Iluka Resources has confirmed the $375 million takeover of London-listed, Africa-focused miner Sierra Rutile.

The company will offer 36 pence cash for each Sierra Rutile share, valuing the company at about £215 million (A$375 million). The target’s board has backed the offer, but it is still subject to shareholder approval.

Iluka would also assume the company’s debt of about $US60 million ($80 million).

Iluka said the acquisition would double its rutile resource base and secure ownership of a mineral sands operation in Sierra Leone that produced 130,000 tonnes of rutile with expansion potential up to 240,000 thousand tonnes a year.

The company said the acquisition would not affect its ability to fund internal projects such as Cataby and Balranald.

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Iluka chairman Greg Martin said the transaction was consistent with the company’s approach to act in a counter-cyclical manner where appropriate.

He described it as a logical combination of complementary businesses during the prevailing weak mineral sands cycle.

“The acquisition of SRL along with current Iluka project progress provides the potential for enhanced portfolio flexibility which will in turn determine the level and phasing of Iluka’s future capital expenditure,” he said.

“Iluka will continue to prioritise the maintenance of a strong balance sheet after an expected peak debt in 2018 as internal projects are also funded within that period.”

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Managing director David Robb said SRL was a long life operation with an established position in high-grade chloride feedstock markets.

“Iluka is confident the application of its industry-specific technical expertise, together with its market access and reach will enhance the SRL business,” he said.

Sierra-Rutile

“The combination provides Iluka with additional, long-life (20 years plus) resources of proven quality, with further potential through resource additions, reserve optimisation and exploration.

“Iluka believes the offer represents an attractive risk/return profile for shareholders across a range of scenarios.”

The transaction is expected to be earnings per share accretive in the first full year (2017).

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News of the acquisition comes about seven months after Iluka was forced to walk away from a protracted bid for Dublin-based Kenmare Resources, which has mineral sands operations in Mozambique, after failing to lure the group’s major shareholder.

The timing of the purchase is also interesting given the pending leadership change at Iluka, with Wesfarmers’ Tom O’Leary set to take over from the retiring David Robb as managing director at the beginning of September.

Iluka entered 2016 with a strong balance sheet — it has no debt and about $1 billion of undrawn banking facilities — and an appetite for acquisitions.

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Sierra Rutile has been expanding its operations in the south-west of Sierra Leone, with the aim of becoming the world’s biggest producer of rutile, which is used in the pigment industry.

It is expected to produce between 125,000 tonnes and 135,000 tonnes in 2016, with more bolt-on production planned next year.

The company is controlled by Russian oligarch Vladimir Iorich’s investment house, Pala Investments, a notable investor in local mining stocks. Iluka shares were up nine cents, or 1.28 per cent, to $7.11 at 8.20am after emerging from a trading halt.