December Australian Energy & Resources Market Update

Articles Written by Tom Barrett (Senior Associate), Hayley Anderson (Associate), Candy Cheung (Associate), Rachel Cox (Associate), Haerim Nam (Associate), Cloe Woodward (Associate)

Mining

RECENT ANNOUNCEMENTS

Golden River Resources’ Victorian gold assets to be acquired by Kaiser Reef

On 1 October 2020, ASX-listed Kaiser Reef Limited announced that it entered into an exclusive option agreement with Golden River Resources Pty Ltd to acquire Golden River’s major assets in the Victoria Goldfields, being mining leases in the Bendigo Block and Woods Point, the Maldon Goldfield, the A1 Gold Mine, the Porcupine Flat gold processing plant and the Nuggetty Mine. Subject to the exercise of the option and satisfaction of the conditions, Kaiser Reef will issue approximately 53 million ordinary shares (a total deemed consideration of A$16 million) on a pro rata basis to all Golden River shareholders. Kaiser Reef also seeks to raise capital of A$7.5 million to fund activities following the acquisition. 

The acquisition is subject to the vote of Kaiser Reef shareholders and Kaiser Reef’s compliance with ASX’s requirements for admission and quotation.

Cassini Resources shareholders approve proposed demerger and acquisition schemes

Further to our July Australian Energy & Resources Market Update, formerly ASX-listed Cassini Resources Limited announced the implementation of the Demerger Scheme and Acquisition Scheme it originally announced on 22 June 2020.

Cassini announced the implementation of the Demerger Scheme on 2 October 2020. Under this scheme, Cassini’s wholly-owned subsidiary Caspin Resources Limited was demerged by way of capital reduction (resulting in 100% of the shares in Caspin Resources being distributed to Cassini shareholders). The now ASX-listed Caspin Resources owns 100% of the Mount Squires asset and 80% of the Yarawindah Brook asset, each in Western Australia.

Cassini announced the implementation of the Acquisition Scheme on 5 October 2020. Under this scheme, ASX-listed OZ Minerals Limited acquired 100% of the shares in Cassini. As mentioned in our July Australian Energy & Resources Market Update, this transaction enables OZ Minerals to consolidate its ownership of the West Musgrave Project in Western Australia to 100%.

Northern Star Resources and Saracen Mineral Holdings agree to A$16 billion merger-of-equals

On 6 October 2020, ASX-listed Northern Star Resources Ltd and Saracen Mineral Holdings Limited jointly announced that the companies entered into a binding Merger Implementation Deed for a merger-of-equals. The companies will merge via a Saracen Scheme of Arrangement under which Northern Star will acquire 100% of the shares in Saracen.

Upon implementation, which is scheduled for February 2021, Northern Star shareholders will own 64% of the combined entity and Saracen shareholders will own the remaining 36%. The companies announced that the new merged gold producer entity will have an A$16 billion pro-forma market capitalisation and A$118 million net cash.

On 6 October 2020, The Australian reported that the merged company may look to acquire ASX-listed Kirkland Lake Gold Ltd, a gold miner which owns the Fosterville Mine in Victoria and other assets in Canada. The item reported that the acquisition of Kirkland Lake would make the new combined entity the largest gold mining company in Australia. However, the item also speculated that a rival bidder for Kirkland Lake may be ASX-listed Evolution Mining Limited.

Petratherm executes an agreement for the sale of its Victorian gold assets

On 12 October 2020, ASX-listed Petratherm Limited announced that it executed an agreement to sell its Victorian gold assets to Canadian-listed Skarb Exploration Corp.

The Victorian gold assets are comprised of the Yuengroon Gold Project, Silver Spoon Gold Project, Glenfine Gold Project Farm-In and Joint Venture and Ballarat West Gold Project.

Some of the joint venture assets being acquired were subject to a pre‑emptive right in favour of the other joint venture parties. On 5 November 2020, Petratherm announced that this right had been waived. Petratherm will now receive 100 million Skarb shares as consideration for the Victorian gold assets, which in turn will be distributed in-specie and pro rata to Petratherm’s shareholders.

The acquisition of the Victorian gold assets is subject to a number of conditions precedent, including Skarb completing a private placement for gross proceeds of not less than CAD$4 million at or prior to completion of the acquisition.

Panoramic Resources’ Panton PGM Project to be acquired by Dubai 2020

On 12 October 2020, ASX-listed Panoramic Resources Ltd announced that it executed an agreement to sell up to 100% of its Panton PGM Project located near Halls Creek, Western Australia, to Dubai 2020 (or a nominee), a private family office investor. Dubai 2020 has paid a deposit of A$200,000 for exclusivity until 5 December 2020.

Under the terms of the agreement, Dubai 2020 will acquire an 80% interest in the project for A$12 million cash and will also have the right to purchase the remaining 20% for A$3 million cash within six months or nine months (depending on whether there is a change in control of Panoramic) of completion of the acquisition of its initial 80% interest. The agreement is subject to satisfactory due diligence being completed by Dubai 2020 and negotiation of definitive documentation by 5 December 2020.

The Panton PGM Project reportedly contains 14 million tonnes of high grade platinum and palladium mineralisation resources on granted mining leases.

CIMIC to sell 50% stake in Thiess to Elliott Advisors

On 19 October 2020, ASX-listed CIMIC Group announced that it entered into an agreement with funds advised by Elliott Advisors (UK) Ltd to sell a 50% equity interest in Thiess, the world’s largest mining services provider. The announcement noted that the equity interest in Thiess implies an enterprise valuation of approximately A$4.3 billion and that the sale will generate cash proceeds of A$1.7–1.9 billion for CIMIC.

CIMIC will retain the remaining 50% equity interest in Thiess and CIMIC and Elliot Advisors will jointly control Thiess in accordance with a Shareholders’ Agreement which contains governance arrangements, as well as Thiess’ financial and dividend policies and other items.

Completion is subject to customary conditions including financing and regulatory approvals.

The transaction also includes customary future share transfer options including a potential IPO or sale to a third party and an option for Elliott Advisors to sell its interest in Thiess to CIMIC between three to six years from completion. If Elliott Advisors exercises this option, CIMIC will potentially be able to repurchase the interest now being acquired by Elliott Advisors at the lower of the sale price or fair market value at that point in time, with the benefit of a guarantee from CIMIC’s majority shareholder, HOCHTIEF.

Sale of Altura Lithium Project by receivers

On 1 December 2020, ASX-listed Pilbara Minerals Limited announced that it entered into a share sale agreement with Altura Mining Limited (Receivers and Managers Appointed) (Administrators Appointed) and the receivers and managers of Altura to acquire shares in Altura Lithium Operations Pty Ltd for US$175 million.

Altura Lithium owns the Altura Lithium Project, located in Pilgangoora, Western Australia.

Pilbara Minerals also proposed a Deed of Company Arrangement (DOCA) to Altura Mining’s administrators under which Pilbara Minerals will increase its contribution to the DOCA fund from A$4 million to A$6 million, subject to the second creditors’ meeting being held on or before 11 December 2020. The contribution will largely be used to fund employee redundancy entitlements which resulted from the receivers having placed the Altura Lithium Project into care and maintenance to mitigate operational cash losses.

The share sale agreement and DOCA proposal follows a formal process conducted by receiver KordaMentha to market the project for sale and recapitalisation.

Conditions precedent to Pilbara Minerals’ acquisition include approval of the DOCA proposal at the second creditors’ meeting and subsequent completion of the proposed A$240 million equity raising by Pilbara Minerals. If the Altura Mining creditors do not approve the DOCA proposal, the parties will proceed by way of an asset sale agreement, as agreed under the Implementation Agreement announced on 28 October 2020.

MARKET RUMOURS AND OPPORTUNITIES

IGO has several financing avenues to execute potential transformative acquisition – CEO; Tropicana sale update

On 6 October 2020, Mergermarket reported that according to CEO Peter Bradford, ASX-listed IGO Limited will look at corporate and project acquisition opportunities across multiple commodities and jurisdictions and, in particular, evaluate opportunities which offer green energy metals (the key materials being copper and nickel). IGO is a diversified mining and exploration company.

The item noted that any potential opportunity will be assessed on its own merits and that key determinants are the target’s alignment with IGO’s strategy, delivery of key undisclosed metrics, scale and length of mine life and quality of assets.

The item quoted Mr Bradford stating that IGO has various financing avenues for such acquisitions such as a rights issue or placement, the company’s debt carrying capacity of A$500 million to A$1 billion debt and cash reserves of A$453 million.

In relation to IGO’s Tropicana gold mine in Western Australia, the Australian Financial Review reported on 15 November 2020 that IGO has launched a two-stage auction for its 30% stake in the mine. The stake could reportedly sell for around A$1.5 billion. The other 70% of the joint venture is owned by AngloGold Ashanti, which is thought to be the most logical buyer, the article noted.

Other possible buyers include ASX-listed entities such as Northern Star Resources, Evolution Mining, Gold Road Resources, Regis Resources and Saracen Mineral Holdings, as discussed in our October Australian Energy & Resources Market Update.

Mincor will consider inorganic growth; welcomes approaches from advisors pitching targets

On 6 October 2020, Mergermarket reported that according to managing director David Southam, ASX-listed Mincor Resources NL will consider inorganic growth following the commencement of production at its Kambalda Nickel Operations in Western Australia. The item noted that Mr Southam did not comment on target commodities other than nickel nor on other criteria.

It was reported that the Perth-based nickel exploration company is currently mobilising equipment on-site following a definitive feasibility study and will reportedly seek to deliver the project on schedule before making any acquisition.

The report noted that Mincor has a market capitalisation of A$370.94 million and A$100 million of cash at hand, but that it was unclear how much would be spent on an acquisition.

De Grey Mining, NTM Gold and Bellevue Gold may be attracting potential buyers

On 8 October 2020, The Australian reported that there may be a wave of merger and acquisition deals in the gold mining market following the A$16 billion merger between ASX‑listed Northern Star Resources Ltd and Saracen Mineral Holdings Limited. According to the article, there is particular interest in ASX-listed Western Australian gold miners De Grey Mining Limited, NTM Gold Limited and Bellevue Gold Limited.

The article noted that the logical buyer for De Grey Mining is ASX-listed Kirkland Lake Gold Ltd, which owns a stake in De Grey Mining and is interested in Australian opportunities, and that other potential purchasers for De Grey Mining are companies whose mines are reaching the end of their lives such as ASX-listed Newcrest Mining Limited, St Barbara Limited and Dacian Gold Limited.  

Vedanta selling Mount Lyell copper mine

On 21 October 2020, The Australian reported that ASX-listed IGO Limited, Sandfire Resources Limited and Aeris Resources Limited and others are interested in acquiring the Mount Lyell copper mine in Tasmania from India-based Vedanta Resources. Macquarie Capital is reportedly advising Vedanta on the sale.

The article reported that the Mount Lyell copper mine is thought to be valued at around A$200 million and that the asset presents a rare opportunity for potential buyers to gain additional exposure to copper.

Empire Metals could target further Australian acquisitions – CEO

On 30 October 2020, Mergermarket reported that according to its CEO Mike Struthers, UK-based Empire Metals may look at acquiring further targets in Australia if it decides to continue developing its Eclipse gold mining project in Western Australia.

The item noted that the company is interested in targets with two or three projects in Australia and in projects or project companies which, as a minimum, have discovered resources, a very good understanding of the geology and potential exploration upside.

Mr Struthers did not indicate specific deal sizes but stated that transactions will likely be funded through equity and that whether the company will make a corporate acquisition or enter into a joint venture type farm-in agreement will depend on the asset.

VHM attracts interest from Wesfarmers

On 3 November 2020, The Australian reported that ASX-listed conglomerate Wesfarmers Limited is a potential buyer of VHM, a Victorian unlisted miner which holds several exploration tenements within the Loddon Mallee region of Victoria, including its Goschen Zircon and Rare Earth Mineral Project. According to the article, the deposits within VHM’s tenements have a potential value of up to A$1.3 billion and an expected sale price of A$500 million. It was reported that VHM requires up to A$300 million of capital investment. The articles notes VHM has previously had intentions to publicly list, with JPMorgan engaged to assist. 

Whitehaven attracts Indonesian investors connected to Stanmore Coal

On 15 November 2020, The Australian reported that Indonesian investors in Golden Energy and Resources, which owns 75% of the shareholding in ASX-listed Stanmore Coal Limited, may have purchased shares in ASX-listed Whitehaven Coal Limited from its major investor, private equity firm AMCI.

It was reported that the founders of AMCI and hedge fund Farallon Capital, which was Whitehaven’s largest shareholder, are understood to be divesting their interests. 

Indonesia mainly produces thermal, rather than metallurgical coal, which may be an explanation for the move, the article noted. 

EMR Capital seeking buyers for Golden Grove mine through Macquarie Capital

On 17 November 2020, The Australian reported that private equity firm EMR Capital may be selling its Golden Grove mine through Macquarie Capital. The mine, which produces copper, lead, zinc, silver and gold, is located 450km northeast of Perth, Western Australia.

It is understood that the mine was initially to be sold as part of a larger portfolio but other assets will only be listed for sale if the Golden Grove mine cannot achieve a satisfactory price, the article noted. 

According to the article, possible buyers are ASX-listed OZ Minerals Limited (which has owned the asset previously), IGO Limited, Mincor Resources NL and Western Areas Limited or others with a market value of at least A$1 billion. The article noted that the mine is unlikely to attract pure gold miners as it produces a substantial amount of zinc.

Oil & Gas

RECENT ANNOUNCEMENTS

Squadron Energy acquired Australian Industrial Energy

On 20 October 2020, Squadron Energy, a company of the Andrew Forrest related Tattarang investment group, announced that it has gained full ownership and operatorship of Australian Industrial Energy Pty Ltd (AIE), the developer of the Port Kembla Gas Terminal Project located in New South Wales. Under the arrangement, Squadron Energy has acquired the stakes in AIE held by its joint venture partners, being a 30.1% stake owned by Japanese trading house Marubeni Corporation and the 19.9% stake owned by Japanese energy company JERA Co., Inc.  AIE announced that JERA and Marubeni have indicated that they remain open to future opportunities for targeted involvement in the AIE Port Kembla Gas Terminal Project, including LNG procurement and the development of an associated gas-fired power station.

Senex Energy’s Cooper Basin assets sold to Beach Energy

On 3 November 2020, ASX-listed Senex Energy Limited announced that it entered into a binding agreement with ASX-listed Beach Energy Limited to sell its South Australian Cooper Basin assets for A$87.5m. Beach Energy also announced the transaction. The consideration amount will be funded by Beach Energy from existing cash and debt facilities and the transaction is expected to complete in the March quarter of 2021.

Senex Energy’s announcement noted that the sale followed a strategic review of its asset portfolio and will enable the company to accelerate the development of its Surat Basin natural gas assets in Queensland and strengthen its balance sheet.

The sale is subject to standard conditions, including Senex Energy financier consents and regulatory approvals.

MARKET RUMOURS AND OPPORTUNITIES

Potential sale of Dalby Bio-Refinery

On 5 November 2020, Mergermarket reported that Australia-based United Petroleum has engaged financial advisors Ernst & Young for the potential sale of its A$74 million Queensland grain-based ethanol production facility, Dalby Bio-Refinery. The item noted that the facility has the capacity to produce over 76 million litres of fuel grade and high grade ethanol, as well as high protein livestock feed products. According to the item, Ernst & Young was set to distribute an information memorandum in the next two weeks and will call for non-binding offers by Christmas. It was reported that the advisor also anticipated that the Dalby Bio-Refinery will attract existing fuel refiners, retailers and wholesalers, and interest from offshore parties, particularly in Asia. The item noted that Japan’s Mitsubishi Chemical Corporation and Idemitsu Kosan have eyed off ethanol production assets previously and that other potential suitors include Singapore-based Wimlar International and Australia-based Manildra Group.

Chevron selling stake in North West Shelf – update

In our October Australian Energy & Resources Market Update, we reported that ASX-listed Woodside Petroleum Ltd had potentially partnered with Brookfield, previously a part-owner of the Western Australia-based oil and gas business Quadrant Energy, to bid on US-based Chevron Corporation’s interest in the North West Shelf Project located in Western Australia. However, on 9 November 2020, The Australian reported that Woodside is no longer partnering with Brookfield. The article suggested that Woodside, who has always been seen as the strongest bidder, could partner with the US-headquartered Global Infrastructure Partners or bid on its own. It was reported that first round bids were due in November 2020.

Details of the partnership and Chevron’s sale are detailed in our August, September and October Australian Energy & Resources Market Updates.

QCLNG bids – update

In our July and September Australian Energy & Resources Market Updates, we reported on Royal Dutch Shell’s potential sale of its 26.25% stake in the QCLNG common facilities located on Curtis Island, Queensland. Mergermarket reported on 14 October 2020 that final bids were due on 23 October 2020 and that CKI had withdrawn from the bidding process, leaving IFM Investors and Global Infrastructure Partners as the remaining contenders. The Australian Financial Review reported on 19 November 2020 that it appeared Global Infrastructure Partners was in front in the auction, and that the deal is expected to be worth more than A$3 billion. 

Woodside Petroleum halts sale of stake in Scarborough gas project

On 11 November 2020, The Australian reported that ASX-listed Woodside Petroleum Ltd has halted the sale of its 25% stake in the Scarborough gas project located offshore Western Australia. The article noted that talks to sell the stake with Chinese investors fell apart in a tense trade climate between the two countries. The article also noted that Woodside has switched its focus to selling a 50% share of the expanded Pluto LNG plant located onshore in Western Australia, which it controls outright.

Couche-Tard bid for Ampol halted – update

In our September Australian Energy & Resources Market Update, we reported that Canadian company Couche-Tard may have had renewed interest in making an offer for ASX-listed Ampol Limited. The Australian reported on 23 November 2020 that Couche-Tard’s purported takeover bid may have been halted by Ampol’s delayed decision about shutting down its Lytton Oil Refinery in Queensland. The article noted that if Ampol was to shut down the refinery, it would be more attractive to Couche-Tard for a further bid.

ExxonMobil sale of stake in Gippsland Basin – update

In our July and October Australian Energy & Resources Market Updates, we reported that US‑based ExxonMobil was continuing with its plans to sell its 50% stake in the Gippsland Basin oil and gas venture. The Australian Financial Review reported on 27 November 2020 that ExxonMobil has abandoned sale plans after the initial bids failed to reach the desired price. 

Electricity & Renewables

RECENTLY COMPLETED DEALS

Engie acquires the Hills of Gold Wind Farm

On 30 October 2020, Engie Australia & New Zealand announced the purchase of the 420 MW Hills of Gold Wind Farm development in New South Wales. The deal, worth A$750 million, involves the acquisition of the project entity Wind Energy Partners Pty Ltd. Following completion, Engie will be responsible for developing and operating the facility. 

MARKET RUMOURS AND OPPORTUNITIES

Fotowatio Renewable Ventures to sell stake in Australian solar assets

On 13 October 2020, the Australian Financial reported that Spain’s Fotowatio Renewable Ventures is believed to be seeking buyers among infrastructure and superannuation funds for a 50% stake in its Australian solar portfolio. The portfolio is believed to be worth around A$1.5 billion and includes the Clare and Lilyvale solar farms in Queensland, the Moree solar farm in New South Wales, the Royalla solar farm in the Australian Capital Territory, the Winton solar development in Victoria and the Chaff Mill solar development in South Australia. According to an article in The Australian on 20 October 2020, the deal may interest parties such as First Sentier, Palisade Investment Partners, Infigen Energy and UAC.

BlackRock Real Assets seeks buyers for 90% stake in Gretel Solar Portfolio

On 13 October 2020, the Australian Financial Review reported that BlackRock Real Assets (part of the US$7.3 trillion BlackRock family) is seeking buyers for its 90% stake (held through the US$1.65 billion Global Renewable Power Fund II) in the 240 MW Gretel Solar Portfolio which consists of the Daydream and Hayman solar farms in Queensland. The Daydream solar farm is believed to be backed by a 10-year power purchase agreement with ASX-listed Origin Energy Limited. According to an article in The Australian on 20 October 2020, the deal could be worth over A$300 million and may interest parties such as First Sentier, Palisade Investment Partners, Infigen Energy and UAC.

The remaining 10% stake in the Gretel Solar Portfolio is held by Australia’s Edify Energy, the developer of the solar farms.

New Energy Solar reportedly selling its Australian solar farms

On 26 October 2020, the Australian Financial Review reported that ASX-listed New Energy Solar is seeking buyers for the 111 MW Beryl solar farm and 56 MW Manildra solar project in New South Wales. Parties such as Palisade Investment Partners, Lighthouse Infrastructure, First Sentier and the Dutch Infrastructure Fund are believed to interested, The Australian reported on 5 November 2020. It is understood that the solar farms have long-term sales contracts in place and the sale allegedly comes following a strategic review of the company. With most of New Energy Solar’s assets in the US, the company is understood to be exiting Australia. In a separate report by The Australian on 22 October 2020, it was speculated that New Energy Solar may be the takeover target of a US-based fund.

Partners Group reportedly selling its stake in the Ararat wind farm

On 16 November 2020, the Australian Financial Review reported that Swiss global markets investor Partners Group is believed to be selling its 53% stake in the 240 MW Ararat wind farm in Victoria. The Partners Group first invested in the A$450 million Ararat wind farm development with Canadian pension fund OPTrust in 2015. It is understood that the wind farm has offtake contracts for approximately 70% of its generating capacity, including with the Australian Capital Territory government and energy retailer Flow Power.

Partners Group’s Grassroots Renewable Energy to merge with CWP Renewables

On 23 November 2020, the Australian Financial Review reported that Partners Group and Australia’s CWP Renewables are believed to have entered into an agreement to merge the Partners Group’s asset owner Grassroots Renewable Energy with CWP. The report noted that, having worked together on previous wind and storage developments, the deal will allegedly allow Grassroots and CWP to restructure their financials and streamline their relationship. It is understood that the new entity will retain CWP’s name but will be majority owned by the Partners Group.

Elliott Management to sell Australian solar energy business

On 22 November 2020, The Australian reported that US-based Elliott Management Corporation is believed to be launching a sale process for its Australian solar energy business Elliott Green Power Australia in early 2021. The report noted that the sale is anticipated to include the Susan River Solar Farm, Childers Solar Farm and Nevertire Solar Farms in Queensland and New South Wales, which are valued at over A$500 million and have a generation capacity of over 300 MW. It was reported that First Sentier, Palisade Investment Partners, Lighthouse Infrastructure and Dutch Infrastructure Fund are believed to be interested in the sale.

Goldwind Australia to sell Clarke Creek Wind Farm I

On 25 November 2020, the Australian Financial Review reported that Goldwind Australia (owned by Chinese wind turbine maker Xinjiang Goldwind Science & Technology) hired PwC to find a buyer for the 450 MW first stage of the Clarke Creek Wind Farm Development in Queensland. It was reported that the wind farm has a 348 MW power purchase agreement with the Queensland state-owned electricity generator Stanwell Corporation. The report noted that analysts believe that it will cost approximately A$800 million to commission the wind farm. It is understood that Goldwind Australia will continue to progress the other stages of the development including the addition of a solar farm and battery.

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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