Independence Group NL. agreed to buy Sirius Resources NL for about A$1.8 billion ($1.4 billion) in a cash and stock deal that gives it control of a nickel project with the lowest production costs in Australia.
Sirius shareholders will receive the equivalent of A$4.38 a share, more than 35 percent above Friday’s close, Perth-based Independence said in the statement. They will also get stock in a new company that will house some assets to be led by Sirius’s founding Managing Director Mark Bennett.
Buying Sirius will give Independence control of the Nova-Bollinger nickel and copper project, which is forecast to start production late next year. It will be Australia’s lowest cost nickel asset and the 12th cheapest mine globally once operational, Independence said.
“They have paid a full price for it, there’s no doubt about that,” Matthew Keane, a Perth-based analyst at Argonaut Securities Pty. said by phone. “Though they have paid for quality.”
Independence, which already mines nickel and gold, fell 11 percent to A$5.19 at 12:55 p.m. in Sydney. Sirius jumped 22 percent to A$3.94, the most since March 1, 2013.
With about three years output remaining at Independence’s Long nickel mine, adding Sirius’s Nova-Bollinger’s will offer a new source of the metal from late 2016, according to filings. The deal also gives Independence exploration assets in the Fraser Range and Tropicana belts close to existing operations.
BHP Billiton Ltd. has an agreement to buy half of Nova-Bollinger’s nickel concentrate over the first three years of production, while Trafigura Beheer NV this month agreed an offtake deal for its copper concentrate over the same period.
Mark Creasy, the largest Sirius shareholder with 35 percent according to filings, intends to vote for the offer of 52 Australian cents cash and 0.66 percent of an Independence share, the statement said. The offer has been unanimously recommended by the Sirius board.
Independence will seek a new expanded corporate debt facility to fund the cash component of the deal, Managing Director Peter Bradford told analysts today on a call, without giving details of the amount. The producer will continue to pay a dividend in addition to making the acquisition and completing the Nova-Bollinger project, he said.
Sirius’s Polar Bear gold assets in Western Australia, the Baloo gold discovery and Scandinavian exploration projects will be spun off into a new company to be called S2 Resources Ltd., Independence said. Sirius holders will receive 1 share in S2 for every 2.5 Sirius shares they hold.
Independence was advised by UBS Group AG, Herbert Smith Freehills, Euroz Ltd. and Treadstone Partners. Hartleys Ltd. and Ashurst advised Sirius, the statement said.