BHP bows out of the bidding war for Canada’s Noront Resources

Andrew Forrest has seen off an attempt by BHP to snatch control of an emerging nickel district in Canada.

Andrew Forrest has seen off BHP’s attempt to snatch control of a major Canadian nickel district. Picture: NCA NewsWire / David Swift

Iron ore billionaire Andrew Forrest has snatched pole position in the race to develop a new nickel province in Canada, after BHP bowed out of the chase to acquire Noront Resources.

BHP said on Wednesday it would not match the price for the company offered by Dr Forrest’s Wyloo Metals, abandoning a protracted tussle for control of the Canadian nickel explorer.

Wyloo trumped BHP’s C75c (81c) a share offer for the company last week by almost 50 per cent, throwing down a $C1.10 offer – valuing Noront at about $C616m ($667m) – after the failure of talks with BHP about a potential deal to end the bidding war.

At stake is Noront’s extensive position in Canada’s co-called “Ring of Fire” minerals district, shaping up as one of the promising emerging base metals regions across the world.

Noront’s primary project is Eagle’s Nest, touted as the best high-grade Canadian nickel project since the discovery of Vale’s Voisey’s Bay.

But both BHP and Wyloo have been clear that their interest is far broader than the nickel project Noront has drilled out – their belief is that Noront’s extensive ground position in Ontario could deliver a replacement for Canada’s ageing Sudbury and Voisy’s Bay base metals operations.

Wyloo already controls about 37 per cent of Noront shares, and said last week it would not support any alternative bids for Noront.

The Noront board backed Wyloo’s latest offer on Tuesday night, recommending shareholders accept the offer and agreeing to sell their own shareholdings into the new deal.

The agreement of insiders and key shareholders to the latest offer effectively handed Wyloo close to half of the company’s share register, without a superior offer from BHP.

BHP has now effectively bowed out of the chase for Noront, saying it will not match Wyloo’s offer.

BHP chief development officer Johan van Jaarsveld said in a statement that the company did not see value in Noront’s assets at the price offered by Wyloo.

“BHP is committed to its strict capital discipline framework. While the Eagle’s Nest deposit is a promising resource, we do not see adequate long-term value for BHP shareholders to support an increase in BHP’s offer in order to match the $C1.10 per share proposal from Wyloo Metals,” he said.

But, while BHP doesn’t see value in stumping up the $C616m needed to win control of Noront, Wyloo’s total outlay for complete control of the company would be closer to BHP’s C75c offer than its $C1.10 final bid implies.

Wyloo paid about C18c a share for its initial stake in Noront, with its business development team getting in well ahead of the majors in identifying the nickel explorer as one of the best options available in a global race for control of the best sources of top-class battery-grade nickel.

It is not yet clear how much Wyloo will need to spend on buying Noront shares, with the company having promised to keep the company trading on the Toronto exchange if existing shareholders want to stay for the ride rather than cashing out their holdings.