BHP Offtake Agreements with OZL

Hey guys,

here is an excerpt from AFR article showing OZL and BHP were in discussions regarding Offtake Agreements on the West Musgrave Project before the takeover bid from BHP. Interesting stuff:



BHP talk offtakes with OZ Minerals, returns with $8.4b b BHP and OZ Minerals were in discussions about offtake agreements for the latter’s West Musgrave project in Western Australia, before the Big Australian changed course and stunned its target with an $8.4 billion bid for the entire company Investor sources briefed by OZ Minerals in the past few days said the two companies had been talking at an operational level about West Musgrave for a potential offtake agreement, with no mention of a whole of company transaction. The companies’ top brass only spoke last Friday, when BHP shot across its non-binding and indicative bid to OZ’s Adelaide offices, and asked for six-weeks’ due diligence and a friendly board recommended deal. Instead of being flattered by the attention, OZ Minerals’ board is playing it cool and defensive. OZ Minerals’ board, advised by Macquarie Capital and Greenhill, is understood to be staunchly against giving BHP a look at its books at a $25 a share offer, reckoning it’s both invasive and disruptive to the business. It has said as much to investors in recent days. a Barrenjoey are in BHP’s corner. What’s OZ Minerals worth The approach and the retreat were so swift that investors haven’t had time to think what the company’s worth to a bidder. But they are taking heart from three things: that OZ smacked the $25 a share bid really hard (so BHP must be way off mark) and that the two had been talking about offtakes (so BHP’s interest isn’t just tyrekicking).Investors reckon they still need a week or so to come up with a number they reckon would be fair, and OZ’s half-year results are due about the same time. But early talk is any suitor wanting to unlock OZ’s data room would have to present it with a low-thirties bid. The offtake revelations have also revived investors’ early read of the approach: that BHP’s after better performance for Olympic Dam and its copper operations, but is also thinking strategically about securing nickel concentrate for its WA smelters.