LA Private

IGO’s costly nickel adventure

IGO (ASX:IGO) is facing a scarcity of cash and its finances have been strained after incurring a near $1 billion clean-up bill for its costly takeover of nickel miner Western Areas. The expensive acquisition seems to have left IGO wary of further investments in the nickel sector until it resolves the issues surrounding the Western Areas deal.

Despite controlling around 20% of Western Areas, which would require a relatively small contribution of just over $8 million for IGO with its market cap of $10.8 billion, the company has shown no interest in contributing to Panoramic Resources’ deeply discounted $40 million fund raising. Panoramic Resources is a nickel, copper, and cobalt explorer in Western Australia.

Panoramic revealed plans for a fully underwritten two-tranche Placement to raise $40 million and a non-underwritten “share purchase plan” aiming to raise up to an additional $5 million, with the new shares being issued at 5 cents each—a 45.7% discount to the last closing price of 9.2 cents on Monday.

The funds raised will be used to strengthen Panoramic Resources’ balance sheet, particularly to address the short-term working capital pressure caused by delays in revenue due to a filter press head plate failure and disruptions caused by severe weather events at the Savannah nickel mine earlier this year. Panoramic is confident that Savannah will improve its production and financial performance in the 2023-24 financial year, with forecasts indicating significant increases in nickel, copper, and cobalt production compared to the previous year.

Trafigura, a commodity trading giant, has stepped in to help Panoramic Resources, indicating its improved confidence in Savannah and its main nickel product. However, IGO has not shown any involvement in the financing plan, raising further questions about its stance on the nickel sector and its focus on being a lithium darling stock for many investors.

Overall, IGO’s costly Western Areas adventure seems to have led to cautiousness about further investments in nickel, leaving it focused on its lithium endeavors while Panoramic Resources seeks financial support from other players like Trafigura.