By Amin Kef (Ranger)
A fresh contender, Leonoil Company Limited, a petroleum marketing business entity, controlled by Sierra Leonean businessmen, has emerged in the heated battle to control a West African mineral sands miner, Sierra Rutile Company Limited. It has announced its intention to acquire ASX-listed Sierra Rutile for $0.18¢ash a share. This cash offer is approximately $76.4 million, with Leonoil backed by West Perth’s Sternship Advisers.
Already, Leonoil has sent an unsolicited proposal to Sierra Rutile Holdings Limited (ASX: SRX). The company holds 19.85% of the issued and outstanding ordinary shares in Sierra Rutile ( SRX). Leonoil’s conditional off-market takeover bid targets all remaining shares it does not already own, offering $0.18 cash per share without a minimum acceptance condition.
The Leonoil Proposal presents key terms similar to those of a competing bid from Gemcorp Commodities Assets Holding Limited (Gemcorp), with Sierra Rutile’s Board indicating that it may reasonably be expected to become a superior proposal under the Gemcorp Bid Implementation Agreement (BIA). Gemcorp has been notified of the Leonoil Proposal and has until the close of business on 18 July 2024 to provide a matching or superior offer.
In summary the Leonoil Proposal is offering a price of $0.18 cash per ordinary share with no minimum acceptance condition, no prescribed occurrences, no material adverse change, no Government or regulatory action adversely impacting the proposal and no breach by SRX of certain business restrictions.
With regards to deal protections such includes “no shop, no talk” and “no due diligence” restrictions as well as notification and matching rights in the event of a competing proposal. A reciprocal break fee is also proposed.
Sierra Rutile shareholders are advised to refrain from taking action under the Gemcorp Offer during this period and wait for further information in accordance with SRX’s continuous disclosure obligations.
In terms of Rutile Market Insights the global market anticipates a supply deficit for natural rutile due to growing demand outstripping depleting resources leading to increasing prices. Natural rutile is the cleanest and purest form of titanium dioxide and it boasts of high grade and low impurity characteristics, making it superior to ilmenite. It is highly sought after for its applications in pigment production, titanium metal and welding.
It must be noted that rutile is used in paints, paper, plastics, inks and coatings. It serves as a primary source of white coloring in products such as paint and toothpaste. As a Titanium Metal it is essential in aerospace, medical implants, defense, sports equipment and industrial applications due to its high strength-to-weight ratio and chemical resistance. In welding, it enhances the safety, durability and strength of steel joining in construction, manufacturing and shipbuilding.
Despite a dip in pigment demand in 2023 due to economic factors, the long-term demand for titanium metal remains robust.
Sierra Rutile, supplying over 20% of global natural rutile, is well-positioned to benefit from constrained supply and recovering demand, potentially leading to increased future pricing and investment in replacement supply from deposits like Sembehun.
As the competition intensifies, Sierra Rutile’s established track record and high-quality products make it a valuable asset in the mineral sands industry. Shareholders and industry watchers alike await further developments in this unfolding corporate saga.
Sierra Rutile stands as the world’s largest producer of natural rutile, boasting over 50 years of operational history in Sierra Leone. The company is strategically positioned to expand its operations with the proposed development of the Sembehun deposits, one of the world’s largest and highest-grade natural rutile resources. This development is expected to extend SRX’s mine life by at least 14 years. Sierra Rutile is publicly listed on the Australian Securities Exchange, highlighting its global reach and industry significance.
Leonoil is a marketing oil company specializing in automotive gas oil, petroleum motor spirit, and lubricants, has established itself as a significant player in the West African oil industry. Founded in 1994, Leonoil is proudly 100% Sierra Leonean-owned. The company operates twenty-four gas station outlets across Sierra Leone and extends its operations to four other West African countries. A key subsidiary, National Petroleum Sierra Leone Limited, supplies fuel to SRX.
Being an indigenous company that is doing extremely well in the petroleum sector, it is incumbent on Sierra Leoneans to support Leonoil’s unsolicited proposal of $76M to Sierra Rutile in fierce competition with Gemcorp.
