https://thewest.com.au/business/mining/nickel-price-surge-prompts...

https://thewest.com.au/business/min...use-on-igos-western-areas-ambitions-c-6046575

Investors fear IGO may have to sweeten bid for Western Areas bid

Stuart McKinnonThe West Australian
Mon, 14 March 2022 12:10PM
Comments
Stuart McKinnon


The processing plant at the Cosmos nickel complex where Western Areas is developing its new Odysseus underground nickel mine. Credit: SUPPLIED/SUPPLIED


Shares in IGO have dipped as investors feared it might have to sweeten its offer takeover target for Western Areas amid nickel’s recent price spike.

Western Areas revealed on Monday it had pushed back the timetable for its agreed $3.36-a-share merger with IGO while it and its hired adviser KPMG considered the implications of the soaring price of nickel.

The market for the steel-making and battery metal was thrown into choas last week when a short squeeze in trading on the London Metal Exchange sent the commodity’s price skyrocketing to more than $US100,000 a tonne.
The initial rise in price was prompted by Russia’s invasion of Ukraine which led to a range of sanctions against the pariah state, one of the world’s biggest producers of nickel.

The spike forced Chinese nickel producer and short seller Tsingshan to race to cover its losing bets, prompting a classic short squeeze.
It also led the London Metal Exchange to halt trading of the commodity until the market stabilised and fundamentals could return.

Western Areas said on Monday it was continuing to consider the implications of the recent nickel market volatility on the market expectations for nickel prices in the medium to long-term.
A revised schedule has put back the timetable for implementation of the merger by between one and two months to May or June.

Western Areas shares were up 3.5¢, or 1 per cent, to $3.515 at noon, well clear of IGO’s $3.36 offer price, suggesting investors are expecting a sweetened offer from IGO or a rival player to enter the bidding.

However IGO said it expected any delay in the timetable of its tie-up with Western Areas to be “relatively short”.
The Peter Bradford-led company said its valuation of Western Areas was based on its long-term view of the nickel market fundamentals and price, which had not changed.

“IGO has no obligation, nor any current intention, to increase the consideration in response to these short-term events, although it reserves the right to do so,” the company said in a statement.
“As always, IGO remains disciplined in its approach to growing the business via mergers and acquisitions.”

The news came as credit ratings agency Fitch said it was expecting significant prolonged disruption to Russian production and exports of nickel in the coming months, which made up 9 per cent of global production.
“Global mine and smelter production of nickel are thus likely to be significantly impacted in the short and medium term,” it said in a research note.
Fitch said it expected the price of nickel to remain above “pre-invasion levels” in the short term at least.

IGO shares were off 32¢, or 2.5 per cent, to $12.42 at noon.