Strike - undervalued despite company-making announcement, page-146

Snippets to the article...

Buried within the bidder’s statement lodged by Gina Rinehart’s Hancock Prospecting as part of its tilt at Perth Basin gas group Warrego Energy is a remarkable indication of her financial firepower.

The deal, Hancock Prospecting says, will be funded by existing cash reserves. At June 30, cash and cash equivalents sat at a remarkable $17.755 billion – even after paying $4.6 billion of dividends from 2021-22’s $5.8 billion profit.

....Shortly after Hancock Prospecting was confirmed as the leading bidder for Warrego – Kerry Stokes’ Beach Energy now has the chance to match Rinehart’s $342 million offer – Perth rare earths hopeful Arafura confirmed Hancock had grabbed a 10 per cent stake by pumping $60 million into a $121 million capital raising....

...While Rinehart regularly criticises the “greenies and fellow travellers” who oppose the mining and resources sector, and recently suggested energy affordability would get so bad that pensioners would face a “heat or eat” dilemma, she’s clearly betting on the demand for commodities the energy transition will require....

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But at the same time, Hancock Prospecting sees clear value in fossil fuels that still have a profitable life as the energy transition rolls out.

Rinehart’s move on Warrego is partly designed to ensure Hancock Prospecting’s growing mining interests have access to the power they need. But the Hancock bidder’s statement at Warrego makes it clear Rinehart’s group sees the opportunity to drive gas exploration and development in the Perth Basin “to facilitate the timely development of new natural gas into the Western Australian market”.

Hancock’s successful acquisition last year of Queensland gas player Senex alongside Korean steel giant POSCO, and 3 per cent stake in Norwest Energy, another Perth Basin explorer, also highlights Rinehart’s broader bet on what some would call the dirty side of the energy transition. Hancock Prospecting is also part of a joint venture hoping to develop coal mines in Queensland.

Hancock’s strategy of playing both sides of the energy transition is being mirrored by several other global investors. At the Financial Review’s infrastructure summit last month, Canadian giant Brookfield and Global Infrastructure Partners both said they are betting big on LNG and renewable energy, while Macquarie Group is at once one of the world’s biggest investors in green infrastructure and a global energy commodities trading giant.

Like these giants, Rinehart’s Hancock’s Prospecting has extraordinary deep pockets, a willingness to work with joint venture partners and a preparedness to move quickly to secure deals.

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