BHP buys noront resources, page-23

Forrest weighs next move in BHP nickel takeover tussle

AFR - Brad ThompsonReporter

Jul 28, 2021 – 5.02pm

Andrew Forrest is weighing his options after BHPgazumped his takeover bid for a Canadian nickel explorer, but could opt to remain on the register as a big shareholder.BHP has won the support of the Toronto Stock Exchange-listed Noront Resources board and secured about 14 per cent of the shares. Dr Forrest’s privately-owned Wyloo Metals controls about 37 per cent.

Wyloo could choose tocash in its hand for a tidy profit, dramatically lift its May takeover bid, orsit along for the ride with BHP.

It is understoodrelations between Dr Forrest and BHP, which became strained when his FortescueMetal Group emerged as an iron ore rival in Western Australia, have thawed alittle in recent times.

Wyloo said it wasreviewing the Noront situation following the BHP bid.

Nickel prices are close to seven-year highs because of the disruption atseveral mines, including Vale’s operations in Canada and Glencore’s in NewCaledonia.

“Our cornerstoneposition in Noront Resources is part of our investment strategy to support thediscovery and development of critical materials needed to power thedecarbonisation of the global economy,” a Wyloo spokesman said.

Profit potential

“We are continuing toreview our investment in Noront as part of this long-term commitment.”

Dr Forrest and Wyloostand to make a profit of more than $US60 million in just more than sevenmonths if they do opt to sell their stake to BHP. Wyloo also has in its backpocket a 1 per cent royalty on any future production from Noront’s mostadvanced nickel project.

Wyloo, which sitswithin the Forrest family’s private investment arm Tattarang, secured theroyalty and its 37 per cent stake in Noront for just $US26.5 million last Decemberthrough a deal with Resource Capital Fund.

Wyloo paid $US11.5 million for 22.65 per cent ofNoront shares plus the royalty and put its foot on another 14.3 per cent withthe purchase of a $US15 million convertible note from Resource Capital Fund.

In a note to clients, Macquarie said the BHPtakeover bid was a surprise and highlighted the company’s focus on increasingits exposure to battery minerals.

Last week, BHP announced adeal to supply Elon Musk’s Tesla from its resurgent Nickel West business in WA as part of a future in battery metals.

Ring of Fire

Dr Forrest and BHP are targeting Noront’shighly-rated Eagle’s Nest nickel project that sits in the Ring of Fire, anemerging multi-metals region in the James Bay Lowlands of Northern Ontariowhere Noront has several assets.

A 2012 Noront feasibility study on Eagle’s Nestoutlined a modest 1 million-tonne-a-year underground mine with an annualproduction of 15,500 tonnes of nickel, 8700 tonnes of copper, 23,400 ounces ofplatinum, 91,000 ounces of palladium and 4900 ounces of gold for up to 20years.

“Given thecomparatively small scale of Eagle’s Nest, we suspect BHP’s acquisition is morefocused on Noront’s substantial exploration tenement portfolio in the Ring ofFire,” Macquarie said.

“We note that theportfolio already includes four chrome resources and Noront has identified +70Ni-Cu-PGE exploration targets. The region is remote and requires significantinvestment in road infrastructure.”

BHP chief developmentofficer Johan van Jaarsveld said the acquisition of Noront represented a“world-class growth option” in Canada.

Cash offer

The Noront board hasrecommended that shareholders accept BHP’s cash offer of C55¢ (59.4¢) a share,which represents a 129 per cent premium to Noront’s last closing price beforeWyloo launched its takeover bid in May.

The BHP offer is at a69 per cent premium to Noront’s closing price on Monday, the last trading daybefore the bid was announced to the Toronto Stock Exchange.

The BHP bid values Noront at$C325 million ($351 million) and represents a 75 per cent premium on the Wyloooffer of C31.5¢ a share announced to the market on May 25.

“This transaction provides asignificant premium to Wyloo’s indicative offer, and crystallises immediate andcertain value through an all-cash offer,” Noront chief executive Alan Couttssaid.

“BHP has the financialstrength, world-class mining expertise, and commitment to work in partnershipwith stakeholders to advance Eagle’s Nest and the Ring of Fire, which has thepotential to deliver benefits to local communities, First Nations, and Ontariofor years to come.”

Mr van Jaarsveld said theacquisition was a “win-win” for BHP and Noront shareholders.

“For BHP, the acquisition ofNoront presents a world-class growth option, in a key future-facing commodity,”he said.

“The highly prospective Eagle’sNest nickel project provides an excellent platform from which to developfurther opportunities in Ontario’s Ring of Fire.

“For Noront shareholders, thisoffer recognises and realises the full value of Noront’s portfolio, deliveringguaranteed shareholder returns in the near term.

“We are excited to bring ourmining expertise and capabilities to develop these long-term opportunities. Welook forward to working in constructive partnerships with First Nationspeoples, government and communities to realise the untapped potential of theseimportant resources.”