Join our daily newsletter At The Bell to receive exclusive market insights
On day two of the RIU Explorers Conference 2024, there was one speech given by BDO Australia’s Corporate Finance division partner Adam Myers that came across like a dog whistle.
Mr Myers claimed that the accounting giant is getting an increasing rate of inquiries from the managers of junior explorers on what to do when hit with a hostile takeover attempt.
His talk, titled “Takeovers and Market Commentary”, was far more about takeovers than it was about market commentary.
In the speech directed at shareholders but perhaps not meant for them necessarily, Mr Myers ran through the different stages of project stake ownership and its implications.
This journalist, at least, heard something else between the lines: He was talking to the CEOs in the room, not the punters.
A talk designed to assuage
Here’s what to do, Mr Myers effectively told the audience – and it goes without saying that BDO will be there to make everything okay.
That’s good timing. Because according to Mr Myers, BDO is seeing an increasing number of companies knocking at its door.
“We’re getting a lot of inquiries at the moment and seeing that heat up [regarding takeover advice],” he said.
Mr Myers earlier noted the early 2020 COVID-borne exploration downturn was easily two years out of fashion and that more projects were now becoming “palatable” to bigger players.
Read: stranded assets ripe for the picking currently on ice due to low commodity prices.
He didn’t specify which, but given that he started talking about lithium and nickel. One doesn’t need to be a detective.
A talk for shareholders, sort of
He turned his attention to what shareholders should think if one of their junior resources stocks releases an announcement about a stake increase from a third party.
This part, at least, felt like he might have actually been educating shareholders, and not just speaking in code to CEOs currently haunted by their own 4C cashflow reports.
“Once you’re above 10, you can block a compulsory acquisition,” Mr Myers said, referring to controlling interest powers under the Australian Corporations Act.
He then noted that a party with an interest in any publicly listed company is obliged to make an offer once their stake comes to 20 per cent.
For this reason, you may often strategically see parties holding 19.99pc of a company, he rightly observed.
Interestingly, this whole 20pc-stake-area-of-things Mr Myers referred to as BDO’s “bread and butter”.
ANZ weighs in
ANZ bank junior resources relationship manager Tim Robinson was there too, reminding the crowd his finance team were at the booth and ready to talk.
In short, ANZ appears to be warming up to funding exploration projects like it’s a pre-COVID world, though, only those which have at least some potential.
“We’re looking to fund projects where there’s fat in the game,” Mr Robinson said, which this journalist took to mean copper, uranium, or gold, based on his later comments. More on that in a second.
“At the very least, projects where we can put in place structural enhancements that can reduce the cost risk,” Robinson continued, “things like hedging, or projects that are lowly geared or with a low-cost base to begin with.”
So, risk-off appetite. Got it.
Mr Robinson specifically mentioned construction overruns, saying ANZ wants those companies with the capacity to meet additional costs. So, worried about inflationary pressures. Got it.
As for why I think he meant copper, uranium and gold?
The rest of the speech he spent talking about lithium and nickel. In short: ANZ sees “no nickel upside”, and while the words didn’t leave his mouth, it’s clear that the view behind closed doors is the same for lithium.
BDO’s Mr Myers spent some time talking about lithium too, but perhaps his comments on nickel were more eye-opening.
Like ANZ, BDO sees structural issues in the nickel market and said that we need a “move away from Indonesian production.”
How, exactly, that would occur, seemed as unclear to him as it is to anyone else – especially this journalist.
RIU 2024 runs until Thursday in Fremantle, WA.
