BHP Walks from Anglo Deal

Is Westgold edging ahead of Ramelius in Murchison superiority?

May 30, 2024

The Pre-Start

  • BHP announced it does not intend to make a firm offer for Anglo (BHP) after Anglo revealed that BHP had not moved at all in the final week extension (AAL) - after hearing Tshepo describe BHP’s approach as amateurish, we are left thinking that Anglo was a necessary red herring

  • Carnaby revealed a scoping study for its Greater Dutchess copper project showing an IRR of 34% standalone or 105% if they can utilise Glencore’s Mt Isa concentrator (CNB)

  • NexGen closed the purchase of 2.7mlb of U3O8 for US$250m, funded through the issuance of a convertible debenture (NXG)

  • Latin Resources shared an updated Salinas project resource of 78Mt @ 1.24% Li2O, with the majority at Colina. DFS due Q3 2024 (LRS)

  • Meeka Metals released its Murchison DFS, underlined by an NPV8 of $202m for the 9-year project. AISC comes in at $1804/oz with capex of $44m, based on the re-commissioning of 0.5Mtpa Andy Well (MEK)

  • Troubled mineral sands producer, Strandline revealed it drew down $5m more from senior lenders as it plans to trial the MSP for its Coburn project in June (STA) - With proceeds from the sale of its Tanzanian assets yet to be received, the funding situation is starting to look grim for even the lenders. You can probably forget about the equity at this point…

High Grade It

  • BHP abandoned its $75b bid after Anglo refused more talks (AFR)

  • Anglo rejected BHP’s attempt for a further extension, saying BHP has not done enough over the past week to deserve a further 7 days (AFR)

  • Anglo’s rejection leaves BHP the opportunity to make one approach (with UK approval) to Anglo in the next 6 months (The Australian)

  • Glencore will consult shareholders on the future of its coal business once its deal to buy Teck mines closes later this year, saying it won’t hold a vote if most shareholders back keeping coal (Bloomberg) everyone’s base case should now be that Glencore keeps its coal

  • Workers set to bring sexual harassment, discrimination class action against mining giant Rio Tinto (The West)

  • Silver rose to an 11-year high last week; the arbitrage window — the Chinese & world price spread — has widened further (Bloomberg)

  • The Chief Responsible Investment Officer (whatever that is) of the Church of England Pension Fund came out with immediate support for Anglo’s rejection of BHP’s bid (Linkedin)

  • A historic squeeze in NY copper futures is drawing to a close, with the loosening of a key price spread taking pressure off traders (Bloomberg)

  • The UAE is the leading recipient of tens of billions of dollars of gold smuggled out of Africa illegally every year (FT)

Wheelin’ n Dealin’

  • Ramelius approached Westgold for a ‘merger of equals’ in November 2023 (AFR)

  • Ora Gold entered an agreement with Westgold (deemed a “strategic alliance”), to develop Ora’s Crown Prince. WGX invested $6m into OAU via a strategic placement, taking 15% of the company (OAU)

  • ConocoPhillips agreed to buy Marathon Oil in a $22.5b deal the latest in a series of mega-mergers in the O&G industry as companies look to bolster reserves (Reuters)

  • New World Resources has acquired the Pinafore copper deposit, which sits 75km away from its Antler project (NWC)

  • Tigers Realm shareholders approved the sale of its Russian coal assets to APM-Invest for US$49m at yesterday’s AGM (TIG)

  • Prospect Resources has completed the acquisition of the Mumbezhi copper project in Zambia (PSC)

  • Galileo is in a trading halt pending an announcement in relation to a joint-venture farm-in agreement for its Norseman lithium (GAL) could this be MinRes, again?

Rattlin’ the Tin

  • Murchison explorer Ora Gold are conducting a strategic placement of $6m at $0.0045 to Westgold, equivalent to a 15% pro forma shareholding (OAU)

In the Weeds

  • The Biden administration proposed expanding tax credits that have for years boosted U.S. solar and wind energy projects to cover a wider range of clean energy tech including nuclear fission & fusion (Reuters)

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Today’s Top Tweet

Devil’s in the Detail x Word on the Decline

If you are still trying to make sense of the Murchison Mayhem that emerged yesterday when Ramelius took Westgold to the Takeovers Panel, let us add to your confusion with something important that everyone seems to have missed.

After posting the early news on Twitter, Chuckie sent us down a rabbit hole yesterday.

We jumped on SEDAR to learn that it is now slightly less shit than it used to be, while still being really shit.

And armed with the alpha-leak Ben Bailey left us with 8 months ago, we went searching to see if the transaction docs revealed the date that Westgold and Karora signed a confidentiality agreement themselves… BOOM.

“Confidentiality Agreement” means the confidentiality agreement dated January 22, 2024 entered into between Karora and Westgold;

So now we know:

  1. Ramelius and Westgold had entered a confidentiality agreement (including a standstill) on 14 November 2023 (Takeovers Panel)

  2. Westgold and Karora entered a confidentiality agreement on 22 January 2024 (KRR); and

  3. Ramelius was in ‘exclusivity’ with Karora right up until 28 March 2022 when discussions ended and Karora immediately revealed it was then in exclusivity with another third party thereafter.

So all three had confidentiality agreements with each other, and the timelines overlap a lot. What else did we find?

It reads to us like both Karora and Westgold have ‘fiduciary out’ provisions if a third party proposes a better deal to either party EXCEPT if that bid comes from a party subject to a standstill from a confidentiality agreement that remains on foot (aka, Ramelius for both of them!)

If you’re still following, let us propose a timeline of events that could line up with the data we have. Please note: this is our unverified hypothesis only.

  1. Ramelius and Westgold engage in mutual DD to merge the Murchison miners in early November. Negotiations break down, probably on value.

  2. Ramelius uses a ‘potential’ Karora alternative as a bargaining chip with Westgold. It’s well known that Karora wants to do a deal. Ramelius has some interest, but it’s probably not as compelling as Westgold at the right price.

  3. Ramelius gets exclusivity with Karora, edging into pole position (again)

  4. Westgold, who had also looked under the hood of Karora in January, realises they’re 2nd fiddle. The potential tie-up of Karora and Ramelius winds up in Street Talk (I wonder who had the incentive to leak this one…)

  5. Ramelius halts on Thursday, March 7. Instead of emerging with an agreed deal, they only confirm the media speculation. Was it a bluff all along? And did Westgold call the bluff here?

  6. Ramelius’ share price tanks - classic M&A trading activity as the market bakes in Ramelius paying a premium. At this stage, any deal at a reasonable price gets harder and harder to get over the line.

  7. Westgold comes in over the top. Did this happen before Ramelius' exclusivity had ended or after?

  8. Ramelius is left on the sidelines with Plan A and Plan B now in exclusivity with each other instead.

  9. The deal with Westgold and Karora emerges and the docs explicitly prevent a Superior Proposal from Ramelius on either party. Goddammit!

  10. Ramelius goes to the Takeovers Panel

Catch up on our latest episode

🔗BHP’s Approach was Amateurish says Investment Banker Tshepo Magagane

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