The Battle Continues: Australian Magnate Challenges BHP Bid For Canadian Assets

Earlier this month, Australian miner BHP (NYSE: BHP; LSE: BHP; ASX: BHP) through a subsidiary entered into an agreement to acquire all the outstanding shares in Canadian junior mining company Noront Resources Ltd. (TSXV: NOT).  

But, Noront’s largest shareholder, Wyloo Metals has increased its offer, despite Noront’s support for the BHP deal.  

BHP’s offer proposed to acquire all of the issued and outstanding common shares of Noront for C$0.55 per share in cash for a total deal value of US$325 million. BHP currently owns 3.7% of the Noront shares on a fully diluted basis.

However, Wyloo had made an earlier bid of C$0.351 in May. Wyloo with a 24.4% equity stake, also holds a large portion of the company’s debt. Wyloo holds a convertible loan, which it intends to convert to shares, which would increase its stake to 37.3 per cent.

On August 30, Wyloo made a revised offer for Noront that beats BHP’s $C325 million takeover bid and now proposes that Noront remain a publicly-listed company rather than being absorbed by the privately-owned Wyloo Metals.

The latest Wyloo takeover offer is C$0.70 per share, compared to BHP’s C$0.55, with Wyloo offering Noront shareholders the success of Fortescue Metals Group (ASX: FMG) leadership. 

Wyloo is backed by Andrew Forrest, founder and chair of Fortescue Metals, and one of the richest individuals in Australia. According to Australia’s Financial Review, Mr. Forrest, who will pocket a $2.35 billion full-year dividend from Fortescue next month, plans to chair the Noront board if he gains control.

Under the deal from Wyloo, Noront would remain as its own business with a public listing but its current board and management team would be changed. Existing shareholders of Noront would have the option of accepting cash for their shares or holding on to their stock and participating in a new version of Noront.

According to the Canada-based newspaper the Globe and Mail, Wyloo did not propose a management team, but in an interview with Luca Giacovazzi, head of Wyloo and board member of Noront, said that it would likely be a mix of old and new faces. “It’s a company that’s unfortunately made very little progress for the better part of a decade,” he said. “There needs to be a change at the top.”

If Wyloo’s offer succeeds, Mr. Forrest would become chairman of Noront. Other proposed new directors would include Ian Delaney, former chief executive of Sherritt International Corp. (TSX: S), and former CIBC World Markets mining banker Warren Gilman, who is CEO of Queen’s Road Capital Investment Ltd. (TSXV: QRC).

Wyloo and the current Noront board have been at odds, with Wyloo claiming earlier this month that it had been denied access to due diligence. Noront directors, who support the BHP bid in July, denied the Wyloo claim.

Noront controls more than 200 million tonnes of high-grade resources in Ontario’s “Ring of Fire”. The company had proposed to mine just under one million tonnes of chromite annually, producing enough semi-finished ferrochrome to supply half of the U.S. stainless steel industry. However, there is more to the deal than just chromite. 

At the heart of the deal is Noront’s Eagle Nest Mine, a high-grade nickel-copper-platinum-palladium deposit located in the Ring of Fire region of Northern Ontario. A 2012 resource estimate outlines 11,000,000 tonnes of material at 1.78% Ni, 0.98 Cu, 0.99 g/t Pt, 3.41 g/t Pd, and 0.20 g/t Au in the Measured and Indicated category. 

In addition to Eagle’s Nest, Noront’s portfolio includes mineral deposits of chromite, nickel, copper, zinc, platinum, palladium, along with 100 documented mineral occurrences with showings of gold, titanium, vanadium, diamonds and cobalt.