Norton Takeover Talks Between BHP (ASX:BHP) and Wyloo Begin

Nickel ore processing mine.

Talks have begun between BHP (ASX:BHP), the world’s biggest mining company, and billionaire Andrew Forrest’s Wyloo Metals in regards to the takeover of Noront Resources, a Canadian nickel company. 

Both companies are trying to acquire the nickel producer, but in October BHP increased its all-cash offer for Noront to C$0.75 per share. This offer surpassed Wyloo’s $0.70 proposal, which promoted the discussion between the two companies. 

“BHP and Wyloo Metals have engaged in initial conversations and are considering a mutually beneficial arrangement regarding the acquisition of Noront by BHP,” the company said in a statement.

Acquiring Noront would include the Eagle’s Nest nickel asset in Canada’s so-called Ring of Fire, a high-grade deposit of the electric-vehicle battery metal, as well as copper and palladium.

“Wyloo Metals is considering the potential of a mutually beneficial arrangement with BHP insofar as this arrangement can deliver greater deal certainty to Noront shareholders,” Wyloo said in a statement on Wednesday.

BHP announced on Tuesday it has made the decision to extend the tender expiry for its takeover from Nov. 9 to Nov. 16. 

The Drive for Nickel Now

Nickel is a popular metal for lots of things but one of the most well-known uses is to make alloys for steel. Steel is used in products such as cookware, cutlery, and even medical equipment because it is easy to keep clean. Mining nickel is a similar process to mining copper and may even use the same equipment in some scenarios. Nickel comes from ores, either sulfide or a laterite ore, which will use different procedures depending on which you are mining. 

The future of nickel mining is bright as the demand for stainless steel and alloys remains consistent, as well as the electric vehicle movement becoming more popular than ever. Lithium is known to be used widely in EV’s, but nickel is also used in rechargeable batteries, which makes it handy for the EV market as well. 

It is important for companies and legislation to closely watch nickel production as it can be harmful towards the environment when produced in excessive amounts. 

As the company focuses on Noront, BHP is also focused on reducing its presence and operations in the coal industry, but not as quickly as once predicted. BHP have been planning to exit the coal industry for at least two years now and still have ties to certain mines as the asset is becoming more valuable due to coal’s rally. 

BHP has already sold a stake in the Cerrejon thermal coal mine in Colombia and is close to a deal to sell some Australian coking coal mines. However, they are taking their time with the Mt Arthur mine in Australia and considering potential better future offers if they arise since coal is becoming more valuable. 

A Difficult and Slow Exit

According to people familiar with the matter, BHP has already declined offers for Mt Arthur that didn’t meet its valuation “with uncertainty around future liabilities.”

The Company was looking into exiting the industry, along with other big names such as Anglo American Plc because investors were not comfortable with these huge companies mining the dirtiest source of fuel. However, the urgency is much less and it is unclear if and when it will rise again. 

BHP CEO Mike Henry last month said the plan to exit thermal coal was largely business-based, rather than being driven solely from an environmental standpoint. 

There “wasn’t any push toward becoming fossil-fuel free,” he said at a shareholder meeting. “It was simply a cold-eyed assessment on how those commodities fit with the BHP portfolio, how we saw the long-term value and the ability to compete for capital in the BHP portfolio.”

Prices for thermal coal exported from Australia also spiked last month to a record high. The cost is beginning to drop again though as China creates plans to ease a supply crunch that results in power outages. 

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

By Matthew Evanoff

I cover the mining industry and the best mining stocks around the world. I write about industry news, individual companies, projects, management, and profiles on industry leaders.

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