lowest vol short selling seen for a long time, page-36

Why the very large short position on SLR (7.16%) but only a very small short position on IGR (0.2% of issued stock)?
Most other gold producers around the levels of IGR.
E.g. RRL 0.2%, NCM 0.3%, PRU 1.76%, AQG 0.12%, EVN 0.47%, KCN is an exception at 5.3%.

You could assume the market has a dim view on KCN but it’s difficult to imagine the same is true for SLR when IGR’s short position is typical.
Up to very recently, IGR traded most of the time at a 1c discount to its implied merger value based on the SLR sp.
Often the discount was 1.5c.
At 53c, a 1c discount is equivalent to 1.9%.
It makes me wonder if the unusually large short position on SLR is hedge funds taking advantage of the arbitrage.
Buy IGR and short SLR and pocket the 1.9% difference?
Later their IGR get converted to SLR, they use those to cover their shorts and pocket the 1.9% which is a pretty good return for a couple of months.
The day before the merger was announced total shorts against SLR were just 0.4% which was in line with the sector at that time (AQG 0.71%, EVN 0.3% NCM 0.15%, PRU 2.5%).
By the end of Aug, three weeks later it was up to 3.9%.
So it looks very likely this arbitrage is the reason why SLR has such a large short position against it.
That makes the short position neither a bearish sign nor a bullish one.
We can’t expect a large short covering rally as the short positions will be covered by the IGR shares converting to SLR.
There may be some short covering of any shorts that might have joined in with the short selling without realising what was going on with the hedge (if there are a significant amount of those shorts).
The 1.9% return in a month or two could be amplified using leverage making it even more attractive but if using leverage you would need to be 100% confident the merger will go ahead.
In fact even without leverage you would need to be 100% because if the deal falls through, IGR will drop much more than SLR and the trade will backfire with losses much greater than just 1.9%.
These hedge funds must be 100% confident of the merger.
The 1c discount seems to be occurring less often lately.