Independence Group launches hostile takeover for Panoramic Resources
Nickel is facing a rare moment in the sun after Independence Group fired the starter’s pistol on a wave of consolidation.
Australia’s long-unloved nickel sector is facing a rare moment in the sun after Independence Group fired the starter’s pistol on a wave of industry consolidation, launching a hostile $312m bid for Panoramic Resources as the sector positions for a looming boom in demand for battery-grade nickel.
Independence Group offered Panoramic holders 1 of its own shares for every 13 Panoramic shares on issue on Monday, valuing its target at 47.6c a share -- a 42 per cent premium to its 33.5c close on Friday.
The all-scrip move on Panoramic, first flagged in DataRoom in October, sent its shares soaring and dragged up the stock of fellow near-term nickel producers Mincor Resources and Poseidon Nickel, also seen as potential takeover targets as interest in the WA sector returns.
All control deposits of nickel sulphide, more easily converted to use in lithium batteries than product from the laterite mines that dominate the supply of nickel to China’s stainless steel sector.
Much of WA’s output was shuttered when the nickel price bottomed in 2016, and Independence Group (IGO) is one of only three significant WA nickel sulphide miners still in production, along with BHP’s Nickel West operations and mid-tier miner Western Areas.
All are now eyeing nickel’s use in batteries for their long-term growth, betting its ability to increase the energy density of lithium batteries -- increasing vehicle range and reducing recharge times -- will deliver a surge in demand and prices for nickel sulphide product.
Western Areas has also eyed a tilt at Panoramic, and managing director Dan Lougher confirmed to The Australian on Monday it could look to compete with IGO for assets, saying he believed “well planned and executed consolidation in the WA nickel space made sense, provided any potential combination provided shareholders with meaningful long term exposure to the emerging battery metal nickel market.”
READ MORE: Independence sells nickel mine
At stake this week is Panoramic’s Savannah nickel sulphide mine in WA’s Kimberley region, which the company has struggled to return to production after its 2016 closure
Independence Group (IGO) has been stalking Panoramic for months, pegging prospective exploration ground around Savannah and then taking a 3.8 per cent stake in the company during an emergency capital raising in September -- its second this year.
Speaking to analysts in the wake of Monday’s bid, IGO boss Peter Bradford tied the takeover firmly to expectations that nickel will firm as a lucrative commodity when electric vehicles hit a mass-market tipping point, expected within the next five years.
“Nowhere do we see the demand for clean energy growing more rapidly than in the electric vehicle sector,” he said.
Mr Bradford said IGO had tried to engage with Panoramic’s board but had been rebuffed, taking its offer public in order to force its directors -- and Panoramic’s 35 per cent shareholder Zeta Resources -- to the negotiating table.
“We’ll be relying on the shareholders, if they like the transaction, to be talking to directors and encouraging them to talk to us and allow due diligence,” he told The Australian.
Panoramic advised shareholders to take no action on the IGO bid, saying it would consider the offer. But given Zeta’s sizable shareholding, Mr Bradford said IGO was prepared to walk away and consider other options if it was not offered the chance to look under the hood of Savannah through a formal process.
Mincor Resources, which is working on plans to restart its Kambalda nickel mines, could be another option given IGO took Mincor shares in exchange for its mothballed Long nickel mine in May, and retains a small stake.
Mincor put on takeover defence advisors as interest in the sector began to heat up earlier this year, and Mr Bradford confirmed IGO was keeping a close eye on the company and its emerging high-grade Cassini deposit, but said there were no firm plans to bid on Mincor.
Andrew Forrest-backed Poseidon Nickel is also said to be a possible target as it firms up plans to restart its own WA mines.
The dearth of operating mines and near term development opportunities has also put a spotlight on advanced exploration plays, such as St George Mining, also believed to be the target of interest from Western Areas and other potential buyers.
Panoramic shares closed up 9c, or 26.9 per cent, to 42.5c on Monday. Mincor shares gained 6c, or 9.8 per cent, to 67.5c, with Poseidon up 0.2c to 5.2c and St George down 0.5c to 15c.
Independence Group shares fell 5c, or 0.8 per cent, to $6.35.