A few people have asked various similar questions over the past few weeks, namely revolving around whether Wyloo could agree to sell their securities to BHP and leave retailers out in the cold.  It was asked again yesterday, but I didn't have time to answer then.

As per NI 62-104, if an entity attempting to take over a company offers a price to someone, they have to offer that price to ALL shareholders of that particular type of share.  So Wyloo cannot get a special deal from BHP that retail doesn't also benefit from.

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Restrictions on acquisitions after bid

2.5         During the period beginning with the expiry of a take-over bid or an issuer bid and ending at the end of the 20th business day after that, whether or not any securities are taken up under the bid, an offeror must not acquire or offer to acquire beneficial ownership of securities of the class that was subject to the bid except by way of a transaction that is generally available to holders of that class of securities on identical terms.

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Wyloo and BHP are locked in a very interesting scenario.  Wyloo is already in a position whereby the best that BHP can get out of this is a stalemate.  But BHP, depending on how it moves forward, can also ensure that the best that Wyloo can get is a stalemate.  And neither wants the other to win.

Also, for those of you who are worried that Wyloo is going to accept a low-ball bid from BHP right now and that this story is over, the following points should reassure you:

1.  Wyloo controls 37.2 percent of Noront shares right now.  That's approximately 208.32m shares by my math.

2.  I don't actually know the average acquisition cost of those 208.32m shares, but let's say that it's around 25 cents apiece.  Rough number.  I'd have to do a lot of digging to figure out the true underlying cost, which would be clouded by the method of acquisition (acquisition of equity share from RCF, conversion of loan, etc.).  But 25 cents is good enough for my purposes now.

3.  If Wyloo were to agree to accept 75 cents from BHP, which is what everyone is worried about, that would give them an immediate profit of about 50 cents per share.  On 208.32m shares, that's a profit of about $104 million dollars.

4.  Fortesque just gave Andrew Forrest a divided this year of approx. $1.6b USD, which is around $1.984 billion CAD.

Do you seriously think that Forrest is going to give up control of what might eventually prove to be the most valuable mining district on the entire planet, with hundreds of billions of dollars in situ value (spread across a dozen different types of PGM's and minerals, able to provide ore for a couple DOZEN different mines), just because he can make about $108m on his current Noront investment?  When he has almost two billion dollars in his pocket?

If so, you're out of your mind.

BHP has to come up with a lot more than a cash offer at the current levels.

We [retail shareholders] are all dogs, laying on the floor at the foot of the table.  But the feast above us is so great that whatever scraps fall to us on the floor will be quite juicy.  Salivate impatiently, but remember that when the masters are eventually done their meal, we'll be fed too.