Monsters of Rock: Plenty of questions as IGO scales back disclosures

When IGO and Tianqi’s lithium hydroxide refinery in WA could be profitable remains anyone’s guess with prices failing to fire.

Josh Chiat

3 min read

October 28, 2024 - 5:08PM

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IGO flags continued price pain for lithium as it pulls earnings reporting for hydroxide plant
MinRes up, with review of Chris Ellison's business dealings due next week
Paladin and Adriatic smashed on reports

IGO (ASX:IGO) dialled back reporting of earnings data on its Kwinana lithium hydroxide plant as it and partner Tianqi continue to try fine tune the stuttering operation in Perth's southern industrial corridor.

The plant delivered 1500t of hydroxide in the September quarter, 99.5 per cent of it suitable for plugging into lithium ion batteries.

But that remains just a quarter of the planned 24,000tpa capacity of the plant's first train.

While previously rocketing lithium prices gave a fair degree of grace to IGO and Tianqi's TLEA JV as they struggled to ramp up the plant a couple years ago, a collapse in both chemical and concentrate pricing has made it a more complicated equation.

The Greenbushes mine for instance, in which IGO holds a touch under a quarter in a JV with Tianqi and US producer Albemarle, did not deliver a dividend to its owners in the three months to September 30 despite smashing production expectations as super high head grades of 2.27 per cent Li2O saw it produce 406,000t of spod at unit cost excluding royalties of $277/t.

Prices came in at $US872/t FOB Australia.

With prices at cyclical lows, the capital is being recycled into the business to fund the completion of a third spodumene processing plant.

Low prices have made the question of profitability at Kwinana in particular a tough one for IGO boss Ivan Vella to answer, beyond stating that the owners' goal remains to ramp up to nameplate.

"That's what the engineering was intended to deliver and that's what the team are working towards," he said on an earnings call.

"I think when you talk about profitability, that's a much more complicated answer given the prevailing price conditions, which look very depressed and certainly ... the consensus is that's going to hold for some time."

Spare me a nickel

While Greenbushes was a beat and lithium hydroxide output was up 13 per cent QoQ, nickel production was disappointing, falling 41 per cent as the Forrestania nickel mines reached the end of their life and Nova nickel production down 42 per cent to 3692t.

Copper output also fell 43 per cent to 1743t, while the company is also working to redirected sales internationally after the closure of BHP's Nickel West business.

Overall IGO's EBITDA loss came in at $2.9m for the quarter, down from a $76.8m June quarter gain, thanks to lower profits from TLEA and lower nickel sales related to the timing of shipments.

The hydroxide business lost $356.5m in FY24 and $18.2m in the June quarter, though the number is no longer being reported.

A major shutdown to enable higher production rates was scheduled for this month.

While IGO's results were a little damp for analysts, the firm still lifted amid a broader run for materials stocks.

Singapore iron ore prices were 2.6 per cent higher at US$103.75/t, with strong performances from large caps lifting the sector by 0.75 per cent.

Mineral Resources (ASX:MIN) rose 1.2 per cent as its board provided some certainty on the timing of an investigation into controversial tax dealings and alleged preferential sales made to founder and MD Chris Ellison and a network of executives before and after the company's 2006 listing.

The company's statement suggested it could contest statements made about Ellison's business dealings in the media.

"There has been considerable media coverage since October 19, 2024, and the board’s investigation has evolved to respond to statements that do not accord with the company’s understanding of the facts," the company said in its statement.

"The company is working to resolve these inconsistencies, recognising that some of the reported matters date back to before the company’s formation and ASX listing in 2006.

"The company is committed to a timely process and to reporting to the market as soon as possible, while ensuring that fair and robust governance processes are followed with everyone concerned.

"Mr Ellison is continuing to cooperate with the investigation while taking planned leave, from which he is scheduled to return in November 2024."

The lithium and iron ore miner's board expects to update the market on its conclusions and the actions it plans to take next Monday.

Uranium producer Paladin saw its shares hammered on ramp up issues at its Langer Heinrich mine in Namibia, where it produced 640,000lb of yellowcake in the September quarter. That's well shy of the runrate required to meet guidance of 4-4.5Mlb for FY25.

Bosnian silver producer Adriatic Metals was also down after burning through ~$US36m at its Vares mine in the September quarter, closing with $US23.8m cash.