Battle for Noront heats up with BHP’s US$258 million bid

BHP (NYSE: BHP; LSE: BHP; ASX: BHP) has offered $325 million (US$258.45 million) for Canadian nickel miner Noront Resources (TSXV: NOT), trumping a bid by Australian mining billionaire Andrew Forrest’s Wyloo Metals, as top miners race to secure supplies of battery metals.

The world’s largest miner is offering $0.55 per share of Noront, representing a premium of 129% to the company’s closing price on May 21, a day before Wyloo’s proposal.

Noront is recommending  shareholders accept the bid, which comes through BHP Lonsdale, a subsidiary that already owns 3.7% of the Canadian nickel producer.

“BHP has the financial strength, world-class mining expertise, and commitment to work in partnership with stakeholders to advance Eagle’s Nest and the Ring of Fire, which has the potential to deliver benefits to local communities, First Nations, and Ontario for years to come,” Alan Coutts, Noront’s CEO, said in a press release. 

BHP is speeding up its push into so-called future-facing commodities, including nickel, lithium and copper, which are poised to benefit from the green-energy transition.

“Noront represents a growth opportunity in a prospective nickel basin capable of delivering a scalable, new nickel-sulphide district,” the Australia mining giant said in the statement.

The company is also in the process of exiting thermal coal and is considering exiting the oil and gas sector as part of its commitment to reduce emissions.

Wyloo Metals, which is Noront’s top shareholder with a 23% stake as of December 2020, had in May offered $0.315 per share for the stock it did not already hold in the company. Noront adopted a poison pill to stop the takeover.

BHP’s offer comes on the heels of its decision to move the exploration team’s headquarters to Toronto, Canada’s most populous city. The company plans to  almost double exploration spending for base metals within five years.

Noront owns the early-stage Eagle’s Nest nickl and copper deposit in northern Ontario’s Ring of Fire. It has been billed by Wyloo as the largest high-grade nickel discovery in Canada since the Voisey’s Bay nickel find in the eastern province of Newfoundland and Labrador.  

Eagle’s Nest is expected to begin commercial production in 2026 with the mine running initially for 11 years. The mine’s start date has repeatedly been pushed back by Noront due to successive federal and provincial governments’ inability to consult and reach unanimous agreement with First Nations in the area.

Nickel production would need to increase nearly fourfold to meet expected demand for electric and hybrid vehicles, the company estimates. Likewise, copper output would also need to grow exponentially to meet demand from renewable power generation, battery storage, electric vehicles, charging stations and related grid infrastructure.

Tesla’s boss Elon Musk has expressed worries about a looming nickel shortage. He pleaded with miners last year to produce more nickel, promising a “giant contract” for supply produced efficiently and in an “environmentally sensitive way.”

The EV maker became involved in March in the development of the conflict-ridden New Caledonia nickel mine, as part of the company’s attempt to secure enough supply of the key battery metal.

BHP’s offers coincides with Canada’s push to position the country as a hub for clean-tech metals.

The bid is conditional on acceptance by more than 50% of the Noront common shares, excluding a small stake that BHP already owns.