Pic: Stu Forster/Getty Images
Mining
We have another takeover test on our hands with Musgrave Minerals (ASX:MGV) dead-batting Westgold Resources’ (ASX:WGX) bid for the gold explorer, rejecting its $177 million scrip offer for the Cue gold project owner.
It came after Westgold and MD Wayne Bramwell came out Bazball style, all guns blazing, launching a media offensive to get MGV shareholders onside with an off-market takeover offer.
The bid was lobbed after Westgold claimed discussions with Musgrave’s board could have been leaked amid unusual trading in the junior’s shares.
MGV shares were trading in and around the 30c per share offer price before a small drop this morning.
But a lack of enthusiasm from Westgold shareholders since the unsolicited bid for Musgrave was announced on June 6 has taken the wind out of its sails, with its share price sliding from $1.60 to $1.38 today, and that’s with a small lift this morn. That means MGV is now trading above the implied offer price, the target reckons.
At the time, Westgold MD Wayne Bramwell said the offer would remove execution risk for Musgrave’s Cue project, which includes the more than 10g to the tonne Break of Day gold discovery.
It would hasten the development of the project by displacing low grade ore from Westgold’s existing mines and stockpiles and replacing it with the high grade juice from Musgrave.
In its target’s statement, Musgrave has rejected the $650 million suitor and recommended shareholders take no action, accusing Westgold of undervaluing the medium and long term benefits of Musgrave’s broader exploration portfolio in WA’s Mid West.
It comes after a State 1 pre-feasibility study which placed a $121 million price tag on the development of a standalone mine delivering 337,000oz in five year peaking at 80,000ozpa. At proposed all in sustaining costs of $1315/oz, Musgrave says the mine will be one of the highest margin in Australia.
A Stage-2 PFS aimed at extending the mine life at Cue is ongoing.
“In the opinion of your Directors, the Westgold Offer is opportunistic following the results of the Stage 1 Prefeasibility Study and there is further potential for Musgrave shareholders by remaining invested in Musgrave due to the potential of Musgrave’s Cue Gold Project,” the company said in it’s target’s statement today.
“Musgrave shareholders will enjoy longer term value creation as the development of the Cue Gold Project is progressed.
“Your Directors believe the success of Musgrave’s existing exploration program and recent development studies represent significant potential and the Offer fails to recognise this.”
That $121m capex forecast had been latched onto by Westgold as rationale for Musgrave shareholders to accept its bid. It came on the same day as the Reserve Bank lifted interest rates, potentially raising borrowing costs for project developers as inflation continues to impact the mining construction sector.
Gold posted a slight rally on Friday to list to US$1921/oz after a week knocked down by speculation on rate hikes from the US Fed.
It never really left, but the merger of the former Ausdrill with Barminco did see the drilling business slip into the background for Perenti (ASX:PRN) in recent years.
But the mining services giant is heading back to its roots, when the late Ron Sayers started the iconic Aussie firm with a single second hand drill rig in Kalgoorlie, with a $410 million deal to acquire DDH1 (ASX:DDH).
The largest standalone Australian drilling stock on the ASX, fresh off its own merger with underground diamond drilling experts Swick last year, is poised to exit the market in a deal that would see shareholders receive 12.38c and 0.7111 Perenti shares for every DDH1 share they own.
It’s been backed by DDH1’s board and 38% of its voting stock, including private equity backer Oaktree, which controls over a fifth of DDH1’s register.
The offer is at an implied price of $1.01 a share, a premium of 17.4% against DDH1’s 5-day VWAP.
Perenti plans to create a new drilling services division including DDH1, Swick and Ausdrill to capture what it says will be a long term outlook for drilling demand dominated by big spending from producers aiming to extend the lives of ageing mines.
“This is a compelling transaction that represents an exciting next step in delivering on Perenti’s purpose and strategy by building a portfolio of complementary high quality businesses. Perenti has a long history in drilling with our Ausdrill heritage and Barminco Diamond Drilling businesses, and we and understand the opportunities and attractiveness of this market.
“The long term outlook for a minerals demand requires increased drilling to ensure mining reserves are replaced and expanded. Drilling is also becoming more complex, resulting in larger programs and demand for specialist services,” PRN MD Mark Norwell said.
“DDH1 is a highly respected tier 1 global operator, with significant capabilities across a complete range of specialised surface and underground drilling services that are complementary to our existing service offering.
“We have a clearly articulated framework against which we assess all investment opportunities, with this transaction addressing our key assessment criteria in relation to strategic attractiveness, fit within Perenti and value creation potential.”
DDH1 shareholders will hold 29% of the combined group, which PRN says could have ASX 200 potential with a market cap of $1.3 billion, the world’s second largest drill fleet and $22m in P & L synergies along with $29m in cash generation from those synergies, while lifting its EBITA margin to over 10%, beyond its FY25 target.
It will also see Perenti, which has seen its revenues shift to Africa in recent years, boast 54% of its revenue in Australia, with more exposure to copper and nickel than it had previously.
Element 25 shares climbed 10.8% this morning after the manganese hopeful signed a second major carmaker up to its plan to deliver battery grade manganese supply in the US market.
E25, which nailed down a major investment from Fiat and Chrysler producer Stellantis earlier this year, now has General Motors on board, offering a US$85 million loan to build a high purity manganese sulphate plant in Louisiana.
The first of its kind in the US, the plant will provide a domestic source of a key lithium ion battery cathode component from 2025, using ore from its Butcherbird mine in WA’s North West.
“E25 aims to be a leading source of high quality, vertically integrated, traceable and ESG-compliant battery material to the global electric vehicle industry and GM’s support does more than accelerate our strategy for HPMSM production in the United States,” E25 MD Justin Brown said.
“Together, we are creating a resilient and sustainable North American supply chain that will help introduce millions of customers to the performance and environmental benefits of EVs.”
The deal will allow GM to receive up to 32,500t of HPMSM annually, tapping into incentives from the US Government’s Inflation Reduction Act in a bid to bring down the cost of the more than 1 million EVs it plans to producer in North American each year.
“GM is scaling EV production in North America well past 1 million units annually and our direct investments in battery raw materials, processing and components for EVs are providing certainty of supply, favorable commercial terms and thousands of new jobs, especially in the U.S., Canada and with free trade agreement countries such as Australia,” GM EVP of global product development, purchasing and supply chain Doug Park said.
“The facility E25 will build in Louisiana is significant because it’s expected be the first plant in the United States to produce battery grade manganese sulfate, a key component of cathode active material which helps improve EV battery cell cost.”
The plant is expected to cost US$290 million to build and employ 200 people once filly operational. Site prep for the 230,000 square foot facility is due to start in the third quarter.
Stellantis previously agreed to provide US$30m of funding for the HPMSM facility in exchange for a take or pay offtake deal for 45,000t of HPMSM over a five year period.
At its full production rate the plant will be able to produce 130,000t of manganese sulphate a year.
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