Mob: [phone]

IMPORTANT NOTICE

This announcement does not constitute an offer to sell, or the solicitation of an offer to buy or subscribe for, securities of the Company in the United States or in any other jurisdiction.

This announcement has not been approved by the Irish Financial Regulator, the Financial Services Authority or by any other regulatory authority. This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any securities referred to in this announcement except on the basis of information provided in the prospectus to be published by the Company in due course. Copies of the prospectus will, following publication, be available from the Company's registered office at Chatham House, Chatham Street, Dublin 2, Ireland and at the Company's website at www.kenmareresources.com.

The securities of the Company (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 unless registered under the Securities Act or an exemption from such registration is available.  No public offering of Securities is being made in the United States. Any representation to the contrary is a criminal offence in the United States.

The securities mentioned herein and in the Prospectus may not be offered, sold, resold, transferred or delivered, directly or indirectly, in any Excluded Jurisdiction absent registration or an applicable exemption from the registration requirements of the relevant laws of any Excluded Jurisdiction. There will be no public offer of such securities in any Excluded Jurisdiction. This announcement does not constitute an offer to sell, or a solicitation of an offer to subscribe for, the securities being issued in any jurisdiction in which such offer or solicitation is unlawful.

No communication or information relating to the offer of Securities (the "Offering") may be disseminated to the public in jurisdictions other than the United Kingdom and the Republic of Ireland where prior registration or approval is required for that purpose.  No action has been taken that would permit an offer of the Securities in any jurisdiction where action for that purpose is required, other than in the United Kingdom and the Republic of Ireland.

J.P. Morgan Cazenove is a marketing name used by J.P. Morgan Securities Ltd.  J.P. Morgan Securities Ltd. is acting as Global Co-ordinator, Bookrunner and Joint Broker to Kenmare in respect of the Capital Raising. J&E Davy ("Davy") is acting as Sponsor, Co-Bookrunner and Joint Broker to Kenmare in respect of the Capital Raising.  Canaccord Adams Limited ("Canaccord Adams") and Mirabaud Securities LLP ("Mirabaud") are acting as Co-Bookrunners and Joint Brokers to Kenmare in respect of the Capital Raising.  N.M. Rothschild & Sons Limited ("Rothschild") is acting as Financial Adviser to Kenmare in respect of the Capital Raising.

This announcement has been issued by and is the sole responsibility of Kenmare. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Banks or Rothschild, or by any of their respective affiliates or agents as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any responsibility or liability therefore whether arising in tort, contract or otherwise is expressly disclaimed.

J.P. Morgan Cazenove., Canaccord Adams, Mirabaud and Rothschild, each of which is authorised and regulated in the United Kingdom by the FSA, are acting exclusively for the Company and no one else in connection with the Capital Raising and will not regard any other person as their client in relation to the Capital Raising and will not be responsible to anyone other than the Company for providing the protections afforded to their clients or for providing advice in connection with the Capital Raising or any other matter referred to in this announcement.

Davy, which is authorised and regulated in Ireland by the Financial Regulator, is acting exclusively for the Company and no one else in connection with the Capital Raising and will not regard any other person as its client in relation to the Capital Raising and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Capital Raising or any other matter referred to in this announcement.

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.

1.         Introduction

Today, the Company announced a Capital Raising to raise gross proceeds of £179.6 million (US$269.9 million) (£170.8 million (US$256.7 million) net of expenses) through the issue of in aggregate 1,497,030,066 New Ordinary Shares at an issue price of 12 pence per New Ordinary Share. 748,515,033 New Ordinary Shares will be issued through the Placing and Open Offer and 748,515,033 New Ordinary Shares will be issued through the Firm Placing. The issue price of 12 pence (€0.13) per New Ordinary Share represents a discount of 8.6 pence (41.8 per cent.) to the closing mid-market price of 20.6 pence per Ordinary Share on the London Stock Exchange on 4 March 2010 and a discount of 11.1 cents (45.7 per cent.) to the closing mid-market price of €0.24 per Ordinary Share on the Irish Stock Exchange on 4 March 2010 (being the last trading day prior to the announcement of the Capital Raising).

The Capital Raising is conditional on, amongst other things, the passing by Shareholders of all of the Resolutions proposed for consideration at the Extraordinary General Meeting on 29 March 2010, upon the Placing and Open Offer Agreement becoming unconditional in all respects and upon Admission. The Resolutions proposed seek an increase in share capital and the grant to the Directors of share issue authorities necessary for the implementation of the Capital Raising, and, in accordance with the Listing Rules, seek the approval of the Issue Price and the approval, as a related party and class 1 transaction under the Listing Rules, of the potential participation by M&G, a substantial shareholder in the Company, in the Firm Placing and the Placing.

The purpose of this announcement is to set out the background to, and the reasons for, the Capital Raising and to explain why the Directors believe it is in the best interests of the Company and the Shareholders as a whole and why the Directors are recommending that Shareholders vote in favour of the Resolutions necessary for the implementation of the Capital Raising. The Prospectus will set out the actions to be taken by Qualifying Shareholders in respect of the Open Offer. The notice convening the Extraordinary General Meeting, to be held at 11.00 a.m. on 29 March 2010 at The Westbury Hotel, Grafton Street, Dublin 2, Ireland, will be set out in the Prospectus.

2..                                Background to and Reasons for the Capital Raising

Background

The principal activity of Kenmare is the operation of the Mine. The Mine contains substantial reserves of heavy minerals including the titanium minerals ilmenite and rutile, and the relatively high value zirconium silicate mineral, zircon. As at 31 December 2008 the Mine had total reserves of 634 million tonnes of ore and resources of 5,900 million tonnes of ore as will be set out in the Prospectus. The Namalope Reserve, currently being mined by Kenmare, and the Nataka Resource, a second deposit located at the Mine which is currently not being mined, would together maintain production at the Mine at design capacity levels of 800,000 tpa of ilmenite plus co-products for more than 150 years of mining (assuming the mineral resources at Nataka are converted to mineral reserves).

The Directors believe that the Kenmare Group has a number of significant advantages, including the location of the Mine in a favourable location beside the ocean with an export terminal, the size of the resource, the ability to implement a relatively low cost dredge mining method, the high quality of the ilmenite products, the Group's low cost power supply arrangements and the integrated and efficient nature of the Mine's facilities. Further, in addition to ilmenite which is the Group's main revenue component, the Mine has valuable co-products in zircon, which the Company has sold during 2008 and 2009, and rutile which the Directors expect to be produced in commercially significant quantities during 2010.

The Directors believe that the characteristics of the Mine and the significant progress recently made in implementing the Ramp Up (as detailed below) now position Kenmare to implement an expansion of the existing mining operation (the "Expansion") in order to significantly increase production, at a relatively low cost per incremental tonne of annual production, take advantage of projected favourable market conditions, and generate a substantially expanded revenue base with which to pay down debt, thereby significantly improving the financial performance and value of the Group. This Expansion is the main purpose of the Capital Raising. The Capital Raising will also enable the Group to make the Deposit which enables the Agreed Financing Amendments to become effective.

Existing Operations

Mining at Moma is carried out by means of dredging in an artificial dredge pond, with concentration of the heavy minerals in a wet concentrator plant ("WCP"), which floats behind the dredges. This produces a heavy mineral concentrate ("HMC") which is pumped to a mineral separation plant ("MSP") for further processing. The MSP separates and upgrades the HMC into the final products: ilmenite, rutile and zircon. These products are exported directly from the Mine using a dedicated shipping terminal and a trans-shipment vessel owned by the Group which loads ocean-going ships typically chartered by customers of the Group.

Kenmare has held mining tenements in the general Moma area since 1987. Following completion of a definitive feasibility study in 2001, financing arrangements (a combination of long term project loans and equity) for the development of the Mine were finalised in 2004, following a period of negotiation with prospective lenders, lender due diligence, the procurement by the Company of off-take contracts for planned production from Moma and the completion of a definition phase in 2003 (involving the designing of items such as the jetty, concrete works and conveyor systems) in order to facilitate bidding from sub-contractors. In April 2004, Kenmare entered into an EPC Contract with the EPC Contractor for the engineering, procurement, building and commissioning of the facilities at the Mine. However, during the course of construction in late 2006, it became apparent to the Directors that the EPC Contractor would not achieve the original contractual handover date for the plant in November 2006. A Deed of Amendment and Settlement was therefore entered into in December 2006 to provide for, among other things, a phased handover of completed sections of the Mine to Kenmare for its operation and management. The Group entered into a Deed of Final Settlement and Release with the EPC Contractor in December 2009.

Following assumption of control of the assets but prior to the Deed of Final Settlement and Release, Kenmare became aware of deficiencies in the plant and equipment, which resulted in the failure of certain performance tests set out in the EPC Contract. From this point in 2008, until the cessation of the relationship with the EPC Contractor in December 2009, Kenmare was engaged with the EPC Contractor in implementing a Performance Improvement Programme ("PIP"), the costs of which were substantially met by the EPC Contractor. The PIP was designed to address these deficiencies and to achieve production levels at design capacity. The deficiencies in the equipment and the consequent requirement to implement the PIP has led to a delay in achieving the planned Ramp Up and achieving production levels at design capacity levels across all three of the Mine's mineral products.

The implementation of the PIP has materially increased production levels in the fourth quarter of 2009:

·      HMC production was 280,000 tonnes. This reflects a 22 per cent. increase compared to the third quarter of 2009 and represents 100 per cent. of design capacity for the period;

·      Ilmenite production was 143,000 tonnes. This reflects a 10 per cent. increase compared to the third quarter of 2009 and 72 per cent. of design capacity for the period;

·      Zircon production was 5,400 tonnes in total, comprising two different zircon products, standard zircon (3,900 tonnes) and special zircon (1,500 tonnes). This reflects a similar level of production as the third quarter of 2009 (and was adversely affected by disruptions to zircon production associated with the implementation of the metallurgical optimisation projects) and 43 per cent. of design capacity for the period;

·      Rutile production was negligible in 2009; and

·      Finished product sales in the fourth quarter of 2009 were 139,000 tonnes, comprised primarily of ilmenite, but also including zircon. This reflects a 6 per cent. increase on the previous quarter and resulted in shipments in the second half of 2009 being 83 per cent. higher than in the first half of 2009. In 2009, there were 24 shipments totalling 418,000 tonnes of finished products (2008: 17 shipments totalling 250,000 tonnes of finished products).

Although the PIP has been completed, the Company has not yet reached design capacity for production of the Group's final products on a quarterly or monthly basis. Additional upgrading is in progress to address the production deficiencies. This includes the installation of additional reheaters in the zircon and rutile circuits, along with a new ilmenite scavenging circuit, which are designed to significantly enhance the zircon and rutile production.

In addition, revenue generated by the Group was hampered significantly by the market deterioration resulting from the global recession in 2009, as decreased demand led customers to defer delivery of shipments and by the reduction of prices realised for non fixed price contracted products. As a result of the production-related issues experienced during 2008 and the first half of 2009 and the market deterioration, cashflow generation from the Mine during 2009 was below budget.

The construction of the Mine was funded by a combination of equity and senior and subordinated loan facilities under the Financing Agreements. The Financing Agreements contained schedules for repayment and certain operational tests, including with respect to Technical Completion. The Lender Group, which includes a number of development finance institutions, has historically been accommodating to the evolving situation at the Mine (including in relation to construction delays and operational challenges) and it has previously agreed a number of amendments to the Financing Agreements, including deferral of the principal repayments of Senior Loans that would have fallen due in 2009.

In the context of the Capital Raising, the Lender Group has agreed to the Agreed Financing Amendments. These include modifications to the Technical Completion tests and deferral of the date for achieving Technical Completion from 31 December 2010 to 31 December 2011, as well as changing the consequence of failing to achieve Technical Completion at the required date from an event of default to an interest margin increase of, in the case of the Senior Loans, 1 per cent., and in case of Subordinated Loans 2 per cent. until Technical Completion is achieved. Under the current terms of the Financing Agreements, failure to achieve Completion by the Final Completion Date is an event of default. Pursuant to the Agreed Financing Amendments, the Lender Group has agreed to eliminate this event of default, so that Completion can be achieved at any time. The Agreed Financing Amendments also introduce the concept of Non-Technical Completion and defer the Final Completion Date from 31 December 2012 to 31 December 2013. Failure to achieve Non-Technical Completion by the Final Completion Date will result in an event of default. The Agreed Financing Amendments are conditional on the Deposit. As part of the Agreed Financing Amendments, funds deposited into the Contingency Reserve Account can be transferred to the Project Accounts and spent on, amongst other things, the Expansion.

Absent the Capital Raising and subsequent completion of the Deposit (which is the sole remaining condition to the effectiveness of the Expansion Funding Deed of Waiver and Amendment, as further described below in this section), the Agreed Financing Amendments will not take effect and the Company's ability to comply with the existing terms of the Financing Agreements may be compromised. In such circumstances, further negotiations with the Lender Group may be required. Further information on the financial position of the Company absent the Capital Raising will be set out in the Prospectus.

During 2009, the Group made a number of key appointments to its operational management team which have helped with the effective implementation of the PIP, the continued implementation of improvements to increase production since the cessation of the relationship with the EPC Contractor and the conclusion of the PIP in December 2009. The Group is currently producing HMC at design capacity levels and expects to approach design capacity levels for ilmenite and zircon by the end of the first half of 2010. The Group has not produced any commercially significant amounts of rutile to date but the Directors anticipate such production will commence during 2010. Information on projected market conditions, including on the recovery in demand, is detailed in the section below entitled "Opportunity for Expansion".

Opportunity for Expansion

Based on Kenmare's own supply and demand analysis, the Directors anticipate that the titanium dioxide feedstock industry will experience demand growth over the next five years which will be above average historic industry trend growth rates. This view is shared by that of independent industry analysts, including TZMI as referred to below. Demand for pigment (the principal end use market for titanium feedstocks) has averaged a compound annual growth rate of approximately 3 per cent. over the past 30 years and has moved closely in line with the growth in the global economy over this period. The compound annual growth rate of Chinese pigment consumption has averaged approximately 15 per cent. over the last 20 years, reflecting the growing importance of China in pigment demand. While demand was adversely affected by the global recession in late 2008 and 2009, industry experts have predicted a strong rebound in pigment demand of 8 per cent. to 10 per cent. for 2011. DuPont, for example, has stated that its expectations are for above trend line growth for the period 2009 to 2015 in the range of 5 per cent. to 10 per cent. as demand catches up with the long term growth rate. This demand growth is expected to be driven principally by increased demand from China and other developing countries driven by strong economic growth and a shift towards urbanisation in those countries, as there is typically a strong correlation between GDP growth per capita and demand for titanium dioxide feedstock products. The anticipated growth in GDP per capita in developing countries and the relatively low consumption of pigment per capita in such developing countries underpins the favourable global outlook for the titanium dioxide feedstock industry.

The ongoing recovery in the pigment market is expected to result in significant re-stocking by pigment producers of TiO2 feedstocks during 2010 and 2011. A small surplus of feedstocks until 2012 has been forecasted by TZMI in a statement to Kenmare, followed by a significant growing deficit in supply to 2015 of over approximately 1 million TiO2 units or 20 per cent. of the total projected market size in 2015, if no new projects, incremental to those already approved, come on stream.

Increase in supply necessary to address this anticipated deficit is subject to a number of constraints: certain existing operations are reaching full capacity and have limited expansion potential and a number of the major titanium feedstock producers are expected to decrease their future production. Reasons for reducing (or not increasing) future production include suspension or cancellation of development projects; resource depletion in some major titanium mines; considerable capital expenditure required to facilitate meaningful expansion (often unjustified by the size of the resource) and significantly increasing power prices in competitors' jurisdictions, particularly in South Africa. As a result of such factors, a number of Kenmare's global competitors have curtailed or cancelled production or are expected to decrease future production. In addition there are a limited number of known new sources of significant supply which could come on stream in the short term and there are uncertainties with respect to the development of certain of these projects, for example BHP has recently relinquished its Corridor Sands deposit in Mozambique, Tiomin Resource's Kwale project in Kenya has recently been written off in their accounts and Tata Steel's Titanium Project in India and Mineral Commodities' Xolobeni deposit in South Africa have both been delayed.

The Directors believe that Kenmare is favourably positioned to expand its existing operation and take advantage of the market opportunity presented by this combination of demand growth and supply constraints. Kenmare's key strengths are:

·      A large resource - the Moma titanium mineral deposit is large. The size of the resource provides significant potential to expand production well beyond current design capacity;

·      A long life resource - at design capacity levels of 800,000 tpa of ilmenite plus co-products the Namalope Reserve, currently being mined by Kenmare, and the Nataka Resource, a second deposit located at the Mine which is currently not being mined, could be operational for more than 150 years of mining (assuming the Nataka Resource can be converted into an equivalently sized mineral reserve). The Namalope Reserve and the Nataka Resource could maintain production at post-Expansion design capacity levels of 1.2 million tpa of ilmenite plus co-products for more than 110 years of mining (assuming the Nataka Resource can be converted into an equivalently sized mineral reserve);

·      Low-cost production - Moma contains a large dredgeable resource with an abundance of fresh water for dredge mining (dredge mining being the lowest cost method of mining such a resource) with low cost power supply arrangements and integrated and efficient materials handling equipment and infrastructure, in addition to a favourable fiscal regime in Mozambique;

·      High quality ilmenite products - the Mine produces a number of high quality ilmenite products, with differing TiO2 content for different market applications, which can be used by a broad range of end users. The quality of ilmenite product is sufficiently high to allow the sale of ilmenite product directly to pigment consumers without the need to upgrade through slagging or other processes;

·      Valuable co-products - while ilmenite is expected to be 64 per cent. of the Group's revenue at design capacity levels, Kenmare also expects to produce significant quantities of high value co-products zircon and, to a lesser extent, rutile;

·      A well positioned and integrated site in a favourable location with export terminal - the Group's operations are efficient and streamlined due to the close proximity between existing mining operation, processing plant and port, with no significant on-site product transport requirements, located on the coast with a dedicated marine terminal to export final products to customer markets in Asia, Europe and North America;

·      Capital efficient expansion options - the large Moma resource and existing operations and infrastructure at the Mine (installed at a total capital cost since 2004 of approximately US$500 million) allow Kenmare to implement the Expansion with a relatively low cost per incremental tonne of annual production;

·      Experience - the Group's management and other employees gained experience through the development of the Mine to date and through the expertise of the key management personnel recently appointed, notably the appointment of Jacob Deysel as Chief Operations Officer in February 2009. An EPCM Contract will be concluded in order that Kenmare retains control over the Expansion process to ensure rigorous commitment to meeting key dates and deliverables; and

·      Ease of expansion - the Mine's modular design (consisting of distinct and separate components) and the modular structure of the proposed Expansion (including a new dredge and WCP operating in a separate dredge pond from the existing dredges and WCP and a WHIMS plant housed in its own structure) means that interference caused by the Expansion to current operations will be minimised. The Expansion will also utilise proven, existing technology.

Planned Expansion

Kenmare completed an Expansion Study in January 2010 that considered the options available to the Group to improve the productivity of the Mine and exploit the potential market opportunity presented by the projected shortage of and increased demand for titanium dioxide feedstock. A number of mining options and mineral separation options were analysed with a view to maximising returns consistent with integrating the Expansion into the existing operation and minimising disruption to production. From a range of mining and production options, the Expansion Study concluded that the upgrade of the existing Mine operation, the construction and commissioning of a second mining operation at the Mine and the expansion of the MSP, was the best way to deliver increased financial growth while maximising the utilisation of existing facilities, infrastructure and technology. More specifically, the Expansion Study contains the following recommendations:

·      an upgrade of the capacity of the existing two dredges and WCP concentrator to increase spiral feed capacity from 3,000 tph to 3,500 tph;

·      the installation of a second WCP with a spiral feed capacity of 2,000 tph in a separate dredge pond, utilising a new third dredge on the Namalope Reserve approximately 5km away from the existing mining operation; and

·      the addition of a Wet High Intensity Magnetic Separation (WHIMS) circuit at the front of the ilmenite circuit of the MSP, as well as other modifications to the MSP, including an auxiliary ilmenite 80tph circuit, to increase throughput capacity from 135 tph to 220 tph.

The Directors expect that the Expansion will increase design capacity by approximately 50 per cent. from the Mine's current design capacity, resulting in the existing design capacity increasing from 800,000 tpa to 1.2 million tpa of ilmenite, from 50,000 tpa to 80,000 tpa of zircon and from 14,000 tpa to 22,000 tpa of rutile. Assuming Kenmare's production levels reach full post-Expansion design capacity, Kenmare would supply approximately 10 per cent. of the world's titanium dioxide feedstock supply and approximately 6 per cent. of the world's zircon supply, based on the total global supply in 2008 estimated by TZMI in their Mineral Sands Annual Review 2009.

The Expansion Study estimates the cost of the Expansion as approximately US$200 million, which includes a contingency of approximately US$18 million. This estimated cost, excluding the contingency, is stated to an accuracy limit of +/- 25 per cent.

As the next step in implementing the Expansion, in November 2009 Kenmare appointed Aker Solutions to commence an Engineering Study. This Engineering Study is expected to be completed by mid 2010. Pending results of the Engineering Study, detailed design is expected to commence in the third quarter of 2010, with construction expected to be completed by the end of 2011. The Directors expect that the Expansion will be completed, and production expanded to the post-Expansion design capacity levels, by the end of 2012.

The Directors expect that the Expansion will benefit the Group and deliver value to Shareholders by allowing Kenmare to:

·      take advantage of the market supply deficit of ilmenite expected to develop by 2012 by achieving post-Expansion design capacity levels at that time;

·      deliver increased financial growth by maximising the utilisation of existing facilities, infrastructure and technology, thereby delivering a capital efficient expansion;

·      capture market share and continue to provide high quality products at relatively low operating costs;

·      seize first mover advantage in capturing upside in an evolving market supply deficit by announcing the Expansion plans ahead of other competitors, thereby discouraging further investment in the sector; and

·      increase revenues in order to pay down debt.

The Lender Group has conditionally agreed that the Expansion may proceed and has agreed to the Agreed Financing Amendments which, if effective, will amend the terms of the Financing Agreements to modify the terms of the Technical Completion tests and certain other matters, including deferral of the dates by which the tests for Technical Completion and Completion have to be satisfied, in order to facilitate the Capital Raising and the Expansion. The effectiveness of the Agreed Financing Amendments is conditional on Kenmare depositing at least US$200 million into the CRA on or before 30 June 2010. Funds in the CRA may be contributed to the Project Accounts at the sole discretion of Kenmare, without restriction or condition.

In connection with the Lenders Group's agreement to the Agreed Financing Amendments, the independent engineer appointed by the Lenders, SRK, has reported to the Lender Group its reasonable satisfaction with the Expansion Study and has confirmed to the Lender Group its view that the Expansion will not materially and adversely affect existing operations at the Mine.

A summary of the principal terms of the Expansion Funding Deed of Waiver and Amendment will be contained in the Prospectus.

It is proposed that implementation of the Expansion would commence in the second half of 2010 on completion of the Deposit, the Engineering Study and the execution of an EPCM Contract with an appropriate contractor capable of managing the Expansion project. Assuming completion of these steps, the Directors believe that completion of the Expansion along with the anticipated increase in demand and the market opportunity presented by the projected supply deficit in titanium dioxide feedstocks compared to demand would leave Kenmare well placed to achieve significantly enhanced financial performance.

3.         Use of Proceeds

In accordance with the capital cost estimates under the Expansion Study, £133.1 million (approximately US$200 million in Q3 2009 US$ terms and including a contingency of approximately US$18 million) of the net proceeds from the Capital Raising is intended to be used to fund the engineering, procurement and construction costs of the Expansion. This estimated cost, excluding the contingency, is to a stated accuracy limit of +/- 25 per cent. It is expected that US$2.3 million will be spent on upgrading the existing WCP A, US$74.3 million will be spent on a new WCP B (including the dredge), US$57.5 million will be spent on the upgrade of the MSP including the WHIMS and approximately US$65.9 million will be spent on, inter alia, electricity supply upgrade, other mobile equipment, product storage, construction and spares.

The balance of the net proceeds of approximately £37.7 million (US$56.7 million) from the Capital Raising will be available to the extent necessary for any increase in costs of the Expansion and general corporate purposes, including meeting any debt service payments (inclusive of the August Payment) which are not met from operating cash flows. Any unspent proceeds which have not been deposited to the CRA may be used at the Group's option to prepay Additional Subordinated Lender Margin without penalty.

In order to make the Deposit and thereby satisfy the condition in the Expansion Funding Deed of Waiver and Amendment, US$200 million of the proceeds of the Capital Raising will initially be deposited into the Contingency Reserve Account. Under the Expansion Funding Deed of Waiver and Amendment, funds in the CRA may be contributed to the Project Accounts and spent on, amongst other things, the Expansion.

4.         Principal Terms of the Capital Raising

Kenmare is proposing to raise gross proceeds of approximately £179.6 million (US$ 269.9 million) (approximately £170.8 million net of expenses (US$256.7 million)) by way of the Capital Raising. 748,515,033 New Ordinary Shares will be issued through the Placing and Open Offer and 748,515,033 New Ordinary Shares will be issued through the Firm Placing.

Placing and Open Offer

The Issue Price represents a discount of 8.6 pence (41.8 per cent.) to the closing mid-market price of 20.6 pence per Ordinary Share on the London Stock Exchange on 4 March 2010 and a discount of 11.1 cent (45.7 per cent.) to the closing mid-market price of €0.24 per Ordinary Share on the Irish Stock Exchange on 4 March 2010 (being the last trading day prior to the announcement of the Capital Raising).

Qualifying Shareholders, on and subject to the terms and conditions of the Open Offer, are being given the opportunity to apply for the Open Offer Shares at the Issue Price, pro rata to their holdings of Existing Ordinary Shares on the Record Date on the following basis:

19 Open Offer Shares for every 23 Existing Ordinary Shares

Fractions of Open Offer Shares will not be allotted to Qualifying Shareholders in the Open Offer and fractional entitlements under the Open Offer will be rounded down to the nearest whole number of Open Offer Shares. Accordingly, Qualifying Shareholder holding fewer than 23 Existing Ordinary Shares on the Record Date will not be eligible to participate in the Open Offer.

Qualifying Shareholders may apply for any whole number of Open Offer Shares up to their maximum entitlement which, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Open Offer Entitlements as shown in Box 2 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 CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlements at 8.00 a.m. on 8 March 2010. 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 entitlements under the Open Offer.

The Placing and Open Offer is fully underwritten by the Underwriters pursuant to, and subject to the terms of, the Placing and Open Offer Agreement, the principal terms and conditions of which will be summarised in the Prospectus.

The Placing and Open Offer is conditional, inter alia, upon:

(i)   the passing of all of the Resolutions;

(ii)   Admission taking place by no later than 8.00 a.m. on 1 April 2010 (or such later time and date as the Company, J.P. Morgan Cazenove and Davy may agree not being later than 8.00 a.m. on 15 April 2010); and

(iii)  the Placing and Open Offer Agreement having become unconditional in all respects and not having been terminated in accordance with its terms.

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 8 March 2010. The Open Offer Entitlements will also be enabled for settlement in CREST at 8.00 a.m. on 8 March 2010. Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

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 their Application Form is not a negotiable document and cannot be traded.

Further information on the Placing and Open Offer and terms and conditions on which it is made, including the procedure for application and payment, will be set out in the Prospectus and, where relevant, on the applicable Application Form.

If Admission does not take place on or before 8.00 a.m. on 1 April 2010 (or such later time and/or date as the Company, J.P. Morgan Cazenove and Davy may determine, not being later than 8.00 a.m. on 15 April 2010), the Open Offer will lapse, any Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest as soon as practicable thereafter. In these circumstances, the Placing to the Conditional Placees will not proceed.

Application has been made to the ISE and the UKLA for the New Ordinary Shares, the subject of the Placing and the Open Offer, to be admitted to the Official Lists and to the Irish Stock Exchange and the London Stock Exchange for the New Ordinary Shares, the subject of the Placing and the Open Offer, to be admitted to trading on the Irish Stock Exchange's and the London Stock Exchange's respective regulated markets for listed securities. It is expected that Admission will become effective on 1 April 2010 and that dealings for normal settlement in the New Ordinary Shares, the subject of the Placing and the Open Offer, will commence at 8.00 a.m. on the same day.

Any Qualifying Shareholder who has sold or transferred all or part of his/her registered holding(s) of Ordinary Shares prior to 6.00 p.m. on 3 March 2010 is advised to consult his or her stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from him/her by the purchasers under the rules of the Irish Stock Exchange and the London Stock Exchange.

The Open Offer Shares, when issued and fully paid, will be identical to and rank in full for all dividends or other distributions declared, made or paid after Admission and in all other respects will rank pari passu with the Existing Ordinary Shares. No temporary documents of title will be issued. The New Ordinary Shares can be held in certificated form or in uncertificated form in CREST.

The commitments of the Conditional Placees are subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer.

Firm Placing

Kenmare is proposing to issue 748,515,033 Firm Placed Shares at the Issue Price pursuant to the Firm Placing.

The Firm Placed Shares are not subject to clawback and do not form part of the Open Offer. The Firm Placing is expected to raise approximately £89.8 million (US$135.0 million).

The Firm Placing is fully underwritten by the Underwriters pursuant to, and subject to the terms of, the Placing and Open Offer Agreement.

The Firm Placing is subject to the same conditions and termination rights which apply to the Placing and Open Offer.

Application has been made to the ISE and UKLA for the New Ordinary Shares, the subject of the Firm Placing, to be admitted to the Official List and to the Irish Stock Exchange and London Stock Exchange for the New Ordinary Shares, the subject of the Firm Placing, to be admitted to trading on the Irish Stock Exchange's and London Stock Exchange's respective regulated markets for listed securities. It is expected that Admission will become effective on 1 April 2010 and that dealings for normal settlement in the New Ordinary Shares, the subject of the Firm Placing, will commence at 8.00 a.m. on the same day.

The Firm Placed Shares, when issued and fully paid, will be identical to, and rank in full with, the Ordinary Shares for all dividends or other distributions declared, made or paid after Admission, and will rank pari passu in all other respects with the Existing Ordinary Shares as at the date of issue. The New Ordinary Shares can be held in certificated form or in uncertificated form in CREST.

Related Party Transaction

M&G is a related party for the purposes of the Listing Rules because it is a substantial shareholder in the Company (being a party which holds in excess of 10 per cent. of the currently issued ordinary share capital of the Company). M&G, as at 3 March 2010 is interested in approximately 165,694,896 Ordinary Shares, representing approximately 18.3 per cent. of the existing issued ordinary share capital of the Company. As M&G is participating, or may participate, in the Firm Placing and the Placing in respect of up to a maximum of 432,600,000 New Ordinary Shares (£51.9) million), it will be entitled to a commission of 1.75 per cent. of the value of the New Ordinary Shares for which it has agreed, or shall agree, to subscribe for under the Placing. Final participation of placees in the Firm Placing and the Placing is expected to occur on 5 March 2010 and has not therefore been confirmed as of the issue of this Announcement. In the event that M&G participates in the Firm Placing and the Placing in respect of this maximum, and is allocated all such New Ordinary Shares subscribed for under the Placing (but does not otherwise participate in the Open Offer), the shareholding of M&G in the Enlarged Issued Share Capital would be 598,294,896 Ordinary Shares or 24.9 per cent.

The participation of M&G in the Firm Placing and the Placing in respect of up to a maximum of 432,600,000 New Ordinary Shares is classified under the Listing Rules as a related party transaction and a class 1 transaction and, as such, requires the approval of Independent Shareholders by way of a simple majority in general meeting. This approval is sought in a Resolution to be tabled at the Extraordinary General Meeting. M&G will not vote at the Extraordinary General Meeting on the relevant Resolution. M&G has undertaken to take all reasonable steps to ensure that its associates (as defined in the Listing Rules) do not vote on the relevant Resolution at the Extraordinary General Meeting. As will be referred to in the Prospectus, the Board believes that the participation by M&G in the Firm Placing and the Placing in respect of up to a maximum of 432,600,000  New Ordinary Shares, which would be on the same terms and, other than the approval of the relevant Resolution, subject to the same conditions as the participation of all other participants, is fair and reasonable and in the best interests of Shareholders as a whole and the Board has been so advised by Davy, an independent financial adviser.

5.         Current Trading and Prospects

Today, Kenmare published its unaudited preliminary results in respect of the year ended 31 December 2009. In these Preliminary Results, which will be reproduced in the Prospectus, the Group has reported revenue and related costs in the income statement from July 2009 (until the end of June 2009, because of the delayed ramp-up, Kenmare continued to operate an accounting policy where costs net of revenues were capitalised into the overall development expenditure for the project).

The reported loss after tax for the year ended 31 December 2009 was US$30.4 million. During the first six months of the year costs of US$13.8 million, net of revenue earned of US$15.6 million and net of delay damages of US$1.2 million, were capitalised in development expenditure in property, plant and equipment. Loan interest of US$13.4 million and finance fees of US$5.6 million were also capitalised resulting in an increase in development expenditure of US$32.8 million to 30 June 2009.

Revenue for the six months from July to December 2009 amounted to US$26.7 million and cost of sales for the corresponding period was US$35.2 million resulting in a gross loss of US$8.5 million. Distribution and administration costs for the six month period to December 2009 were US$1.8 million and US$1.9 million respectively. There was loan interest and finance fees of US$15.5 million during the second half of the year and deposit interest earned of US$0.2 million. In addition there was a foreign exchange loss for the year of US$2.9 million, mainly as a result of the retranslation of the euro denominated loans, resulting in a loss for the year of US$30.4 million.

For the year, additions to property, plant and equipment amounted to US$47.7 million made up of assets of US$14.1 million and development expenditure of US$33.6 million. At 31 December 2009 net property, plant and equipment amounted to US$540.9 million. Depreciation and amortisation for the six month period was US$12.9 million.

In June 2009, the Group completed a share placing resulting in US$16.1 million being received in August 2009. At the 31 December 2009 Group loans totalled US$356.1 million and cash balances amounted to US$17.4 million. In January 2010 US$7.7 million was received pursuant to the exercise of warrants.

The loss which occurred in the last six months of 2009 is a result of both the slower than planned ramp-up and the depressed feedstock market situation.

Since 31 December 2009, both production and market conditions, current and projected, are now healthier providing encouraging indications of a significant improvement in operational and financial performance for the year ahead. While the production improvements delivered by the PIP fell short of expectations during 2009, HMC production is currently at design capacity levels, with processing improvements on track. The significantly improving trend in zircon production since the commissioning of additional equipment in the zircon circuit, referred to in the announcement of 26 January 2010, has continued and is expected to be followed by improvements in rutile production. Production at levels approaching design capacity for ilmenite and zircon is expected by the end of the first half of 2010, with work to increase rutile production ongoing throughout 2010.

From 1 January 2010 to the end of February 2010, eight shipments from the Mine have been completed totalling 154,000 tonnes of ilmenite and zircon, as compared to one shipment in the first two months of 2009 for 7,050 tonnes of ilmenite, and twenty four shipments in 2009 totalling 418,000 tonnes of ilmenite and zircon.

6. Importance of the Vote

The Board is recommending the raising of approximately £179.6 million (US$269.9 million) (approximately £170.8 net of expenses (US$256.7 million)) through the Capital Raising. This Capital Raising will enable the Group to proceed with the proposed Expansion on the basis of the Expansion Study and make the Deposit, thereby satisfying the condition of the Expansion Funding Deed of Waiver and Amendment, and will provide the Group with additional liquidity to the extent that the capital raised is not used for the Expansion. According to the Expansion Study, the estimated cost of the Expansion is approximately US$200 million, which includes a contingency of approximately US$18 million. This estimated cost, excluding the contingency, is stated to an accuracy limit of +/- 25 per cent. The Lender Group has agreed to a number of revisions to the existing Financing Agreements, in connection with the proposed Expansion, which are conditional on the Deposit which is proposed to be raised through the Capital Raising. These waivers and amendments, details of which will be set out in the Prospectus, include the modification of the Completion tests, the deferral of the deadline for Technical Completion (currently set for 31 December 2010) elimination of the deadline for Completion (currently set for 31 December 2012) and the introduction of Non-Technical Completion as a concept and establishing its deadline as 31 December 2013. These Agreed Financing Amendments are conditional on, and will become effective immediately upon, making the Deposit.

The Capital Raising is conditional, inter alia, on the passing of the Resolutions at the EGM. If the Resolutions are not passed, the Capital Raising will not complete, the proposed Expansion will not proceed at this time (thereby preventing the Group from significantly increasing its production in order to take advantage of the projected improvement in market conditions for titanium mineral products) and the Agreed Financing Amendments to the Financing Agreements will not become effective. In this situation, the existing provisions of the Financing Agreements would, absent further renegotiation, continue. These include, inter alia, requirements that Technical Completion and Completion occur by 31 December 2010 and 31 December 2012 respectively. In addition, a number of scheduled Senior Loan principal and interest repayments fall due under the Financing Agreements over the forthcoming period including the August Payment.

Cashflow generation from the Mine for 2009 was significantly below budget. This was due in part to market deterioration as a result of the global recession in 2009, decreased demand leading to customers deferring delivery of shipments and reduced prices being realised for some spot market ilmenite sales. The Group has also experienced delays in achieving targeted production for the period as a result of difficulties with the equipment, the consequent necessity for the implementation of the PIP, and the delay in completing all material aspects of the PIP to achieve the planned Ramp Up in production to design levels across all three of the Group's final products. While the PIP has been completed and some additional upgrading is in progress to address the production deficiencies, including the installation of additional reheaters in the zircon and rutile circuits, along with a new ilmenite scavenging circuit, which are designed to significantly enhance the zircon and rutile production the Company has not yet completed the Ramp Up and reached targeted production. There is also a risk that pricing and/or shipment levels may not be achieved and that insufficient cash may therefore be generated from the Mine to meet the next scheduled payment under the Financing Agreements in August 2010. Accordingly, should circumstances require it, some of the proceeds of the Capital Raising may be used so as to ensure that the Company can meet any shortfall in cashflow in order to service Senior Loan obligations as they fall due.

If the Resolutions are not passed, the Capital Raising and the Deposit will not complete, the Agreed Financing Amendments will not become effective and the Company will not proceed with the Expansion at this time. In such circumstances, the Company would, to the extent it becomes necessary, take a number of actions designed to maximise cashflow/increase its cash balances in order to meet scheduled Senior Loan interest and principal payment obligations as they fall due, including the August Payment. These steps could include disposing of stocks of titanium minerals product built up at the Mine earlier than planned under the Company's shipping schedule, curtailing discretionary expenditure, seeking to obtain additional debt or equity finance and/or seeking to agree with the Lender Group amendments to the loan repayment schedules. While the Directors believe they would be able to implement the necessary courses of action in order to satisfy the payment obligations under the Financing Agreements, the consequences of such actions may be inconsistent with the long term strategy of the Group. For example, the accelerated sale of inventory may affect the pricing the Group achieves for its products more generally, curtailment of expenditure may delay or prevent the delivery of benefits from the capital expenditure programme, alternative capital may be expensive, and the cost of any amendments agreed with the Lender Group may be punitive and may result in more onerous obligations than those currently prevailing. Discussions between Kenmare and the Lender Group to date have been based on the assumption that the Capital Raising and the Expansion will proceed.

The current terms of the Financing Agreements require the Group to achieve Technical Completion tests by 31 December 2010. Should the Capital Raising and Deposit not be completed and, as a result, the Agreed Financing Amendments do not become effective, Kenmare would seek to agree with the Lender Group a number of amendments to the Technical Completion tests in order to accommodate some operational aspects of the Mine which are different than those originally envisaged. Furthermore, in the event that production rates and other operational aspects from the Mine were not expected to be sufficient to satisfy the Technical Completion tests as at 31 December 2010, the Company would also seek to re-negotiate the tests for Technical Completion and/or implement a number of operational measures (certain of which may be uneconomical and may be inconsistent with the Group's long term strategy) in order to satisfy the Technical Completion test or to limit the scope of any necessary modifications to the Technical Completion tests. While the production levels and operational measures required under Technical Completion have not yet been achieved and there can be no guarantee that the Technical Completion requirements will be satisfied, the Directors believe that they would be able to implement the required operational measures and/or successfully re-negotiate a deferral or relaxation of loan terms with Lenders.

If the Capital Raising is not completed, the Deposit is not made and the Group is unable to meet its obligations under the Financing Agreements (whether in relation to scheduled payments of Senior Loan principal and interest repayments or Technical Completion or otherwise), and if in addition the Group is unable to agree requisite amendments to the Financing Agreements prior to the agreed schedule in the Financing Agreements, there would be an event of default under the Financing Agreements. In the case of an event of default under the Financing Agreements, the Lenders may in certain circumstances be permitted to apply post-default interest margins, accelerate the payment of all sums outstanding under the facilities (including any accrued interest), enforce the security interests in the assets of the Project Companies, the CRA and the shares of the Project Companies and guarantees granted by Kenmare and Congolone, place the Project Companies into administration and initiate insolvency or other similar proceedings against the Project Companies.

Accordingly, the Board believes that it is in the best interests of the Company and Shareholders as a whole that all Shareholders vote in favour of the Resolutions in order that the Capital Raising and, consequently the Deposit, can proceed and the Agreed Financing Amendments to the Financing Agreements become effective.

7. Extraordinary General Meeting

A notice convening the Extraordinary General Meeting will be set out in the Prospectus. The Extraordinary General Meeting will be held on 29 March 2010 at 11.00 a.m. at The Westbury Hotel, Grafton Street, Dublin 2, Ireland. A Form of Proxy will be enclosed with the Prospectus.

The Extraordinary General Meeting is being held for the purpose of considering and, if thought fit, passing the resolutions that will be set out in the Prospectus.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Event	Time and/or Date
Record Date for entitlement under the Open Offer	6.00 p.m. on 3 March, 2010
Announcement and publication of Prospectus and Application Form	5 March,  2010
Ex-entitlement date for the Open Offer	8 March, 2010
Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST	by 8 March, 2010
Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST	4.30 p.m. on 19 March,  2010
Latest time and date for depositing Open Offer Entitlements into CREST	3.00 p.m.  on 23 March, 2010
Latest time and date for splitting Application Forms (to satisfy bona fide market claims only)	3.00 p.m.  on 24 March, 2010
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate)	11.00a.m.  on 26 March, 2010
Latest time and date for receipt of Forms of Proxy and receipt of electronic proxy appointments by registered Shareholders for the Extraordinary General Meeting	11.00a.m.  on 27 March, 2010
Extraordinary General Meeting	11.00a.m.  on 29 March, 2010
Admission and commencement of dealings in the New Ordinary Shares	8.00 a.m.  on 1 April, 2010
New Ordinary Shares, in uncertificated form, expected to be credited to CREST accounts	8.00 a.m.  on 1 April, 2010
Despatch of definitive share certificates for New Ordinary Shares in certificated form	by 8 April, 2010

Notes:

(1)        The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement may be adjusted by the Company, in which event details of the new times and dates will be notified to the Irish Stock Exchange, the UKLA, the London Stock Exchange, and, where appropriate, Qualifying Shareholders by means of an announcement through a Regulatory Information Service.

 (2)       References to times in the timetable are to Dublin times unless otherwise stated.

DEFINITIONS

In this Announcement, the following expressions have the following meaning unless the context otherwise requires:

"1990 Act"	the Companies Act 1990;
"1963 Act"	the Companies Act 1963;
"1983 Act"	the Companies (Amendment) Act 1983;
"2005 Act"	the Investment Funds, Companies and Miscellaneous Provisions Act 2005;
"Absa"	Absa Bank Limited, a South African bank;
"AfDB"	African Development Bank, an international organisation established and existing under the agreement establishing the African Development Bank and having its headquarters in Abidjan, Republic of the Cote D'Ivoire;
"Additional Standby Subordinated Loans"	additional Subordinated Loans in an aggregate principal amount of US$22 million made to the Project Companies by FMO and, by way of sub-participation, EAIF, pursuant to an amendment to the Subordinated Loan Agreement dated 28 August 2007;
"Additional Subordinated Lender Margin"	additional interest accruing on the Subordinated Loans at the rate of 3 per cent. per annum from 31 March 2009 until the date of Technical Completion, and at the rate of 1 per cent. per annum from the date of Technical Completion until the date of Completion, and thereafter, nil;
"Admission"	the admission of the New Ordinary Shares to the Official Lists becoming effective in accordance with the Listing Rules and the admission of such shares to trading on the respective regulated markets for listed securities of the Irish Stock Exchange and the London Stock Exchange becoming effective in accordance with the Admission and Disclosure Standards;
"Admission and Disclosure Standards"	the "Admission and Disclosure Standards" of the London Stock Exchange and the Admission to Trading Rules of the Irish Stock Exchange containing, among other things, the admission requirements to be observed by companies seeking admission to trading on the Irish Stock Exchange's and London Stock Exchange's respective regulated markets for listed securities;
"Agreed Financing Amendments"	the agreed amendments to the Financing Agreements set forth in theExpansion Funding Deed of Waiver and Amendment;
"Aker Solutions" or "AS"	Aker Solutions E&C International Ltd;
"Application Form"	the personalised application form on which Qualifying Non- CREST Shareholders who are registered on the register of Kenmare at the Record Date may apply for Open Offer Shares under the Open Offer;
"August Payment"	a payment of US$17.8 million in respect of repayment of principal and payment of interest under the Senior Loans due on 3 August 2010;
"Banks"	J.P. Morgan Cazenove, Davy, Canaccord Adams and Mirabaud Securities;
"BHP"	BHP Billiton Limited of BHP Billiton Centre 180 Lonsdale Street, Melbourne Victoria 3000, Australia;
"Board"	the board of directors of Kenmare Resources plc;
"Capital Raising"	the Placing and Open Offer and the Firm Placing;
"Canaccord Adams"	Canaccord Capital Inc, trading as Canaccord Adams of 7th Floor, Cardinal Place, 80 Victoria Street, London SW1, United Kingdom;
"Cash Collateral and Shareholder Funding Deed"	the cash collateral and shareholder funding deed dated 18 June 2004, as amended, varied, novated from time to time to time, entered into among Kenmare, Congolone, the Lender Group, and Absa as administrative agent, Absa Bank Limited, London branch, as account bank and security trustee;
"CCSS"	the CREST Courier and Sorting Service established by Euroclear to facilitate, amongst other things, the deposit and withdrawal of securities;
"Closing Price"	the closing, mid-market quotation of an Existing Ordinary Share, as published in the daily official list of the London Stock Exchange, or as the case may be, the closing, middle market quotation of an Existing Ordinary Share, as published in the daily official list of the Irish Stock Exchange;
"Common Terms Agreement"	the agreement dated June 18 2004, as amended, varied and novated from time to time, entered into among the Project Companies, the Lender Group and Absa as administrative agent, Absa Bank Limited, London branch, as account bank and security trustee setting forth common terms for the provision of the Senior Loans and Subordinated Loans to the Project Companies;
"Companies Acts"	the Companies Acts 1963 to 2009;
"Completion"	in summary the achievement of Technical Completion and the satisfaction of certain other legal, financial and marketing conditions, as evidenced by the delivery of the completion certificates specified in the Completion Agreement in the manner so specified;
"Completion Agreement"	the agreement dated 18 June 2004 and as amended, varied and novated from time to time among Kenmare, Congolone, the Lender Group and Absa as administrative agent, Absa Bank Limited, London branch, as account bank and security trustee;
"Completion Guarantee"	the guarantee in the Completion Agreement by Kenmare and Congolone of all amounts of Senior Loans;
"Completion Tests"	the conditions to be satisfied by the Mine and the Project Companies for purposes of achieving Completion, being the conditions set forth in the completion certifcates specified in the Completion Agreement and the delivery of such certifcates in the manner so specified;
"Computershare"	Computershare Investor Services (Ireland) Limited, the Registrar and receiving agent of the Company;
"Conditional Placees"	any persons who have agreed or shall agree to subscribe for Open Offer Shares pursuant to the Placing subject to clawback to satisfy valid applications by Qualifying Shareholders pursuant to the Open Offer;
"Congolone"	Congolone Heavy Minerals Limited, a wholly owned indirect subsidiary of Kenmare;
"Contingency Reserve Account" or "CRA"	the account established, maintained and secured in favour of the Lender Group in accordance with the Cash Collateral and Shareholder Funding Deed into which certain cash collateral is deposited as collateral security for Kenmare's and Congolone's obligation under the Completion Agreement;
"CREST"	the relevant system (as defined in the 1990 Act (Uncertificated Securities) Regulations 1996 of Ireland), as amended enabling title to securities to be evidenced and transferred in dematerialised form operated by Euroclear UK & Ireland Limited;
"CREST Manual"	the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure and CREST Glossary of Terms (all as defined in the CREST Glossary of Terms promulgated by Euroclear on 15 July 1996 and as amended since);
"CREST Regulations"	the Companies Act 1990 (Uncertificated Securities) Regulations 1996, including (i) any enactment or subordinate legislation which amend or supersedes those regulations; and (ii) any applicable rules made under those regulations or any such enactment or subordinate legislation for the time being in force;
"Davy"	J&E Davy (trading as Davy) of Davy House, 49 Dawson Street, Dublin 2, Ireland, trading as Davy;
"Deed of Amendment and Settlement"	the deed entered into on 18 December 2006 between the Project Companies and the EPC Contractor to amend the EPC Contract;
"Deed of Final Settlement and Release"	the deed entered into on 18 December 2009 between the Project Companies and the EPC Contractor to settle and release all outstanding rights under the EPC Contract;
"Deferred Shares"	deferred shares of €0.25 each in the capital of the Company which are non-voting, carry no dividend rights and may be repurchased by the Company at a price not exceeding 1c for all such Deferred Shares so purchased;
"Deposit"	the deposit of US$200 million into the Contingency Reserve Account by no later than 30 June 2010, as required under the Expansion Funding Deed of Waiver and Amendment to give effect to the Agreed Financing Amendments;
"Directors"	the directors of the Company;
"EAIF"	Emerging Africa Infrastructure Fund Limited, a limited liability company organised and existing under the laws of Mauritius;
"EIB"	European Investment Bank, a European Union institution established by the Treaty of Rome;
"enabled for settlement"	in relation to Open Offer Entitlements, enabled for the limited purpose of settlement of claim transactions and unmatched stock event transactions (each as described in the CREST Manual issued by Euroclear);
"EGM" or "Extraordinary General Meeting"	the extraordinary general meeting of the Company, to be held at 11.00 a.m. on 29 March 2010 at The Westbury Hotel, Grafton Street, Dublin 2, Ireland or any adjournment thereof, notice of which will be set out in the Prospectus;
"Engineering Study"	the engineering study being performed by Aker Solutions in relation to the Expansion;
"Enlarged Issued Share Capital"	the Existing Ordinary Shares as enlarged by the allotment and issue of the New Ordinary Shares;
"EPC"	Engineering, Procurement and Construction;
"EPC Contract"	the contract for the building, and transfer of facilities at the Mine;
"EPC Contractor"	the joint venture formed between subsidiaries of Multiplex Limited and Bateman B.V.;
"EPCM"	Engineering, Procurement Construction and Management;
"EPCM Contract"	the contract for the engineering, procurement, construction and management of the Expansion;
"EPCM Contractor"	the contractor responsible for delivering the EPCM Contract;
"EU"	the European Union;
"EUR" or "€" or "Euro"	euro, the lawful currency of Ireland;
"Euroclear"	Euroclear UK & Ireland Limited, the operator of CREST;
"Excluded Territories"	Australia, Canada, Hong Kong, Japan and Switzerland and any other jurisdictions where the extension of availability of the Placing and Open Offer would breach any applicable law or any one of them as the context requires;
"Excluded Territory Shareholder"	subject to certain exceptions, a Qualifying Shareholder who has a registered address in or are otherwise located in the United States or any Excluded Territory;
"Executive Directors"	Michael Carvill, Jacob Deysel, Terence Fitzpatrick and Tony McCluskey;
"Existing Ordinary Shares"	the Ordinary Shares in issue at the Record Date;
"Expansion"	the upgrade of the existing Moma mining operation, the construction and commissioning of a new mining operation and the expansion of the MSP to achieve a circa 50 per cent. increase in ilmenite production capacity to circa 1,200,000 tonnes per year plus associated co-products of zircon and rutile;
"Expansion Funding Deed of Waiver and Amendment"	The deed of waiver and amendment dated 4 March 2010, relating to the Common Terms Agreement, Cash Collateral and Shareholders Funding Deed, Senior Loan Agreements and Subordinated Loan Agreements entered into by the Project Companies, the Lender Group and the Lenders' Agents;
"Expansion Plan" or "Expansion Study"	the expansion study completed by Kenmare into the expansion of production capacity of the Mine;
"Final Completion Date"	currently under the Financing Agreements, 31 December 2012 and, upon the effectiveness of the Agreed Financing Agreements, 31 December 2013;
"Financial Regulator"	the Irish Financial Services Regulatory Authority, as a constituent part of the Central Bank and Financial Services Authority of Ireland;
"Financing Agreements"	the loan documentation for the financing of the Mine entered into with the Lender Group including the Common Terms Agreement, the Completion Agreement, the Cash Collateral and Shareholders Funding Deed, Senior Loan Agreements, Subordinated Loan Agreements, Subordinated Lenders' Option Agreement and amendments thereto;
"Firm Placed Shares"	the 748,515,033 New Ordinary Shares which are the subject of the Firm Placing;
"Firm Placing"	the placing of the Firm Placed Shares with the Firm Placees;
"Form of Proxy"	the form of proxy to be used at the Extraordinary General Meeting;
"FMO"	Financierings Maatschappij Voor Ontwikkslingslanden N.V., a limited liability company organised and existing under the laws of the Netherlands;
"FSA"	the Financial Services Authority of the United Kingdom;
"FSA Handbook"	the handbook of rules and guidance issued by the FSA, as amended from time to time;
"FSMA"	Financial Services and Markets Act 2000 of the United Kingdom, as amended from time to time;
"Global Co-ordinator"	J.P. Morgan Cazenove;
"IBMA"	International Business Management Associates Inc.;
"Independent Shareholders"	the shareholders other than M&G, being those Shareholders who are eligible to vote on Resolution (5);
"Ireland"	Ireland other than Northern Ireland, and the word "Irish" shall be construed accordingly;
"Irish Stock Exchange" or "ISE"	The Irish Stock Exchange Limited;
"ISIN"	International Securities Identification Number;
"Issue Price"	GBP12p (€0.132) per New Ordinary Share;
"Issued Share Capital" or "Issued Shares"	the 906,097,146 Ordinary Shares which were in issue on 3 March 2010 (being the latest practicable date prior to the publication of the Prospectus);
"J.P. Morgan Cazenove"	J.P. Morgan Securities Ltd. (which conducts its UK investment banking activities as J.P. Morgan Cazenove) of 125 London Wall, London EC2Y 5AJ;
"KfW"	KfW, a public law institution organised under the laws of the Federal Republic of Germany;
"Kenmare" or "the Company"	Kenmare Resources public limited company, a company registered in Ireland with registered number 37550 and having its registered office at Chatham House, Chatham Street, Dublin 2;
"Kenmare Group" or "the Group"	Kenmare and its subsidiaries, subsidiary undertakings, branches and associate undertakings;
"KMML"	Kenmare Moma Mining (Mauritius) Limited, a wholly-owned indirect subsidiary of Kenmare which is incorporated in Mauritius;
"KMPL"	Kenmare Moma Processing (Mauritius) Limited, a wholly-owned indirect subsidiary of Kenmare, which is incorporated in Mauritius;
"Lender Group" or "Lenders"	the group of lenders which have provided Senior Loans and Subordinated Loans to the Group for the Mine being the EIB, AfDB, FMO, KfW, EAIF and Absa;
"Lenders' Agents"	the administrative agent, the security trustee and the account bank appointed pursuant to the terms of the Common Terms Agreement;
"Listing Rules"	the listing rules issued by the FSA in its capacity as the competent authority for the purposes of Part VI of the FSMA and as set out in the FSA Handbook, as amended from time to time and/or the listing rules issued by the Irish Stock Exchange;
"London Stock Exchange"	the London Stock Exchange plc;
"Market Abuse Directive"	Directive 2003/6/EC;
"M&G"	M&G Investment Management Limited and its associates (as defined in the Listing Rules);
"Mine"	the Moma titanium minerals mine consisting of a heavy mineral sands mine, processing facilities and associated infrastructure which is located in the north east coast of Mozambique under licence to KMML and KMPL;
"Minerals Concentrator Plant"	the minerals concentrator plant which was purchased from BHP Titanium Minerals Pty Limited, a subsidiary of BHP in January 2000;
"Mining Concession"	mining concession 735C issued by the Government of Mozambique to KMML relating to the Namalope Reserve which is valid until 28 August 2029;
"Mirabaud Securities"	Mirabaud Securities LLP of 21 St. James's Square, London, SW1Y 4JP, United Kingdom;
"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;
"Namalope Reserve"	the deposit of heavy mineral sands contained within the Mining Concession;
"Nampula"	capital city of the province in which the Mine is situated;
"Nataka Resource"	the deposit of heavy mineral sands contained within the Nataka exploration licenses;
"New Ordinary Shares"	the new Ordinary Shares to be issued by the Company pursuant to the Capital Raising and "New Ordinary Share" means any one of them;
"Non-Technical Completion"	satisfaction of the non-technical requirements for Completion;
"Notice"	the notice of EGM set out at the end of the Prospectus;
"Non-executive Directors"	the Directors other than the Executive Directors;
"Official Lists"	the official lists of the UKLA and the Irish Stock Exchange;
"Open Offer"	the offer to Qualifying Shareholders, constituting an invitation to apply for the Open Offer Shares on the terms and subject to the conditions set out in the Prospectus and, in the case of Qualifying Non-CREST Shareholders, in the Application Form;
"Open Offer Entitlements"	an entitlement of a Qualifying Shareholder to apply for 19 Open Offer Shares for every 23 Existing Ordinary Share(s) held by him or her on the Record Date pursuant to the Open Offer;
"Open Offer Shares"	the 748,515,033 New Ordinary Shares to be offered to Qualifying Shareholders under the Open Offer;
"Ordinary Shares"	the ordinary shares with a nominal value of €0.06 each in the share capital of the Company including, if the context requires, the New Ordinary Shares;
"PIP"	performance improvement programme entered into by the Project Companies and the EPC Contractor in 2008 and 2009 to address the deficiencies in the plant and equipment;
"Placing"	the conditional placing of the Open Offer Shares with Conditional Placees in accordance with the Placing and Open Offer Agreement;
"Placing and Open Offer"	the Placing and the Open Offer;
"Placing and Open Offer Agreement"	the conditional agreement dated 5 March 2010 between the Company and J.P. Morgan Cazenove, Davy, Canaccord Adams and Mirabaud Securities, further details of which will be set out in the Prospectus;
"Preliminary Results" or "Preliminary Results Announcement"	the announcement by the Company of the unaudited preliminary results in respect of the twelve months ended 31 December 2009 as published on 5 March 2010 and reproduced in the Prospectus;
"Project Accounts"	the accounts established by the account bank for the benefit of the Project Companies pursuant to the Common Terms Agreement, which are secured in favour of the Lender Group and the Lenders' Agents;
"Project Companies"	KMML and KMPL;
"Prospectus"	the document expected to be issued by Kenmare dated 5 March 2010;
"Qualifying CREST Shareholders"	Qualifying Shareholders holding Ordinary Shares in uncertificated form in CREST;
"Qualifying Non-CREST Shareholders"	Qualifying Shareholders holding Ordinary Shares in certificated form;
"Qualifying Shareholders"	Shareholders on the register of members of the Company on the Record Date, with the exclusion (subject to exceptions) of persons with a registered address or located in the United States or any Excluded Territory;
"Ramp Up"	the ramp up of the Mine to achieve design capacity levels of 800,000 tpa of ilmenite, 50,000 tpa of zircon and 14,000 of rutile;
"Record Date"	6.00 p.m. on 3 March 2010;
"Registrar" or "Receiving Agent" or "Computershare"	Computershare Investor Services (Ireland) Limited;
"Regulatory Information Service" or "RIS"	one of the regulatory information services authorised by the Irish Stock Exchange and/or the FSA to receive, process and disseminate regulated information from listed companies;
"Resolutions"	the resolutions to be proposed at the Extraordinary General Meeting in connection with the Capital Raising, contained in the Notice which will be set out in the Prospectus;
"Rothschild"	N.M. Rothschild & Sons Limited, of New Court, St. Swithin's Lane, London EC4P 4DU, United Kingdom;
"Senior Lenders"	the group of lenders that have provided Senior Loans to the Project Companies being EIB, AfDB, FMO, KfW, EAIF and Absa;
"Senior Loans"	the loans with Senior Lenders;
"Senior Loan Agreement"	each of the agreement entered into between the Project Companies and a Senior Lender;
"Shareholders"	holders of Ordinary Shares;
"SRK"	SRK (UK) Limited;
"Sponsor"	Davy, in its capacity as sponsor to Kenmare in respect of the Capital Raising under the Listing Rules;
"Standby Subordinated Loans"	additional Subordinated Loans in an aggregate principal amount of €2.8 million and US$4 million made to the Project Companies by EIB and FMO, and by way of sub-participation in FMO's Standby Subordinated Loans, EAIF, pursuant to agreements entered into on 30 June 2005;
"Subordinated Lender"	the group of lenders that have provided the Subordinated Loans to the Mine being the EIB, FMO and as a sub-participant in FMO's Subordinated Loans EAIF;
"Subordinated Loan(s)"	the loans from Subordinated Lenders to the Project Companies, including the Additional Standby Subordinated Loans and the Standby Subordinated Loans;
"Subordinated Loan Agreements"	the agreements entered into between the Project Companies and EIB and FMO, pursuant to which the Subordinated Loans have been made available to the Project Companies;
"subsidiary"	shall be construed in accordance with the 1963 Act;
"subsidiary undertakings"	shall have the meaning given by the European Communities (Companies: Group Accounts) Regulations 1992;
"Technical Completion"	the completion of the construction of the Mine to the point where it is operational in a defined manner as evidenced by the delivery of certain completion tests specified in the Completion Agreement by the Project Companies;
"TZMI"	TZ Minerals International Pty Limited, independent consultant in the mineral sands and TiO2 pigment industries;
"UK Listing Authority" or "UKLA"	the UK Listing Authority, being the FSA acting as the competent authority for the purposes of Part VI of the FSMA;
"United Kingdom"	the United Kingdom of Great Britain and Northern Ireland;
"Underwriters"	J.P. Morgan Cazenove, Davy and Canaccord Adams;
"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; and
"US Securities Act"	the US Securities Act of 1933, as amended.

 

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