Mineral Resources confirms Bald Hill bid, wants Government to...

Mineral Resources confirms Bald Hill bid, wants Government to block loss-making Chinese offtake deal

Sean SmithThe West Australian
Mon, 4 September 2023 4:04PM



Mineral Resources chief executive Chris Ellison. Credit: Michael Wilson/The West Australian

Chris Ellison’s Mineral Resources is calling on the Federal Government to overturn a loss-making offtake deal with a Hong Kong company after confirming it has struck a deal with administrators to buy WA’s Bald Hill lithium mine.
MinRes would step into a breach left by Austroid Corporation, a Chinese-linked company that signed up to buy the mine three years ago but was banned in July by Federal Treasurer Jim Chalmers from finalising the purchase.

However, the MinRes sale agreed by the administrators from McGrathNicol put into the mine owner Alita Resources in 2019 is likely to be opposed by Alita’s receivers, who have questioned the administrators’ authority to sell Bald Hill and other secured assets that are under their control.

MinRes has added more fuel to the confrontation by asking the Federal Government to scrutinise Bald Hill’s offtake deal, suggesting that the long-term agreement circumvents Dr Chalmers’ ban on Austroid by leaving the mine “in the effective control” of banned “foreign entities”.
“If the Treasurer’s decision-making power has been circumvented .... MinRes believes the Australian Government should use its powers under the Foreign Acquisitions and Takeovers Act to intervene,” it said on Monday as it confirmed it wants to add Bald Hill to its WA portfolio.
MinRes referred to reports that Bald Hill’s profits “are transferred overseas via an offtake agreement with a Hong Kong-registered entity, Yihe Cleantech Material.
“It has been alleged that this offtake agreement has led to underpayment of State royalties,” it said.

The company said its acquisition of Bald Hill “will ensure that the mine is operated by an experienced ASX listed Australian lithium miner, and any profits generated and taxes and royalties are paid in Australia to the benefit of Australian taxpayers”.
The US-registered Austroid is owed an estimated $70m as Alita’s secured creditor.

It is understood that under MinRes’ deal with McGrathNicol, that debt would be paid out in full and a significant return made to Alita’s shareholders, who stand to receive nothing under Austroid’s deed of company arrangement.

McGrathNicol has been the subject of hefty shareholder criticism that Bald Hill, 60km south-east of Kambalda, was being sold on the cheap to Austroid given the recovery in lithium prices in the past two years.
The criticism has ignored the administrators’ lack of power and funding; they simply oversee the DOCA. The mine is held by KordaMentha, which was put into Alita simultaneously in 2019 to protect Austroid’s interests.

However, with MinRes lobbing an unsolicited and better offer when Austroid was banned two months ago, McGrathNicol believes it can now move to scrap the Austroid DOCA as no longer being in Alita’s best interests.
The MinRes offer will likely be decided in the courts, with the Supreme Court dealing with applications from McGrathNicol for court orders that would prevent the receivers and other parties from blocking its sale deal.
The matter returns to the court on Tuesday.

Some media have reported its bid for Bald Hill, 60km south-east of Kambalda, is valued at $1 billion. However, its actual offer is thought to be significantly less.

While no explanation has been given, it is believed the Government’s banning order was made on the grounds of national interest and reflected its tougher stance against foreign investment in Australia’s critical minerals industry.
In an announcement posted on the Singapore stock exchange, where Alita is still listed, KordaMentha said it had received more than ten approaches from parties interested in buying Bald Hill since launching its own sale process after the Austroid ban.

It noted that that McGrathNicol believed its new sale could proceed because such a deal would enable Austroid to be paid out and the receivers retired.