Miner Independence Group has struck a $1.8 billion deal to buy the company behind an emerging West Australian nickel project while the metal's price hovers at historic lows.
Sirius Resources has recommended its shareholders accept the takeover offer, and millionaire minerals explorer Mark Creasy, its major investor, has backed the deal.
It will give Independence Group the Nova-Bollinger nickel and copper project that Sirius recently began building.
The deposit, 350km from Kalgoorlie, is one of the best undeveloped projects of its type in Australia, and will be profitable at all points of the commodity price cycle, Sirius says.
Independence managing director Peter Bradford said it would fit neatly with his company's existing operations, which are located in the same region.
With nickel prices at their lowest point in a decade, the timing was also right, he said.
"We believe strongly in the principle that if you're going to transact, you're better off doing that at the bottom of the cycle," Mr Bradford said.
Sirius managing director Mark Bennett said the medium-term outlook for nickel prices was positive - it was just a question of how positive.
Sirius shareholders will vote on the cash-and-stock deal in mid-August, and if approved the takeover is expected to be completed by the end of August.
Mr Creasy, who owns 34.6 per cent of Sirius after selling the company his stake in Nova-Bollinger in 2014, said the takeover would create a company that is better equipped to manage the increasing volatility in commodity markets.
The new company would have a market value of about $2.7 billion, after Sirius spins off its Polar Bear gold exploration project in WA, plus its Scandinavian exploration assets, into a new company to be called S2 Resources.
Investors expect the takeover to win shareholder support, and sent Sirius shares soaring, adding 68 cents, or 21 per cent, to $3.92 by 1519 AEST.
Independence Group shares were down 71 cents, or 12.1 per cent, at $5.14.
WHAT THE TWO COMPANIES OWN:
INDEPENDENCE GROUP
* 30 pct stake in Tropicana gold mine
* Long Operation nickel mine
* Jaguar Operation copper, zinc and silver mine
SIRIUS RESOURCES
* Nova-Bollinger nickel, copper and cobalt deposit
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