March Australian Energy & Resources Market Update

Articles Written by Tom Barrett (Senior Associate), Jarrod Wilksch (Senior Associate), Isabel McElhinney (Associate), Haerim Nam (Associate), Cloe Woodward (Associate), Lalita Kirilak (Law Graduate)

Our update covers mining, oil and gas, electricity and renewable energy.

Mining

RECENTLY COMPLETED DEALS

Pilbara Minerals completes Altura Lithium Operations acquisition

Further to our December Australian Energy & Resources Market Update, ASX-listed Pilbara Minerals Ltd announced on 20 January 2021 that it completed its 100% acquisition of Altura Lithium Operations Pty Ltd and thereby wholly acquired the Altura Lithium Project located in Pilgangoora, Western Australia.

RECENT ANNOUNCEMENTS

AuStar Gold agrees to be fully acquired by White Rock Minerals for merger

On 3 February 2021, ASX-listed AuStar Gold Limited announced that it entered into a binding merger implementation deed pursuant to which ASX-listed White Rock Minerals Ltd will acquire 100% of AuStar via a scheme of arrangement.

Each AuStar shareholder will receive 0.78 White Rock shares for each AuStar share held.

The merged group will be a diversified gold explorer and producer with a portfolio of assets in the   Walhalla-Woods Point gold belt in Victoria, the silver-zinc-gold-lead VMS and gold IRGS Red Mountain project located in Alaska and the pre-development stage Mount Carrington gold-silver project located in New South Wales.

Shandong Gold to compulsorily acquire all remaining Cardinal Shares

Further to our previous updates on the takeover of ASX-listed Cardinal Resources Limited, on 27 January 2021, Cardinal announced that Shandong Gold Mining (HongKong) Co., Ltd now holds 95.62% of Cardinal’s shares and intends to compulsorily acquire all remaining shares of Cardinal. 

On 24 December 2020, long-standing rival bidder and previously Cardinal’s largest shareholder NordGold S.E. announced the expiry of its on-market takeover offer and acceptance of Shandong’s unconditional off-market takeover offer. Shandong on the same day announced that it acquired a controlling stake in Cardinal and would increase its unconditional off-market takeover offer for Cardinal from $1.05 to $1.075 per share.

ASX-listed Engineers & Planners Company Limited and Dongshan Investments withdrew their respective offers on 31 December 2020 following Shandong’s acquisition of the controlling stake. Access the full announcement by Engineers & Planners here and Dongshan Investments here.

Aldoro to undertake strategic review of gold asset portfolio following EOI

On 18 January 2021, ASX-listed Aldoro Resources Limited announced that it will undertake a strategic review of its gold portfolio including its Penny South Gold project, Unaly Hill South mine and Ryan’s Find mine located in Western Australia, following approaches by unrelated parties expressing interest in the assets.  

Aldoro stated that it is considering a potential sale of the gold portfolio and other capital initiatives. The announcement noted that the company will continue to prioritise its exploration programme at its 100% owned Narndee Nickel-PGE project, located about 90 kilometres south-west of Mount Magnet in Western Australia.

MARKET RUMOURS AND OPPORTUNITIES

Chalice Mining interest heats up as Julimar results keep improving

On 25 February 2021, Mergermarket reported that, according to managing director Alex Dorsch, interest is increasing for ASX-listed Chalice Mining Limited (market cap A$1.47 billion).

However, it was reported the company will explore its “pipeline of opportunities” prior to engaging anyone for the sale. The company’s key project is its 100% owned Julimar nickel-copper-platinum group elements project located about 70 kilometres north-east of Perth, Western Australia. The drilling program for the project, which began in the first quarter of 2020, has reportedly produced a 2000% shareholder return since January 2020.

The item noted that, with no Australian PGE company large enough to be a potential purchaser, logical buyers are thought to be South African companies familiar with palladium deposits, including Anglo American Platinum and Impala Platinum. The item also noted that nickel companies, such as ASX-listed BHP and Anglo-Swiss Glencore, may also be potential buyers if the project is a “once in a generation” nova nickel discovery like that of ASX-listed Sirius Resources NL.

Magnetic Resources attracting interest at Laverton projects with deal on 2021 horizon – MD

On 16 February 2021, Mergermarket reported that ASX-listed Magnetic Resources NL is in discussions with ASX-listed companies Dacian Gold Ltd and AngloGold Ashanti Limited, as well as JSE-listed Gold Fields to sell its Hawkes Nest 9 and Lady Julie projects located in Laverton, Western Australia.

The item noted that, according to Magnetic’s managing director George Sakalidis, the structure of a potential deal will depend on Magnetic’s drill results and scoping and prefeasibility studies in coming months, but the company expects to make a decision in the second half of this year. 

Golden Grove mine attracts Sandfire Resources  

On 14 February 2021, The Australian reported that private equity firm EMR Capital may be listing its copper, lead, zinc, silver and gold-producing Golden Grove mine (located 450 kilometres northeast of Perth, Western Australia) and other copper assets including an 80% stake in the Lubama copper mine in Zambia and the Capricorn copper operation on the ASX.

However, it was reported that the auction for Golden Grove is in its second round and that EMR may decide to sell the operation. The report noted that ASX-listed Sandfire Resources Limited is believed to be a strong contender for the asset and stands against one or two miners and some gold streaming investors. An earlier report by The Australian on 20 December 2020 cited Silver Lake Resources Limited, OZ Minerals Limited, Mt Gibson Iron LimitedMincor Resources NL, Western Areas Limited, Sumitomo and Mitsui as other potential buyers.

Mineral Resources mulls partial sell-down of iron ore division

On 10 February 2021, The Australian reported that ASX-listed Mineral Resources Limited may sell a portion of its iron ore division as the company seeks to construct port infrastructure to stranded Pilbara deposits. Construction of the new ports is set to commence in mid-2021.

Managing director Chris Ellison reportedly told The Australian that Mineral Resources was actively considering joint venture deals, partnerships and the eventual partial sell down of its iron division, which is expected to ship 19.6-20.5 million tonnes of ore for the full financial year.

Caspin Resources will consider inorganic options but is a likely takeover target if it strikes Chalice Mining-style discovery – CEO

On 22 January 2021, Mergermarket reported that ASX-listed Caspin Resources Limited is likely to become a takeover target if discovery is made at its Yarawindah Brook nickel-copper-PGE sulphide project in Western Australia but will otherwise consider acquisitions and joint ventures as it advances its projects, according to its CEO Greg Miles.

The Yarawindah Brook project is located 40 kilometres away from the Julimar nickel-copper-PGE project, which is owned by ASX-listed Chalice Mining Limited. Chalice Mining’s share price reportedly increased from A$0.16 in March 2020 to A$4.66 following a major discovery at Julimar in March 2020. Caspin Resource’s CEO was reported as stating that the company is reasonably confident that the Yarawindah Brook project can also produce good results, being “on the same strike” as Julimar. 

The article noted that, as the largest shareholder in Caspin Resources (holding a 10% stake), Chalice Mining may be a potential buyer in a takeover. The article also reported that Mr Miles noted that Chalice Mining does not have a blocking stake and its shareholding will not decrease potential takeover opportunities.

It was reported that Mr Miles also stated that other potential buyers may include ASX-listed companies IGO Limited and Western Areas Limited and other nickel sulphide miners. However, Mr Miles reportedly did not provide a timeline for scoping and feasibility studies, discovery or takeover, noting that the project is in its early-stage exploration phase.

Separately, Mr Miles reportedly stated that Caspin Resources is also monitoring the market for an Australian joint venture partnership for its Mount Squire project located in the West Musgrave province of Western Australia, which is primarily a gold project.

Whitehaven could buy Itochu’s Maules Creek stake as Japanese group pledges coal exit

On 14 January 2021, the Australian Financial Review reported that if Japanese group Itochu decides to sell its 15% stake in the Maules Creek mine, located 45 kilometres south-east of Narrabri in New South Wales, its joint venture partner and ASX-listed Whitehaven Coal Limited may purchase that interest. Whitehaven Coal currently owns 75% of the mine.

The article reported that Itochu lodged documents with the Tokyo Stock Exchange on 13 January 2021 declaring that it would divest its thermal coal assets by 2024.

However, the article reported that Whitehaven Managing Director Paul Flynn stated that the company had not discussed the latest announcement with Itochu and that Itochu had previously indicated that the Maules Creek mine was not included in the thermal coal mining portfolio that Itochu indicated it would be divesting.

South32 preparing to sell 50% stake in Eagle Downs project

On 11 January 2021, The Australian reported that ASX-listed South32 Limited is considering options to sell its 50% stake in the Eagle Downs metallurgical coal project in Queensland. According to the article, South32 will not be developing the project as originally planned, which it purchased in 2018 for an upfront cost of US$106 million, after receiving the results of a feasibility analysis conducted last year.

The other 50% stake in the project is owned by China BaoWu Steel Group, which acquired its stake through the A$1.4 billion takeover of Aquila Resources. It was reported that BaoWu maintains a continued interest in the project, highlighting the mine’s capacity to produce high-quality coal at low operating cost. However, the article noted that it is unclear whether BaoWu will seek to purchase South32’s stake and that, if it does, BaoWu will be liable for rail and port take-or-pay contracts regardless of shipping performance. 

KORES puts 82.25% stake in Wallarah 2 Coal Project up for sale

On 6 January 2021, Mergermarket reported that, according to an article by the Korea Economic Daily, Korea Resources Corp (KORES) will sell its entire 82.25% stake in the Wallarah 2 Coal Project, a coal joint venture in Australia’s Wyong region in New South Wales.

It is reported that the sale is being undertaken in response to the South Korean government’s request for KORES to sell all of its overseas assets to cut its debt ratio. The Wyong coal mine reportedly has an annual production of up to 5 million tonnes, with 1.2 billion tonnes of bituminous coal reserves.

The article also noted that KORES stated in its sale notice that the ownership stakes in the project held by SK Networks (8.5%) and Kyungdong (4.25%) could also be included as a package in the sale.

Oil & Gas

RECENTLY COMPLETED DEALS

Santos QNT acquires stake in South Nicholson Basin Exploration Project from Armour Energy

On 4 February 2021, ASX-listed Armour Energy Limited announced that it had completed the sale of a 30% interest in a portion of the South Nicholson Basin Exploration Project located in the Northern Territory to Santos QNT Pty Ltd, a wholly-owned subsidiary of ASX-listed Santos Ltd.

Armour Energy first announced the sale on 22 December 2020, when it informed the market that it had entered into a binding term sheet with Santos QNT for the sale of its remaining 30% interest in a portion of the South Nicholson Basin Exploration Project covering an area of approximately 40,751km2. As consideration, Armour received an initial payment of A$3 million upon execution of the term sheet and a further A$9.25 million in cash upon completion of the conditions precedent.

Armour retains full ownership and operatorship of ATP(A) 1107, which covers 7,906km2 of the South Nicholson Basin Exploration Project.

RECENT ANNOUNCEMENTS

FAR receives conditional non-binding indicative offer from Lukoil

On 17 February 2021, ASX-listed FAR Limited announced that it had received a conditional non-binding offer from Russia-based PJSC Lukoil, which is one of the world’s largest publically traded energy companies, to acquire 100% of the shares in FAR at a price of A$0.022 per share. The proposal values FAR at A$220 million.

The item noted that the offer is subject to timely and targeted due diligence on FAR and Lukoil board approval. Lukoil has also stated that any formal binding offer would not include any financing conditions.

Global Infrastructure Partners Australia acquires Royal Dutch Shell’s stake in QCLNG common facilities

In our July, September and December Australian Energy & Resources Market Updates, we reported that Royal Dutch Shell was looking to sell a 26.25% stake in the QCLNG Common Facilities located on Curtis Island, Queensland. On 21 December 2020, Royal Dutch Shell announced that it had agreed to sell its stake to Global Infrastructure Partners Australia for US$2.5 billion. The item noted that upon completion of the transaction, Shell will remain majority owner and operator of the QCLNG Common Facilities.

MARKET RUMOURS AND OPPORTUNITIES

Chevron selling stake in North West Shelf – update

In our October and December Australian Energy & Resources Market Updates, we reported that ASX-listed Woodside Petroleum Ltd was participating in the sale process for US-based Chevron Corporation’s interest in the North West Shelf Project located in Western Australia.

On 3 February 2021, The Australian reported that Woodside, once considered the most likely buyer, has not progressed to the second round of the auction for the interest.  The report noted that Woodside has pre-emptive rights over the stake and that some suspect that Woodside may be preparing to raise equity which could enable it to return to the auction at a later stage.

Electricity & Renewables

MARKET RUMOURS AND OPPORTUNITIES

Bidders to acquire Tilt Renewables and Infratil

On 21 December 2020, The Australian reported that ASX-listed Infratil Limited initiated a strategic review of its 65.6% (A$1.2billion) stake in ASX-listed Tilt Renewables Limited. Tilt Renewables owns wind and solar farms in Australia and New Zealand. The article noted that Infratil’s strategic review was initiated after it was approached by AustralianSuper with an offer of A$5.1 billion to acquire Infratil. That offer was ultimately rejected by Infratil. The article also noted that, since receiving AustralianSuper’s offer, Infratil has hired Goldman Sachs as its defence adviser.

On 24 January 2021, The Australian reported that Spanish company Iberdrola, who was believed to have made an early bid for Infratil’s interest in Tilt Renewables in 2020, is no longer pursuing the acquisition of that interest. That article also reported that ASX-listed APA Group has hired investment bank UBS as part of an attempt to buy Infratil’s stake in Tilt Renewables and that UBS is on board as APA positions itself for a major equity raising should it win the auction. It was noted in the article that first round bids for Infratil’s stake in Tilt Renewables were due on 22 January 2021 and it was believed that offers were put forward by ASX-listed AGL Energy Limited and Queensland Investment Corporation through their Powering Australia Renewables Fund, Canadian pension fund CDPQ, and the New Zealand company Mercury.

On 4 February 2021, Tilt Renewables announced that it had received a number of non-binding indicative proposals to be acquired. On the same day, Infratil announced that it will provide due diligence access to a number of parties to enable them to prepare binding proposals for Tilt Renewables. The Australian Financial Review also reported on 4 February 2021 that shortlisted bidders for the second round of the auction for Tilt Renewables include CDPQ, Mercury, the Powering Australia Renewables Fund and the Australian Government’s Future Fund.

On 9 February 2021, the Australian Financial Review reported that the Powering Australia Renewables Fund and Mercury had teamed up to run joint due diligence on Tilt Renewables in the second round of the auction.

OSMI Secures Cubico as long term investment partner for Delburn Wind Farm

On 27 January 2021, OSMI, an Australian energy development company, announced that it had selected Cubico Sustainable Investments, a UK-based renewable energy investment fund, as the principal project investor for the Delburn Wind Farm in Victoria’s Latrobe Valley.

New Energy Solar Seeks to Sell Australian Assets

Further to our December Australian Energy & Resources Market Update, the Australian Financial Review reported on 17 February 2021 that the sale of ASX-listed New Energy Solar Ltd’s Australian solar farms is up and running and that it was understood New Energy Solar had sent interested parties an information memorandum and financial model to kick off an auction. The assets in question are the 11 MW Beryl solar farm and 56 MW Manildra solar project, each of which is located in New South Wales. The article noted that mid-market infrastructure players such as Palisade Investment Partners, First Sentier, Infrastructure Capital Group and Iberdrola were believed to be taking an early look at the assets.

On 25 February 2021, the Australian Financial Review reported that New Energy Solar expects that the sale process for the two Australian solar farms will be completed by mid-2021.

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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