Australian private equity firm Wyloo Metals Pty Ltd. is poised to acquire Ring of Fire development company Noront Resources Ltd. for $617-million, with rival bidder BHP Group Inc. dropping out of a takeover battle that had raged for seven months.
A week ago Wyloo offered $1.10 a share to acquire Noront, blowing an earlier 75-cent bid from BHP out of the water. Noront’s board of directors got behind Wyloo’s offer, and had given BHP five days to match or improve on it.
“While the Eagle’s Nest deposit is a promising resource, we do not see adequate long-term value for BHP shareholders to support an increase in BHP’s offer,” the Melbourne-based miner said on Tuesday.
With BHP out of the picture, Noront and Wyloo will now move to formalize the arrangement. The takeover must be approved by Noront shareholders in a vote, with the threshold for success being at least two-thirds of votes cast.
Wyloo already holds 37.2 per cent of Noront’s shares, and Noront insiders holding an additional 10.3 per cent have agreed to back the proposal.
Under the Wyloo proposal, Noront shareholders can receive cash for their shares, or elect to receive a portion in cash, and retain the rest in shares. Perth-based Wyloo is backed by Andrew Forrest, one of the richest people in Australia, and founder of iron ore giant Fortescue Metals Group. Mr. Forrest is slated to become chairman of the company once the transaction closes. Other proposed new directors include Ian Delaney, former chief executive officer of Sherritt International Corp., and Warren Gilman, CEO of Queen’s Road Capital Investment Ltd.
Situated in the remote James Bay lowlands in Ontario’s Far North, Noront’s Ring of Fire projects contain economically unproven deposits of chromite and nickel. Both BHP and Wyloo have raised the possibility that Noront’s Eagle’s Nest nickel project could one day produce battery-grade nickel for the North American electric-vehicle market. Ontario Premier Doug Ford has also repeatedly pushed the potential of the minerals district.
But Noront’s early-stage projects still need years of study, the investment of billions of dollars for infrastructure such as an access road into the Ring of Fire area, and likely will require significant financial aid from both the federal and provincial governments. The project will also require consultation with nine First Nations communities, several of which already have significant concerns about developing the ecologically sensitive region. The Ring of Fire is home to one of the last untouched boreal forests in North America, and is situated in one of the world’s biggest expanses of peatlands, making it a major carbon sink.
Wyloo first proposed buying Noront for 31.5 cents a share in May. BHP countered with a 55-cent tender offer, only to see Wyloo increase its proposal to 70 cents. In October, BHP bumped up its bid to 75 cents a share, but Wyloo countered with a barn-busting proposal that was 35 cents a share higher last week.
The tussle for Noront underlines how scarce major mineral discoveries are becoming globally, and the lengths to which major mining companies are going to secure them. Earlier this month, Kinross Gold Corp. bid $1.8-billion for gold exploration company Great Bear Resources Ltd. Great Bear’s Dixie gold project in Red Lake, Ont., is at an even earlier stage of development than Noront’s nickel property. Dixie, however, is situated in a well-established mining district, close to existing road and hydro infrastructure, and has significantly lower development costs than the remote Ring of Fire.
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