This mining company’s takeover plans haven’t gone down well with the market…
The post Why the IGO (ASX:IGO) share price is sliding 8% today appeared first on The Motley Fool Australia. –
The IGO Ltd (ASX: IGO) share price is on course to end the week with a day deep in the red.
In morning trade, the battery materials focused mining company’s shares have fallen 8% to $8.78.
Why is the IGO share price sinking today?
In respect to the latter, this morning IGO responded to media speculation. It stated that it “is in preliminary discussions with Western Areas in relation to a change of control proposal and the basis upon which engagement and due diligence could proceed.”
This was also confirmed by Western Areas. However, both companies are warning that there can be no assurance whether any transaction will eventuate. Nor is there any assurance in regard to the terms and conditions of any such transaction should one eventuate.
Nevertheless, that hasn’t stopped investors bidding up the Western Areas share price and selling down the IGO share price today.
Why Western Areas?
Earlier this month IGO made an appearance at the Diggers and Dealers conference. In its presentation, management spoke very positively about nickel, noting that demand for the metal is expected to increase 5.2x by 2030 from 2021 levels. This is largely due to its use in the lithium batteries of electric vehicles.
Management appears to see Western Areas as a good addition to its growing battery materials portfolio. It would also help offset the declining production at its Nova operation, which is nearing the end of its mine life.
However, with the IGO share price falling heavily today, investors don’t appear too keen on the idea.
This could be due to IGO finishing FY 2021 with a cash balance of $528.5 million. So, with an acquisition price of $1 billion being touted for Western Areas, IGO would either need to raise funds again or issue shares.
Another factor that could be of concern is Western Areas’ underwhelming performance in recent years. Its addition could add some uncertainty, especially given the ongoing ramp up of Western Areas’ key Odysseus mine at the Cosmos Nickel Operation.
Despite today’s decline, the IGO share price is up 32% in 2021.
Should you invest $1,000 in IGO right now?
Before you consider IGO, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and IGO wasn’t one of them.
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*Returns as of August 16th 2021
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.