I'm not sure whether IGO shareholders know what's worse - buying Western Areas (WSA) or not buying Western Areas. Yesterday IGO's share price tanked yesterday on news they were in preliminary talks with WSA to buy the underperforming nickel miner. Then today it has emerged they could get outbid by Twiggy Forrest who has turned up on WSA's register as a substantial holder. On top of that, speculation has mounted BHP might want a piece of the action, utilising proceeds of it's yet to be finalised sale of coal assets. Both Fortescue and BHP are keen to tout their green(er) credentials, with nickel being a key component of mainly higher performance batteries. In response to the prospect of competition IGO has slumped another 2% today.
Western Areas is a largely WA-based nickel miner who always seems to be 'nearly there'. They seldom fail to disappoint when on the cusp of breaking out. Some traders talk about the classic play being to buy when their SP has a '1' in front of it and sell when it has a '3' in front of it. Their older assets are getting pretty tired and will be exhausted in the next few years but their ace in the hole is the Odysseus mine, which has a 15 year+ mine life and is due to start production in FY23. It positions them as one of the few nickel miners with a clear line of sight into the 2030s. One way or another it seems like a good chance they'll be under new management soon.
[I hold WSA. I don't hold IGO, BHP or Fortescue. Getting some IGO scrip as part of the proposed deal is not entirely unattractive]
