Iluka pushing hard for Sierra rutile split

Company News

by Glenn Dyer

Iluka Resources is urging shareholders to support the demerger of the company’s disappointing Sierra Leone beach sands operations to clear the way for the creation of a standalone rare earths operation in WA.

Iluka revealed plans in April to separate the Sierra Leone operations and has been working up the divorce petition in the time.

Yesterday, the documents landed and Iluka said the separation of the Sierra Leone mineral sands business is in the best interest of shareholders, according to the independent expert commissioned to assess the value of the split.

Directors hope the expert report will boost the prospects of the proposal winning sufficient support.

The deal is being pitched as a way to revive the weakly performing Sierra Leone mineral sands business, which Iluka has, without success, sought to find investment partners for the project.

But sustained production problems, equipment challenges and personnel issues have not helped make the assets perform, so in April the Perth based Iluka announced plans to split its business during the remainder of 2022.

The demerger will result in two independent ASX-listed companies being created – Iluka and Sierra Rutile.

Iluka directors say the company will continue to be a leading global supplier of critical minerals such as rare earths while Sierra Rutile will be a West African focused mineral sands producer and developer.

Iluka shareholders will vote on the split at a meeting on July 22 and should it happen, Iluka shareholders will get one Sierra share for every one Iluka share held.

Iluka’s directors have unanimously recommended that shareholders vote in favour of the proposed demerger.

The Independent Expert, Deloitte Corporate Finance Pty Limited, has concluded that the demerger is in the best interests of Iluka shareholders.

The Iluka directors said in the split documents issued Monday that they unanimously believe the Demerger of Sierra Rutile “is in the best interests of Iluka Shareholders and will, over time, deliver greater value to Iluka Shareholders than the current structure.”

“In arriving at this view, the Iluka Board has considered a range of alternatives, with the Demerger providing a balance between the benefits of separating the business, and Iluka Shareholders having the option to retain longer term exposure to its future development and growth,” Directors said.

“Iluka’s business has evolved significantly since it acquired Sierra Rutile in 2016, with Iluka’s strategic and capital allocation priorities now focused on key Australian operations and development projects.”

“Key among these is Iluka’s continued diversification into rare earths, with the recent Board approval of the development of the fully integrated Eneabba Rare Earths Refinery in April 2022.

“This evolution in Iluka’s strategic priorities has led to the determination that a separation of Sierra Rutile by way of demerger is the optimal pathway for Sierra Rutile to reach its potential and maximise value for Iluka Shareholders,” Iluka directors said in the statement.

In other words, Sierra Rutile is seen as an impediment to Iluka’s rare earths ambitions at Eneabba near Perth.

Iluka shares eased more than 3% to $8.73 yesterday.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.