Noront Resources Ltd. [NOT-TSXV] shares jumped 72% Tuesday, amid news that a subsidiary of BHP Billiton Ltd. [BHP-NYSE, BHPLF-OTCPK] has agreed to make a recommended all-cash offer of 55 cents per share for the Toronto-based junior, worth $325 million.
The announcement comes over a year after Noront signed agreements with Algoma Steel Inc. and engineering firm Hatch Ltd. to facilitate development of the Ring of Fire mineral district in northern Ontario and associated processing facilities.
Noront is hoping to extract nickel and chromite from its properties in the Ring of Fire area in partnership with local First Nations. Those properties include the company’s 100%-owned Eagle’s Nest deposit, which it has described as the highest- grade nickel-sulphide find in Canada since the Voisey’s Bay discovery in Labrador.
It was envisioned that the chromite would be extracted and then concentrated at source. It would then be shipped by road or rail to processing facilities further south in one of Ontario’s major mining centres, where it would be turned into Ferrochrome, a critical ingredient used to manufacture stainless steel.
Noront has been hoping to see construction of a related Ferrochrome production facility in Sault Ste Marie.
In a joint press release, Noront and BHP said Noront represents a growth opportunity in a prospective nickel basin capable of delivering a scalable, new nickel-sulphide district and provides the BHP group with more growth options in future facing commodities.
“With proven expertise and capabilities in both exploration and bringing complex base metals projects into production, the BHP group is well positioned to advance Noronto’s Ring of Fire projects through the next stages of development,’’ the companies said.
Based in Melbourne, Australia, BHP ranks among the world’s leading resource companies with more than 80,000 employees and contractors on the payroll.
BHP said the highly prospective Eagle’s Nest nickel project provides an excellent platform from which to develop further opportunities in Ontario’s Ring of Fire.
Noront shares soared on the news, rising 72.3% or 23.5 cents to 56 cents on volume of 4.1 million. The shares had previously traded in a 52-week range of 37.5 cents and 15 cents.
The members of the board of directors of Noront who voted on the matter unanimously recommend that Noront shareholders tender their shares to accept the offer.
Noront directors and senior management and a major shareholder, holding 9.9% of Noront’s shares on a fully diluted basis have agreed to tender their shares to the offer.
The cash consideration of 55 cents per share represents a 129% premium to Noront’s closing price of 24 cents on May 21, 2021, the last trading day that Australian suitor Wyloo Metals Pty Ltd. first publicly announced its intention to make an offer for Noront.
It also represents a 69% premium to Noront’s closing price of 32.5 cents on July 26, 2021. In addition, the BHP offer price is $0.235 per share, or 75% higher than the $0.31.5 per share proposed by Wyloo in its announcement on May 25, 2021.
Wyloo had indicated on that date that it intended to commence an unsolicited proposal to acquire all of the common shares of Noront, a move that prompted the junior to adopt a shareholders rights plan.
Back in December, 2020, Wyloo Metals agreed to acquire the equity and debt interests in Noront that where previously held by U.S. private equity firm Resource Capital V L.P.
Wyloo is the mining division of Tattarang, one of Australia’s largest private investment groups. Under a purchase agreement between Wyloo Metals and Resource Capital Fund V and Resource Capital Annex Fund V (collectively RCF), Wyloo acquired 22.5% of Noront’s issued and outstanding shares, a US$15 million debenture, and a 1.0% Net smelter royalty interest in Noronto’s Eagle’s Nest deposit.