BHP outbids Wyloo as fight for Ring of Fire operator Noront intensifies

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BHP Group Ltd. has increased its bid for Norant Resources Ltd., thrashing Australian mining heavyweight Wyloo Metals Pvt Ltd as the battle for the Ring of Fire operator intensifies.

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Melbourne-based BHP, the world’s largest mining company, said it would pay 75 cents a share in cash for Toronto-based Norant Resources, five cents more than Wylu is willing to pay. Noront’s board also endorsed BHP’s latest $419.3 million bid and is recommending the tender to shareholders.

Vailu owns 37.2 percent of Norant’s shares, and said it has no intention of tendering it to BHP. However, BHP does not need Vayloo’s support for its bid to be successful. The threshold of success is at least 50 percent of the shares it doesn’t already own, or 48.15 percent.

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“We are very confident that we are going to get there,” BHP chief development officer Johan van Jaersveld said in an interview.

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Investors will now watch to see if Vayloo chooses to improve upon BHP’s latest proposal. Backed by billionaire Andrew Forrest, Wailoo has already shown he is willing to dig in for a long and costly battle for Norant.

In May, Vialu made an offer to buy Norant for 31.5 cents a share. BHP offered 55 cents in July. Earlier this week, Vialu raised its bid to 70 cents.

On Wednesday, shares of Norant closed at 82 cents on the TSX Venture Exchange, up seven cents from BHP’s offering, indicating that investors believe an even higher bid is coming.

The scramble for Noront is about securing a long-term supply of important minerals like nickel. While much engineering and study is needed, Noront’s Eagle’s Nest project in northern Ontario has the potential to produce high-grade nickel that can be fed into the electric-vehicle supply chain. Industrial goods are a major component in car batteries. BHP, like many large mining companies, is diversifying from fossil fuels such as coal and oil to minerals with a lower environmental footprint, such as potash, or those that have cleaner end uses, such as nickel for EVs.

Located in the remote James Bay lowlands of Ontario, 550 kilometers northeast of Thunder Bay, the Ring of Fire contains promising – but unproven – deposits of nickel, copper and chromite. Norrant named the area the “Ring of Fire” because the geographic outline resembles a ring, and a staff bore a resemblance to the hit song of the same name by Johnny Cash. Once the epicenter of a stakes frenzy, Noront has failed to make significant progress in developing its projects in the area over the past decade, due to the enormous costs associated with developing mines in the region.

Noront’s mining camp is located in a swamp, about 300 km north of the provincial highway network, which has been cut off from the electricity grid and internet access. BHP has previously developed mines in extremely remote areas in Canada, including the Ekti diamond mine in the Northwest Territories. However, unlike extremely valuable diamonds, which can be taken out of mines, nickel is a heavy and bulky commodity, meaning that the Eagle’s Nest mine requires a dedicated road link.

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Norant expected the provincial and federal governments to commit about $1.6 billion to help build the access road, but none have committed capital. Mr. van Jaersveld said BHP sees significant value to shareholders in the development of Ring of Fire over a 40- or 50-year time horizon, but has not made a decision on whether the company will continue to grow on its own. Will be ready to fund.

“There’s still a few years of study needed here,” he said.

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