BHP's Exit Impacts Havilah Resources

In a surprising turn of events, Australian mining behemoth BHP (ASX:BHP) has opted to sever ties with Havilah Resources (ASX:HAV), dealing a severe blow to the development of the Kalkaroo copper and gold project in northeastern South Australia.

The Backstory

In a significant industry move, BHP acquired control of the Kalkaroo project through its $9.6 billion takeover of OZ Minerals last year. However, recent developments bring unfortunate news as BHP decides not to exercise its option to acquire the Kalkaroo project. This unexpected decision has resulted in a substantial 24% drop in Havilah Resources' share price, marking a challenging day for the exploration company.

BHP's Perspective

Michelle Ash, BHP's copper growth vice president, shared insights into the decision, emphasizing that while Kalkaroo remains an attractive copper asset, the company's current focus is on optimizing Gawler Craton copper assets. This strategic shift involves redirecting efforts to integrate OZ's Carrapateena and Prominent Hill copper mines with BHP's Olympic Dam mine and Oak Dam prospect in South Australia, signifying a broader approach to resource optimization.

Havilah's Resilience

Undeterred by the setback, Havilah Resources proactively pursues an alternative path for the Kalkaroo project. Engaging Deutsche Bank, the company is actively approaching potential interested parties. Despite the challenges, Simon Gray, Havilah's chair, maintains optimism, emphasizing the rarity of advanced undeveloped open-pit copper-gold projects in the low sovereign risk environment of South Australia.

Technical Developments

BHP's technical advancements in the Kalkaroo project have extended the open-pit mine life to over 20 years, backed by higher metal prices and improved ore recoveries. Havilah maintains ownership of nearby exploration areas, with promising copper prospects within 15 kilometers, highlighting the project's potential for continued success.

Navigating Agreements

Havilah Resources strategically navigated project development through a comprehensive agreement structure. Initially, the company entered into a Call Option agreement with OZ Minerals for the purpose of selling the Kalkaroo Project. Following OZ Minerals' integration into BHP after the takeover, the agreement seamlessly transitioned, maintaining its intended purpose under the new ownership. Concurrently, Havilah solidified its commitment to exploration and growth by signing a Strategic Alliance agreement. This parallel initiative focused specifically on copper exploration drilling within the expansive exploration tenements surrounding the Kalkaroo mining lease. These coordinated agreements exemplify Havilah's strategic foresight and multifaceted approach to project advancement.

The Path Forward

Havilah Resources stands undeterred in its commitment to monetize the Kalkaroo project despite BHP's recent decision. Expressions of interest from multiple parties signify the ongoing appeal of the project. The company's robust financial standing, reflected in a cash balance of $3.8 million as of November 29, 2023, provides a solid foundation to fund planned activities throughout the current financial year. While challenges loom following BHP's withdrawal, Havilah approaches them with optimism. The groundwork laid in technical developments and strategic agreements positions the Kalkaroo Project favorably for a future liquidity event, showcasing resilience and a proactive stance in navigating the evolving landscape.

Conclusion

In conclusion, while BHP's withdrawal from the Kalkaroo project presents challenges, the robust financial model and potential for project extension, coupled with exploration opportunities, keep the hope alive for a successful development.