Australian nickel and lithium miner IGO Ltd (ASX: IGO) (ASX: WSA) in an all-cash deal valued at A$1.1 billion (about $793 million), marking what could be the beginning of a nickel assets consolidation trend in Western Australia.
The A$3.36 a share cash splurge will boost IGO鈥檚 nickel business from a short-life, single asset operation centred around its Nova nickel-copper mine into a multi-asset division with decades ahead of it.
The move would immediately turn IGO into a major regional player, boosting the miner鈥檚 nickel output from 25,000 to 27,000 tones in fiscal year 2022 on a proforma basis to between 41,000 and 44,000 tonnes.
IGO and Western Areas have been in talks for months, but the twist is the all-cash nature of the deal that will see the buyer taking on A$900 million in corporate debt. The company said it would also use A$272 million from its cash reserves to fund the acquisition.
The transaction will give IGO Western Areas鈥� Forrestania nickel operations, but the biggest win is arguably , scheduled to begin production by the end of 2022.
Odysseus, part of the giant Cosmos nickel operation, is expected to produce over 10,000 tonnes of nickel a year during a ten-year mine life.
鈥淏oth Forrestania and Cosmos are high-grade, low-cost nickel sulphide operations and this acquisition, together with our existing world class Nova nickel-copper-cobalt operation, will consolidate our position as Australia鈥檚 leading independent nickel producer,鈥� GO鈥檚 CEO, Peter Bradford,聽said in the statement.
The deal follows IGO鈥檚 $1.4 billion acquisition of a stake in Tianqi Lithium鈥檚 Australian assets a year ago, as the company looks to capitalise on rising demand for raw materials used to make electric-vehicle batteries.
Nickel fever
Global miners聽are聽rushing in聽to聽secure an adequate supply of聽battery metals ahead of an imminent surge in demand for electric vehicles.聽
Two major Australian miners, BHP (ASX, LON, NYSE: BHP) and Wyloo Metals, are currently tangled in a bidding war over Canada鈥檚 Noront Resources (TSX-V: NOT), which owns the early-stage Eagle鈥檚 Nest nickel and copper deposit in the 鈥楻ing of Fire鈥� in northern Ontario.聽
Nickel production would need to increase聽nearly fourfold聽to meet expected demand for electric and hybrid vehicles, the company estimates. Likewise, copper output will also need to grow exponentially to meet demand from renewable power generation, battery storage, electric vehicles, charging stations and related grid infrastructure.聽
Tesla boss Elon Musk has聽expressed worries聽about a聽looming nickel shortage. He聽pleaded with miners聽last year聽to produce more nickel, promising a 鈥済iant contract鈥� for supply produced efficiently and in an 鈥渆nvironmentally sensitive way.鈥澛�
The US EV giant聽inked in October a multi-year nickel supply deal聽with New Caledonia鈥檚聽Prony Resources. The contract guarantees聽it about 42,000 tonnes of聽the metal needed to produce the batteries that power聽its聽EVs.聽
Tesla also has a聽similar agreement with BHP.