Mincor suffers BHP slap-down during Andrew Forrest takeover battle
Minnow miner Mincor’s nickel has been rejected on quality grounds by BHP as it faces a $760m takeover offer by Andrew Forrest.
BHP has flexed its muscles with minnow nickel miner Mincor Resources – currently subject to a $760m takeover bid from Andrew Forrest – by rejecting its latest nickel shipment because it did not meet standards such as its nickel-to-arsenic ratio.
The move and subsequent failure to reach a deal on future shipments has triggered Mincor to withdraw its production guidance for shipments to BHP given earlier this month.
“Given the lack of certainty regarding future acceptance of any off-specification product and the incomplete status of potential solutions, Mincor has decided to withdraw its guidance,” the company said in a statement to the Australian Securities Exchange.
“Mincor will continue to deliver on-specification ore to BHP and is conducting work to improve orebody knowledge to enable optimisation of its forward mine plan to consistently deliver on-specification product,” the company said.
Mincor shares slumped 5 per cent to $1.42 on the news. The company had previously guided it would provide 8,000-10,000 tonnes of finished nickel to BHP for the year.
Whether there was any ulterior motive behind BHP’s decision to reject the nickel, for quality reasons, remains to be seen.
Clearly, though, it will leave the Mincor senior executives and board frantically rewriting parts of the Target Statement for the takeover offer by Mr Forrest’s private company Wyloo, which is due for release on Tuesday.
Nickel – once an unloved metal that Mr Forest made and lost his first fortune in at Anaconda Nickel before turning to iron ore – is now in hot demand due to being a critical component in lithium-ion batteries.
Taking full control fits with his strategy of diversifying his interests away from the carbon intensive iron ore industry that’s made him a billionaire at Fortescue Metals, to industries that have a carbon-neutral setting.
Wyloo is already Mincor’s largest shareholder with a 19.9 per cent stake, but trying to grab control of one of the country’s few in-production nickel sulphide producers certainly pits him against sometimes rival BHP again.
Before the world suddenly paid attention to what was needed to decarbonise and reach net-zero targets, prices for nickel – then mainly used for stainless steel – often did not meet the cost of mining.
Mincor restarted production in 2022 after prices surged, and currently supplies BHP’s monopoly nickel smelter in Kalgoorlie.
If Mr Forrest gains control of the company, he may accelerate plans to develop his own nickel processing facility in a potential joint venture with IGO, which would mean it no longer needed BHP’s own ageing smelter.
Australia’s second-richest man has come up against the world’s second-biggest miner many times, including a battle which Mr Forrest won for Canadian nickel miner Noront.
Mincor shares remained above the Wyloo bid price of $1.40 per share even after the company revealed the quality problems that had led to BHP rejecting a shipment.
Battery making companies have been in the spotlight in recent weeks, with bids and control battles taking place for lithium miners. Given the scarcity of nickel sulphate producers in Australia, some in the market may be betting the same could occur with Mincor.
Mincor said in its statement that BHP had previously been accepting the nickel that hadn’t met its quality standards and that the company would work to find a solution.
“Mincor will stockpile any ore that BHP indicates will not be accepted due to product specification requirements, allowing for blending with other Mincor ore sources at a subsequent date,” the company said in a statement.
According to data by Statista, BHP was the fourth-biggest nickel miner by production in 2020, behind Russian company Nornickel, Brazilian company Vale and Swiss-owned Glencore.
Nickel is used in lithium-ion battery cathodes used by EV manufacturers. Its new prominence as a key product needed to electrify the world is already leading to some industry consolidation.
Last year Western Areas was taken over by IGO and BHP has recently grabbed control of Oz Minerals.