Iluka said late on Friday that "discussions remain at an early stage," and there is no certainty an offer will be made for Kenmare. This was the first confirmation in several months it is pursuing a merger with the Irish company.

The disclosure helped to push Kenmare shares ahead 4 per cent to €7.05 ($10.90) on Friday, pulling the shares off long-term lows in the process.

Shares in Kenmare, which operates the Moma mine in Mozambique have fallen steadily since not long after Iluka's interest in the miner was initially disclosed, reflecting its underlying lack of profitability amid a high level of debt.

In the six months to June, Kenmare lost €32 million, up from the €10.2  million loss of a year earlier.

Its financial woes has forced Kenmare to renegotiate loan repayments on project debt to beyond mid-2015, while it struggles to maintain cashflows as it seeks to rein in costs amid continued soft product prices.

In the September quarter, Kenmare's ilmenite production rose 6 per cent to 220,200 tonnes and zircon by 239 per cent to 12,900 tonnes.

Kenmare's share price surged to around €17 from €11 when news of Iluka's interest first emerged, although it has fallen steadily since, sinking last week to below €7 on concerns over its outlook.

Iluka is pursuing a range of potential expansion opportunities, ranging from a prospective joint venture in Brazil to new primary production in Australia.

However, continued weak underlying demand, especially amid confusing signs over the outlook for Chinese industrial and construction sector demand is weighing on product prices amid concerns that any recovery after the recent downturn may prove to be elusive.