Ground Breakers: BHP faces defeat to Twiggy Forrest in Noront nickel battle
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On a day supposed to be about BHP’s (ASX:BHP) quarterly results, the world’s biggest miner has been overshadowed by its old rival, Andrew Forrest, after the billionaire gazumped it in a bid for a Canadian nickel explorer.
BHP was in the box seat with a previous C$0.55 a share bid but has been kicked into the pit by Noront, who say the C$0.70 a share offer from Forrest’s Wyloo Metals offers more value.
The Pilbara mining giant has five days to respond or admit defeat in the testy takeover squabble.
Noront holds a dominant land position in Canada’s Ring of Fire exploration district in Ontario.
Forrest has now emerged as a potential blocker in BHP’s bid to get more nickel — and not just with Noront.
Wyloo also has positions in a number of junior explorers in Australia which could be potential acquisition targets for BHP, as it looks to expand its Nickel West division in response to the energy transition.
After Rio Tinto (ASX:RIO) seriously disappointed with its quarterly production notes last week it was BHP’s turn to front up today.
But it’s fair to say the Big Australian bored, more than it underwhelmed.
BHP’s vaunted iron ore division was down 3% quarter on quarter and 4% year on year in the September quarter to 63.3Mt (around 71Mt on a 100% basis).
Planned maintenance and a Covid-related shortage of train drivers, which has now been addressed, was blamed.
Nickel West was also struck by maintenance issues, with nickel volumes down 20% and 21% respectively to 17,800t, while copper production was impacted by renovations at the Olympic Dam smelter, falling 7% QoQ and 9%YoY to 376,500t.
Met coal volumes were down 9% YoY and 25% QoQ to 8.9Mt, while thermal coal production, a division BHP is expected to soon divest completely, climbed by 17% YoY but was down 6% QoQ to 4.2Mt.
Petroleum, a division which will soon be hived off into Woodside, was a surprise performer, up both year on year and quarter on quarter to 27.5MMboe.
Despite falling behind previous quarters in production volumes, BHP has kept its guidance unchanged across the board.
“BHP’s operations delivered reliably during the first quarter and we completed planned major maintenance activities across a number of our assets. We continue to skilfully navigate the ongoing challenges of COVID-19,” BHP CEO Mike Henry said.
He reiterated BHP’s commitment to “future facing commodities.”
RBC Capital Markets analyst Kaan Peker, who has a $42 price target and outperform rating on BHP stock, said the iron ore numbers were above expectations.
“A mixed quarter for BHP but with all cost and volume guidance unchanged, the quarter should have limited impact on the shares,” he said.
“Iron ore performance continues to be differentiated from peers as production volumes remain elevated, with BHP bettering our forecasts by 4%.”
BHP has approval now from the WA Government to ramp up its operations from current levels to a maximum port throughput of 330Mtpa, but it will be some time before it gets there if it ever does. In the medium term its aim is to ramp up incrementally from current production levels of ~280Mtpa to 290Mtpa.
Henry said BHP is targeting ‘future facing’ commodities. That includes the US$5.7 billion it is splashing on its Jansen potash project in Canada, approved last quarter, as well as the elevation of the copper and nickel assets in its global portfolio alongside the divestment of its coal and petroleum businesses.
It also means a bigger push into the junior end of the market and exploration.
In copper, in particular, it is widely regarded that exploration will be needed to find the volume of resources and reserves to satisfy future demand.
BHP has quietly progressed another deal to secure some ground near its Oak Dam copper discovery, which is itself in and around the neighbourhood of the massive Olympic Dam deposit.
The company has exercised an option to form a joint venture with unlisted Red Tiger Resources to explore its Intercept Hill copper project, which borders the Oak Dam discovery.
In macro news, the iron ore price retreated ever so slightly over night to US$124.32/t according to Fastmarkets MB.