Nickel prices are close to seven-year highs because of the disruption at several mines, including Vale’s operations in Canada and Glencore’s in New Caledonia.

“Our cornerstone position in Noront Resources is part of our investment strategy to support the discovery and development of critical materials needed to power the decarbonisation of the global economy,” a Wyloo spokesman said.

Profit potential

“We are continuing to review our investment in Noront as part of this long-term commitment.”

Dr Forrest and Wyloo stand to make a profit of more than $US60 million in just more than seven months if they do opt to sell their stake to BHP. Wyloo also has in its back pocket a 1 per cent royalty on any future production from Noront’s most advanced nickel project.

Wyloo, which sits within the Forrest family’s private investment arm Tattarang, secured the royalty and its 37 per cent stake in Noront for just $US26.5 million last December through a deal with Resource Capital Fund.

Wyloo paid $US11.5 million for 22.65 per cent of Noront shares plus the royalty and put its foot on another 14.3 per cent with the purchase of a $US15 million convertible note from Resource Capital Fund.

In a note to clients, Macquarie said the BHP takeover bid was a surprise and highlighted the company’s focus on increasing its exposure to battery minerals.

Last week, BHP announced a deal to supply Elon Musk’s Tesla from its resurgent Nickel West business in WA as part of a future in battery metals.

Ring of Fire

Dr Forrest and BHP are targeting Noront’s highly-rated Eagle’s Nest nickel project that sits in the Ring of Fire, an emerging multi-metals region in the James Bay Lowlands of Northern Ontario where Noront has several assets.

A 2012 Noront feasibility study on Eagle’s Nest outlined a modest 1 million-tonne-a-year underground mine with an annual production of 15,500 tonnes of nickel, 8700 tonnes of copper, 23,400 ounces of platinum, 91,000 ounces of palladium and 4900 ounces of gold for up to 20 years.

“Given the comparatively small scale of Eagle’s Nest, we suspect BHP’s acquisition is more focused on Noront’s substantial exploration tenement portfolio in the Ring of Fire,” Macquarie said.

“We note that the portfolio already includes four chrome resources and Noront has identified +70 Ni-Cu-PGE exploration targets. The region is remote and requires significant investment in road infrastructure.”

BHP chief development officer Johan van Jaarsveld said the acquisition of Noront represented a “world-class growth option” in Canada.

Cash offer

The Noront board has recommended that shareholders accept BHP’s cash offer of C55¢ (59.4¢) a share, which represents a 129 per cent premium to Noront’s last closing price before Wyloo launched its takeover bid in May.

The BHP offer is at a 69 per cent premium to Noront’s closing price on Monday, the last trading day before the bid was announced to the Toronto Stock Exchange.

The BHP bid values Noront at $C325 million ($351 million) and represents a 75 per cent premium on the Wyloo offer of C31.5¢ a share announced to the market on May 25.

“This transaction provides a significant premium to Wyloo’s indicative offer, and crystallises immediate and certain value through an all-cash offer,” Noront chief executive Alan Coutts said.

“BHP has the financial strength, world-class mining expertise, and commitment to work in partnership with stakeholders to advance Eagle’s Nest and the Ring of Fire, which has the potential to deliver benefits to local communities, First Nations, and Ontario for years to come.”

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Mr van Jaarsveld said the acquisition was a “win-win” for BHP and Noront shareholders.

“For BHP, the acquisition of Noront presents a world-class growth option, in a key future-facing commodity,” he 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.

“For Noront shareholders, this offer recognises and realises the full value of Noront’s portfolio, delivering guaranteed shareholder returns in the near term.

“We are excited to bring our mining expertise and capabilities to develop these long-term opportunities. We look forward to working in constructive partnerships with First Nations peoples, government and communities to realise the untapped potential of these important resources.”