May Australian Energy & Resources Market Update

Articles

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

Mining

RECENT ANNOUNCEMENTS  

Battle North Gold shareholders approve scheme to be acquired by Evolution Mining for CAD$343 million

On 12 May 2021, ASX-listed Evolution Mining announced that TSX-listed Battle North Gold Corporation has obtained shareholder approval for Evolution to acquire all of the outstanding shares of Battle North. Total consideration will be approximately C$343 million, at a price of C$2.65 per common share in cash.

The transaction remains subject to approval of the Supreme Court of British Columba. The hearing is scheduled for 17 May 2021 and if approved, the transaction will complete on 19 May 2021.

Marvel Gold to spin out Evolution Energy Minerals via IPO

On 11 May 2021, ASX-listed Marvel Gold Limited announced its plan to spin out its 100%-owned Chilalo Graphite Project located in Tanzania into a newly-incorporated and wholly-owned subsidiary, Evolution Energy Minerals. Evolution intends to undertake an initial public offering to raise at least A$13 million.

Strategic Energy Resources announces agreement to acquire the “Isa North” Copper-Gold project from Newcrest Mining

On 4 May 2021, ASX-listed Strategic Energy Resources announced that it entered into an agreement with ASX-listed Newcrest Mining Limited to purchase 100% of the 976km2 “Isa North” Copper-Gold project located in north-west Queensland.

In return, Newcrest will retain a first right of refusal to any future transaction on the project, a 1% net smelter royalty capped at 10 years of production, and access to technical data.

Upon completion, Strategic Energy will control major extensions of both the Eastern and Western Fold Belts of the Mt Isa Province. Drilling will commence only upon completion of the drilling programs at East Tennant and Canoble.

GWR Group to demerge, launch IPO for Western Gold Resources

On 20 April 2021, ASX-listed GWR Group Limited announced that it will demerge and launch an initial public offering for its wholly-owned subsidiary, Western Gold Resources Limited, which holds the Wiluna West Gold Project, located in Western Australia.

The proposal is to raise a minimum $5 million and up to $7 million at an offer price of $0.20 per share. The IPO will allow GWR to focus on its Wiluna West Iron Ore Project.

MARKET RUMOURS AND OPPORTUNITIES


Shandong Yulong Gold terminates proposed acquisition of Barto Industry

On 30 April 2021, Mergermarket reported that China-based Shandong Yulong Gold terminated its planned acquisition of Australia-based gold miner Barto Industry from Shandong Tianye Real Estate Development Group.

The parties had signed an agreement in March 2021 so that Shandong Lanjing Mining, a subsidiary of Jiangsu Yulong Steel Pipe (Shandong Yulong Gold’s predecessor) would purchase the Barto Industry (formerly known as Shandong Tianye Group Bid Co Pty Ltd for CNY 1.22484 billion (U$188.75 million).

Orocobre, Galaxy Resources to merge via scheme of arrangement

On 19 April 2021, ASX-listed Orocobre Limited announced that it entered into a binding Merger Implementation Deed for A$4 billion merger of equals with ASX-listed Galaxy Resources Limited. The merger, by which Orocobre will acquire 100% of the shares in Galaxy, will create the fifth largest global lithium chemicals company.

The Orocobre board has supported the merger scheme, subject to no proposal emerging.

IGO's 30% stake in Tropicana project to be acquired by Regis for A$903 million; financed with equity raise, term loan

On 13 April 2021, ASX-listed companies Regis Resources Limited and IGO Limited announced that the parties entered into a conditional binding asset sale agreement under which Regis will acquire IGO’s 30% interest in the Tropicana Gold Project, located in Western Australia, for a cash consideration of A$903 million.

The remaining 70% is owned by joint venture party AngloGold Ashanti, who is also the manager of the unincorporated joint venture.

Glencore Aurukun Bauxite project 30% stake to be acquired by Mitsubishi

On 18 March 2021, Mitsubishi Corporation announced that it entered into a conditional agreement with Glencore Plc to acquire a 30% interest in the undeveloped Aurukun Bauxite Project located in Far North Queensland. The project is currently wholly-owned by Glencore.

The acquisition, which is subject regulatory approval by the Queensland Government, will mark Mitsubishi Corporation’s first investment in bauxite mining. Glencore is currently conducting feasibility assessments for development.

Mitsubishi Development Pty Ltd, a wholly-owned subsidiary of Mitsubishi Corporation, intends to make its final investment decision on development of the mine during 2022.

Oil & Gas

RECENT ANNOUNCEMENTS

Santos to announces its decision to proceed with Barossa gas project to sell its interests in Barossa

On 30 March 2021, ASX-listed Santos Ltd (Santos), operator of the Barossa joint venture announced the final investment decision to proceed with the US$3.6 billion Barossa gas project (Barossa), located offshore Northern Territory. Barossa is reportedly one of the lowest cost, new LNG supply projects worldwide. The final investment decision kick-starts the US$600 million investment in the Darwin LNG life extension and pipeline tie-in projects to extend the facility life for around 20 years. The Santos-operated LNG plant has the capacity to produce approximately 3.7 million tonnes of LNG per annum. First gas production is targeted for the first half of 2025.

The announcement noted that Santos is also finalising an agreement to sell a 12.5% interest in Barossa to Darwin LNG partner JERA and has a binding agreement to sell 25% interests in Bayu-Undan and Darwin LNG to Korean based clean energy and solution provider SK E&S Co. Ltd (SK Transaction). Santos currently holds a 62.5% operator interest in the Barossa joint venture, with partner SK E&S owning the remaining 37.5% stake.

Completion of the SK Transaction occurred on 30 April 2021 resulting in net funds to Santos of approximately US$186 million.

AGL announces demerger plans

On 30 March 2021, ASX-listed AGL Energy (AGL) announced that it planned to split into two separate entities, a carbon-neutral energy retailer called “New AGL” and “PrimeCo”, which would hold its carbon emitting gas and coal-fired power stations. The new carbon neutral retail unit is reportedly set to provide electricity, gas, internet, and mobile services to 30% of the households in Australia.

On 28 April 2021, The Australian’s Dataroom Column reported that Shell could target the green retail division. The report noted that AGL’s large coal portfolio has previously been a deterrent for Shell, but AGL’s proposed separation would demerge the coal assets into Prime Co and provide the opportunity for Shell to chase what it considers to be a more attractive investment in carbon neutral retail unit.

On 4 May 2021, The Sydney Morning Herald reported that AGL’s interim chief executive, Graeme Hunt stated that AGL remains on track to release details of the demerger by 30 June 2021 despite the recent departure of its chief executive Brett Redman.

FAR not proceeding with intended take-over offers from Lukoil and Remus

In our March Australian Energy & Resources Market Update, we reported that ASX-listed FAR Limited (FAR) received a conditional non-binding offer from Russia-based PJSC Lukoil (Lukoil) to acquire 100% of the shares in FAR at A$0.022 cents per share. On 1 April 2021, FAR announced that Lokoil had withdrawn its non-legally binding offer.

FAR then advised on 14 April 2021, that Remus Horizons PCC Limited (acting for a private investment fund regulated by the Guernsey Financial Services Commission and incorporated in the Island of Guernsey) (Remus) intended to make a conditional off-market takeover offer for FAR shares at A$0.021 per share. On 21 April 2021, FAR announced that it will not be proceeding with intended takeover offer from Remus because the offer was not properly authorized by Remus and it had not lodged its bidder's statement. According to the announcement, a letter from Remus stated that it was unable to lodge its bidder’s statement as its registration as a private investment fund was recently suspended.

Empire Energy acquires Pangaea’s Beetaloo Sub-basin portfolio

On 14 April 2021, ASX-listed Empire Energy Group (Empire Energy) announced that it had entered into a binding sale and purchase agreement with Pangaea (NT) Pty Ltd (Pangaea) to purchase an 82.5% majority stake in Pangaea’s Beetaloo Sub-basin portfolio which includes interests in five tenements across the Beetaloo Sub-basin onshore Northern Territory. The remaining 17.5% of Pangaea is owned by the Houston-based Energy and Minerals Group

It was reported that Empire Energy will pay A$5 million in cash and the issue of 140 million shares in Empire Energy to Pangaea upon completion of the transaction, along with 8 million unlisted Empire Energy options with an exercise price of A$0.70 per share.

The announcement noted that completion of the transaction is subject to ministerial approvals and Empire Energy shareholder approval. 

MARKET RUMOURS AND OPPORTUNITIES

Tamboran Resources preparing to launch A$100 million IPO

In our August Australian Energy & Resources Market Update, we reported that Australia-based shale gas explorer Tamboran Resources (Tamboran) raised A$10 million in a private placement of equity, ahead of a potential IPO in Australia in 2021.

On 6 May 2021, The Australian’s Data Room Column reported that Tamboran is preparing to launch an IPO targeting a raising of up to A$100 million on 21 June 2021, expecting to list a market capitalisation of A$280 million – A$350 million. The item also noted that Tamboran will offer between 160 million – 250 million shares at A$0.40 - A$0.50 per share.

Landbridge has appointed Bell Potter and Highbury Partnership to list Westside Corporation

On 16 May 2021, The Australian Financial Review Street Talk Column reported that China-based Landbridge has appointed Bell Potter and Highbury Partnership to list Westside Corporation, an Australia-based oil and gas business, on the ASX.

The item also noted that Landbridge is not planning to sell any shares in the IPO, which could value Westside between A$250 million – A$300 million and funds raised would be used to increase production at Westside's Greater Meridian gas fields, in Queensland’s Bowen Basin.

Electricity & Renewables

RECENTLY COMPLETED DEALS

Korea Zinc acquires 30% stake in MacIntyre Wind Farm

On 16 March 2021, Spanish infrastructure developer ACCIONA announced that it had reached agreement with international metals group Korea Zinc Co to jointly develop the 923 MW MacIntyre Wind Farm in Queensland. Under the agreement, Ark Energy (a subsidiary of Korea Zinc) will acquire a 30% stake in the MacIntyre Wind Farm. ACCIONA will retain the remaining 70% stake and will manage the project through its development, construction, operations and maintenance stages.

The project is underpinned by a 400MW Power Purchase Agreement with CleanCo, Queensland's newest public electricity company. The project will also power Sun Metals Corporation (a subsidiary of Korea Zinc).

Adjacent to the MacIntyre Wind Farm, ACCIONA will build the 103MW Karara Wind Farm owned by CleanCo. The two projects will involve an investment of approximately A$2 billion.

RECENT ANNOUNCEMENTS

Powering Australian Renewables and Mercury NZ to acquire Tilt Renewables

Further to our March Australian Energy & Resources Market Update, Tilt Renewables Limited (Tilt Renewables) announced on 14 March 2021 that the company has entered into a Scheme Implementation Agreement with Powering Australian Renewables (PowAR) (a partnership between AGL, Queensland Investment Corporation and the Future Fund) and Mercury NZ Limited (Mercury). Under the agreement, it is proposed that PowAR will acquire Tilt Renewables’ Australian business and Mercury will acquire Tilt Renewables’ New Zealand business, each for NZ$7.80 per share in cash, by way of a Scheme of Arrangement.

On 16 April 2021, Tilt Renewables announced that the Scheme Implementation Agreement has been amended to increase the scheme consideration from NZ$7.80 per share to NZ$8.10 per share. This amendment came following a report from the Australian Financial Review that Tilt Renewables had received a competing proposal from Canada’s CDPQ for NZ$8.00 per share.

Infratil, Tilt Renewables’ largest shareholder has agreed to vote its entire 65.5% shareholding in favour of the scheme and has entered into a voting deed with PowAR to this end. Mercury, Tilt Renewables’ second largest shareholder has agreed to vote its entire 19.92% shareholding in favour of the scheme as a separate interest class.

Tilt Renewables shareholders will likely vote on the scheme in July.

Hydro Tasmania reviews options for Momentum Energy, including sale

On 11 March 2021, Hydro Tasmania announced that it is reviewing options for its gas and electricity retailer Momentum Energy including a potential sale. The review comes as Hydro Tasmania is considering options to simplify its business and take advantage of unprecedented changes in the energy sector.

MARKET RUMOURS AND OPPORTUNITIES

Sale of Elliott Green Power Australia and Nexif Energy

It is believed that Elliott Management Corporation is selling its Australian renewable energy portfolio Elliott Green Power Australia, The Australian reported. The transaction is expected to be valued at more than A$500 million. First Sentier, Palisade Investment Partners, Lighthouse Infrastructure, Dutch Infrastructure Fund and ICG are believed to be interested.

Sale of New Energy Solar’s Australian solar assets

Further to our March Australian Energy & Resources Market Update, The Australian reported that Palisade Investment Partners, Infrastructure Capital Group, and Thai energy company Banpu are believed to have been invited to the final round of the auction for New Energy Solar’s Australian solar farms. It is believed that New Energy Solar is currently valued at A$279 million.

Sale of Fotowatio Renewable Ventures’ Australian solar assets

Further to our December Australian Energy & Resources Market Update, Fotowatio Renewable Ventures is believed to have rejected an offer from Pacific Equity Partners to acquire a 49% stake in its Australian solar portfolio, the Australian Financial Review reported. Infrastructure Capital Group and First Sentier are believed to be among the parties in the auction’s second round.

UPC/AC Renewables Australia tests buyer interest

The Australian Financial Review reported that Hong Kong-based renewable energy business UPC Renewables has appointed Rothschild to test buyer interest in UPC/AC Renewables Australia which it jointly owns with Philippines-based AC Energy. UPC/AC Renewables Australia’s capabilities include renewable energy generation, storage and trading.

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).