North Bay Resources acquires two BC rare earth properties
Marketwire | August 4, 2011
North Bay Resources Inc. announced on Wednesday that the Company has acquired a 100% undivided interest in two rare earth properties in southeastern British Columbia.
The Perry River Carbonatite property covers 505 hectares (1,247 acres) and is located approximately 42 kilometres northwest of Revelstoke, BC. The property is known to host niobium, lanthanum, cerium, neodymium, and other REEs.
If there’s one thing the latest WikiLeaks missive reveals about BHP Billiton, it is that the company’s much derided takeover strategy hasn’t been the disaster that many large shareholders claim.
BHP supremo Marius Kloppers no doubt is smarting over the leaked cables from US consul general Michael Thurston back to his masters in Washington. They reveal the kind of candid comments one would expect in a meeting between a corporate heavyweight and a representative of the US government on sensitive issues regarding the world’s fastest-growing economy, China.
But the leaked cables also highlight just how successful BHP was in railroading the contentious tie-up between Rio Tinto and the Chinese government-owned Chinalco, a deal that would have been disastrous for Australia’s national interests and that would have seriously undermined BHP’s ability to operate in China.
BHP’s big institutional shareholders, particularly those in the UK, have made it clear that they have been underwhelmed by the vast millions of dollars spent on advisers and consultants since 2007 on three massive merger proposals that never eventuated. In recent months, they have called for a halt to the mega mergers and insisted the company return a large part of the cash being generated by the resources boom.
In particular, many questioned the wisdom of BHP’s much vaunted joint venture proposal with Rio Tinto’s West Australian iron ore operations. Why proceed down that path when it was clear European regulators raised objections about that very issue two years earlier when BHP launched its hostile takeover bid for Rio Tinto?
The answer is now clear. To stymie Chinalco, BHP needed to offer Rio Tinto an alternative. It needed to offer its great rival a compelling reason to dump the Chinese government, a legally binding, superior offer that Rio directors could not refuse.
At the time, Rio’s new chairman Jan du Plessis was looking for an exit strategy from the China deal. With commodity prices rebounding, the Chinalco deal – struck out of desperation by a debt-laden Rio – was looking even less attractive and Rio shareholders were in open revolt.
Kloppers handed him the perfect opportunity. And while much of the attention focused on the potential synergies of the iron ore merger, the real value rested in severing the link between the Chinese government and Rio Tinto, a link that would have delivered the world’s biggest consumer of iron ore control of the world’s primo deposits.
The value for BHP in successfully killing that deal? Immeasurable.
It took a while, but the market’s appetite for acquisitions has returned with gusto.
THE markets didn’t need the Goldman Sachs deal with Facebook this week, valuing the social network at about $US50 billion, to confirm that last year’s late binge of deal doing would continue well into the new year, but it helped keep the champagne corks popping.
After the drought of 2008 and a quiet start to 2009, normal services have resumed.
”When the GFC hit, most people swapped into a short-term survival mode,” says Allens Arthur Robinson corporate partner Richard Kriedemann. ”The second half of last year saw things return to a more normal, longer-term trend.”
And the party isn’t confined to the latest crop of Silicon Valley dotcoms either. After all, the sliver of money actually being handed over to Facebook by Goldmans and other friends – $US450 million – pales into insignificance beside the $US40 billion that BHP Billiton offered in a failed bid for Canada’s Potash Corp last year.
The setback is not expected to stop the miner from attempting another one or more multibillion-dollar acquisitions this year.
Also it’s not like all the deal-making in the resource sector has been confined to BHP, as shown by Newcrest’s $24.5 billion merger with fellow gold producer Lihir.
The resource sector wasn’t the only dealer in the mix, with AMP playing its part in the $13.3 billion mop-up of AXA Asia Pacific – the biggest Australian-based transaction of the year and the third-biggest Asian-based takeover.
It helped mergers and acquisitions activity in Australia more than double last year to $US164.4 billion, according to figures from Thomson Reuters, giving the lucky country a significant chunk of the $US474.6 billion in activity in Asia, excluding Japan.
There are no prizes for guessing the resource sector is expected to continue to lead activity this year.
Rio Tinto’s recent $3.5 billion bid for coal producer Riversdale Mining is a taste of things to come, with Chinese interests also continuing to scour the country for strategic stakes in other commodity suppliers.
And after BHP’s recent failed attempts to expand with a Rio tie-up and Potash – the world’s regulators appear to be of the view that BHP is getting a little too big – energy may prove to be the only viable expansion option.
BHP is expected to devote a chunk of its growing pile of cash to an acquisition in the oil and gas sector, with more than 20 independent exploration and production (E&P) companies in the US market on its watch list.
It was against that background last week that London’s Daily Mail tipped BHP was considering making a $US90-a- share, or $US45 billion, bid for Anadarko Petroleum. BHP watchers say Anadarko is not the only potential multibillion-dollar deal in the company’s sights.
BHP may look to take out Noble Energy, a $US15 billion company and operator of the big Leviathan gas discovery off Israel, or Cobalt International Energy, valued at $US4.3 billion.
A more tantalising prospect is BHP as a potential suitor for Woodside Petroleum, which went into play last year after Shell sold a 10 per cent stake for $3.3 billion. This implicitly put its remaining 24 per cent stake in play for the right buyer.
The resource sector’s appetite for acquisitions, locally and overseas, is to be expected given the strength of company cash flows, their stock, and the Australian dollar, but it is not expected to stop overseas interest in Australian companies across the board.
Kriedemann says a return of private equity this year will see a surge in deal making in Australia.
”There have already been a number of privately negotiated deals occurring and I don’t think you can point to any one area of the economy and say it will be immune from M&A activity in the next 12 months,” Kriedemann says.
Freehills’ merger specialists, Tony Damian and Neil Pathak, agree.
”The conservatism of the last three years has resulted in many large and mid-market companies with low gearing and stable cash flow . . a nice combination for a private equity pursuer,” they wrote before Christmas.
”The time to strike would seem to be now, particularly, before the general economy improves and asset prices increase.”
Private equiteers TPG and the Carlyle Group certainly don’t need any prompting on this point, they joined forces last year to acquire Healthscope for $2.7 billion.
Another strong theme Damian and Pathak expect to continue this year is strong overseas interest in Australia’s agriculture sector, which saw takeovers last year of AWB by Canada’s Agrium, CSR’s sugar business, Sucrogen, by Singapore’s Wilmar International, and Ricegrowers by Spain’s Ebro Foods.
But it won’t be plain sailing as the Singapore Stock Exchange is finding with its $8.4 billion bid for Australian Securities Exchange and BHP did with Potash.
Intervention by the Australian Competition and Consumer Commission killed several deals last year, like NAB’s tilt for the AXA assets, although not the ASX bid, which is being lost in the corridors of Canberra.
Freehills also expects the Foreign Investment Review Board to be more vigilant this year, especially in relation
to the resource and agribusiness sectors, which are expected to be the main areas of activity.
The law firms says FIRB vigilance reflects a global trend for increased scrutiny of foreign investments.
”In Australia, this will manifest itself in FIRB probing and seeking additional information and an increased incidence of approvals being granted subject to conditions and undertakings relating to maintenance of Australian head office, industry impacts, pricing of export of product and maintenance of employment. Also expect some outright rejections (which will perhaps be presented as withdrawals of applications),” Freehills says.
Events last year are expected to pave the way for potential M&A candidates this year outside the red-hot resource sector.
A split of Foster’s wine and beer divisions is expected to attract attention, as is Tabcorp’s decision to divide its casino division from its wagering and gaming operations.
Asahi Breweries, Japan’s second-largest brewer and the acquirer of Cadbury’s Australian drinks unit in 2009, reportedly hired advisers to look at Foster’s beer business last year and its president, Naoki Izumiya, said recently it will “aggressively seek acquisitions and alliances” this year.
The brewer said in April that it may buy food and alcohol companies in the Asia-Pacific region, and has also said it may spend as much as ¥400 billion on acquisitions.
There is more certainty around Tabcorp’s split, although no one is punting on either operation surviving as a stand-alone operation for long, with potential predators already lining up for both divisions.
James Packer’s gambling operation, Crown, has been cited as a likely buyer of Tabcorp’s casinos while Tattersall’s chief executive, Dick McIlwain, has expressed interest in the wagering and gaming business, which would put all Australia’s traditional wagering pools under one roof for the first time.
The most intriguing transaction of the year is likely to be one of the earliest, with the receivers appointed in controversial circumstances to one of the world’s biggest ammonia producers, Burrup Fertilisers, expected to appoint advisers and fast-track the sale of a 65 per cent stake in the company owned by its founder, Indian entrepreneur, Pankaj Oswal, and his wife.
The entire company was valued at more than $3 billion in 2008 when it first attempted to go public before the GFC.
The receivers report that more than 10 parties are interested. The front runner is expected to be Burrup’s other shareholder, Norwegian fertiliser company Yara International, which also has a long-term agreement with Burrup to buy all its ammonia.
Back in 2009, BHP Billiton and Rio Tinto signed core principles to establish a production JV covering the entirety of both companies’ Western Australian Iron Ore assets. This resulted in the signing of definitive agreements on 5 December 2009. The completion of these agreements was subject to a number of conditions, including regulatory approvals.
Since the agreement was signed it has become increasingly apparent that regulatory approvals of the joint venture are unlikely to be achieved. Consequently, BHP Billiton and Rio Tinto have reluctantly agreed to dissolve the proposed joint venture.
BHP Billiton Chief Executive Officer, Marius Kloppers, said, “The large synergies from combining our Western Australian iron ore assets with Rio Tinto’s have caused us to persevere in seeking to obtain regulatory approvals. However, it has become clear that this transaction is most unlikely to obtain the necessary approvals to allow the deal to close and as a result both parties have reluctantly agreed to terminate the agreement”.
Mr Kloppers said he appreciated the high level of cooperation and goodwill displayed by Rio Tinto in pursuing the joint venture. The parties have mutually agreed that no break fee is payable by either party.
While BHP Billiton was progressing approvals for the joint venture, it has continued to invest in its Western Australian Iron Ore business. With the termination of the joint venture, this focus on efficiently growing and operating our Western Australian Iron Ore business through our existing Perth-based Iron Ore management team will continue forward.
BHP Billiton and ArcelorMittal had jointly announced they have ended discussions to combine the two companies’ iron ore interests in Liberia and Guinea into a single joint venture. They were unable to reach a commercial agreement. BHP Billiton and ArcelorMittal have continued to advance their iron ore interests in West Africa independently and work closely with governments as well as their communities.
THE drama continued at Fairfax Media yesterday with mining billionaire Gina Rinehart revealed as the buyer of a $50 million stake in the company, one day after the abrupt departure of its chief executive, Brian McCarthy.
Market sources confirmed Ms Rinehart was behind the acquisition, which follows her raid on the Ten Network last month that netted her 10 per cent of the broadcaster. Morgan Stanley, which conducted Ms Rinehart’s raid on Ten, would not comment yesterday, nor did Ms Rinehart’s Hancock Prospecting.
Fairfax chairman Roger Corbett said: ”The company welcomes the investment interest and show of confidence from all our shareholders.”
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It is not known if Ms Rinehart plans to increase her stake in Fairfax, owner of The Age. Her current stake represents 1.5 per cent of the company’s stock.
More than 60 million Fairfax shares were traded on Monday following the departure of Mr McCarthy, who has been replaced on an interim basis by Greg Hywood. Because broking codes have been removed from trading systems, there is no confirmation of how many of those shares were traded by Morgan Stanley.
Under sharemarket rules, once Ms Rinehart’s holdings reach 5 per cent, she must declare ownership. It is then that questions will be asked in earnest as to what her intentions are towards the company, which has an open and fluid register.
Former director John B. Fairfax’s Marinya Media is the largest individual shareholder with 9.7 per cent. The largest institutional investor is Colonial First State with 11 per cent.
In May this year, Fairfax signed a deal with Ten to serve short clips of news footage to complement news reports by Fairfax journalists. But Ms Rinehart’s second media acquisition in as many months may have more to do with gaining influence as she protects a mining empire worth around $5 billion.
Ms Rinehart has continued to be a vocal critic of the mining tax, including its latest iteration, the mineral resource rent tax.
In a recent article she wrote for a mining publication, Ms Rinehart said: ”Changes are needed, and not only to bury the MRRT immediately and permanently.”
Ukrainian billionaire Gennadiy Bogolyubov is poised to reopen the Coobina chromite mine in the Pilbara, creating 120 jobs for an operation that could generate about 2.5 per cent of the world’s supply of the stainless steel ingredient.
The billionaire, who picked up Coobina as part of his $1.2 billion takeover of Consolidated Minerals in late 2007, expects the resumption of mining at Coobina will cost about $6 million.
Coobina, east of Newman, is Australia’s only chromite mine.
Chromite is a key ingredient in ferrochrome and sought after in stainless steel for its corrosion-resistant characteristics.
The Coobina open pit mine has been on care and maintenance since 2008 when the global financial crisis triggered a collapse in stainless steel production. About 20 people have remained on site to work on the crushing and beneficiation plant, with another 100 needed to support the reopening of the mine by October.
Mr Bogolyubov expects Coobina to produce up to 450,000 tonnes of chromite a year, equivalent to about 2.5 per cent of an annual world supply estimated at 18 million tonnes.
The chromite products – lump, chips and fines ore – will be trucked to Port Hedland for shipping to markets in Asia and Europe.
Coobina’s reopening comes as ConsMin’s main undertaking, the high-grade Woodie Woodie manganese mine about 400km south-east of Port Hedland, prepares for a 25 per cent boost to annual production levels to 1.2 million tonnes.
The Korea Gas Corporation has signed a 20-year agreement worth billions of dollars to purchase liquefied natural gas from the $25 billion Wheatstone gas project off the North-West coast.
US oil giant Chevron Corporation, the operator of the project in Ashburton North, said its Australian subsidiaries had signed a Heads of Agreement with KOGAS.
The new agreement will boost the likelihood of the Wheatstone project getting final approval, slated for next year.
KOGAS, the largest LNG buyer in the world, will purchase 1.5 million tonnes per annum of LNG from Wheatstone for 20 years.
The company also signed an agreement to acquire a five per cent stake in Chevron’s Wheatstone field licenses and in the Wheatstone project LNG and domestic gas processing facilities.
KOGAS’ LNG purchase together with its equity participation will see KOGAS take delivery of about 1.95mtpa of Wheatstone LNG.
State One Stockbroking energy analyst Peter Kopetz estimated the deal with KOGAS would be worth about $20 billion over its 20 year life, based on previous deals announced.
He said such a move would boost the chances of the gas project getting final approval.
“I think Wheatstone now has contracted about 80 per cent of its LNG,” Mr Kopetz said.
Tokyo Electric Power Company last year signed Australia’s biggest energy deal, with a deal worth an estimated $90 billion to take 4.1mtpa of Wheatstone gas during the next 20 years.
KOGAS has previously signed a deal with Chevron for 1.5 million tonnes per annum of LNG from the Gorgon gas project offshore from WA.
Chevron has not disclosed the value of the latest deal.
A sinking Australian dollar, global equity jitters and a surge in Chinese foreign reserves have put Australian acquisitions back on China’s agenda, analysts say.
Paladin Energy, PanAust and Aquarius Platinum top the list of takeover targets, according to Citigroup analysts. They say miners with offshore assets will be sought after because those with local projects could be hurt by the resource super profits tax and or adverse Foreign Investment Review Board rulings.
“Just as the GFC gave China an opportunity to bid for mining assets with little competition, we expect the global risk reduction sell-off and collapse in the Australian dollar to once again provide an opportunity,” Citi analysts said in a note to clients.
The Citi report echoes industry speculation that the proposed tax could hand Chinese interests a greater slice of Australian resources as other sources of funding dry up.
Chinese foreign exchange reserves surged to $US2.4 trillion in March, up 25 per cent year-on-year. On Citi’s numbers, it is estimated about 70 per cent of that is in US dollars, with the balance mostly in euros and Japanese yen.
The Australian dollar has fallen more than 9 per cent from this year’s high of US93.51¢. It closed yesterday at US84.78¢, down from Friday’s close of US85.09¢.
Paladin, PanAust and Aquarius were named at Citi’s top targets because they all own overseas assets, have no major potential blocking shareholder and are mining commodities that China is expected to be seeking: uranium, copper and platinum respectively.
UPDATE 12.20pm: Conquest Mining has announced a $58 million takeover offer for North Queensland Metals in a bid to expand its landholding in the State and join the ranks of gold producers.
Under the cash and scrip bid, the company will offer NQM shareholders half a Conquest share and 10 cents cash for every share they hold, valuing the company at 29 cents a share, a 29 per cent premium to yesterday’s closing price of 22.5 cents.
It also represents a 37 per cent premium to the volume weighted average share price (VWAP) of the company over the past month.
Conquest said NQM’s major shareholder, non-executive director Don Walker, supported the offer and had signed a pre-bid acceptance agreement covering his 19.9 per cent shareholding in the company.
NQM holds a 60 per cent interest in the Pajingo gold mine near Charters Towers while Conquest owns the nearby Mt Carlton project with reserves of more than 1.15 million ounces of gold equivalent.
Conquest executive chairman Jake Klein said the combined company would be better placed to increase exploration expenditure at Pajingo and attract and retain high quality people.
“NQM shareholders will benefit initially from the significant up-front offer premium and are expected to benefit over the longer term as value is unlocked by combining the complementary assets and capabilities of Conquest and NQM,” he said.
He said the case for combining the two companies was compelling because it would deliver value to NQM shareholders more rapidly and in excess of that achievable by NQM alone.
Conquest said if the offer was successful, it would have about 453 million shares on issue and former NQM shareholders would own 22 per cent of the combined company.
Conquest has made the offer conditional upon it securing 90 per cent of NQM’s issued capital.
North Queensland Metals urged shareholders to take no action until its board had considered the offer and provided a recommendation.
Shares in North Queensland jumped 4.5 cents, or 20 per cent, to 27 cents by 12.15pm after hitting an earlier peak of 29 cents.
Conquest shares were off 1.5 cents, or 3.95 per cent, to 36.5 cents
