Could Orion Minerals be Independence Group’s next takeover target?
Mid-tier precious and base metals player Independence Group has strengthened its ties and taken a greater stake in junior explorer Orion Minerals.
Independence (ASX:IGO) is well-known for its strategy of doing corporate deals. The company gobbled up Sirius Resources in a $1.8 billion deal in 2015 for its massive nickel landholding in the Fraser Range region of Western Australia.
The company has also picked up assets from other players in the renowned Fraser Range and already has a joint venture deal in place over Orion’s Fraser Range nickel, copper and gold project.
This latest deal with Orion saw Independence inject $5 million at a nearly 40 per cent premium to Orion’s closing share price on Thursday.
The news pushed Orion’s share price up to the same level as the placement price of 5c on Friday morning.
This has raised Independence’s stake to 11.1 per cent and given it matching rights to any potential joint venture or sale of Orion’s nickel projects located in the Areachap Belt of South Africa.
“There’s very few provinces around the world now that have the potential for the scale of the Northern Cape in South Africa that haven’t been explored,” Orion chairman Denis Waddell told Stockhead.
“Obviously IGO have looked around everywhere for the next potential big play and it didn’t take them long to assess the potential of our ground package.”
Mr Waddell said Orion had been approached by several majors because of the quality of the company’s landholding in the region.
“It’s a significant endorsement I think of the ground package and prospectivity of our Northern Cape projects to have someone like IGO come in and say yes they agree with us this thing is very prospective and they want to hopefully have a position in it,” he said.
Orion managing director Errol Smart told investors on Friday that Independence’s Nova-Bollinger nickel and Jaguar zinc-copper mining operations in Western Australia have remarkable geological and engineering similarities to Orion’s advanced stage projects in South Africa.
While it is just a strategic alliance for now, it has raised the question of whether Independence is setting itself up to launch a potential takeover play.
Orion’s South African projects are multi-commodity assets hosting gold, zinc, copper and nickel – so for some, Independence’s move to potentially take a position in Orion’s South African projects was a bit unexpected.
“I think it was a bit left field, I wasn’t anticipating it, but it does make sense,” resources analyst Gavin Wendt told Stockhead.
“They obviously have confidence in what they’ve got in South Africa. Yes Independence is a company that has been very much exploration focused, but they’ve been quite aggressive corporately.”
Mr Wendt suggests Independence could look to raise its stake in Orion further.
“The likelihood is that over time that they will want to increase that position,” he said.
“All options are on the table. It’s fair to say given Independence’s track record if they like an asset, they like to have full control of it.”