The nickel crisis shakes up the takeover plan of the mining company IGO


I’M GOING ltd.

I’M GOING -2.55%

an Australian base metals producer, had planned to buy nickel miner Western Areas ltd.

WSA 0.86%

for around $800 million after terms of the deal were agreed in mid-December. Everything seemed to be progressing smoothly, with the directors of Western Areas having recommended that its shareholders vote in favor at an upcoming meeting.

On Monday, however, IGO said the deal would likely be delayed as Western Areas and its advisers assess whether the nickel price rally is a short-term blow to the market or indicative of a deeper change.

“In response to the recent significant volatility in the price of nickel (which led to the temporary suspension of nickel trading on the London Metal Exchange on March 8), Western Areas and the independent expert continue to review the implications, if appropriate, on nickel market fundamentals and expectations for nickel prices over the medium to long term,” IGO said.

IGO, which has a market value of around $6.8 billion, said it believed it would lead to a “relatively short delay” in closing the deal. Western Areas, which did not repeat that language, said the findings of its independent expert, KPMG, would likely be sent to its own shareholders next month.

IGO and Western Areas said they expect the deal to close in May or June. The companies previously expected it to be completed in April.

Nickel prices typically move a few percent per day. They jumped 66% on March 7, then the next day the price briefly doubled. This led to the London Metal Exchange suspending trading and canceling eight hours of trading on March 8.

Nickel, a cog in the global economy for its use in stainless steel and electric vehicle batteries, has not been traded since.

Nickel prices began to rise after Russia, a major metal producer, invaded Ukraine, an example of how war and punitive Western sanctions have upended global commodity markets, sending prices metals and energy at their highest levels in years.

IGO said it “recognizes the recent short-term volatility in the LME nickel market and price, which is primarily attributed to the Russian invasion of Ukraine, which in turn would have created the need for a large player to the industry to run a short nickel position on the LME.

That entity is Chinese nickel titan Tsingshan Holding Group, which faces billions of dollars in business losses, people familiar with the company said last week.

Producers such as Tsingshan often sell futures contracts to lock in prices for the physical nickel they mine and refine. This is because they hold positions that profit when prices go down and lose money when prices go up.

IGO said it currently has no plans to raise its cash offer by A$3.36 for every Western Areas share, or $2.44, in response to the nickel market crisis. The company said its long-term view of the nickel market and price has not changed.

Write to David winner at david.winning@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8


Wj

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button