MinRes shares soar on $1.1b deal with Hancock Prospecting
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More news: Shares in Mineral Resources surged in early trading on the ASX after the mining group agreed to sell two oil and gas exploration permits in the Perth Basin to Gina Rinehart's Hancock Prospecting.
MinRes was the best performing ASX 200 company by 11am, up 13.9% to $41.09.
RBC Capital Markets said the deal values the sold assets at $600 million, compared to the $1.13 billion sale price, and saw it as a "positive outcome" for MinRes.
Following the release of MinRes' first-quarter results, RBC analyst Kaan Peker noted that operational metrics were "broadly in line" with market expectations.
Jarden analysts called MinRes' trading update a "weak quarterly result". However, they said the result was "overshadowed" by the Hancock deal. The analysts said Hancock's upfront consideration of $804 million is more than double Jarden's valuation of $400 million.
They also flagged that the "highly uncertain outcomes" of MinRes' response to long-running governance concerns may "continue to influence share price volatility and possibly act as an overhang."
What they said: "We would expect an initial positive response to the sale of the energy assets to outweigh the weak quarterly data, which only provides a limited insight into the assets with the lack of cost disclosure," Jarden analysts said.
MinRes and Hancock Prospecting agree to $1.1b gas deal
The news: Mineral Resources has reached a $1.1 billion agreement with Gina Rinehart's Hancock Prospecting on its oil and gas exploration ground in Western Australia.
The numbers: MinRes will sell 100% of its exploration permits (EP) 368 and 426 in the Perth Basin to Hancock, and enter two joint venture agreements over MinRes' remaining onshore Perth Basin and Carnarvon Basin exploration grounds.
Hancock will pay MinRes an upfront consideration of $804 million, payable upon completion and subject to limited conditions, including ministerial consents.
The deal also includes additional purchase price adjustments of $327 million, subject to meeting certain resource thresholds and classifications from MinRes' Moriary Deep prospect and its Lockyer Gas and Erregulla Oil discoveries.
Definition drilling related to the purchase price adjustment for the Moriary Deep prospect and the Lockyer Gas discovery are expected to be completed during FY25, with drilling of the Moriary-2 well to begin in November 2024.
On completion of the transaction, Hancock will acquire 100% of EP368 and EP426. It will also receive a 50% share in MinRes' remaining Perth Basin and Carnarvon Basin permits. MinRes will retain a 50% interest in the exploration joint venture assets and remain as operator, while receiving initial funding for high-priority work in the Carnarvon Basin.
The context: MinRes noted that if a commercial discovery is made and a joint decision to develop is agreed, Hancock will fund 100% of post-final investment decision development costs for the exploration joint venture assets.
Last month, the Perth-based mining group said it was reviewing options to release value from its gas exploration ground, in response to a number of inbound queries from domestic and global parties.
Separately, MinRes has reiterated its full-year guidance across its operations, but expects higher costs in the first half of the year.
What they said: "This transaction maximises the value of our exploration success for shareholders and again showcases our ability to unlock significant capital from MinRes' portfolio of assets," MinRes' energy CEO Darren Hardy said.
"The new exploration joint ventures with Hancock in the Perth and Carnarvon basins immediately derisk and accelerate our future exploration programs across this highly prospective onshore petroleum acreage,."
The sources: ASX announcement, ASX announcement, Jarden research, E&P Capital research
