“Western Areas ‘Board of Directors has considered a wide range of factors … and has considered the scheme’s considerations based on a number of valuation models for each part of Western Areas’ business and our overarching responsibility to act in the best interests of all shareholders,” he said.
Late Wednesday, Western Areas revealed that the offer was supported by 94.2 percent of the vote.
Nickel sector consolidation
The long-term agreement came amid massive nickel price volatility following the Russian invasion of Ukraine. Also speaking was billionaire Andrew Forrest, whose private company Wyloo Metals bought shares in Western Areas in January at prices higher than the original IGO offer, sparking speculation about a bidding war.
Wyloo eventually agreed to sell its 9.8 percent stake in Western Areas to IGO in February, but only after entering into an agreement that would grant it participation rights in any future nickel processing facility the merged group will build in Australia.
Completion of the transaction means consolidation of the Australian nickel sector, which is dominated by BHP, which produces nickel, which IGO, Western Areas and junior Mincor mine in the state. It also increases IGO exposure to nickel as part of its key position in batteries and “green” metals over the past few years, just weeks after the discovery of the first lithium hydroxide production from its jointly owned refinery in Kwinana near Perth.
IGO shares fell 11.3 percent to $ 11.21 on Wednesday due to a sharp sell-off in lithium shares, with Pilbara Minerals down 19 percent and AllKem down 13 percent Mineral Resources down 6.5 percent.
Analysts have pointed to a recent survey by bear brokers, such as Goldman Sachs’ warnings, that “we see the bull market for battery metals as ending for now.”
Citi analyst Kate McCutcheon added that the fall in stock prices followed Bloomberg’s reports that Argentine customs authorities plan to set a reference price for lithium carbonate exports at $ 53,000 per tonne, below recent March highs of $ 66,000 per tonne.
“We believe that this is essentially a mechanism by which customs authorities can demand the integrity of contract prices where there are large differences,” Ms McCutcheon said. “As this is not a minimum or cap price, nor will it change the prevailing royalty regimes, we do not expect any fiscal impact on our coverage.”
Lithium prices are opaque and vary depending on geography, form and other factors, but generally trade around record highs amid bullish expectations of demand for electric vehicles, despite some recent cooling.
Ms McCutcheon said Citi’s assumption was to reduce lithium carbonate prices in the coming years, averaging $ 35,000 per tonne until 2025, which is still good for Australian producers.
“It’s still an extremely high price in relation to the production costs of the miners, especially compared to other markets, and historical prices,” she said.
Separately, shares of Nordic Nickel jumped when the explorer debuted on ASX on Wednesday after its initial public offering of $ 12 million at 25 cents a share, an increase of 16 percent to 29 percent.
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