The bigger deal yesterday was the $1.8 billion move on the nickel assets of Sirius Resources (SIR) by Independence Group (IGO) – a transaction that had been well in the market in recent weeks.
Independence will pay $1.8 billion in cash and shares to buy the nickel assets and, in the process, create a company with a market value of around $2.7 billion.
The deal will see Sirius split in two – Independence will take ownership of Sirius’s highly prospective Fraser Range nickel assets, particularly the Nova nickel, copper and cobalt deposit that is currently being turned into a mine.
But Sirius shareholders will retain 100% of Sirius’ Baloo/Polar Bear gold prospect in WA and its Scandinavian assets, with those assets to be spun-out into a new company called “S2”.
Sirius shareholders will get 0.66 Independence shares plus $0.52 per share, under an offer that has been endorsed by Sirius’ major shareholder the well-known and very wealthy WA prospector, Mark Creasy, who owns 35% of the company.
Mr Creasy will become the largest single shareholder in Independence Group, turning the 35% of Sirius into an 18.6% stake in the merged group. He will also get $75 million in cash and will be the largest shareholder in a newly created public company, dubbed S2, which will end up with some unwanted Sirius assets and $22 million in cash.
Sirius shareholders will also receive about one new share in S2 Resources for every 2.5 of their Sirius shares they hold.
Sirius shareholders will also be entitled to receive Independence’s final dividend later this year, provided the deal is approved and settled before September 30. Sirius shareholders are expected to vote on the deal at a meeting in late August.
SIR vs IGO 1Y – Independence gets Sirius
In a statement yesterday Sirius managing director Mark Bennett described the deal as a great outcome for Sirius shareholders.
“The board and management of Sirius have full confidence in the ability of (Independence managing director) Peter Bradford and the Independence team to drive the combined company’s projects forward and create significant value for shareholders,” he said.
“The combination of the Sirius development and IGO operational teams, together with their joint exploration experience, will be unrivalled.”
Mr Bennett said he was looking forward to replicating the success of Sirius at the new entity S2.
And Independence managing director Peter Bradford said the transaction created a leading, diversified Australian mining company with an outstanding and rapidly growing production profile, a strong balance sheet, and excellent current and future cash flows.
“The acquisition of Sirius continues our stated strategy of building a diversified mining company with a balanced portfolio of exploration, development and producing assets, focusing on high-margin and long life,” he said.
“The proximity of the Sirius and Independence assets in WA creates opportunities to realise synergies and cost efficiencies across a dominant land-holding position.
“We are also delighted that Mark Bennett and Neil Warburton have agreed to join the Independence board and believe their skill sets will be of significant value to Independence going forward,” Mr Bradford said.
Independence said shareholders in the new company “will have exposure to IGO’s portfolio of production, development and exploration projects, including the 30% owned Tropicana gold mine, the 100% owned Long nickel mine, and the 100% owned Jaguar copper/zinc mine, as well as the 100% owned Stockman copper/zinc development project Independence.
“Shareholders will also benefit from the growth potential of Sirius’ world-class Nova-Bollinger nickel/copper development project, which is fully financed, currently under construction and remains on track to be generating significant cash flow from 2017.
"The combined entity would have a pro forma market capitalisation of ~$2.7 billion, making it a leading ASX-listed mining company, with significant strategic value and the potential to attract strong global investment interest.
"The merged entity has potential to become an ASX100 company, be well positioned to leverage its increased scale to deliver enhanced efficiencies and will have the capacity to pursue further value-accretive growth opportunities," Independence claimed in yesterday’s statement.
Sirius shares jumped 20.4% to $3.93 while Independence shares lost 12% to close at $5.15.
