July Australian energy & resources market update

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

Mining

Recent annoucements

Perseus Mining proposes acquisition of Exore Resources via scheme of arrangement

On 3 June 2020, Perseus Mining Limited announced that it entered into a scheme of arrangement under which it will acquire 100% of the issued share capital of ASX-listed Exore Resources Limited. If implemented, the scheme consideration of A$59.8 million will be paid in the form of shares. Each shareholder of Exore will receive one Perseus share for every 12.79 Exore shares held.

The announcement also noted that Exore has elected to exercise its pre-emptive right to acquire the remaining 20% of Apollo Consolidated Limited’s joint venture interests in the Bagoe and Liberty Projects in northern Côte d’Ivoire for US$4.5 million, the completion of which will result in Exore owning 100% of the two projects.

Exore holds approximately 2,000km2 of prospective land in northern Côte d’Ivoire, near Perseus’ Sissingué Gold Mine.

Read the full ASX announcement.

Davenport Resources appoints Deloitte Corporate Finance as financial advisor, seeking strategic partner for potash projects

On 9 June 2020, ASX-listed Davenport Resources Ltd announced that it appointed Deloitte Corporate Finance Inc. as its financial advisor as part of its process to develop its European potash projects portfolio.

Davenport stated that it is seeking to secure strategic development partners for the portfolio, which consists of at least four standalone potash projects in Germany.  The partnership will allow the company to advance toward feasibility studies to validate the results of the positive technical studies completed for three of the projects.

Read the full ASX announcement.

Cardinal Resources announces 100% cash takeover offer from Shandong Gold  

On 18 June 2020, ASX-listed Cardinal Resources Limited announced that it received an off-market 100% cash takeover offer from Shandong Gold Mining (Hong Kong) Co, Ltd, a subsidiary of Shandong Gold Mining Co, Ltd.

Under the Bid Implementation Agreement, Shandong agreed to pay A$0.60 per share with a 50.1% minimum acceptance condition, a significant increase from the non-binding indicative and preliminary offer of A$0.46 per share made by Nord Gold SE on 16 March 2020.  Shandong’s offer also reflected a 39.3% increase from Cardinal’s 20-day volume weighted average price up to close of trading on 18 June 2020 (the last trading day prior to the announcement of the offer).  Cardinal’s Board unanimously recommended all shareholders accept the Shandong offer in the absence of a superior proposal.

Shandong also agreed to provide Cardinal with interim funding of A$11.96 million by subscribing for 26 million Cardinal shares at an issue price of A$0.46 per share to ensure the advancement of the Namdini Project in Ghana.

The offer is conditional upon Shandong obtaining approval from FIRB and regulatory bodies within the People’s Republic of China.

Read the full ASX announcement.

Matsa Resources, IGO Newsearch sign JV agreement for 70% stake in Symons Hill project

On 17 June 2020, ASX-listed Matsa Resources Limited announced that it entered into an option, purchase and joint venture agreement with IGO Newsearch Pty Ltd, a wholly-owned subsidiary of ASX‑listed IGO Limited, under which IGO may earn a 70% interest in the Symons Hill nickel project in the Fraser Range tectonic zone, which is 6 kilometres SSW of IGO’s Nova Nickel Operation in Western Australia.

Under the agreement, IGO must expend a total of A$3.5 million on in-ground exploration over a 36‑month period and make total payments of A$3.5 million to Matsa to acquire a 70% interest in the project.  IGO has the ability to withdraw within the 36-month period, provided it has met applicable minimum expenditure requirements.  If IGO acquires a 70% interest, IGO and Matsa will form a joint venture with Matsa retaining a 30% interest and being “free carried” until completion of a feasibility study or a decision to develop a deposit within the project.  After the occurrence of either of those two events, Matsa may retain its interest by contributing to the joint venture or dilute to a 0.75% NSR royalty interest. 

Read the full ASX announcement.

Alkane Resources announces EGM on 16 July to consider planned demerger and listing of Australian Strategic Materials

On 17 June 2020, ASX-listed Alkane Resources Ltd announced that it will hold a virtual EGM on 16 July 2020 in which shareholders will vote for the demerger and ASX listing of Australian Strategic Materials Limited, following its previous ASX announcement on 20 May 2020.

As discussed in our June update, if approved, eligible Alkane shareholders will receive one share in Australian Strategic Materials for every five Alkane shares held. 

Read the full ASX announcement.

Norilsk Nickel sells Honeymoon Well project to BHP for undisclosed sum

On 19 June 2020, Russian metals miner Norilsk Nickel, through its subsidiary MPI Nickel Pty Ltd, entered into an agreement with BHP Billiton Nickel West Pty Ltd for Norilsk Nickel to sell its Honeymoon Well nickel project in Western Australia to BHP, as well as Norilsk Nickel’s 50% interests in the Albion Downs North and Jericho exploration joint ventures.  BHP currently owns the remaining 50% interest in those exploration joint ventures.  The sale, which is subject to regulatory approvals and other customary closing conditions, will mark Norilsk Nickel’s complete exit from Australian operations.  

Read Norilsk Nickel’s press release.

OZ Minerals to acquire Cassini Resources via scheme of arrangement – Cassini to de-merge exploration assets

On 22 June 2020, ASX-listed OZ Minerals Limited and Cassini Resources Limited announced that OZ Minerals will purchase all of the issued (and to be issued) share capital of Cassini through a scheme of arrangement (Acquisition Scheme).

Under the Acquisition Scheme, OZ Minerals will consolidate its ownership of the West Musgrave Project in Western Australia to 100%, enabling maximum optionality and flexibility regarding future funding and development of the project.  A pre-feasibility study released in February this year reported that the West Musgrave Project is a low cost, long life (26 years), copper-nickel open pit project with a low carbon footprint.

Under a separate scheme implementation deed, Cassini will demerge its Yarawindah Brook and Mount Squires assets in Western Australia into a new company, Caspin Resources Limited (Demerger Scheme).  Under the Demerger Scheme, Caspin will own 100% of the Mount Squires asset, which holds a number of prospective gold targets, and 80% of the Yarawindah Brook asset, a nickel, copper and platinum group elements project.  Caspin intends to apply for listing on the ASX.

Under the Acquisition Scheme, Cassini shareholders will receive consideration with an implied value of A$0.16 per share at the date of announcement, comprised of A$0.15 in the form of one new Oz Minerals share for every 68.5 Cassini shares held and an A$0.01 per share cash capital return to be paid out of Cassini’s existing cash balance.

Under the Demerger Scheme, Cassini shareholders are anticipated to receive one Caspin share for every 22 Cassini shares held, to allow them to retain full exposure to the value and upside of the Yarawindah Brook and Mount Squires assets.

The Acquisition Scheme and Demerger Scheme will each be subject to various conditions.

Cassini shareholders will be asked to approve the Acquisition Scheme and Demerger Scheme at shareholder meetings expected to be held in late September 2020.

Read the full ASX announcement.

Northern Star Resources Mt Olympus project to be acquired by Kalamazoo Resources

On 22 June 2020, ASX-listed Northern Star Resources Limited announced that it has agreed to divest the Mt Olympus Project to ASX-listed Kalamazoo Resources Limited for a deferred contingent cash consideration of A$17.5 million.

The deferred cash consideration is comprised of A$5 million on mining of the first 250,000 tonnes of ore, a 2% net smelter royalty (NSR) on the first 250,00 ounces of gold produced and a 0.75% NSR on any subsequent gold produced, with the same NSRs applying to any other metals produced.

Completion is conditional on Ministerial approval and third party rights being observed.

Read the full ASX announcement.

Kookynie Gold Project to be acquired by Genesis Minerals

On 24 June 2020, ASX-listed Genesis Minerals Limited announced that it entered into a binding option agreement to acquire 100% of the Kookynie Gold Project in Western Australia from A&C Mining Investment Pty Ltd and Ms Yijun Zhu for a consideration of A$13.5 million.

The project is located immediately south-east of the Ulysses Gold Project, also 100% owned by Genesis.

Genesis plans to fund a feasibility study on a larger standalone gold project at Ulysses by raising up to A$19.5 million at an issue price of A$0.042 per share.

Read the full ASX announcement.

Evolution Mining to sell Cracow gold mine

Further to a report by The Australian discussed in our June update, ASX-listed Evolution Mining Limited announced on 4 June 2020 that it entered into a binding agreement with ASX-listed Aeris Resources Limited to sell its Cracow gold mine in Queensland for a total consideration of up to A$125 million.

The consideration payable by Aeris Resources for the purchase comprises a cash payment of A$60 million on closing of the transaction, a deferred payment of A$15 million payable on 30 June 2022 and a 10% net value royalty from 1 July 2022 to 30 June 2027 which is capped at A$50 million.

In its separate statement, Aeris Resources announced that it intends to fund the transaction through a A$40 million equity raising (conducted via a fully underwritten institutional placement and an underwritten 2.02 for 1 pro rata accelerated renounceable entitlement offer) and an acquisition bridge debt facility of A$30 million.

The sale is expected to close around the end of June 2020.

Read the full ASX announcements by Evolution and by Aeris.

Market rumours and opportunities

Orion Minerals receives strong investor interest amid Prieska project financing push – CEO

On 1 June 2020, Mergermarket reported that, according to its CEO Errol Smart, ASX-listed Orion Minerals NL has received strong investor interest in relation to its Prieska project – a copper-zinc project located in Northern Cape, South Africa. 

Orion reportedly plans to focus on securing equity funding to account for 20-30% of the A$413 million funding requirement before securing the residual amount through a mixture of senior and subordinated debt.  Orion’s CEO stated the company is open to selling equity at company or project level.

The updated bankable feasibility study on the project released on 26 May 2020 showed a 43% increase to A$1.6 billion in undiscounted cash flows since the previous June 2019 study, an anticipated pre-tax internal rate of return of 39%, a life of mine of 12 years and an estimated payback period for the capex of 2.4 years from first production.  The target of the project is reportedly an annual production of 22,000 tonnes of copper and 70,000 tonnes of zinc and has a pre-tax NPV of A$779 million.

Thiess owner, CIMIC, pitching pre-IPO investment to private equity players

On 4 June 2020, the Australian Financial Review reported that CIMIC is planning a “one-two staged exit” of Thiess and is looking to secure pre-IPO funding from private equity firms as a form of short-term capital injection.  The pre-IPO funding round would end in Thiess listing on the ASX.  According to the report, analysts speculate that Thiess could be worth $4 billion or more, should Thiess list on the ASX.

It was reported that the cash raised would enable CIMIC to bankroll its other projects and that the investment would likely create a windfall for the pre-IPO investor.

The article reported that although CIMIC has started pitching the proposal to major private equity groups, including global firms with offices in Sydney and Melbourne, it is currently unclear which investors, if any, will participate.

Breaker Resources receives interest in Bombora gold deposit as drilling program reveals strong results

On 16 June 2020, Mergermarket reported that Perth-based gold exploration company Breaker Resources NL has received interest regarding the potential acquisition or joint venture development, of its Bombora gold deposit in Western Australia.

Feasibility studies are yet to be conducted but according to executive chairman Tom Sanders, the current focus of the company is to build value and de-risk the asset to determine the size of the Bombora resource and create development opportunities.

Breaker Resources plans to continue its current drilling program until it identifies locations suitable for further resource drilling.  So far, the drilling program has revealed a significant shallow open pit source and the company announced in May 2020 the discovery of high-grade gold lodes within its Lake Roe Project in Western Australia.  Most recently, on 11 June, it reported potential for significant gold discovery at the Kpoai prospect, which is 3km north of the Bombora gold deposit.

Capricorn Metals investor Hawke’s Point may consider exit

On 17 June 2020, the Australian Financial Review reported that brokers are on the watch for mining investor Hawke’s Point to sell its substantial 16.8% stake in ASX-listed Capricorn Metals Ltd.

According to the article, brokers believe that the strong trading price of Capricorn shares is a reason to speculate a potential sale.  Capricorn shares were reportedly issued at A$0.065 this time last year and they were trading at A$1.70 per share as at 27 June 2020.  Capricorn entered the All Ordinaries Index on 15 June 2020, the article notes.

Brokers also speculate that Hawke’s Point is in need of a cash injection to fund its Ora Banda Mining investment.  A sale of the full 16.8% stake would be worth about $90 million, according to the article.

Regis Resources likely to pursue major acquisition

On 29 June 2020, The Australian reported that ASX-listed Regis Resources Limited may pursue a major acquisition, following other high-profile deals in the gold mining sector as share prices in the industry continue to rise.  

Regis has projects in Western Australia and New South Wales.  According to the article, M&A activity could be necessary to support growth as the organic growth of the company, much resting on the McPhillamys Gold Project in New South Wales, is encumbered by permit hurdles and delays.

The article noted ASX-listed Capricorn Metals Ltd as a potential target as well as the possibility of a merger with ASX-listed Gold Road Resources Ltd.  Gold Road’s joint venture partner on the Gruyere goldmine, Gold Fields, is said to have a similar deposit to that of Regis.

Tianqi Lithium could sell Kwinana refinery and retain Greenbushes stake

Further to our June update, it has been reported by The Australian that Tianqi Lithium Corporation may no longer be selling all or parts of its 51% stake in Talison Lithium, the holding company of the Greenbushes lithium mine in Western Australia.

Rather, The Australian reported on 10 June 2020 that Tianqi could be looking to alleviate its large interest-bearing debts by selling its refinery operations at Kwinana, Western Australia, and thereby retain its holding in the Greenbushes mine which is considered to be one of the best lithium mines in the world.  The article noted that the Kwinana refinery could be worth up to $2 billion.  However, as noted in our last update, the lithium hydroxide plant is reportedly yet to commence production and may be facing impairment losses.  The Australian noted that refinancing may be another option to selling the asset.

The Australian also noted that Albermarle’s reported pre-emptive right to buy the remaining stake in the Greenbushes mine is not thought to extend to the Kwinana refinery.

The article noted that Fortescue Metals, Wesfarmers and Rio Tinto are still understood to be interested in the Greenbushes mine and that Wesfarmers may also be interested in the Kwinana refinery. 

Oil and gas

Recent announcments

Merger of 88 Energy and XCD Energy - update

In our June update, we reported that ASX-listed 88 Energy Limited and ASX-listed XCD Energy Limited (formerly Entek Energy) announced their agreement to merge.  As of 17 June 2020, 88 Energy held 59.27% of shares in XCD and 28.53% of XCD’s listed options.

88 Energy has noted its best and final offer of 2.4 new 88 Energy shares for every 1 XCD share and 0.7 shares in 88 Energy for every 1 XCD listed option, to XCD shareholders and listed option holders who have not accepted offers made to them.  Offers have been extended and will close on 13 July 2020.  The Board of 88 Energy has advised that, in the event that 88 Energy does not reach compulsory acquisition thresholds, it will remain a minority shareholder in XCD.

Read the full ASX announcement.

Market rumours and opportunities

ExxonMobil still on track for sale

On 23 June 2020, the Australian Financial Review reported that ExxonMobil confirmed it would continue with plans to sell its 50% stake in the Gippsland Basin oil and gas venture, which sale was initially announced in September 2019, despite the slump in oil prices resulting from COVID‑19. 

However, it was reported that there will be a delay in the sale process, which was originally set to begin in July.  It is not yet known for how long the sale process will be delayed.  JP Morgan will be running the sale process.

Read the full article.

Chevron announces interest in selling stake in North West Shelf

On 18 June 2020, the Australian Financial Review reported that Chevron announced it will consider selling its stake in the North West Shelf project in Western Australia, Australia’s largest liquefied natural gas project.  Chevron’s 16.7% stake is estimated to be worth between US$3-4 billion, with UBS expected to market the stake.

According to the Sydney Morning Herald’s report published on 23 June 2020, ASX-listed Woodside Petroleum Ltd, who operates the project, indicated its interest in acquiring Chevron’s stake, which would effectively double its stake in the project.  Woodside’s chief executive indicated that Woodside would consider using its right to block any sale to a third party in order to purchase the stake itself.

Read the full articles in the Sydney Morning Herald and the Australian Financial Review.

Shell’s Infrastructure Assets

It was reported that in the week of 21 June 2020, potential buyers of Royal Dutch Shell’s (Shell) 26.25% stake in the QCLNG common facilities located on Curtis Island, Queensland received information on the infrastructure assets.  Rothschild was hired to search for a buyer for the stake, who may meet Shell’s reported asking price of around US$2.5 billion.  According to The Australian, the successful buyer will receive plant usage fees as a fixed annual cash income for 15 years, regardless of oil price, commodity prices or throughput.

According to the Australian Financial Review, Abu Dhabi Investment Authority is interested in purchasing the stake.  Earlier in June, other potential buyers, CKI Group, Global Infrastructure Partners, Queensland Investment Corporation and IFM Infrastructure (IFM) were tipped to be bidders, with Macquarie Infrastructure and Real Assets already conducting early-phase due diligence on the assets.

The Australian Financial Review’s Street Talk column reported on 29 June 2020 that IFM had teamed up with Brookfield, a Canadian infrastructure investment firm and that IFM and Brookfield plan to make a joint bid before the 31 July deadline.

Read full articles in The Australian, the Australian Financial Review and the Australian Financial Review – Street Talk Column here.

Charter Hall showing interest in Ampol’s petrol station portfolio

On 10 July 2020, The Australian reported that ASX-listed Charter Hall Group is assessing more options to invest in the petrol station sector, eyeing off a stake in ASX-listed Ampol Limited’s petrol station portfolio, currently valued at over A$2 billion.  It was reported that UBS has been appointed to sell the portfolio of assets.  Charter Hall’s offering price is thought to equate to a yield of between 5.3% and 5.4%, the report said.  This follows Charter Hall’s acquisition of $840 million worth of BP fuel and convenience properties late last year.

Read the full article.

Ampol open to consolidation

The Australian reported on 30 June 2020 that ASX-listed Ampol Limited has indicated its willingness to consolidate with Australia’s other refiners given the hardship that has hit the industry.  Matt Halliday, chief executive, specifically spoke of the Lytton refinery in Brisbane which is closed for extended maintenance and was reported as stating that the refinery may not reopen if margins do not improve. 

Read the full article.

Electricity and renewables

Recent announcments

Infigen Board recommends takeover offer from Iberdrola, rejects offer from UAC

On 30 June 2020, ASX-listed Infigen Energy Ltd (Australia’s largest listed wind farm operator) announced that its Board unanimously recommended that shareholders accept the latest takeover offer from Spanish utility company, Iberdrola, and reject the competing offer made by Philippine-based investment company, UAC Energy Holdings Pty Ltd (UAC).

This announcement came after Iberdrola increased its offer price from 86 cents to 89 cents per share and waived all conditions attaching to its offer except for FIRB approval and a minimum acceptance rate of 50% by Infigen’s shareholders.  The Iberdrola offer price is at a 3.5% premium to the UAC offer price of 86 cents per share (which, on 29 June 2020, was increased from the initial offer price of 80 cents per share in an attempt to match the Iberdrola offer price).  The UAC offer is unconditional.

In forming its recommendation, the Infigen Board noted Iberdrola’s higher offer price and that the remaining conditions are capable of being satisfied during the offer period.  The Australian Financial Review reported that Iberdrola’s offer values Infigen at approximately A$856 million.

It remains to be seen whether UAC will match Iberdrola’s offer price again and ultimately, how Infigen shareholders will respond.  Both of the Iberdrola and UAC offers are due to close in or around late July 2020.

Read the full ASX announcement and the article by the Australian Financial Review.

Market rumours and opportunities

Energy Australia, Origin Energy and Alinta Energy interested in Click Energy sale

On 28 June 2020, The Australian reported that Click Energy, an energy retailer selling electricity to private and business customers in Victoria, NSW, South Australia and Queensland is believed to be up for sale.  Energy Australia, Origin Energy and Alinta Energy were identified as potential suitors.

It was reported that bids for the sale are due between late June and early July 2020, and that offers will value Click Energy at around A$50-60 million.  The Amaysim group acquired Click Energy for approximately A$120 million in 2017.

Read the full article.

Important notice

The information in this Australian Energy & Resources Market Update has been obtained from third party sources. Johnson Winter & Slattery has not independently verified any such information. The information stated is also summary information only. This information is of a general nature and does not purport to be complete, nor does it constitute an endorsement of, or express an opinion on, any of the matters stated.  Any reliance on information stated in this update is at the user’s sole risk.

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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