September Australian energy & resources market update

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

Mining

RECENT ANNOUNCEMENTS

Stone Resources Australia’s Ben Hur project sold to Regis Resources for A$10 million

On 12 August 2020, ASX-listed gold developer Stone Resources Australia Ltd announced that it executed a sale and purchase agreement to sell its Ben Hur project in Western Australia to ASX-listed Regis Resources Ltd for A$10 million.

The sale is part of the company’s recapitalisation process which will enable the development of its Brightstar Gold Project in Laverton, Western Australia.

Cardinal bidder SD Gold focusing on maintaining offer price superiority – spokesperson

Further to our July and August Australian Energy & Resources Market Updates, the board of ASX-listed Cardinal Resources Limited unanimously recommended its shareholders to accept the off-market all-cash offer from Chinese gold miner Shandong Gold Mining (Hong Kong) Co., Limited (in the absence of a superior proposal) in its announcement and target statement on 11 August 2020. The offer opened on 13 August 2020 and closes on 13 October 2020. 

On 18 August 2020, a spokesperson for Shandong told Mergermarket that Shandong believes that the outcome is largely dependent on Shandong maintaining a higher offer price than that of its rival, Nord Gold S.E., rather than any regulatory risks attached to the offer. Nord Gold extended the offer period for its offer of A$0.66 per share announced in mid-July 2020 to 10 September 2020, as announced on 24 August 2020. This followed a statement by a spokesperson on 18 August 2020 that Nord Gold would not revise its offer. Details of the previous bids by the two companies were discussed in our July and August Australian Energy & Resources Market Updates.

The spokesperson for Nord Gold reportedly opined that Nord Gold’s offer, including its prompt cash consideration via accelerated payment terms, still outweighs the regulatory risks related to Shandong’s offer, as Shandong’s offer is subject to change of control approvals in Ghana and Canada. However, according to the bidder’s statement on 11 August 2020, Shandong does not consider such approvals as conditions of the offer.

Cardinal’s target statement on 11 August 2020 also only referred to regulatory approvals by China and FIRB as conditions of the offer and stated that all necessary Chinese regulatory approvals had been received. Cardinal announced on 19 August 2020 that Shandong obtained FIRB approval.

Two sources reportedly told Mergermarket on 27 August 2020 that Nord Gold is hesitant to increase its offer to meet Shandong’s offer for A$0.70 per share, because of doubts on the ability to realise a sufficient return on capital and cost leakages associated with Shandong’s offer.

The first source noted that it is undecided whether Nord Gold will keep its 20% stake in Cardinal in the event of Shandong gaining control. This source stated that joint venture options are unlikely.

PT Amman Mineral Internasional’s gold asset to be acquired by Orminex

On 19 August 2020, ASX-listed Orminex Limited announced that it executed a binding framework letter with Indonesian mining company PT Amman Mineral Internasional to progress its acquisition of all or part of PT Amman’s epithermal gold project asset in Indonesia.

Consideration is likely to be issuance of ordinary shares in Orminex resulting in PT Amman acquiring a controlling interest.

The parties agreed to an exclusivity period which expires on 30 November 2020. The valuation of the asset is to be determined.

Mali Lithium to acquire 80% in Morila Gold Mine from Barrick Gold, AngloGold Ashanti

On 31 August 2020, ASX-listed Mali Lithium Limited announced that it entered into an agreement to acquire Morila Limited from Barrick Gold Corporation and AngloGold Ashanti. Morila Limited owns an 80% interest in Malian registered company Société des Mines de Morila, which in turn owns the Morila Gold Mine in the Republic of Mali. The remaining 20% of Société des Mines de Morila is owned by the State of Mali.

Consideration is estimated to be between US$22–27 million (A$31–38 million) and parties are targeting completion before the end of October 2020.

The Malian mine is forecasted to produce approximately 26,350 ounces of gold from November 2020 to the second quarter of 2021.

MARKET RUMOURS AND OPPORTUNITIES

BlackEarth Minerals considering investment opportunities including acquisition

On 5 August 2020, Mergermarket reported that ASX-listed BlackEarth Minerals NL is actively assessing investment opportunities and acquisition targets in Madagascar and Australia, according to its managing director Tom Revy. The company is open to entering into a deal before the end of 2020.

As an emerging graphite miner with a market cap of A$5.81 million, the company is reportedly not seeking to diversify into other commodities.

A report by Investing News in January 2020 reported that a 24% compound annual growth rate is expected for the graphite market as sales for electric vehicle batteries continue to grow.

SolGold strategy debated ahead of October requisitioned GM and lifting of standstill agreement

Further to our August Australian Energy & Resources Market Update, SolGold is at risk of alienating its shareholders and potential acquirers, according to a report by Mergermarket on 12 August 2020.

TSXV-listed Cornerstone Capital Resources Inc., which holds 7.6% of the shareholding in SolGold, announced that a requisitioned shareholders’ general meeting will be held on 27 October 2020 at which it intends to replace the entire SolGold board and conduct a strategic review of the business. Cornerstone’s CEO told Mergermarket that the company expects all sophisticated shareholders including its largest shareholders, Newcrest Mining and BHP, to support the new board that Cornerstone will propose at the requisitioned general meeting.

The report noted, however, that minority shareholder Livermore Partners intends to side with SolGold at the meeting. SolGold could also pre-empt Cornerstone’s attempt to overthrow the board by launching a strategic review of the business itself.

SolGold also approaches the lifting of its standstill agreement with BHP, which prevented BHP from buying new shares in SolGold until mid-October 2020. BHP and Newcrest Mining are reportedly suspected to be potential acquirers of the company.

Bryah Resources in talks with Monument Mining and others regarding Tumblegum South gold-copper prospect 

On 14 August 2020, Mergermarket reported that ASX-listed Bryah Resources Limited is in talks with numerous third parties including Canada-based Monument Mining Limited and ASX-listed Westgold Resources Limited to monetise its Tumblegum South prospect in Meekatharra, Western Australia.

According to the article, the company commenced negotiations at the beginning of this year to explore its options for the project, including a 100% sale or entering into a joint venture. However, there has been no further progress since January, managing director Neil Marston reportedly stated.

Jiangsu Yulong Steel Pipe signs LOI to buy Barto Gold Mining

On 16 August 2020, Mergermarket reported that China-based steel pipe maker Jiangsu Yulong Steel Pipe signed a letter of intent to purchase Barto Gold Mining, an Australia-based gold miner. Barto Gold Mining is fully owned by gold miner Barto Australia, which in turn is fully owned by Shandong Tinaye Group Bid Co.

Superior Gold’s Plutonic mine reportedly available for sale

On 18 August 2020, The Australian reported that Canadian listed company Superior Gold Inc is selling its Plutonic gold mine in Western Australia.

The asset, which could be worth up to A$70 million, reportedly includes the Plutonic underground gold mine, the Hermes open pit projects and an interest in the Bryah Basin joint venture. The mine has been in continuous production since 1990 and average annual gold production since 2010 has been about 10,000 ounces, the article noted.

According to the article, the challenge for any potential acquirer will be the need to make a takeover bid for Superior Gold on the Toronto Stock Exchange, with the mine being Superior Gold’s only asset.

The Plutonic gold mine was previously owned by ASX-listed Northern Star Resources Limited, which is the largest shareholder of Superior Gold holding approximately 20% of the company’s shares.  

Golden Energy and Resources eyeing acquisitions

On 21 August 2020, Mergermarket reported that according to a print article by the Business Times, Singapore-based coal miner and trader Golden Energy and Resources (market cap US$269 million) is eyeing acquisitions.

Investments head Mark Zhou reportedly stated that the company is well-positioned to purchase smaller mining companies in Australia which lack infrastructure to assist them through the current market volatility and low coal prices.

The company will also be diversifying into new areas such as cobalt, copper and other metals used in batteries, the item noted.

Nova Minerals to assess acquisitions once it advances Estelle gold project

On 21 August 2020, Mergermarket reported that junior ASX-listed gold mining company Nova Minerals Limited (market cap A$65.8 million) will assess corporate or project acquisitions “as they present” following the advancement of its Estelle gold project in Alaska, according to its CEO Christopher Gerteisen.

Nova will reportedly look to targets in safe jurisdictions with low sovereign risk down the line, which have “great gold endowment as is the case with Alaska”, according to the Mergermarket article. It is currently open to advisers pitching targets. Nova’s CEO did not describe other target criteria nor potential funding arrangements. 

Nova’s share price has doubled since the lockdown from COVID-19 came into full effect on 23 March 2020 (A$0.023) to trade at A$0.057 (1 September 2020).

Jindal Steel & Power to sell up to 50% stake in Australian coking coal assets

On 28 August 2020, Mergermarket reported that Indian steelmaker Jindal Steel & Power (market cap INR 200bn; US$3 billion) is seeking to sell a stake of 25–50% in its Australian coking coal mine assets. The company is aiming to reduce its debt of approximately US$3.9 billion to approximately US$2 billion by March 2023, according to its Managing Director, V.R. Sharma.

However, the company is not looking to sell its two coking coal mines in New South Wales despite having received proposals. The company will reportedly make a call after coking coal prices improve. Jindal also intends to maintain a part of its stake to source raw materials for its steel plants in India.

The Managing Director reportedly noted that the company is open to investors such as BHP, Rio Tinto and the Adani Group.

IGO could sell Tropicana gold mine and shares in New Century Resources to fund major acquisition

On 27 August 2020, the Australian Financial Review reported that ASX-listed IGO Limited may sell its 30% stake in the Tropicana gold mine located in Western Australia to help fund a major acquisition in the battery metals sector. The remainder of the Tropicana gold mine is held by AngloGold Ashanti. IGO’s CEO Peter Bradford reportedly told the paper that the Tropicana gold mine did not fit with IGO’s strategy to become a “globally relevant” supplier of metals needed in renewable energy generation and storage and electrification, but that the project was a core part of IGO’s portfolio generating strong free cash flow.

The company has rejected unsolicited approaches, the article noted.

On 31 August 2020, the Australian Financial Review reported that stockbroker Euroz is seeking buyers for 180 million shares in ASX-listed New Century Resources Limited, which owns the Century Zinc Mine in Queensland, and signed an indicative term sheet to acquire a 95% stake in the Goro Nickel & Cobalt Mine in New Caledonia. Euroz did not disclose the identity of the entity for whom it was selling the 180 million shares, but the only investor with that number of shares in New Century is IGO, according to the article.

These reports follow IGO’s announcement on 27 August 2020 that its focus into the 2021 financial year is “firmly on growing the business through both exploration and disciplined mergers and acquisitions”, having committed A$65 million to exploration and discovery for “mines of the future”.

The company stated that it will maintain its M&A strategy of identifying and securing interests in high quality, long-life mineral assets which meet its investment criteria.

IGO achieved record financial results in the 2020 financial year, with a net profit after tax of A$155 million. Performance was primarily driven by IGO’s Nova Operation in Western Australia and Tropicana gold mine.

Oil and gas

MARKET RUMOURS AND OPPORTUNITIES

Eni’s Australian gas assets - update

Further to our August Australian Energy & Resources Market Update, The Australian speculated on 30 August 2020 that ASX-listed Beach Energy Limited and Morgan Stanley Infrastructure Partners are in the final stages of the auction led by investment bank Citi for the purchase of Eni’s Australian oil and gas assets. On offer is Eni’s interests in Darwin LNG, the Bayu-Undan gas project, the Blacktip gas project, and the Yelcherr gas plant. Eni is also selling its interest in the Evans Shoal gas field.

Other prospective buyers for Eni’s assets reportedly include Indonesian Group MedcoEnergi, an Indonesian buyer, along with ASX-listed Macquarie Group, which has reportedly partnered with the European E&P company Neptune Energy.

QCLNG bids – update

In our July Australian Energy & Resources Market Update, we reported that Rothschild was hired to find a buyer for Royal Dutch Shell’s stake in the QCLNG common facilities located on Curtis Island, Queensland. Binding bids for the stake from shortlisted bidders are due on 16 October, the Australian Financial Review reported on 20 August 2020. Prospective buyers include IFM Investors, CKI and Global Infrastructure Partners. The Australian Financial Review reported on 5 August 2020 that Brookfield has withdrawn from the bidding process.

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

Further to our August Australian Energy & Resources Market Update, Chevron’s stake in the North West Shelf project in Western Australia continues to draw interest, with The Australian reporting on 19 August 2020 that Global Infrastructure Partners and the Canada Pension Plan Investment Board are arranging to submit indicative first round bids for the stake. Bids will be made next month.

ASX-listed Woodside Petroleum Limited recently released its half year results, and announced that it was progressing existing growth plans. As we reported in our August Australian Energy & Resources Market Update, many think that these growth plans include Chevron’s stake in the North West Shelf project, which would double Woodside’s interest in the venture.

Couche-Tard revives interest in Ampol

Canadian company Couche-Tard may have renewed interest in ASX-listed Ampol Limited (previously known as Caltex) according to an article by The Australian on 5 August 2020. Earlier in the year, Couche-Tard withdrew from an A$8.8 billion offer for Ampol given the COVID-19 pandemic. The article noted that due diligence had mostly been completed by Couche-Tard before it withdrew and that it had not discovered any material issues up to that time.

Electricity and renewables

RECENTLY COMPLETED DEALS

CleanPeak Energy acquires Enwave

CleanPeak Energy, an Australian provider of rooftop solar solutions, has acquired the Enwave distributed energy business from Infrastructure Capital Group, reported the Australian Financial Review on 31 August 2020. The report noted that the acquisition allows CleanPeak Energy to diversify its business to on-site gas power generation, and heating and cooling for offices and apartment buildings.

The acquisition was backed by a A$90 million credit facility from ANZ.

ICG acquired Enwave together with Tasmanian gas distributor TasGas in September 2019 for A$420 million from Brookfield Infrastructure Partners

SIMEC ZEN Energy de-merges

On 13 August 2020, Australian renewable energy retailer ZEN Energy announced the successful de-merger of SIMEC ZEN Energy into SIMEC Energy Australia and ZEN Energy. Acquired by GFG Alliance in 2017, ZEN Energy was merged with SIMEC. GFG Alliance has now sold ZEN Energy back to its founder Professor Ross Garnaut. In a related report by the ABC, it was noted that the de-merger will allow both businesses to focus on their strategies (being the retail end of the supply chain for ZEN Energy and value-added manufacturing for GFG Alliance) and explore more effective capital structures. The sale price was not disclosed.

Partners Group acquires the Murra Warra Wind Farm II

On 3 August 2020, global private markets investment manager Partners Group announced that it had invested over A$180 million in equity to acquire and construct the second stage of the Murra Warra Wind Farm in Victoria from a consortium comprising RES and Macquarie’s Green Investment Group. The announcement noted that construction will commence in August 2020 and is expected to be completed by mid-2022.

The wind farm will comprise 38 turbines with a total capacity of 209MW. 100% of the wind farm’s capacity has already been contracted to Snowy Hydro, an electricity generator and retailer owned by the Commonwealth Government, pursuant to a long-term power purchase agreement.

RECENT ANNOUNCEMENTS

AGL Energy acquires Click Energy

Further to our July Australian Energy & Resources Market Update, ASX-listed energy generator and retailer AGL Energy Limited announced on 31 August 2020 that it entered into an agreement with ASX-listed Amaysim Australia Limited for the acquisition of 100% of the shares of energy retailer Click Energy Group Holdings Pty Ltd for A$115 million. Amaysim also announced the transaction. AGL will acquire Amaysim’s energy business pursuant to the acquisition, but the transaction does not include Amaysim’s mobile customer base or business.

Completion of the acquisition is expected to occur on or by 30 September 2020.

Iberdrola extends offer period to acquire remaining Infigen shares held by minority investors

Further to our August Australian Energy & Resources Market Update, ASX-listed Infigen Energy Ltd announced that Iberdrola had acquired over 76.5% of Infigen’s shares as at 27 August 2020. As a result, Iberdrola may now cast a majority vote and pass a special resolution at a general meeting of Infigen’s shareholders. With Iberdrola’s former rival bidder UAC Energy Holdings Pty Limited holding 19.94% of Infigen’s shares, minority investors now hold approximately 3.5% of Infigen’s shares. In light of this, Iberdrola has asked the Infigen board to consider delisting the company. To acquire the remaining shares held by minority investors, Iberdrola further extended the offer period until 9 September 2020. 

EnergyAustralia to acquire residual stake in Echo Group

On 18 August 2020, energy retailer EnergyAustralia announced that it plans to fully acquire solar and LED lighting company Echo Group following the latter’s strong performance since EnergyAustralia first acquired a 49% interest in it in July 2019. The current acquisition is subject to FIRB approval.

Luminous Energy sells solar farm to Hana Financial Investment

On 28 August 2020, UK-based solar developer Luminous Energy announced that it completed the sale of the 162MW Columboola Solar Farm in Queensland to South Korea-based Hana Financial Investment. Luminous noted that the deal comes following the execution of a long-term power purchase agreement with the Queensland government-owned CS Energy for 100% of the solar farm’s output.

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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