OZ Minerals and BHP have resumed marriage talks trying to strike a dot in the form of an offer price that will see the deal appeal to both shareholders and the broader market.
OZ said “no” to $25 per share in late August when BHP interest first surfaced, even though it represented a hefty 30% premium to the then market price.
It is understood the companies have been in talks for the past few days and yesterday OZ requested a halt to trading in its shares until Friday ‘in relation to a possible change of control transaction’.
There is only one when it comes to OZ and that is BHP.
OZ rejected the initial approach because it believed the indicative proposal significantly undervalued OZ Minerals and was not in the best interests of shareholders.
OZ Minerals CEO Andrew Coles also pointed out that the company has “a unique set of copper and nickel assets, all with strong long-term growth potential in quality locations.”
Coles further noted that these minerals “are in high demand, especially for the topic of global electrification and decarbonization” and that the proposal did not sufficiently recognize these attributes.
OZ maintained its “no” position even though it downgraded its copper output twice in recent months due to wet weather, technical issues at the Carapateena mine and low head grades.
OZ quickly changed course on the West Musgrave copper-nickel project in the far east of Western Australia (near the border with South Australia).
Prior to BHP’s approach, the project was on hold due to soaring inflation and costs, as well as a labor shortage following the Russian invasion of Ukraine in late February. . OZ revealed an 11% increase in project costs in its June quarter report and wondered if a labor shortage could force a delay.
The $1.1 billion project was given the green light after BHP approached when in September OZ released a lengthy statement that spoke of the benefits of the renewable energy boom for the company, its mainly copper mines in South Australia, Brazil and potentially WA (all nickel).
In its September quarterly report, OZ also floated the idea of taking on a partner for West Musgrave.
On Monday this week, OZ released another statement extolling the virtues of its West Grave nickel copper project in what it called the Mixed Hydroxide Precipitate (MHP) Project Study which examines the opportunity to further process West Musgrave’s nickel concentrate into a high quality nickel product.
MHP is becoming the preferred route for nickel and BHP has taken this route for most of its WA nickel metal production after spending heavily on a specialist plant at its Kwinana nickel refinery south of Perth.
OZ also again explored the idea of a partner to develop West Musgrave and possibly the MHP plant and production.
This prospect is likely what has brought BHP’s spirit back to work and is looking to strike a deal with OZ sooner rather than later.
Analysts say if it gains control of OZ, BHP will integrate West Musgrave into its Nickel West business and place OZ’s mines in South Australia – Prominent Hill, Carapateena and the potential Kalkaroo project near the NSW border – in a group including the enormous and long-lived Olympic Dam mine and the nearby new Oak Dam prospect.
The new Santa Lucia copper gold mine in northern Brazil could be sold or transferred to the company’s South American copper group, which owns the huge Escondida copper mine in Chile as well as the mines of Spence copper and Cerro Colorado, also in Chile and 37% of the Antamina copper and zinc mine in Peru.
Shares of OZ were halted at Tuesday’s close at $26.30 – shares fell to $24.30 in early October, dipping below BHP’s price, then bouncing back until late October, when they started to rise substantially to well above $26 – a small premium to BHP’s indicative offer. . They peaked at $26.54 on Monday and fell on Tuesday.