Tropicana Potential Not Reflected in Share Price – IGO Group, Company to Carry Out A Strategic Review

  • Sep 15, 2020 AEST
  • Team Kalkine
Tropicana Potential Not Reflected in Share Price – IGO Group, Company to Carry Out A Strategic Review

Summary

  • Nickel prices have been demonstrating a strong recovery since the onset of the second quarter with price recovering ~ 41.65 per cent on the London Metal Exchange.
  • The continuous surge in nickel prices along with the projected supply lag over the long-term is now prompting many ASX-listed copper and nickel miners to rejuvenate their assets and take advantage of the supply crunch and EV demand boom.
  • After increasing its holdings at the Fraser Range, IGO has now started a strategic review of its interest in Tropicana, as it believes that the value of Tropicana’s potential is not reflected on its share price.
  • Peter Bradford suggested that the key focus of the Company is on commodities that are critical to clean energy.

Nickel prices have been swiftly climbing the price ladder with prices recovering ~ 41.65 per cent since the onset of the second quarter till now.

The recovery in nickel prices and other base metals are now waking up ASX-listed copper & nickel miners such as IGO Group Limited (ASX:IGO), Nickel Mines Limited (ASX:NIC), Sandfire Resources NL (ASX:SFR) from hibernation with many moving towards development and building the production line.

To Know More, Do Read:  Copper Rush Drawing Australian Titans; Australia To Climb the Supply Ladder?

The Nickel Rush and ASX Players Response

The nickel market is anticipated to witness a supply shortfall over the long-run, which along with a price recovery is now drawing ASX-listed copper and nickel miners to develop their asset in order to capture the market share.

  • Since Indonesia banned the export of nickel ore, the nickel market has been witnessing a slight supply gap, which many miners across the globe are currently eyeing on, leading to a short-term surplus in the supply chain.
  • However, due to the impact of COVID-19 outbreak on mining operations across the globe, the supply surplus is projected by many industry experts such as the Department of Industry, Innovation and Science (or DIIS) to diminish ahead, leading to a supply lag over the long-term.

To Know More, Do Read: Nickel to Witness Supply Surplus in 2020, But Well Poised for a Boom Over the Long-Run

In the wake of the anticipated supply lag ahead, ASX-listed copper and nickel miners are coming into the limelight with many progressing towards the development of related prospect to mark their place in the nickel rush.

In the recent past, Nickel Mines Limited (ASX:NIC) decided to fast track its debt repayment from the higher profit generated against the previous corresponding period over improved market prices.

To Know More, Do Read: Nickel Mines Fasttrack Debt Repayment Over Recovery in Base Metals Prices

Likewise, many other players, such as IGO Group are under focus post recent corporate actions and announcements. Recently, IGO Group extended its holdings in the Fraser Range via inking an agreement with Boadicea Resources Limited (ASX:BOA) to acquire nine additional tenements.

To Know More, Do Read: ASX 200 Player, IGO Limited Signs Agreement to Acquire Nine Fraser Range Tenements from Boadicea Resources

After increasing its holdings at the Fraser Range, IGO has now started a strategic review of its options in relation to its 30 per cent interest in Tropicana, which is the response of unsolicited approaches from a number of parties and IGO’s desire to ensure the value of interest in Tropicana for its shareholders is maximised.

  • Tropicana is among one of the top-tier gold asset containing significant upside potential; however, the Company believes that the quality of the asset and IGO’s interest in it is now fully reflected on its share price.
  • The same ideology has now prompted the Company to undergo a strategic review of the prospect, which would involve a detailed technical analysis of the various opportunities to enhance value through underground development and exploration.
  • Furthermore, the strategic review would also include the realisation of the value which may be unlocked through a full or partial sale or other alternative transaction structures.
  • The Company conjointly holds the asset with the ASX-listed gold explorer and producer – AngloGold Ashanti Australia (ASX:AGG) and has advised AGG of its intentions.
  • Additionally, the strategic review work is anticipated to be conducted over the next three to six months, and the Company would disclose any development on the counter to shareholders in accordance with the ongoing disclosure obligations.

The continues flow of news seem to be working for the share price of the Company with its stock now gaining traction on the daily chart.

IGO Daily Chart (Source: Refinitiv Eikon Thomson Reuters)

IGO Daily Chart (Source: Refinitiv Eikon Thomson Reuters)

On following the daily chart, it could be seen that IGO is now testing the +2 Standard Deviation of the 20-day simple Bollinger band, which is overlapping with the 50-day exponential moving average and should act as immediate resistance for the stock.

  • The stock has gained some momentum in the past few trading sessions to gain slight volatility with the price spiking from -2 Standard Deviation of the mean value to the +2 Standard Deviation of the mean value.
  • The volatility surge coupled with an upward sloping On Balance Volume is suggesting that bulls are now entering the market; however, to seed further bullish sentiments, the stock has to give and sustain a volatility breakout.
  • Additionally, the major resistance for the stock would be around 200-day exponential moving average, above which, the stock would change its short-term or intermediate trend to an uptrend.

IGO last traded at $4.750 (as on 15 September 2020), up by 2.592 per cent against its previous close on ASX.

 


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