latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/bhp-wyloo-bidding-war-for-noront-reflects-top-miners-exploration-m-a-focus-66281281 content esgSubNav
In This List

BHP-Wyloo bidding war for Noront reflects top miners' exploration M&A focus

Blog

Global M&A By the Numbers: Q3 2021

Blog

Essential Metals & Mining Insights - October 2021

Blog

Post-webinar Q&A: Global Credit Risk Trends 2021 and Beyond

Video

Essential Metals & Mining Insights - September 2021


BHP-Wyloo bidding war for Noront reflects top miners' exploration M&A focus

BHP Group is vying with commodities billionaire Andrew Forrest for control of a remote nickel project in Canada, reflecting miners' growing appetite for exploration assets.

In an escalating bidding war, Forrest's Wyloo Metals Pty. Ltd. sweetened its bid Aug. 30 for Noront, owner of the Eagle's Nest nickel project in the Ring of Fire region of northern Ontario, as it looks to beat out BHP for ownership. Forrest, chairman of iron ore miner Fortescue Metals Group Ltd., controls Wyloo through Tattarang Pty. Ltd.

Wyloo, which owns a stake in Noront, offered 70 Canadian cents per share, a 27% premium to BHP's bid of 55 cents per share. Noront Resources Ltd.'s board supported BHP's C$325 million takeover offer. Wyloo's new offer values Noront at about C$414 million, up from its previous offer valuing Noront at C$133 million.

A BHP spokesperson told S&P Global Market Intelligence in an Aug. 31 statement that the company will await the response from Noront's board regarding Wyloo's sweetened proposal before determining its next steps.

"It's important to note that Wyloo has only made a proposal, which is subject to conditions, and has not entered into any binding agreement with Noront in respect of a transaction or a formal offer. The BHP offer is the only offer that has been made to shareholders," BHP's spokesperson said.

Luca Giacovazzi, head of Wyloo Metals, also told Market Intelligence in a same-day statement that it has requested from Noront a "modest period of time to conduct confirmatory due diligence. We haven't had access to due diligence but would be prepared to sign a confidentiality agreement on appropriate terms to do so."

Electrification drive

The multiple bids for Noront are a rare example of top miners jostling for nonproducing development assets in recent years as the rise of electric vehicles stokes demand for nickel and other metals. It follows investments by the likes of Glencore PLC and South32 Ltd. in undeveloped projects as diversified miners seek to boost sales in metal industries tied to electrification.

"These companies are looking longer term and thinking: 'You know, we don't have enough exploration projects. We need to start getting some,'" said Joe Mazumdar, a mining investor and head of Exploration Insights.

The Eagle's Nest project has drawn miners' interest because it is one of the larger high-grade nickel discoveries in Canada. Production is unlikely to start for a number of years due to the need for significant infrastructure construction approvals and engagement with various entities, including First Nations groups.

Wyloo holds about 37.5% of Noront shares, giving it a key say in the mine developer's future. Wyloo and Noront have made conflicting statements on whether the stake is big enough to block a BHP takeover.

SNL Image
BHP CEO Mike Henry.
Source: The West Australian.

The stake could lead to Wyloo and BHP joining forces, a potentially awkward situation given the iron ore rivalry between Forrest's Fortescue and BHP, said Robert Stein, a CLSA analyst who previously spent eight years at BHP. Still, a partnership could also have some benefits, Stein said.

"BHP's skills, capabilities and nickel experience teamed up with Wyloo and the capabilities that Andrew Forrest can bring to the table might be a big win," the analyst said.

In the week ended Aug. 27, spokespeople for Noront declined requests for interviews and further comments.

Large miners have funds to invest in potential projects following windfalls from record iron ore and copper prices this year. BHP has also "massively" slashed its capital-spending outlook through the planned sale of its oil and gas operations in an all-stock deal with Woodside Petroleum Ltd., said Lion Selection Group Fund Manager Hedley Widdup.

Interest in the region's assets is a sign that majors want to bolster development pipelines with projects that more directly feed emerging needs from the electric vehicle sector, said Stan Sudol, a mining sector consultant who has long followed events in the Ring of Fire.

SNL Image
Fortescue Metals Group Chairman Andrew Forrest.
Source: Fortescue Metals Group Ltd.

"Obviously everyone's woken up and said, 'Okay, nickel is the new gasoline along with copper [and other metals],'" Sudol said.

BHP has targeted nickel as a growth market, including signing a deal to supply nickel to electric-vehicle maker Tesla Inc. in July. It is also building nickel sulfate processing facilities in Western Australia.

The mining giant plans a further push into "future-facing commodities," such as copper and nickel, through exploration and early-stage partnering with smaller companies, CEO Mike Henry said in August. The company is among the top 10 nickel producers, according to S&P Global Market Intelligence data on 2020 output.

The Noront bid underscores the push for nickel as well as BHP's "outward-looking M&A agenda," Lion Selection Group's Widdup said.

"It looks like BHP has opened its checkbook, and the whole world knows they have a very, very large checkbook," Widdup said.