Iluka Resources Limited (ASX: ILU) has entered into a partnership with the International Finance Corporation (IFC) to expand existing Sierra Leone operations.
Iluka is a resources and mining company focused on minerals zircon, rutile and synthetic rutile which are used in ceramics, pigments and optical equipment, among other products. Headquartered in Perth, Iluka has been operating for over 60 years, and currently operates in Australia and Sierra Leone.
Partnership with IFC
The IFC is a member of the World Bank Group. It offers investment and asset management services to encourage development in emerging economies and less-developed nations.
IFC has agreed to take up a 10% stake in Sierra Rutile, Iluka’s wholly-owned Sierra Leone subsidiary. This will occur through a subscription to new shares.
IFC will initially invest US$20 million for a 3.57% stake, before investing a further US$40 million to obtain a 10% stake, subject to construction and environmental approvals.
The funds are to be used to develop the Sembehun project, which is expected to unlock 70% of Sierra Rutile’s remaining ore reserves. According to the statement from Iluka, this would significantly extend the life of Sierra Rutile’s operations.
The second investment from IFC is subject to Sembehun development approvals within 18 months of the first investment, as well as Sierra Rutile meeting IFC performance standards.
IFC will also have a representative on both the Sierra Rutile and Iluka Investments Limited (the holding company of Sierra Rutile) boards.
Iluka’s Managing Director Tom O’Leary said, “This partnership provides mutual benefit to Sierra Rutile, Iluka, IFC and the people of Sierra Leone by promoting the continued, sustainable development of the Sierra Rutile operation.”
Is Iluka a Buy?
If the second round of investment goes ahead, it would certainly be a positive for Iluka to extend the life of its Sierra Rutile operations. However, rutile is only a small part of Iluka’s mineral sands revenue – rutile and synthetic rutile together made up around 25% of revenue in FY18. Unless this operation leads to significantly higher production, it may not have a large impact on the company.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.