Western Areas’ (ASX:WSA) has made moves on Panoramic Resources (ASX:PAN), starting with taking a 19.9 per cent stake in the somewhat troubled nickel producer.
Panoramic was previously on the radar of much larger rival Independence Group (ASX:IGO), which tabled a $312m takeover bid late last year.
Independence was keen to pick up Panoramic’s producing Savannah nickel mine in Western Australia’s East Kimberley region.
So much so, it offered a 51 per cent premium over the one-month volume weighted average price of Panoramic’s shares at the time.
But a number of subsequent announcements by Panoramic prompted Independence to rethink its pursuit of the nickel miner.
Now Western Areas has joined the register as it looks to ramp up its investments in electric vehicle-focused metal opportunities.
RBC Capital Markets said the acquisition provided Western Areas with additional exposure to nickel outside its existing Forrestania operations and the Odysseus development project.
Forrestania currently produces between 21,000t and 22,000t of nickel-in-concentrate per year.
RBC noted that the investment had the potential to provide material upside if the ramp-up issues at Panoramic’s Savannah project were addressed.
Savannah was previously expected to have a mine life of about seven years with annual production of 11,000t of nickel-in-concentrate. However, Panoramic is currently updating the life-of-mine plan for the project.
The company encountered issues ramping up production at Savannah to its budgeted levels that were made worse by challenges in attracting and retaining personnel.
Production at the project has been suspended since April due to the impact of the COVID-19 pandemic.
Western Areas is paying $28.6m to acquire the stake in Panoramic through a subscription agreement priced at 7c per share.
The company said the investment provided exposure to a significant nickel sulphide resource that also included valuable copper and cobalt by-products.
This investment forms part of Panoramic’s broader capital raising of up to $90m to undertake development activities prior to restarting Savannah and repay debt.
“Western Areas’ investment provides encouragement for our strategy to undertake capital development and review the mine plan at Savannah nickel mine,” Panoramic chairman Nicholas Cernotta said.