Nickel Industries readies equity deal to re-stock M&A kitty
Indonesian miner Nickel Industries was drumming up interest in a sizeable equity raising after market on Tuesday, which investors reckon would help bankroll a planned acquisition of new assets.
A nickel mine in Indonesia’s Central Sulawesi.
Brokers Bank of America and Bell Potter were understood to be lining up some early support, helping get investors interested in a $200 million-odd placement that could launch as early as this week.
Sources said Nickel Industries would plough the proceeds into a couple of nickel assets owned by its largest shareholder, Shanghai Decent Group’s parent Tsingshan, a juggernaut in global stainless-steel production and is also the world’s largest nickel producer.
Sources said the potential deal came after the brokers also took analysts, traders, nickel miners and battery manufacturers through Tsingshan’s Morowali Industrial Park, where Nickel Industries owns stakes in several rotary kiln-electric furnace lines via Hengjaya, Ranger and Oracle projects. Tsingshan owns 18.4 per cent of Nickel Industries’ shares.
The ASX-listed Nickel Industries has previously stated its desire to add exposure to two parts of the value chain: operations in high-pressure acid leach (HPAL), a process used to extract nickel from laterite ore, or more limonite feed that can go into HPAL process and would tee in well with its nickel laterite operation Hengjaya.
It would be interesting to see where Nickel Industries’ M&A search lands. It has pitched itself as low-cost nickel producer of global scale, but investors are mindful of its short history and choppy share price performance since its IPO in 2018.
As an example, sell-side analysts at Citi have forecast the miner would grow from $646 million revenue for the 2021 calendar year to three times that or $1.8 billion by 2025. They reckon production after adding in Oracle’s four furnaces should breach 90,000 tons per year, making it a top-ten nickel producer around the globe.
But they also classify it as “high risk”, thanks to operational and counterparty risks relating to Indonesia and its own ramp-up risks for Weda Bay and Oracle assets.
The raising would be closely watched by ECM bosses and investors, coming as it does after a torrid 2022 for follow-on raises even though resources names have been widely tipped to be this year’s chosen ones for deal activity.
Nickel Industries has been frequent visitor to debt and equity capital markets, raising nearly $1.7 billion since its $200 million IPO in 2018.
The latest deal, should it get to market as planned, would be a return job for both Bank of America and Bell Potter, whoraised for the company early last year. Bank of America also helped Nickel Industries pick up $US225 million ($323 million) via three-year senior secured noted to fund Oracle Nickel’s acquisition just in August, while Bell Potter has been there since the company’s $200 million IPO in 2018.
Nickel Industries didn’t respond to a request for comment on Tuesday night.
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