Western Areas has tapped investment banks Goldman Sachs and Rothschild to capitalise on the weakened share price of Panoramic Resources by taking a strategic stake in the nickel miner.
Panoramic Resources, which counts Azure Capital as its long-term adviser, announced on Monday it was raising $90m at 7c per share.
This involved a strategic investment by Western Areas worth up to $29m, securing 19.9 per cent of the company through participation in a placement.
The play by the nickel miner shakes up the register as investment bankers look to the resources sector to provide deal flow when there are few transactions elsewhere in the market due to COVID-19.
It is understood Western Areas has been in the dataroom for some time, mulling an acquisition or recapitalisation of the company, as had rival Independence Group, which had a takeover scrip bid for Panoramic rebuffed in November.
That bid came at a far higher price to the 7c a share of the current raise – it was valued at the time at 47.6c per share.
The Australian flagged in November that Western Areas also had its eye on Panoramic Resources after initially flagging the Independence bid.
The attraction is that Panoramic offers exposure to the materials used for electric vehicles, which are anticipated to be the transportation mode of the future, with its promising Savannah Project in Western Australia that mines nickel and cobalt, both used to make batteries.
It is a deal that helps Panoramic at a time it remains thirsty for cash and wants to repay money to creditors including Barminco, Macquarie Group and its now 20 per cent shareholder Zeta Resources, backed by well-known investor Duncan Saville.
Before the offer, Zeta had 35.2 per cent.
Part of the problem for Panoramic has been the lagging nickel price, and some blame challenges on the strategy of previous management, which involved the mining of old ore body to fund the new mining remnants and one that turned out to be costly.
Working on the raising has been Canaccord Genuity and Morgans, which are the joint lead managers and Hartleys as co-lead manager.
As well as the $29m placement by Western Areas, the company will raise about $61m through an entitlement offer comprising $28m to institutions and $33m to retail investors.
The shares will be sold at a price that is a 42 per cent discount to Panoramic Resources’ last close on April 9.
The major shareholder Zeta is not underwriting or sub-underwriting any part of the offer, but has indicated it will take up entitlements worth up to $10m.
Western Areas also has priority sub-underwriting to the retail portion of the entitlement offer.
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