Noront Resources (TSXV: NOT) has finally received a formal offer from Wyloo Resources 鈥� more than three months after聽Wyloo聽first floated a proposal to acquire the Ring of Fire junior in late May.
The C$0.70 per share offer trumps BHP鈥檚 (NYSE: BHP; LSE: BHP; ASX: BHP) friendly C$0.55 per share bid for Noront, made in late July.
It鈥檚 also more than double what聽Wyloo聽first proposed in May 鈥� C$0.315 per share.
The success of either bid will put聽high-profile聽Ring of Fire聽nickel asset聽in Australian hands.
Wyloo, a private company controlled by Australian billionaire Andrew Forrest, submitted the offer to Noront鈥檚 board on Friday, Sept. 3, after Noront invited it聽on Aug. 31 to make its proposal official.聽Wyloo聽says it wants to develop a 鈥淔uture Metals鈥� hub in Ontario, building on Noront鈥檚 Eagle鈥檚 Nest project, a high-grade nickel-copper-PGE deposit in the remote Ring of Fire region.
But even though it has now formally submitted its offer, the Perth-based company聽has continued to lob criticisms at Noront鈥檚 board. In its most recent statement, it implied that Noront鈥檚 directors and officers have continued to support BHP鈥檚 bid because under a lockup agreement signed with the giant Australia-based miner, they gain earlier access to certain options or share awards 鈥� a benefit with a gross monetary value of C$10 billion ($7.9bn) at BHP鈥檚 offer price. In addition,聽Wyloo聽doesn鈥檛 like the terms of a confidentiality agreement it has now聽entered into聽in order to conduct due diligence.
According to Noront鈥檚 July 27 support agreement with BHP, the junior can only provide confidential information to another party only if it signs a confidentiality agreement and agrees to a standstill provision. In the interest of Noront shareholders, the company says that BHP has agreed to waive the standstill requirement.
However,聽Wyloo聽says the confidentiality agreement still restricts its ability to communicate directly with shareholders.
For its part, Noront says the聽agreement聽and the terms of its support agreement with BHP are standard.
鈥淲yloo鈥檚聽assertions that, among other things, the exercise of options and share awards by Noront officers and directors is unusual is simply incorrect,鈥� the company said. 鈥淭he acceleration provisions provided in the support agreement for the options and share awards are also customary for a transaction of this nature and are fully disclosed in the support agreement and other public filings relating to the proposed transaction with BHP.鈥�
The lock-up agreements between BHP and Noront鈥檚聽officers聽and directors will automatically terminate if Noront ends its support for the BHP bid in response to a higher offer.
Noront also confirmed it has no undisclosed agreements, understandings or incentives for its directors or officers in connection with the BHP offer.
Notably, while聽Wyloo聽is Noront鈥檚 biggest shareholder, the聽junior鈥檚聽board did not support its proposal and adopted a poison pill provision to block it.
In its release on Aug. 30,聽Wyloo聽said it only made the initial offer because of Noront鈥檚 intention to strike a deal with BHP that it says undervalued the Ring of Fire assets.
鈥淚n April this year, we were deeply concerned when the Noront board proposed to farm out Noront鈥檚 exploration projects to BHP for only C$25 million,鈥� said Luca聽Giacovazzi, head of聽Wyloo聽Metals. 鈥淩ather than consenting to such a transaction, we decided to make an offer to acquire the company. Our fears were justified when the Noront board completed a deeply discounted 5% placement to BHP, giving away a strategic toehold in the company to an obvious suitor.鈥�
Giacovazzi聽added: 鈥淪ince our initial proposal, we have listened to the feedback from shareholders who, like us, believe in the future of the Ring of Fire. We believe Noront shareholders deserve the chance to decide whether to join us in rebuilding the company, and not be pressured into selling all of their shares unless they want to.鈥�
Noront has said that it sought a bid from BHP in its search for a superior offer to聽Wyloo鈥檚聽initial proposal in May.
Wyloo, which now owns a 24.4% stake in Noront, asserts that given its holding and the superiority of its new offer to BHP鈥檚 bid, its proposal has a better chance of success. (The company can increase its interest to 37.2% by converting a $15 million convertible loan into common shares before the Sept. 30,聽2021聽maturity date.) However, the BHP bid only requires 50% of the shares not already owned by BHP to be tendered.
Details of the proposal
Wyloo聽says it will give shareholders the choice between retaining some or聽all of聽their shares in a revamped Noront, with a board of directors headed by Andrew Forrest, or taking the cash offer.聽
Other board members would聽include聽former Sherritt International CEO Ian Delaney; chairman and CEO of Queen鈥檚 Road Capital Investment Warren Gilman; and current Noront director聽Giacovazzi.聽
In a direct appeal to shareholders, Forrest pledged that Noront would make more progress under his leadership.聽
鈥淎fter years of little progress, it鈥檚 understandable that shareholders have lost hope in Noront,鈥� Forrest said in a statement. 鈥淚鈥檝e personally been in the same position before. Seventeen years ago, people told me Fortescue鈥檚 deposits would never be mined because there was no infrastructure to access our projects. We proved those critics totally聽wrong聽and we want to do the same in the Ring of Fire. If shareholders share my view, that it鈥檚 impossible to place a value today on a new mining district with the immense potential of these assets, I invite them to hold on to their shares and come along for the ride.鈥澛�
The company adds that it is also committed to creating business opportunities for First Nations communities, pointing to the success of its Billion Opportunities program created in 2011.
(This article first appeared in聽the )