December Australian Energy & Resources Market Update

Articles Written by Jarrod Wilksch (Senior Associate), Candy Cheung (Associate), Isabel McElhinney (Associate), Haerim Nam (Associate), Emily Leggett (Law Clerk), Ellen Morgan (Law Clerk), Taylor Whitewood (Law Clerk)
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Our update covers mining, oil and gas, electricity and renewable energy.

Mining

RECENT ANNOUNCEMENTS

Glencore agrees to sell Ernest Henry to Evolution Mining for A$1 billion  

On 17 November 2021, ASX-listed Evolution Mining announced that it has entered into a binding agreement with LSE-listed Glencore to sell its 100% interest in Ernest Henry Mining Pty Ltd, which owns the Ernest Henry Mining copper-gold mine located in Queensland.   

The purchase price is $1 billion and the transaction is expected to close in early January 2022.

Andromeda Metals to acquire Minotaur Exploration via off-market takeover offer

On 10 November 2021, ASX-listed companies Andromeda Metals and Minotaur Exploration announced that they have entered into a Bid Implementation Agreement pursuant to which Andromeda will acquire Minotaur by way of an off-market takeover offer.

Minotaur’s 25% and 50% joint venture interests in the Great White Kaolin Project (located approximately 50 kilometres east of Streaky Bay, South Australia) and Natural Nanotech Pty Ltd respectively means that, under the offer, Andromeda will consolidate 100% ownership in both assets. 

Minotaur shareholders will receive 1.15 Andromeda shares for everyone Minotaur share held, equating to 19.5% in the company.

BHP to divest 80% of BHP Mitsui Coal to Stanmore for USD 1.35bn; Golden Energy and Resources provides payment guarantees

On 8 November 2021, ASX-listed BHP Group announced that its subsidiary BHP Minerals Pty Ltd has entered into a share sale and purchase agreement with Stanmore SMC Holdings Pty Ltd, a subsidiary of Stanmore Resources Limited, to divest all of its shares in Dampier Coal (Queensland) Pty Ltd for US$1.3 billion. Dampier Coal owns 80% of BHP Mitsui Coal (BMC), an operated metallurgical coal joint venture in Queensland.

Golden Energy and Resources Limited, a Singaporean company and major shareholder of Stanmore Resources, is acting as guarantor for the transaction for up to US$600 million. 

The sale of Dampier Coal is part of BHP’s broader divestment strategy which has seen the company commit to decarbonisation through focusing on the production of high-quality metallurgical coal. Throughout the transition period, BHP will continue to operate BMC and provide support to Stanmore Resources. Stanmore Resources’ announcement highlighted the proximity of BMC’s assets to existing Stanmore assets and the potential to benefit the Stanmore group through shared infrastructure, corporate functions, and coal blending opportunities.

Vedanta subsidiary enters agreement to sell Copper Mines of Tasmania via option agreement with New Century Resources

On 27 October 2021, India-based Vedanta published a media release stating that its wholly-owned subsidiary Monte Cello BV has entered into a term sheet with ASX-listed New Century Resources to divest the Mt Lyell mine located in Tasmania by way of an option agreement. Successful acquisition is subject to a minimum expenditure commitment of US$10 million by New Century over the two-year option period, among other terms.

Mt Lylle was placed into care and maintenance in 2015, following two safety incidents and a depression in the copper market.

MARKET RUMOURS AND OPPORTUNITIES

Calidus Resources, Capricorn Metals and others could be targets as Canadian gold miners look to Australia for acquisitions - report

On 24 November 2021, The Australian reported that Canadian gold miners such as Kirkland Lake Gold are eyeing acquisitions in Australia, while the Canadian gold mining stocks boom. The article listed the following ASX-listed companies as potential targets:

  • Calidus Resources (A$256 million), which owns the Warrawoona gold project located in Pilbara, Western Australia;
  • Capricorn Metals (A$1.1 billion) which owns the Karlawinda gold project located in Pilbara, Western Australia;
  • Red Five (A$672 million), which owns the Darlot gold mine located 900 kilometres northeast of Perth, the Great Western satellite mine located 28 kilometres north of Leonora, Western Australia and the King of the Hills project, currently being built in Western Australia;
  • Genesis Minerals (A$343 million);
  • Saturn Metals (A$63 million);
  • De Grey (A$1.75 billion) which owns the Hemi Gold Deposit located 60 kilometres south of Port Hedland, Western Australia;
  • Gold Road (A$1.4 billion), which owns the Gruyere mine located in Laverton, Western Australia, in a 50% joint venture with Gold Fields; and
  • St Barbara (A$1 billion).
Maca could see offer from Thiess

On 31 October 2021, The Australian reported that Thiess is considering the acquisition of its ASX-listed rival Maca. The Australian speculated that Thiess, which generates substantial earnings from coal-related activities, purports to reduce the portion of these earnings through the acquisition. The acquisition is said to be part of a long-term plan by its owners, ASX-listed CIMIC Group and Elliott Management, to sell the business in the future.

Elliott maintains the right to sell its interest in Thiess to CIMIC in three to six years.

An attraction of the acquisition is that commodity prices are soaring, and most in the industry see Maca as undervalued, the article noted. Maca’s earnings for the past year before interest, tax, depreciation and amortisation were $162.1 million, and were largely generated from precious metal miners.

Glencore's CSA copper mine attracts Aeris Resources, 29Metals, Nev Power, Metals Acquisition Corporation and Moxico Resources

Further to our September edition of the Australian Energy & Resources Market Update, The Australian reported on 21 November 2021 that ASX-listed Aeris Resources (market value: $445 million), ASX-listed 29Metals (market value: $1.3 billion), Nev Power, NYSE-listed Metals Acquisition Corporation and London-based Moxico Resources are among the bidders considering the purchase of Glencore’s CSA copper and silver mine located in Cobar, New South Wales.

The sale of CSA is being managed by Bank of America and UBS, and the earlier article estimated that the mine could be worth $1 billion.  

Aeris Resources had previously planned to buy the mine for US$575 million, but the terms could not be agreed, according to the items. It acknowledged, but did not confirm or deny, the market rumour in an announcement dated 25 October 2021.

CSA produces over 1.1 million tonnes of copper ore and more than 185,000 tonnes of copper concentrate a year. Five years ago, Glencore reportedly tried to sell the CSA mine to drive down debt but decided to retain the mine following a spike in commodity prices.

Oil & Gas

RECENT ANNOUNCEMENTS

BHP and Woodside agree to create a Global Energy Company

On 22 November 2021, ASX-listed BHP Group announced it has signed a share sale agreement with Woodside Petroleum Ltd for the merger of BHP’s gas portfolio with Woodside. Woodside will acquire the entire share capital of BHP Petroleum International Pty Ltd in exchange for new Woodside shares. Woodside’s announcement revealed that the merger will create a global top ten independent energy company listed on the ASX. On completion, Woodside will issue new shares expected to comprise of 48% of all Woodside shares as consideration for the acquisition of BHP Petroleum. Those new Woodside shares will then be distributed to BHP shareholders as an in-specie fully franked dividend.

Woodside agrees to sell 49% stake in Pluto Train 2 to GIP

As reported in our October edition of the Australian Energy & Resources Market Update, Hong Kong’s CKI had withdrawn from the sale of ASX-listed Woodside’s Pluto Train 2 processing facility, and Global Infrastructure Partners and Brookfield were competing for the sale.

Following this report, Woodside announced on 15 November 2021 that it entered into an agreement with Global Infrastructure Partners to sell its 49% interest in the Pluto Train 2 Joint Venture. Pluto Train 2 is part of the proposed Scarborough development located off the coast of Western Australia. The development includes a new LNG train and domestic gas facilities to be constructed at the existing Pluto LNG onshore facility. In addition to the 49% share of capital expenditure, the joint venture arrangements require Global Infrastructure Partners to fund an additional amount of construction capital expenditure of approximately US$835 million.

Woodside further announced on 22 November 2021 that the final investment decisions had been made to approve the Pluto Train 2 developments, which was the same day it announced its merger with BHP Petroleum.     

MARKET RUMOURS AND OPPORTUNITIES

Seven Group Holdings hires advisers to sell Crux gas field stake

On 17 November 2021, ASX-listed Seven Group Holdings (SGH) announced to shareholders at its Annual General Meeting that it has appointed advisors to sell its 15% stake in the Crux gas field, located 190 kilometres off the Kimberly Coast of Western Australia.

According to an article by The Australian on the same date, the 15% stake is expected to sell for at least A$250 million, given strong demand for supplies among Asian gas buyers and the importance of the asset to Shell’s Prelude floating LNG project also in the Browse Basin.

Electricity & Renewables

RECENT ANNOUNCEMENTS

Shell and ICG to acquire Meridian Energy Australia

Further to our October edition of the Australian Energy & Resources Market Update, ASX and NZE-listed Meridian Energy announced on 22 November 2021 that it has agreed to the sale of its Australian business to the consortium of Shell and Infrastructure Capital Group (ICG) for $729 million. On completion, Shell will own the retail arm of the business Powershop Australia and ICG will own the infrastructure assets which include various wind farms, power stations and development assets. The sale is subject to Shell obtaining FIRB approval and is expected to complete in Q1 2022.

Spark Infrastructure shareholders approve scheme of arrangement

On 22 November 2021, ASX-listed essential energy infrastructure investor Spark Infrastructure announced that its shareholders have approved the scheme of arrangement to be acquired by the consortium of Kohlberg Kravis Roberts & Co LP, Ontario Teachers’ Pension Plan and Public Sector Pension Investment Board. A subsequent announcement on 24 November 2021 confirmed that FIRB approval has been obtained for the scheme. The Australian Financial Review reported on the same day that the total cash bid of $2.8875 per share values Spark Infrastructure at $5.2 billion. Spark Infrastructure’s investments include stakes in SA Power Networks, CitiPower and Powercor (together Victoria Power Networks) and TransGrid.

APA acquires debt in Basslink

On 22 November 2021, ASX-listed APA Group announced that is has acquired an interest in the debt of Basslink, the owner and operator of the electricity interconnector between Victoria and Tasmania which entered into voluntary administration and receivership on 12 November 2021. APA stated that it is interested in acquiring Basslink from the receivers and managers and that the debt acquired is worth approximately $99 million.

MARKET RUMOURS AND OPPORTUNITIES

Sale of AustralianSuper’s stake in Ausgrid

Further to our October edition of the Australian Energy & Resources Market Update, the Australian Financial Review reported on 23 November 2021 that binding offers for AustralianSuper’s 16.8% stake in Ausgrid are due on 6 December 2021. The stake up for sale is expected to be worth around $1.35 billion. The article notes that Kohlberg Kravis Roberts & Co LP is no longer in the race and that the remaining shortlisted bidders include Macquarie Infrastructure and Real Assets, Dutch fund APG and Ontario Teachers’ Pension Plan.

Morrison & Co sells stake in Macarthur Wind Farm

Further to our October edition of the Australian Energy & Resources Market Update, The Australian reported on 31 October 2021 that Morrison & Co is seeking binding bids for the sale of its 50% stake in the Macarthur Wind Farm located in Macarthur, Victoria, with the binding offers due in December. AMP Capital is believed to be a serious contender given it has pre-emptive rights as the holder of the other 50% stake. The asset is expected to be worth between $800 million and $900 million.

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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