Single-asset miners attract predators, as Kinterra targets New World Resources

Listed miners with just one asset are frequently targets for takeovers.

Kinterra Capital’s move on Australian-listed copper miner New World Resources highlights a key trend playing out in the resource industry that companies with just a single asset are more susceptible to takeovers.

Trading in New World shares was halted on Tuesday ahead of the announcement of a buyout, as private equity firm Kinterra Capital has emerged with an 11.99 per cent stake in the business.

The Toronto-based private equity firm was founded by executives who previously worked at Waterton Global, a resources-focused private equity fund with $US2bn of assets under management.

Kinterra earlier purchased the Nevada Copper project, Pumpkin Hollow, located in the US state of Nevada.

The flagship asset of the $186m New World Resources is its Antler Copper project in Arizona, despite the group being listed in Australia.

The move comes after Harmony Gold swooped on MAC Copper, which listed here to fund the purchase of the CSA mine at Cobar, NSW, for $1.6bn.

The other example is the $5bn purchase of De Grey Mining by Northern Star in December with its flagship Hemi project. 

The next to go from the ASX is likely to be Bellevue Gold. Bellevue Gold is for sale through UBS and its one flagship asset is the Bellevue Gold Project in Western Australia.

Most expect Regis Resources to be the likely buyer of Bellevue, and while Vault Minerals was also looking at the business, the understanding around the market is that it has since walked away.

Regis, trading at a high share price, could use its own scrip to buy the asset for twice its net present value and the deal would still represent good value.

Yet it may walk away, as doubts continue to surface about whether further production downgrade forecasts could be ahead.

Listed mining companies with just a single asset are often discounted by investors that factor in greater trading risk.

An example is Ramelius Resources, which has a portfolio of gold mines that may be lower quality than other single-asset businesses.

But Ramelius is ascribed a higher share price premium because having more assets in the business makes it more defensive and lessens the risk.

A company with just one mine is better off out of the public eye, particularly in the ramp-up phase, given the constant need to provide quarterly updates to the market, and the level of compliance costs and work that goes into speaking with investors rather than concentrating on running the business.

In sectors other than copper and gold, listed companies which predominantly gain most of their earnings from just one asset include Paladin Resources, although sources believe the chances of a bid are unlikely, and lithium producer Liontown Resources.

Another is rare earths producer Meteoric Resources, whose main asset is based in Brazil.

Meteoric, with a $300m market value, is yet to embark on its capital spending program, and in the eyes of some it makes it more attractive to a buyer because its shares are priced more cheaply than they would be.

Potential buyers could be Lynas Rare Earths or MP Materials.

But where commodity prices currently are, some market experts say that makes the project uneconomic.

De Grey Mining was purchased after it had raised money for its Hemi gold project, but sources say that was because a recent equity raising pushed its market value lower.

Patriot Battery Minerals, with its flagship Canadian lithium project, is another which could be vulnerable when the price of lithium recovers.