August Australian energy & resources market update

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Mining

RECENTLY COMPLETED DEALS

Alkane Resources completes demerger

Further to our July edition of the E&R Update, ASX-listed Alkane Resources Ltd announced that the demerger of its critical materials subsidiary, Australian Strategic Materials Ltd, completed on 28 July 2020. ASM’s first day of trading on the ASX was Thursday 30 July 2020.

Shares in ASM were transferred to eligible shareholders of Alkane so that each eligible Alkane shareholder holds one ASM share for every five Alkane shares held. 

Access the full ASX announcement here.

RECENT ANNOUNCEMENTS

Novo Resources Corp to undertake transformative acquisition

On 8 August 2020, Novo Resources Corp. announced that it had entered into an agreement to acquire former ASX-listed gold producer Millennium Minerals Limited.  Millennium owns 291km2 of prospective mineral tenure and key processing infrastructure (including a 1.5Mtpa processing plant, tailings storage facility and 230 room camp) which is adjacent to Novo’s existing tenure in the Pilbara region of Western Australia.

Under the agreements, Novo will buy all shares in Millennium from IMC Resources (and related entities) for approximately A$61 million in Novo shares and warrants.  Novo will also fund the repayment by Millennium of IMC’s secured debt (for approximately A$69 million).  Novo has agreed to pay IMC deferred consideration in the form of a fee on future gold production up to an amount of approximately A$20 million.

Metals X to seek offers for sale of its entire copper asset folio

On 2 July 2020, ASX-listed Metals X announced that it is seeking offers for the sale of its entire copper asset portfolio, which includes the Nifty Copper Operation, Maroochydore Copper Project and the Paterson Exploration Project each located in Western Australia.

According to the announcement, it has decided to divest these copper assets following requests made by APAC Resources Strategic Holding Ltd on 22 and 23 June 2020 to remove three independent directors of Metals X and appoint two additional APAC nominees. As reported in our June edition of the E&R Update, APAC had announced its 12 month mandate to increase its 15.31% shareholding in Metals X on 15 May 2020.

According to the announcement, the company has already received interest in full ownership of the copper assets and that some of these interested parties have already conducted initial due diligence. Any proposed transaction will be subject to requisite shareholder approvals.

Access the full ASX announcement here.

Cardinal Resources receives improved off-market takeover offer from Shandong Gold

Further to our July edition of the E&R Update, ASX-listed Cardinal Resources Limited has received competing takeover offers from Shandong Gold Mining (Hong Kong) Co, Limited and gold producer Nord Gold SE.

On 23 July 2020, Cardinal announced that it received an off-market takeover from Shandong at a cash price of A$0.70 per share. This is a revised and improved proposal from Shandong’s previous offer for A$0.60 per share subject to a 50% minimum acceptance condition, which was reported in our July edition of the E&R Update. 

The improved offer remains subject to a number of conditions, including a 50.1% minimum acceptance condition and regulatory approvals in Australia and China. According to the announcement, Shandong expects to receive certain Chinese regulatory approvals imminently. The conditions are set out in the Bid Implementation Agreement contained in Cardinal’s announcement on 18 June 2020. The key points of the agreement were discussed in our July edition.

Shandong’s improved offer stands against Nor Gold SE’s competing unconditional and unsolicited on-market takeover offer at A$0.66 per share, announced on 15 July 2020. On 17 July 2020, Mergermarket reported that shares in Cardinal were trading above Norgold’s offer at A$0.69.

Actus to be acquired by Consolidated Tin Mines via DOCA for A$26.5 million

On 13 July 2020, ASX-listed Consolidated Tin Mines Limited announced that it entered into a binding term sheet with the administrator of Auctus Minerals Pty Ltd and Auctus Resources Pty Ltd under which Consolidated will acquire 100% of the shares in Auctus via a Deed of Company Arrangement for a cash and debt free price of A$26.5 million.

The agreement is conditional upon approvals by the creditors of Auctus Resources and Auctus Minerals Pty Ltd at the second creditors meeting, FIRB and Consolidated shareholders.

Auctus owns 100% of the Chillagoe Base and Precious Metals Project, located 200km west of Cairns in Queensland. The project comprises of the King Vol Underground Mine, Mungana Processing Plant and Mungana Underground Mine assets and other resource development opportunities.

Access the full announcement here.

Alto Metals majority shareholders confirm intention not to accept revised Habrok proposal, accepts entitlement offer

Further to our July edition of the E&R Update, on 20 July 2020, shareholders holding a combined stake of 51.45% in ASX-listed Alto Metals Ltd announced their intention to reject the revised off-market takeover offer by Habrok (Alto) Pty Limited.

The revised offer price of A$0.07 per share was an increase from the initial offer price of A$0.066 per share announced by Habrok on 17 July 2020. The revised offer was conditional upon, among other things, the termination of an Alto entitlement offer announced on 13 July 2020.  Alto’s directors maintained the view that the entitlement offer is in the best interests of the shareholders and confirmed that it did not intend to terminate the entitlement offer.

The announcement also noted that the offer price by Goldsea Australia Mining Pty Ltd lapsed as a result of ongoing delays with FIRB.

Access the full announcement here.

MARKET RUMOURS AND OPPORTUNITIES

Newcrest Mining to explore options for its stake in SolGold

On 8 July 2020, Reuters reported that Australian gold producer ASX-listed Newcrest Mining has appointed Canadian RBC Capital Markets to weigh options for its 13.57% shareholding in SolGold. According to the article, Newcrest has not indicated whether it will sell its shareholding or purchase more shares.   

The appointment follows SolGold’s latest funding initiative – a financing package and bridge loan for its Alpala project in Northern Ecuador. Newcrest had reportedly contested the initiative, urging SolGold to raise funds via equity.

Newcrest holds the largest shareholding in SolGold after BHP, which is prevented from buying new shares in Solgold by a standstill agreement until October 2020, the item noted.

Ardea Resources may select strategic partner for Goongarrie project by 4Q20, acquisitions not ruled out

On 14 July 2020, Mergermarket reported that according to CEO Andrew Penkethman, Australian cobalt and nickel producer ASX-listed Ardea Resources may select a strategic partner for its flagship Goongarrie nickel-cobalt project in the Eastern Goldfields of Western Australia by 4Q20.

The structure of the deal is undecided but options include a partner taking a direct equity investment in the company.

The report also noted that Ardea is still open to becoming a multi-commodity player through acquisitions which expand its portfolio and other strategic joint venture partnerships with existing assets. Acquisitions will likely remain in Western Australia, particularly in the Goldfields region, the item noted.

Element 25 could become takeover target following commencement of manganese production next year

On 16 July 2020, Mergermarket reported that according to managing director Justin Brown, ASX-listed manganese mine developer Element 25 could become a takeover target.

Element 25 reportedly expects to be in production next year and aims to fund production independently without a joint venture partner.

The article did not specifically name interested parties but noted Chinese interest for manganese resources.

Element 25 also may assess acquisitions of other manganese assets following the commencement of production works in the Butcherbird project, located south of Newman in the Pilbara region of Western Australia, the item noted.

The managing director reportedly stated that the company would sell or partner its other assets – the Pinnacles cobalt-nickel project in Western Australia and the Bonneval exploration permit in France.

Lithium Australia to consider acquisitions as it seeks to create circular battery economy

On 20 July 2020, Mergermarket reported that according to managing director Adrian Griffin, Perth-based lithium miner and processor ASX-listed Lithium Australia will seek acquisitions as it seeks to become a diversified player and create a circular battery economy, enhancing sustainability and energy security in the process.

According to the article, Lithium will assess opportunities internally without using advisors but welcomes firms pitching suitable targets. No information was provided as to how much the company would spend on a deal nor what specific criteria it well set for M&A.

US Newmont Corporation expanding search to find buyer for Australian power assets

On 20 July 2020, the Australian Financial Review reported that the world’s biggest gold miner, Newmont Corporation, is expanding its search for a buyer beyond ASX-listed Northern Star for the sale of its Australian power assets, following the lapse of Northern Star’s exclusive purchase rights (originally secured in December 2019).

The items for sale include the power transmission assets and also a 50% stake in the Parkeston power station, located in Western Australia. The power station supplies power to the Super Pit but also has a licence to sell excess power to third parties.

The article noted Canada’s TransAlta, which owns half of the Parkeston plant, and Saracen, which acquired Barrick’s 50% stake in the Super Pit gold mine in November 2019, as potentially interested parties.

 

Oil and gas

RECENT ANNOUNCEMENTS

Merger of Real Energy and Strata to create Pure Energy

On 15 July 2020, ASX-listed Australian east coast focused gas company Real Energy Corporation Ltd and Strata-X Energy Ltd announced that they had entered into a binding Scheme Implementation Agreement to create a new entity ‘Pure Energy Corporation Limited’ with a view of becoming a Queensland-focused gas operator and supplier in the East Coast markets of Australia. Under the merger scheme, Real Energy shareholders will receive one new Strata Energy share for three Real Energy shares.  If the deal goes ahead, Pure Energy will have exposure to highly prospective projects including Project Venus located in the Surat Basin, the Windorah Gas Project in the Cooper Basin as well as the merged entity’s broader asset portfolio in Australia and Botswana.  Pure Energy’s vision is to lower emissions and is looking for opportunities to enter the hydrogen economy.  At present, it is investigating the feasibility of building a methane to hydrogen plant in Gladstone.

Access the full ASX announcements by Real Energy here and Strata Energy here.

MARKET RUMOURS AND OPPORTUNITIES

Chevron announces interest in selling stake in North West Shelf - update

In our July edition of the E&R Update, we reported that Chevron announced it will consider selling its 16.7% stake in the North West Shelf project.  According to the Australian Financial Review’s report published on 13 July 2020, ASX-listed Woodside Petroleum is likely to appoint one or two banks to advise on a bid for Chevron’s stake, to double its interest in the North West Shelf venture. The paper’s Street Talk Column further reported on 13 July that Woodside has deferred two LNG projects, Scarborough and Browse, freeing up capital to pursue such a transaction. 

An earlier article published by The Australian reported on 12 July 2020 that ASX-listed Beach Energy is also considering offers for Chevron’s stake, noting however that Woodside remains the most likely purchaser for the asset.  The report further noted that the new infrastructure-style tolling model may see other North West Shelf joint venture partners contemplate an exit, including Shell, BP and BHP.

BHP exploring options to join ExxonMobil in sale of its stake in Gippsland Basin

On 8 July 2020, The Australian reported that Goldman Sachs has been appointed as ASX-listed BHP’s financial advisor to consider the options for its circa US$2 billion dollar stake in the Gippsland Basin joint ventureThe Australian further reported that prospective buyers for BHP’s assets include ASX-listed companies Macquarie Group, Beach Energy, Santos and AGL Energy, and Japanese trading houses and Asian companies.

Sources reportedly informed The Australian that BHP will wait for Esso Australia (a subsidiary of ExxonMobil) to complete its sale of its share of the assets. In our July update, we reported that ExxonMobil’s sale process has been delayed.  A recent article also published by The Australian reported that the sale process is expected to face further delays due to the COVID-19 lockdown in Victoria.

The Australian further noted that some believe BHP and Exxon may be seeking a buyer for the entire Gippsland Basin project.  

Beach Energy eyeing acquisition opportunities – Gippsland Basin, North West Shelf, ENI assets

On 23 July 2020, The Sydney Morning Herald reported that Matt Kay, managing director of ASX-listed Beach Energy, confirmed that the company was looking at acquisition opportunities in Australia and New Zealand while not specifying individual sale processes.  The company is reportedly in a strong position to undertake acquisitions despite the COVID-19 market environment, with $50 million in cash and access to $500 million in liquidity.

The article speculated that Beach Energy may be an interested purchaser of ExxonMobil’s stake in the Gippsland Basin joint venture worth more than US$2 billion, and according to an article by The Australian on 12 July, the company is also eyeing US-based Chevron’s 16.6% stake in Australia’s North West Shelf joint venture worth about $5.4 billion, and energy assets owned by Italian group ENI up for sale for up to $1 billion. Beach is reportedly one of the few parties that could operate the ENI’s assets up for sale, which includes the Blacktip gas field project and a 10.99% stake in Darwin LNG.

Tamboran Resources set to list on the ASX

On 21 July 2020, the Australian Financial Review’s Street Talk Column reported that East Coast gas market player Tamboran Resources is looking to list on the ASX, aiming to raise $195 million over the next six months, with A$30 million - $50 million in a pre-IPO raising through Bell Potter Securities followed by A$160 million through an IPO set to take place in the December quarter.  The additional capital will fund commitments across its assets located in the McArthur Basin, within the Beetaloo Sub-Basin and to complete its acquisitions of Pangaea Resources and Sweetpea Petroleum.

 

Electricity and renewables

RECENT ANNOUNCEMENTS

Iberdrola gains control of Infigen

Further to our July edition of the E&R Update, Philippine-based investment company, UAC Energy Holdings Pty Ltd’s (UAC) takeover offer for ASX-listed Infigen Energy Ltd (Infigen) lapsed on 24 July 2020. On the same day, UAC’s rival, Spanish utility company, Iberdrola further increased its offer from 89 cents to 92 cents per share (valuing Infigen at A$893 million).

On 29 July 2020, UAC announced that it has increased its interest in Infigen to just below 20% (valued at approximately A$178 million). According to a report by the Australian Financial Review on 29 July 2020, it is likely that UAC will remain as a strategic investor in Infigen rather than selling its interest to Iberdrola.

As at 6 August 2020, Iberdrola holds a 52.75% interest in Infigen. Having gained control of Infigen, Iberdrola’s offer period has been extended from 7 August 2020 to 19 August 2020.

Access the ASX announcement dated 24 July 2020 here and the announcement dated 6 August 2020 here.

OMERS acquires a stake in TransGrid

On 20 July 2020, Spark Infrastructure announced that Ontario Municipal Employees Retirement System (OMERS), one of Canada’s largest pension funds has completed its acquisition of a 19.99% stake in TransGrid from the UK-based Wren House Infrastructure Management. The stake was first offered to Spark Infrastructure and other securityholders in February 2020 in accordance with the pre-emptive process under a Securityholders Deed.

Spark Infrastructure noted in its announcement that its 15.01% equity investment in TransGrid was purchased for A$734.3 million in December 2015.

According to a report by the Australian Financial Review on 14 July 2020, OMERS’ stake in TransGrid is valued at approximately A$2 billion.

Access the full ASX announcement here.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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