Monsters of Rock: Twiggy fires back in BHP stoush
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Fresh off one of Australia’s greatest individual dividend hauls, a beefed up Andrew Forrest has wasted little time firing back at BHP (ASX:BHP) in his bid to unseat it in the hunt for Canadian nickel minnow Noront Resources.
Forrest’s Wyloo has dropped a re-upped C$0.70 cash bid in an attempt to trump BHP, a 27% premium to the C$0.55 per share the Big Australian committed last month and 192% premium to the C$0.24 price it traded at in May before the bidding war began.
“Wyloo Metals didn’t make its cornerstone investment in Noront earlier this year to accept an offer that represents a fraction of the potential value of Noront’s Ring of Fire assets,” Forrest Lieutenant and Wyloo Metals head Luca Giacovazzi said.
“We invested in Noront because it has the potential to be Canada’s next great mineral hub and produce the metals critical to decarbonising our planet.”
The stoush dates back to April, when Noront’s board proposed to farm out its exploration assets in Canada’s so-called “Ring of Fire” to BHP in a $C25 million deal.
That irked Wyloo and Forrest, which claimed a 37.4% position in Noront from Resource Capital Funds in December last year, prompting a takeover battle between Forrest and BHP.
Forrest’s pitch is to use Noront’s assets as the foundation of a “green metals hub” in Ontario, Canada.
On the bourse, the materials sector was little changed today, up 0.14%. Lithium focused Orocobre (ASX:ORE) and Mineral Resources (ASX:MIN) and rare earths miner Lynas (ASX:LYC) were among the large cap gainers, while a number of mid-tiers posted their financials.
The talk for IGO today was all about nickel M&A as well, after news broke last week that it was pursuing a merger with Western Areas (ASX:WSA), owner of the Forrestania and Odysseus nickel mines.
While CEO Peter Bradford was understandably cautious about discussing that deal itself, he did hint IGO’s M&A focus was on operating assets within Australia, especially given the border situation around Covid restrictions that still persist.
With the company fully focused on the battery metals of nickel, copper, cobalt and lithium after both selling its 30% stake of the Tropicana gold mine and buying 49% of Tianqi’s Australian lithium operations in FY21, Bradford hinted on an analyst call at the need to grow IGO’s nickel reserves.
The company still has plans it shelved a couple years ago to build a nickel sulphate plant in WA on the back burner. The declining reserves of the Nova nickel mine did not justify the $500 million capital cost back in 2019.
Bradford said IGO needs a 10 year horizon to underpin an investment decision, something that would require exploration success in the Fraser Range.
“What we found at that time was the cost of building that in Australia at a scale and size that would take all the Nova product was about half a billion dollars, and with the mine life we had at that stage we didn’t have enough mine life to deliver the payback and return we would need to commit to the investment,” he said.
“Part of the work we’re doing on the Fraser Range to find more nickel is to deliver that long-dated nickel sulphide supply to allow us to go back and relook at that opportunity for nickel downstream in the future.
“Whether that be by ourselves, or in collaboration with others. It’s something that sits permanently on the backburner bubbling away but we really need the catalyst around longer-dated nickel sulphide supply to be able to look at that more aggressively.”
IGO reported a 254% increase in NPAT to $549 million in FY21, on a 12% increase in operating cashflows from $397.5m in 2020 to $446.1m in 2021. The company announced a 10c per share dividend.
Record copper prices were a big boon for Sandfire Resources, which is making the most of its DeGrussa copper-gold mine while it still has it.
Sandfire has regularly failed to extend the life of DeGrussa, which is set to wrap up over the next year ahead of a production gap while the miner builds its new Motheo operation in Botswana.
But seeing prices for the red metal hit all time highs in the June quarter may have been manna from heaven.
It’s enabled Sandfire, which made a record $813 million in FY21 from copper and gold sales and a 132% increase in profits to $170.1 million, to pay a 26c dividend final dividend.
When combined with its half-year dividend of 8c, Sandfire will return 80% more to shareholders than in FY20.
As Sandfire builds Motheo and pushes ahead with development and approval work at its Black Butte project in Montana, its boss Karl Simich notes talk of a new “copper supercycle” has emerged as decarbonisation becomes the big industry theme.
“As the world continues to embrace multiple strategies to decarbonise and switch to green energy solutions, demand for copper is widely expected to grow exponentially – with some commentators even predicting a new copper super-cycle,” he said.
“With a strong production base, a robust balance sheet and a world-class team of mining and
exploration professionals driving the execution of its growth strategy, Sandfire is well placed to capitalise on this environment.”
Sandfire has also pledged $50 million to exploration, including $16 million on copper and gold exploration in the Doolgunna region around DeGrussa, $14 million in the Eastern States and $19 million across Africa’s Kalahari belt in Namibia and Botswana.
Resource drilling is also underway at the Old Highway gold deposit in WA, a maiden resource estimate will be outlined later this year.
One of the gold industry’s most consistent performers, Regis delivered NPAT of $146 million on revenues of $819 million and EBITDA of $403 million, delivering a 3c per share dividend.
The gold miner sold 367,285oz of gold at an average price of $2229/oz in FY21 and produced 372,870oz at all in sustaining costs of $1372/oz.
After years in the 300,000-400,000oz mid-tier range, Regis is set for a step change in FY22 as it adds the 30% share of Tropicana it bought from IGO to its portfolio.
The company will produce 460,000-510,000oz in 2021-22 at costs of $1290-1365/oz. It has paid out half a billion dollars in dividends since 2013.