Wyloo hikes bid for Ring of Fire explorer Noront Resources, trumps BHP offer

Wyloo Metals Pty Ltd. is increasing its bid for Noront Resources Ltd., trumping BHP’s current offer, and proposing an arrangement that would see the Ring of Fire exploration company remain as a publicly traded entity.

Since May, Toronto-based Noront has been the subject of a takeover battle between Australian private equity company Wyloo and BHP, the world’ biggest mining company, which is also based in Australia.

Wyloo’s latest offer of $0.70 a share is 27 per cent higher than BHP’s $0.50 proposal, and 122 per cent higher than Wyloo’s original approach.

Wyloo already owns 37.5 per cent of Noront’s shares and has said it won’t support BHP’s offer.  For BHP’s offer to succeed it must attain at least 50 per cent of the shares it doesn’t already own in Noront.

Like BHP, Wyloo is extremely well funded, and is backed by mining magnate Andrew Forrest, one of the richest individuals in Australia.

Shares in Noront traded up 21.5 per cent to $0.73 a share on Monday morning on the Toronto Stock Exchange, a few pennies above Wyloo’s latest offer, suggesting that shareholders expect BHP to counter with an even stronger offer.

Under the arrangement proposed by Wyloo, Noront would remain as a standalone but its current board and management team would be revamped. Existing shareholders of Noront have the option of accepting cash for their shares, or holding on to their stock and participating in Noront under a new management and board. If Wyloo’s arrangement succeeds, Mr. Forrest would become chairman of Noront, while Ian Delaney, former CEO of Sherritt International Corp. would also serve as director. Wyloo did not reveal its proposed management team but in an interview Luca Giacovazzi, head of Wyloo Metals, said that it would be made up of a mix of old and new faces, adding that Noront has made very little progress for the best part of a decade under the existing team.

The Ring of Fire is situated in an extremely remote region, 550 kilometres northeast of Thunder Bay in the James Bay Lowlands in Ontario’s Far North. The area is believed to contain rich mineral deposits of chromite and nickel,  but lack of infrastructure has been a major hurdle to extraction. Noront has never proven the economic case for its biggest projects, and has not persuaded the provincial and federal governments to invest the billions of dollars required to develop necessities such as an access road into the region.

Noront Eagle’s Nest nickel project is what is driving interest from industry heavyweights. Nickel is one of a number of industrial metals that is increasingly being used in low emission power.

The commodity is prized in particular because it is a key input for electric car batteries. Nickel also represents for BHP one of what it refers to as its “forward facing” commodities, those that are used in greener energy applications.