After looking overseas, especially in Canada, billionaire Andrew Forrest’s Wyloo Group has returned to Australia to make its first big deal in minerals.
Wyloo revealed a $1.40 per share, $760 million on-market takeover bid for the remaining shares in Mincor Resources which it does not currently own.
Wyloo Group is Mincor’s largest shareholder with 19.9% equity (or 106.5 million shares) and manages a diverse portfolio of exploration and development projects, as well as cornerstone investments in public companies here and especially in Canada.
The news saw the shares surge well over 425 to $1.48, well above the offer price and a pint from the market that a counter offer might appear, perhaps from BHP.
The future of the deal will depend in part on BHP – Mincor has been supplying nickel ore to BHP Nickel’s Kambalda concentrator since February, 2022. BHP processes it into concentrate which is then sent to Kwinana, south of Perth for smelting and refining.
BHP pays Mincor for the metal, less the processing and handling costs. At the moment, Mincor is a big supplier of nickel ore to BHP.
But for how long? BHP is bidding for OZ Minerals which has a major copper nickel project at West Musgrave, just inside WA on the border with South Australia.
OZ Minerals expects West Musgrave to produce an average of 28,000 tonnes of nickel and 35,000 tonnes of copper per year over the first five years of operation.
BHP had talked to OZ about an offtake deal before launching its $9.6 billion bid last August. The mine is due to start producing concentrate in the second half of calendar 2025.
But West Musgrave is in the future and BHP will still need nickel from Mincor for the next three years. Mincorp is looking to produce 63,000 tonnes of nickel in concentrate over five years from 2022
The 35,000 tonnes a year from West Musgrave is just under half the near 80,000 tonnes BHP’s Nickel West business is capable of producing at the moment. BHP’s own business seems hard pressed to fill any gap that Mincor’s ore might leave.
Forrest’s bidding company sits within the Tattarang Group alongside Wyloo Consolidated Investments and Wyloo Metals, and is owned by Forrest and his wife Nicola.
Wyloo claims the $1.40 per share offer is a 35% premium to the $1.04 closing price of Mincor shares on Monday. But it is half the 52 week high of $2.82.
Wyloo Group believes the offer represents attractive value to Mincor shareholders given current risks and uncertainties in the face of prevailing economic and equity market risks.
These risks have ultimately had an impact on Mincor’s total valuation, as demonstrated by a 45% decline in its share price over the last 12 months.
In late 2021 and early 2022 Forrest’s Wyloo won a protracted takeover battle against BHP for Noront Resources in Canada, an explorer since renamed Ring of Fire Metals after the remote nickel and chrome mining in northern Ontario where it has prospects.
It was also a potential blocker in IGO’s billion dollar plus deal to acquire nickel producer Western Areas last year, but lent its support to the bid after agreeing to work together on a future battery nickel business.
Merrill Lynch Equities (Australia) has been appointed Wyloo’s broker for the takeover.
