Article by Glenn Dyer courtesy of Sharecafe.
Gina Rinehart’s private business has made two significant moves in rare earths in the Northern Territory and natural gas in the Perth Basin, near the WA capital.
Monday saw Ms Rinehart’s company emerge with a 10% stake in Arafura Rare Earths after it coughed up just on half of Arafura’s $121 million raising to develop the Nolans rare earths mine in the NT.
Arafura will issue roughly 326 million new shares in two tranches at 37 cents a share to raise the funds — a 15.9% discount to its last closing price on December 1.
The shares closed at 41.5 cents on Monday, down 5.6% on the pre-offer closing price, but a nice one-day premium for those investors who subscribed to the issue.
Ms Hancock’s private company, Hancock Prospecting acted as a cornerstone investor in the placement, committing $60 million, which will result in a post-completion interest of around 10% stake in Arafura.
The funds raised will be used to accelerate the Nolans project development schedule and will go towards completing an early contractor involvement (ECI) phase, starting fabrication in readiness for main plant construction and early works construction.
“The widespread interest in this placement reflects the increasing global awareness of the importance of our NdPr oxide product within the supply chains essential to energy transition,” Arafura CEO, Gavin Lockyer said in Monday’s statement.
“Nolans is important to all countries that are seeking diversified and robust critical material supply chains as they strive to achieve their net-zero emissions target.
The project includes a mine, process plant (comprising beneficiation, extraction and separation plants) and related infrastructure located 135km north of Alice Springs.
In another indicator of its desire to get its hands on more rare earths resources, it is understood Hancock is also trying to secure a toehold stake in VHM Ltd Groschen project in Victoria 9which has done a deal to sell some of its output to Chinese buyers).
VHM is seeking to raise $30 million for its sharemarket float and has been telling potential investors Groschen was a “globally significant Tier 1” rare earth deposit with an accompanying mineral sands resource. It is a deposit similar to Iluka’s Eneabba deposit in WA.
Meanwhile, Ms Rinehart and her advisers have shown the benefit of moving aggressively and tactically to take a potentially winning position for control of Warrego Energy, a company with a half interest in a WA gas field with no production as yet but plenty of potential.
Specifically in this case, they have shown Beach Energy – and its 30% shareholder Kerry Stokes’ Seven Group Holdings – that trying to not to overpay for an asset can bring you undone, and cost more in the end than if you’d just offered a fair price to begin with.
Beach Energy’s ambitions for Warrego Energy (and those of first bidder Strike Energy, for that matter), have been undermined after Hancock Energy came over the top with two quick cash offers last Thursday and Friday.
Rinehart has wasted no time in putting a higher offer on the table for Warrego Energy on Friday of 28 cents a share cash after Beach had lifted its first offer to 25 cents from the original 20 cents.
Beach has also promised an unknown extra amount for each share if Warrego’s Spanish assets are sold within 12 months of the bid. That seems to be a pie in the sky compared to the cash on offer from Rinehart.
Ms Rinehart is best placed to win because she is wealthier – her key company reported net income of $5.8 billion for the year to June 30 and winning control of Warrego will only cost $342 million.
On Monday, Warrego gave Beach five business days to match the higher Hancock Energy offer – the new deadline is Monday, December 12.
The battle for control of Warrego is ironic given that it has yet to produce any gas.
Now will Beach and Stokes boost that higher – to 30 cents a share? The market thinks even higher with Warrego shares ending the day at 31.5 cents, up more than 11%.
Warrego’s value is up more than $100 million in a couple of weeks and its shares have doubled from around 14 cents a share before Strike tried to pounce in early November.
Warrego is attracting interest because of the 50% interest in the West Erregulla onshore gas field near Perth.
It’s a promising gas field that can quickly be brought into production without any controversial hydraulic fracturing to supply a market that is expected to tighten after decades of low prices due to enforced supply from WA’s huge gas export projects (as a result of WA’s 15% gas reservation policy).
Strike Energy holds the remaining 50% of West Erregulla, while Beach Energy holds 50% interest in nearby producing Waitsia gas field with Mitsui owning the other 50%.
Hancock has a 49.9% shareholding in east coast gas producer Senex Energy and is the largest shareholder in Mineral Resources, whose subsidiary Energy Resources has a stake in onshore Perth basin gas player Norwest Energy Ltd (as well as significant interests in lithium mining and iron ore, as well as contracting).
Santos, the biggest supplier of gas to WA from its offshore fields, and Mitsui which owns Waitsia with Beach, have also been mentioned by media and analysts as possible buyers.
Warrego is deciding whether the Hancock Energy takeover offer satisfies the definition of a “superior offer” as included in the implementation deed with Beach.
Hancock’s offer has been made with no minimum acceptance conditions, meaning the private energy business plans to buy shares in Warrego even if it does not get enough support to secure control of the business.
