Our update covers mining, oil and gas, electricity and renewable energy.
Further to our April 2022 Australian Energy & Resources Market Update, ASX-listed BHP Group Limited announced on 18 November 2022 that it submitted a revised non-binding indicative proposal to acquire 100% of ASX-listed OZ Minerals Limited by way of a scheme of arrangement. Under the proposed scheme of arrangement, which BHP indicated represents its best and final offer in the absence of a competing proposal, BHP is to pay a cash consideration of AU$28.25 per share.
The revised proposal represents, among other things, an enterprise value for OZ Minerals of AU$9.7 billion. In August, OZ Minerals had rejected BHP’s indicative proposal of AU$25.00 per share (value of circa AU$8.3-8.4 billion).
The announcement noted that OZ Minerals confirmed to BHP that it intends to unanimously recommend BHP’s revised bid to its shareholders as being in their best interests in the absence of a superior proposal.
The transaction is subject to the parties entering into a binding scheme implementation agreement following completion of BHP’s confirmatory due diligence, among other completion conditions.
OZ Minerals’ announcement is available here.
On 1 November 2022, public company Aurora Metals Limited announced that it engaged advisors to run a sale process for 100% of its business. Under the proposed sale process, non-binding offers will be due before Christmas 2022 and, following due diligence undertaken by shortlisted bidders, binding offers will be due in the first quarter of 2023.
On 15 November 2022, The Australian reported that Ord Minnett had been hired to run the sale process and that the sale assets comprise of a portfolio of producing mines and processing plants (being the zinc, copper, silver, gold and lead-producing Mungana Mine located 16km west of Chillagoe in far north Queensland, the Mungana processing plant, the zinc and silver-producing King Vol Mine located approximately 40km north-west of Chillagoe, and the Surveyor Project located 165km from Mount Garnet in Queensland), multiple high-grade ore sources and upside from exploration and project development.
The development opportunities reportedly include the company’s Red Dome gold development project located 15km west of Chillagoe in far north Queensland and the restart of the Mt Garnet processing plant located in Mount Garnet, Queensland.
On 12 October 2022, ASX-listed Lake Resources NL announced that it entered into a conditional framework agreement with South Korea-based SK On (an electric vehicle battery subsidiary of SK Group) for a 50% offtake for up to 25,000tpa battery grade lithium from the Kachi Project in Argentina, which includes a 10% investment by SK On in Lake Resources via the issue of new ordinary shares.
The term of the agreement is five years, with an option to extend for a further five years. According to Mergermarket, the original stock exchange filing by SK Innovation (the intermediate holding company of SK On) states that the stake is to be acquired on 8 June 2023 on the condition that Lake Resources’ ongoing project for lithium production yields positive results.
SK On supplies batteries to major automakers, including Ford Motor Company, Hyundai Motor Company and Volkswagen.
On 3 October 2022, The Australian reported that the appointment of Peter Coleman as chairman of ASX-listed Allkem Limited could indicate further M&A in the lithium sector.
The report suggests that, notwithstanding Allkem’s market capitalisation of AU$8.8 billion, the company could be preparing for potential M&A offers by recruiting the former Woodside Petroleum Group Limited’s chief executive.
The article noted that spodumene prices had risen to about US$494 per tonne, representing an increase of nearly 250% over the past year, and sources believed that lithium producers are becoming targets for companies that are making significant profits from ever-rising coal prices.
The item suggested that ASX-listed South32 Limited and BHP Group Limited are amongst the potential buyers following expected coal mine sales next year. ASX-listed Mineral Resources Limited was also reported as being a well-positioned buyer, as it considers listing its lithium business in the US.
On 21 October 2022, the Financial Times reported that ASX-listed Rio Tinto Ltd plans to refocus on deal-making following “missed opportunities” in recent years, according to chairman Dominic Barton.
The article quoted the chairman stating that the company had refrained from acquisition opportunities in part because of fears about a negative investor reaction, given unsuccessful acquisitions in the past. However, Rio Tinto is now seeking growth opportunities in the context of the significant demand for the metals needed for energy transition, according to the article.
The report follows an article by The Australian published on 13 October 2022, which reported that Rio Tinto, along with rival ASX-listed BHP Group Limited, is believed to be actively scouting the market for lithium acquisitions. The article noted that Rio Tinto, which has been conducting trial tests in Canada for processing lithium ore and carrying out trials on the lithium ore of competitor and emerging lithium producer ASX-listed Sayona Mining Limited, could seek offtake deals with third parties.
The Australian listed ASX-listed IGO Limited, Pilbara Minerals Limited, Mineral Resources Limited, Allkem Limited, Core Lithium Ltd and Liontown Resources Ltd as potential Australian targets.
On 27 October 2022, the Australian Financial Review reported that ASX-listed Fortescue Metals Group Ltd intends to push into clean energy by supplying “future facing” metals, quoting executive chairman Andrew Forrest.
Fortescue’s cost of producing iron ore has soared in the context of soaring diesel costs, increasing its efforts to install solar power and gas-fired power and its plan to manufacture batteries and hydrogen in the future, according to the item.
Mr Forrest was quoted as stating that Fortescue wishes to be a direct supplier of lithium and battery minerals. The company has explored for lithium in Western Australia, South America and Portugal since around 2016 but has not discovered a project of material size, according to the article. Fortescue has reportedly been offered “many lithium projects” and is not concerned about shortage, however.
The item noted that, if Fortescue wishes to become a manufacturer of hydrogen electrolysers, then it will also need to buy large volumes of platinum group elements such as iridium.
On 4 November 2022, Mergermarket reported that Denham Capital, a global private equity firm focused on resources and energy and which owns metallurgical coal miner Pembroke Resources, is interested in critical metals required for electric vehicles, according to director Matthew Pedley, who spoke at the International Mining and Resources Conference in Sydney on 3 November 2022. The firm is reportedly very interested in copper.
In his discussions with Mergermarket, however, Mr Pedley suggested that Denham Capital may need to look to other jurisdictions given the highly competitive market for tier-one assets in Australia.
The item also reported that the firm is cautious with downstream processing of critical metals and will not invest until risks involved in downstream processing are understood and technologies proven.
On 7 November 2022, The Australian reported that recent comments from ASX-listed Gold Road Resources Ltd’s CEO, Duncan Gibbs, had amplified speculation of a potential takeover bid for ASX-listed De Grey Mining Limited.
The article noted that the resignations of Samantha Hogg and non-executive directors Ed Eshuys and Jeffrey Parncutt meant De Grey was looking for new board members.
According to the article, Gold Road had recently topped up its stake in De Grey to 19.99%, yet Mr Gibbs told analysts that the company had not approached De Grey seeking to install a board nominee. Mr Gibbs was reported as saying there were “pros and cons” to having board representation.
The article identified that this move may be strategic, as a large shareholder may choose to not have board representation in order to avoid any question of conflicts of interest in a takeover bid, suggesting that the company may pursue such a deal.
On 13 November 2022, The Australian reported that NYSE-listed Barrick Gold Corp was believed to be circling De Grey for a potential buyout, following rallying gold prices and the Australian dollar falling against the US dollar.
The report noted that Barrick Gold, which is the second-largest gold company globally behind NYSE-listed Newmont Corporation, is thought to be seeking opportunities in Australia after opening up an office in Western Australia last year. Further, the report stated that mining experts considered De Grey’s high grade mining deposits to be a logical target for the company.
According to the article, Gold Road would need to use scrip to fund an acquisition, while Barrick Gold would be able to offer cash.
On 11 November 2022, Mergermarket reported that ASX-listed Green Technology Metals Limited expects to receive takeover approaches, according to CEO Luke Cox.
According to the article, the Canada-focused lithium explorer and developer is moving to become a vertically integrated lithium hydroxide producer via its flagship Seymour mine and processing plant in Ontario, Canada.
Practically, a takeover could be difficult as 40% of the shareholding is held by the founders, partners and the board of the company, the item noted. The article quoted Mr Cox as stating that the company could defend takeover approaches while it builds its project to increase value. According to the article, the company is in discussions with potential joint venture partners and funding partners such as the Canadian government, major original equipment manufacturers, computer-aided manufacturers and battery manufacturers to obtain support for the lithium hydroxide plant that it is looking to build as part of its vertical integration process.
On 15 November 2022, Mergermarket reported that the CEO and Managing Director of Perth-based, ASX-listed miner Podium Minerals Limited, Sam Rodda, had said the company will have “plenty” of strategic partnership opportunities with companies who are eager to invest in platinum group metals.
According to the report, Mr Rodda believes strategic partner and investment opportunities will arise following the completion of a scoping study and pre-feasibility study (PFS), which the company expects to complete in 2023.
The report noted that Podium Minerals currently does not have a corporate advisor for potential strategic partners.
Mr Rodda reportedly suggested that potential strategic partners include a major offshore green hydrogen electrical plant or vehicle manufacturer, or a partner who seeks to link platinum group metals to green hydrogen. The item reported the CEO as stating that Podium Minerals could provide green hydrogen to European truck and bus manufacturers and carmakers such as TYO-listed Toyota Motor Corp, KRX-listed Hyundai Motor Co and ETR-listed Bayerische Motoren Werke AG (BMW), who are all moving towards hydrogen fuel cell vehicles.
On 7 October 2022, MidOcean Energy, an LNG company formed and managed by the institutional investor EIG Partners, announced that it had entered into a definitive agreement with Japan-based Tokyo Gas Co., Ltd to acquire Tokyo Gas’ interests in each of the Gorgon LNG, Ichthys LNG and Pluto LNG projects located offshore Western Australia, and the Queensland Curtis LNG project located onshore in Queensland, for US$2.15 billion.
The transaction is expected to close in the first half of 2023, subject to customary closing conditions, including Australian regulatory approvals.
On 9 October 2022, the Australian Financial Review reported that ASX-listed Woodside Energy Group Ltd had indicated that it could use pre-emption rights it holds under existing agreements to block Tokyo Gas’ move to transfer its interest in the Pluto LNG project to MidOcean Energy.
On 10 November 2022, ASX-listed Warrego Energy Limited announced that it had received a non-binding and indicative proposal from ASX-listed Strike Energy Limited, under which Strike would acquire all of the shares in Warrego that it did not already own.
On 11 November 2022, Warrego announced that it had also received a non-binding indicative offer from ASX-listed Beach Energy Limited, under which Beach would acquire all of the shares in Warrego. Beach subsequently announced that it had already commenced preliminary due diligence, and intended to commit to a binding agreement prior to 14 November 2022.
On 14 November 2022, Warrego announced that it had entered into a scheme implementation deed with Beach, under which Beach agreed to acquire all of the issued shares in Warrego by way of scheme of arrangement. Under the scheme, Warrego shareholders would receive cash consideration of AU$0.20 per share, and the proceeds of any subsequent sale of Warrego’s Spanish assets (if such sale completes within 12 months of implementation of the scheme).
On 15 November 2022, Strike announced that it was disappointed with Warrego’s decision, as it believed that its own proposal represented a superior result for Warrego shareholders, noting that, as at 14 November 2022, its proposal represented a 3.3% premium to Warrego’s closing price, whereas Beach’s proposal represented a 4.8% discount to the same closing price.
On 30 November 2022, Hancock Energy (PB) Pty Ltd, a private company controlled by Gina Rinehart, announced that it was submitting an off-market takeover bid to acquire all of the shares in Warrego at an offer price of AU$0.23 per share. On 5 December 2022, Warrego announced that Hancock had increased the offer price under its takeover bid to AU$0.28 per share. It was also announced that Warrego had commenced the matching rights process under the scheme implementation deed with Beach, under which Beach had 5 business days to match the revised offer.
On 9 December 2022, Warrego further announced that it Beach had advised that it did not intend to match the revised Hancock takeover offer. That announcement revealed that the Warrego Board withdrew its recommendation in favour of Beach, and recommended that shareholders accept the Hancock takeover offer in the absence of a superior proposal.
On 6 November 2022, The Australian reported that ASX-listed Woodside Energy Group Ltd is believed to have two potential buyers lined up for its Scarborough Project located offshore Western Australia.
According to the report, one of the parties is based in Europe, while the other is from Asia.
The item noted that market experts have pointed to TotalEnergies or BP as the likely European group, with OVM, Equinor, Repsol, and Galp other possibilities. The Asian suitor could be Petronas, PTT, Mitsubishi, Mitsui, or the MMI joint venture between Mitsubishi and Mitsui, according to the item.
On 16 November 2022, The Australian reported that ASX-listed Beach Energy Limited, who on 14 November 2022 entered into a scheme implementation deed to acquire all of the issued shares in ASX-listed Warrego Energy Limited, has no plan to bid for ASX-listed Strike Energy Limited. The article noted that, while speculation had emerged that Beach may also bid for Strike, which owns 8.2% of Warrego, Beach’s CEO said at the company’s AGM that Beach had no such intention.
On 28 September 2022, the Australian Financial Review reported that ASX-listed Karoon Energy Limited may have found a potential acquisition target. The report speculated that recent visits by chief executive Julian Fowles to Brazil and the UK may indicate that the company has found an M&A target.
The item noted that Mr Fowles had previously informed the Australian Financial Review that Karoon is open to investing in Australian oil fields, but that Brazilian assets are more complimentary to its existing Bauna offshore operations, which it acquired in 2019.
On 4 September 2022, The Australian reported that ASX-listed Woodside Energy Group Ltd may look to exit the Gippsland Basin Joint Venture in which it is a 50/50 participant alongside an Australian subsidiary of NYSE-listed Exxon Mobil Corp. The Gippsland Basin Joint Venture owns oil and gas assets in the Bass Strait, offshore of Victoria. Woodside announced a strategic review in the week prior to the report, prompting speculation that it could exit the joint venture. The article reported that Woodside’s interest in the joint venture is estimated to be worth around US$2 billion.
On 10 November 2022, ASX-listed Origin Energy Ltd announced that it had received an indicative, conditional and nonbinding proposal from Brookfield Asset Management Inc., together with its affiliates and their managed funds, and MidOcean Energy, an LNG company formed and managed by global energy investor EIG Partners, (Consortium) to acquire all the issued shares in Origin, by way of a scheme of arrangement, at a price of AU$9.00 cash per share (Indicative Proposal). The Indicative Proposal values Origin at AU$18.4 billion on an enterprise value basis, according to the announcement.
The announcement stated that the Indicative Proposal would see Origin split into two, with Brookfield taking Origin’s energy markets business, while MidOcean would acquire the integrated gas business.
The announcement also noted that, based on current information and market conditions, if the Consortium made a binding offer at AU$9.00 cash per share, then Origin’s Board intended to unanimously recommend that shareholders vote in favour of the proposal, in the absence of a superior proposal.
On 10 November 2022, The Australian reported that analysts considered the Indicative Proposal to be very likely to succeed, however the bid could face some competition obstacles due to Brookfield’s ownership of AusNet, an Australian-based electricity grid owner acquired by Brookfield in 2021. The article also reported that sources familiar with the situation had stated that Brookfield and MidOcean have started to engage with the Australian Competition and Consumer Commission and the Foreign Investment Review Board in relation to the Indicative Proposal.
On 11 November 2022, the Australian Financial Review reported that Brookfield may be required to ring-fence or sell its stake in AusNet in order to win approval from the Australian Competition and Consumer Commission to acquire Origin. The item noted that Macquarie analysts believed that, if Brookfield were to end up owning both transmission and distribution assets, and energy supply assets, then Brookfield may need to provide an undertaking to curb its market power if it secures Origin.
The Indicative Proposal follows two earlier indicative proposals from the Consortium to acquire Origin, the first being for AU$7.95 cash per share on 8 August 2022 and the second being for AU$8.70 to 8.90 per share on 18 September 2022.
It was reported that the Consortium has been given eight weeks to conduct due diligence.
Following the Commonwealth Government’s announcement of its proposed intervention in the east coast gas market by way of imposing price caps on gas (among other things), the Australian Financial Review reported that such intervention could affect the Consortium’s bid for Origin or even result in the Consortium walking away from the bid.
On 5 September 2022, Western Australian-based independent power producer Zenith Energy announced its acquisition of Peel Renewable Energy. As a result of the acquisition, Zenith Energy will take ownership of the Peel Renewable Microgrid, being a vertically integrated generation, distribution and retail business that will supply power to the new Peel Business Park, which is being developed by the WA Government’s land developer DevelopmentWA near Mandurah, Western Australia. The Peel Renewable Microgrid currently comprises a 22kv distribution network, a 1.2MW solar farm and a 2.5MWh BESS. The announcement noted that the capacity of the generation and battery storage assets of the microgrid are expected to increase upwards of 50MW over the next decade to align with the growth of the Peel Business Park.
On 18 October 2022, ASX-listed APA Group announced it had entered into a Deed of Company Arrangement in relation to the acquisition of Basslink Pty Ltd and its subsidiary Basslink Telecoms Pty Ltd (collectively Basslink), following the second creditors’ meeting. Basslink’s creditors voted to approve the Deed of Company Agreement proposed by APA Group.
Basslink owns and operates the 370 kilometre high voltage direct current electricity interconnector between Victoria and Tasmania. The announcement noted that the acquisition would add a third electricity interconnector to APA Group’s energy infrastructure portfolio and would be funded from existing debt facilities.
APA Group will acquire Basslink for AU$773 million and the proceeds of the sale will be used to repay Basslink’s creditors, including APA Group’s existing secured debt of AU$648 million, according to the announcement.
On 13 October 2022, the Australian Financial Review reported that LSE-listed Shell plc and United Kingdom-based investment manager Foresight Group partnered to acquire the Kondinin renewable energy development project located 245km east of Perth, and 5km north of Kondinin Township, in Western Australia.
The item noted that the project is worth AU$700 million and involves an initial 121MW of wind generation, with a second stage adding a further 114MW. It was also noted that up to 60MW of storage will soon be added and the project has a solar option of up to 80MW total capacity.
According to Foresight’s media release dated 13 October 2022, The Australian Renewables Income Fund, managed by Foresight, will enter into a 50/50 joint partnership with Shell Energy Operations Pty Ltd, a wholly-owned subsidiary of Shell plc. The project will be acquired from Lacour Energy Pty Ltd and Goldwind International Holdings Limited.
On 9 November 2022, ASX-listed ReNu Energy Limited announced that, together with its wholly-owned subsidiary, Countrywide Hydrogen Pty Ltd (collectively, the RNE Group), it has entered into a non-binding term sheet with H.E.S.T. Australia as trustee for superannuation fund HESTA for the investment in the RNE Group’s projects to produce green hydrogen.
Subject to HESTA’s due diligence, the strategic framework set out in the term sheet will be converted into definitive arrangements. Under the term sheet, HESTA may commit up to AU$100 million to develop the green hydrogen projects and will have a first right of refusal to invest in existing and new projects. The RNE Group will deliver and operate the projects and will receive a fee for progressing the projects which will reflect the projects’ status at the time of HESTA’s investment, according to the announcement.
On 7 December 2022, Squadron Energy announced that it had acquired CWP Renewables (an Australian-based renewable energy business owned by asset manager Partners Group). Squadron Energy is the energy division of Tattarang, the Forrest family’s private investment company.
The Australian Financial Review reported in an article on 7 December 2022 that Andrew Forrest had stated that the acquisition price was in excess of AU$4 billion and that the acquisition would be funded from Tattarang reserves.
That article noted that Squadron Energy’s bid beat offers from Spain’s Iberdrola, Australia’s Tilt Renewables, which is owned by QIC, the Future Fund and ASX-listed AGL Energy Ltd. A partnership between ASX-listed Origin Energy Ltd and Canada’s pension fund CDPQ also worked up a bid, according to the article.
It was reported by The Australian on 24 November 2022 that CWP Renewables was one of Australia’s largest renewable energy power producers with 1.1GW of generation capacity in NSW and Victoria and a 5GW development pipeline.
On 13 October 2022, the Australian Financial Review reported that it is expected that Australian-based renewable energy company Pacific Hydro will go to auction next year. The report stated that investment banks are approaching offshore infrastructure investment groups, including those with existing interests in the domestic energy market to put in an early offer to Pacific Hydro and kick-start an auction. Pacific Hydro is owned by China’s State Power Investment Corporation, which acquired Pacific Hydro for AU$3 billion.
The item noted that Pacific Hydro reported AU$345.1 million in revenue and AU$109.4 million in gross profit last year and that it had AU$1.45 billion in assets and nearly AU$1.4 billion in total equity. Pacific Hydro is one of Australia’s biggest renewable energy companies with a portfolio of wind, hydro and solar assets with an installed capacity of 665MW. Pacific Energy also has a development pipeline project promising over 1.2GW of potential capacity and energy storage solutions, according to the article. Its assets are located in Western Australia, South Australia, Victoria, New South Wales and Chile.