Western Area grabs big stake in rival nickel miner

Nickel miner Western Areas is tipping a strong rebound in the battery metals sector after positioning itself to gain control of struggling rival Panoramic Resources.

Western Areas will acquire 19.9 per cent of Panoramic as part of a $90 million raising unveiled on Monday in the latest manoeuvring in the nickel sector.

Panoramic was the target of a $312 million hostile takeover bid from Independence Group, which lapsed at the start of the year, and Andrew Forrest's Squadron Resources has since built up a 5.9 per cent stake in the company.

Dan Lougher-led Western Areas will pay $28.8 million for its 19.9 per cent stake via a $29 million placement at 7¢ a share, which represents a discount of almost 42 per cent on Panoramic's last closing price of 12¢.

Pay down debt

Panoramic is raising another $61 million through a 1.15-for-one rights issue in a move that will see it pay down debt and remove some of the risk hanging over the restart of Savannah nickel mine in the Kimberley region of Western Australia.

The raising will dilute the Zeta Resources stake in Panoramic from 35.2 per cent to 20.1 per cent and also dilute the Squadron Resources stake.

Zeta Resources chairman Peter Sullivan will stand down as Panoramic chairman but remain a director while Western Areas will gain the right to a seat at the board table.

Former Fortescue Metals Group director of operations and current Northern Star Resources and New Century Zinc director Nick Cernotta will take the reins as chairman.

Mr Lougher said the price and the scarcity of quality nickel sulphide deposits were two compelling reasons behind the investment.

"The price is pretty good in terms of what is available in nickel sulphide resources," he said.

"The deposit at North Savannah has got nickel sulphide and it has got cobalt and copper as well. It is what we believe to be a good long-term strategic investment."

Savannah operations suspended

Panoramic suspended operations at Savannah in April and they are unlikely to restart until next calendar year.

Mr Lougher said Western Areas had been looking at Panoramic for some time and was familiar with issues around Savannah and "happy to help on a technical level" with the troubled mine.

Western Areas expects the timing for any restart to be influenced by how the nickel market recovers in the wake of COVID-19.

"I don't think we want to rush anything at the moment," Mr Lougher said. "Care and maintenance is probably the right thing at this time."

He said his view was that the electric vehicle market would start to pick up towards the end of calender 2020 and see strong growth over the medium and longer term.