Mincor Resources is an ASX-listed company focused on re-establishing sustainable, high-grade nickel production in the world-class Kambalda district of Western Australia.
Days Held17 days
Gross Return-03.67%
Event TypeTakeoverMincor Resources, takeover and minor loss in 17 days
Members were recommended to buy MCR at $1.405, a tiny premium to what was an unconditional offer from Wyloo Metals at $1.40. With a worst-case downside of $0.005 (roughly 0.36%), the stock was bought on the hope that Wyloo would increase its bid to ensure it would reach 90% acceptances and compulsory acquisition. However, after MCR downgraded production guidance, Wyloo declared its bid as best and final, and we recommended members take a small loss, selling only two weeks after buying. MCR marked the first realised loss for the Event Portfolio since 2020.
Events timeline:
Current advice: Closed.
Latest Recommendation: 20th April 2023, 12:15 pm
While our expectation was that we would see no further action in MCR, it is a little disappointing how easily bidder Wyloo Metals has won over MCR, with the company reporting acceptances of just under 50% as of yesterday. Once Wyloo has control, it effectively ends any remote chances of a competing bid, so our purpose for remaining invested is now gone.
We bought MCR at $1.405 with only 0.3% downside, and sadly we are recommending members lock in that small loss today at $1.40.
3rd April 2023, 2:30 pm
The MCR battle has already had several twists and turns before today, with Wyloo Metals (owned by Andrew Forrest) launching a hostile takeover bid at $1.40 per share on 21 March. Wyloo, which owned 19.9% of MCR at the time of the bid, had always been a likely future buyer of MCR but the timing caught the market by surprise and came after a big sell-off in the stock. Considering the timing, the market was always going to deem the bid as opportunistic, and the stock traded well above the $1.40 level since.
The last week or so has flipped the deal on its head, with MCR announcing that some of the products it was selling to BHP under an off-take agreement would now be rejected. From a timing perspective, it’s hard not to be cynical about BHP’s motives but the reality is that the announcement was bad news, and MCR would have sold off heavily except for the Wyloo bid underpinning the stock.
Since then, there has been speculation that Wyloo would try to walk away from the bid. Given its bid was unconditional, it seemed highly unlikely that ASIC would allow it, but the situation was concerning, and we stayed on the sidelines. Today, Wyloo announced that it is proceeding with its bid, but its offer price was ‘best and final’ in the absence of competing bids. We now know that $1.40 is the worst-case outcome, and the hope is that BHP, or potentially other parties such as Rio Tinto (RIO), Wesfarmers (WES), and IGO Ltd (IGO) – all names that have been rumored to be looking at MCR – will come back with a higher offer. The issue with the nickel product that BHP has rejected will undoubtedly reduce the potential upside, and perhaps other bidders may be scared away without clarity on the situation, but the fact we’re able to buy at $1.405 with only 0.36% downside, means it’s a low-risk swing for the fences. Wyloo’s existing stake (which will likely be higher after some selling today) could be an obstacle, but we’ve seen some creative approaches to get around blocking stakes, so it isn’t a deal-breaker for another bidder yet.
We, therefore, recommend members buy MCR at no higher than $1.405 for a low-risk, short-term investment.
