05/12/2019 - 11:18

Panoramic rejects IGO $312m takeover bid

05/12/2019 - 11:18

Bookmark

Save articles for future reference.

Panoramic Resources has formally rejected the takeover bid from Independence Group and confirmed it is seeking to raise $31 million to fund its operations, including the underperforming Savannah nickel mine.

Panoramic rejects IGO $312m takeover bid
Panoramic will use proceeds from a rights issue to fund mining of the Savannah North orebody.

Panoramic Resources has formally rejected the takeover bid from Independence Group and confirmed it is seeking to raise $31 million to fund its operations, including the underperforming Savannah nickel mine.

The announcement comes two weeks after Panoramic and IGO entered into a confidentiality deed that allowed IGO to conduct due diligence on the company and the Savannah project.

Today, the Panoramic board unanimously recommended shareholders reject the $312 million takeover offer, saying it was “opportunistically timed” and that IGO was taking advantage of Panoramic's operational and financial underperformance.

Panoramic also said its shareholders would hold less than 10 per cent of the combined group.

“Accepting the IGO takeover offer could reduce your exposure to near-term improvements in operational performance, particularly with recent access to the Savannah North orebody,” Panoramic advised its shareholders in an ASX announcement.

“Panoramic shareholders’ exposure to nickel would be significantly reduced in the combined entity.

“The Panoramic board believes the demand and supply outlook for nickel should create a favourable future pricing environment for Savannah’s nickel sulphide product.”

Major shareholder Zeta Resources, which holds about a 35 per cent stake in Panoramic, said on November 12 it did not intend to accept IGO’s current offer and could accept a superior proposal.

Panoramic announced last month it had granted other companies with access to due diligence, allowing for alternate proposals.

It added today shareholders could wait for a superior proposal from another bidder.

In a separate announcement, Panoramic confirmed it would proceed with one-for-six rights issue, after the company said last month any capital raising would be a breach to IGO’s highly-conditional offer.

The entitlement offer is 30 cents per share, with Gilbert + Tobin and Panoramic's Geoff Rogers appointed as legal advisers.

Panoramic said it would use the funds to continue the development and mining of the Savannah North orebody and for general operating costs associated with the Savannah project, as well as repay the $10.5 million bridging loan from Zeta Resources.

Savannah North operational review outcomes were released yesterday, where Panoramic said reliance on second-hand owner equipment and leasing of equipment, along with multiple contractors on site, were reasons for ongoing challenges with the project.

"The operational review has evaluated several changes to the current mining operations model, which are expected to be implemented from early 2020," Panoramic said.

The changes will comprise a newer mine fleet and equipment, access to superior maintenance and support services, and the recruitment of additional operator skills and expertise.

Panoramic said it expected a strong ramp-up in contained metal production through calendar 2020, as it transitions mining away from the Savannah remnant orebody into Savannah North.

The company today requested a trading halt until December 9.

Independence Group said it would not participate in the entitlement offer in respect of its 3.8 per cent shareholding.

In a separate announcement, Panoramic's project financier Macquarie Bank said the decision to reject IGO's offer, followed by the launch of a rights issue at a 33 per cent discount, was "perplexing".

It said, however, the capital raising would enable Panoramic to resolve past issues and provide funding during the ramp-up of Savannah North.

Macquarie added updated guidance from the operational review had driven some material changes to its forecasts, with medium-term downgrades offset by longer-term upgrades.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options