On the ASX docket Thursday: IGO’s WSA takeover reaches its conclusion; a fairly nondescript investor presentation from Wesfarmers; and an old copper mine gets another life.
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IGO Ltd (ASX: IGO) shares rose 3.9% to $11.60 on Thursday as investors gave it a cautious tick in the wake of finality in its contentious $1.26 billion takeover of rival nickel player, Western Areas (WSA).
This came after the stock had fallen more than 11% in Wednesday’s rout among lithium stocks triggered by a gloomy report from Goldman Sachs so Thursday’s rise reclaimed a little of that loss.
Western Areas shareholders waved through the contentious $1.3 billion deal, at a virtual meeting despite the $3.87 cash a share bid price being under the $4.04 to $5.23 range claimed by the independent expert’s report commissioned by Western Areas.
The IGO bid price was lifted from the initial $3.60 to $3.87 in early April when it became clear that WSA shareholders were resisting the offer and could very well vote it down.
WSA said in an ASX filing that 94.2% of the votes cast by Western Areas Shareholders were in favour of the Scheme; and 78.8% of Western Areas Shareholders present and voting (in person or by proxy, attorney or corporate representative) voted in favour of the Scheme.
Western Areas says it will now seek approval of the Scheme of Arrangement by the WA Supreme Court at a hearing scheduled for Tuesday, June 7 (next Tuesday).
If the Court approves the Scheme at the Tuesday hearing, Western Areas intends to lodge a copy of the orders of the Court with the Australian Securities and Investments Commission on Wednesday, June 8, so that the Scheme will become effective on that date. If this occurs, Western Areas Shares will be suspended from trading on ASX with effect from close of trading on Wednesday, June 8.
Implementation of the Scheme is expected to occur on Monday June 20, subject to the satisfaction or waiver of the remaining conditions precedent to the Scheme (including approval by the Court at the Second Court Hearing).
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It was a tough day for Wesfarmers (ASX: WES) to hold a strategy briefing with the ASX weak after Wall Street had worried itself lower the night before.
This might explain why, even though the company’s investor day presentation contained nothing to set the market on edge, WES shares eased 0.6% to $47.28.
Not helping with investors was the realisation the briefing on Thursday in Sydney lacked some important details, no updated guidance for the year to June 30, despite there being less than a month to go in the 2021-22 financial year.
Updated numbers for revenue and earnings – or even just confirmation or otherwise of the expected percentage movements would have generated more reaction than what was a pretty bland day.
CEO Rob Scott highlighted four value-creating strategies which included strengthening Wesfarmers’ existing portfolio of businesses, grabbing new growth opportunities, renewing its portfolio and ensuring sustainability through responsible long-term management.
Scott noted that consumer demand remains healthy (as the March quarter national accounts confirmed on Wednesday), while inflation and interest rates were likely to moderate shoppers’ behaviour over the next year.
“Wesfarmers’ retail divisions are well equipped to manage inflationary pressures and view this as an opportunity to profitably grow share while extending value credentials,” Scott said in the presentation.
There were some mutterings about high stock levels in later notes from analysts.
Wesfarmers reported “abnormally high” inventory levels in the first half FY22, due to the decision to temporarily hold more stock, domestic supply chain disruptions, and higher commodity prices.
But the company said it now expects them to remain elevated in current second half of 2021-22 before starting to normalise “over time” a phrase that didn’t win many hearts on the day because it indicates the company’s stocks will be slowly falling while interest costs start rising.
But there were hints of a boost in online sales, up threefold on first half of FY19 levels, and the planned expansion of WesCEF – a business portfolio supplying products to critical industries – which is committed to achieving net zero emissions.
As expected, management reaffirmed the conglomerate’s focus on developing Bunnings – its biggest revenue and profit engine – while also hinted at improving the performance of API (Australian Pharmaceutical Industries) and its new Health division which will be based on API.
According to a note from Goldman Sachs, its analysts saw the update as “uninspiring at first glance.”
The broker added: “There were fewer details than we had hoped for on key drivers of the growth algorithm, particularly around Bunnings and Kmart, and the presentation did not offer any aspirational outlook for API nor corporate restructuring options for Officeworks and Industrials.”
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There’s a second, third or fourth coming for the former Mount Lyell copper gold mine in western Tasmania, inland from Queenstown.
Up until its closure in 2014 copper and gold had been mined there by several owners, most notably Consolidated Goldfields of Australia and then Renison Goldfields consolidated.
After first closing in 1994, the Mount Lyell lease and mine was reopened by Copper Mines of Tasmania the next year. Copper Mines was in turn acquired by Sterlite Industries, an Indian-based company, in 1999.
As a result of which it became owned by the Vedanta group of companies. Mining was suspended at Mount Lyell due to accidents in the 2014 and it has remained in mothballs.
New Century Resources (ASX: NCZ) signed a two-year option deal with Vedanta in December 2021 to acquire the old mine and look at bringing it back into operation.
On Thursday New Century said in a statement confirmed there was new life in the old mine and new areas with a reserve estimate of 23.9 million tonnes grading 1% copper and 0.26 grams to the tonne of gold. New Century noted that number represented only around 18% of the resource in the areas.
The ore reserve contains 246,000 tonnes of copper and 198,000 ounces.
The total current Mt Lyell resources (all deposits, includes ore reserve), includes:
- Underground: 71.3 million tonnes at 1.14% copper equivalent for 734,000 tonnes copper and 588,000 ounces gold
- Open Pit: 69.1 million tonnes at 0.71% copper equivalent for 442,000 tonnes copper and 367,000 ounces gold.New Century CEO
Patrick Walta said in Thursday’s statement: “Mt Lyell is shaping up as one of the largest near-term copper production assets on the ASX, aided by the extensive infrastructure in place and a proven production history of high quality, low-carbon copper, utilising low-cost renewable energy from hydroelectric power.
“New Century’s restart development work to date has delivered an initial Ore Reserve at Mt Lyell significantly larger than anticipated, with a mine life projected out greater than 10 years on this Ore Reserve alone,” he said.
New Century has completed the ore reserve pre-feasibility study (PFS) focused on the current underground measured and indicated resource at Mt Lyell within the Prince Lyell and Western Tharsis ore bodies.
The initial ore reserve forms part of the multi-decade Life of Asset (LoA) plan which already has a mine life of more than 10 years at a nominal production rate of 2.4 million tonnes per annum (equivalent to historical mining operations).
New Century said in the statement that a restart pre-feasibility study (Restart PFS) over Mt Lyell is underway and expected to be finalised in second half of this year.
“Extensive historical restart study work completed by Copper Mines of Tasmania (CMT) between 2017 and 2021 has both underpinned the reinstatement of Ore Reserves at Mt Lyell and provided the opportunity to expedite the restart PFS,” New Century said in the statement.
The restart PFS will focus on Prince Lyell, Western Tharsis and other existing ore bodies and the sub-level caving (SLC) technique has been chosen as the most suitable mining method given the orebody geometry, proven previous operational history, and prevailing economics.
The company said that “no material underground infrastructure works are required to restart operations. Dewatering, HV power reticulation, secondary means of egress, refuge chambers, underground workshops, crib rooms, ventilation systems and communications requiring only minor works prior to restart.”
Using the initial ore reserve only, New Century says the mine plan has an estimated net present value (NPV) range of $A280 million to $$410 million, “which clearly demonstrates its economic viability while representing only a small portion of the project’s overall potential.”
Investors were unimpressed and the shares eased 0.9% to $2.14.
