PERTH (miningweekly.com) – Mineral sands miner Iluka on Wednesday announced plans to demerge its Sierra Rutile operations, in Sierra Leone, into a separately listed ASX-listed company.

The demerger would be subject to shareholder and other approvals, Iluka said.

The demerger will have the primary objective of maximising value from Sierra Rutile’s remaining deposits at Area 1 and developing the globally significant Sembehun project, and will allow Iluka to focus its capital allocation priorities and management attention on its core Australian assets and development opportunities.

Iluka said in a statement that the board had concluded that a separation of Sierra Rutile by way of demerger was the optimal outcome for Sierra Rutile to reach its potential and maximise value for shareholders.

This determination follows the process Iluka initiated in late 2020, seeking to identify third parties willing to invest in the next phase of Sierra Rutile’s growth. Having progressed these discussions, the Iluka board has concluded that it is too early to crystallise an appropriate value for the Sembehun development; and that a demerger, which provides shareholders with the option to retain an exposure to Sembehun, is a more appropriate outcome.

“After a comprehensive process, the Iluka board considers that a demerger represents the optimal pathway for Sierra Rutile to reach its full potential. Sierra Rutile will be well equipped to implement strategies to maximise the value from the remaining producing deposits at Area 1 and to continue to progress the globally significant Sembehun project,” said Iluka chairperson Greg Martin.

“For Iluka, the demerger of Sierra Rutile will enhance its focus on its core activities and growth opportunities in Australia, particularly at this important juncture in its evolution and diversification into rare earths. The demerger will simplify Iluka’s structure and ensure management focus is on executing its attractive Australian-based growth opportunities.”

Sierra Rutile will be established with a high-quality board and management team, led by Martin, who will transition to be Sierra Rutile’s inaugural chairperson elect. Sierra Rutile’s current CEO, Theuns de Bruyn, will transition to Sierra Rutile’s MD and CEO elect, while Martin Alciaturi has been appointed to the executive board position of finance director elect of Sierra Rutile.

Sierra Rutile will be financially well-positioned to maximise the value of its asset base; Iluka intends to establish a $45-million cash-funded rehabilitation trust to support Sierra Rutile’s existing rehabilitation obligations.

“Iluka’s business has evolved significantly since it acquired Sierra Rutile in 2016, with our strategic and capital allocation priorities now focused on our Australian operations and development projects. Key among these is our continued diversification into rare earths, where we recently announced final investment decision for the development of Australia’s first fully integrated rare earths refinery at Eneabba in Western Australia,” said Iluka MD Tom O’Leary.

“Sierra Rutile benefits from robust sustainability frameworks that have been implemented during Iluka’s ownership, with a focus on safety, environmental management, community relations and anti-bribery and corruption. Under De Bruyn’s leadership, the business has demonstrated improved performance throughout the second half of 2021, which has continued in 2022.

“Further, the recently ratified adjustments to Sierra Rutile’s fiscal regime and the favourable outlook for the titanium feedstock market all place Sierra Rutile in a strong position as a standalone entity. A demerger will not only position Sierra Rutile to reach its full potential, but also provides investors the opportunity to choose their desired exposure to each business based on their individual preferences for differing geographic exposures and risk-return profiles,” O’Leary said.

If it proceeds, the demerger will be effected by a capital reduction and in-specie distribution, under which all of the shares in Sierra Rutile will be distributed to Iluka shareholders on a pro rata basis in proportion to their existing shareholding in Iluka on a record date to be determined by the Iluka board. Sierra Rutile will be an Australian incorporated company and will apply for admission to the official list of the ASX in conjunction with the demerger.