Lithium delivers for IGO shareholders but company flags a cautious approach to development
IGO has announced a significantly larger dividend than expected but the results were overshadowed by a massive nickel writedown.
IGO says it will take a “cautious” approach to further downstream lithium processing options, as the company paid a bumper dividend on the back of a stellar result from its lithium division.
IGO’s annual financial results were overshadowed by the $968m writedown, as the company took on the nickel assets acquired through its $1.25bn takeover of Western Areas – which largely wiped out their value given the takeover also included a significant cash reserve – which dragged down the company’s net profit to $549m.
But IGO shares posted strong gains on Thursday after it declared a 44c a share final dividend, and a 16c special dividend, which was well above market expectations, on the back of a record underlying net profit of $1.53bn.
RBC analyst Kaan Peker said consensus estimates had tipped a total final dividend of about 27c a share.
IGO generated $1bn in revenue from its own operations. But its share of its TLEA lithium joint venture with China’s Tianqi, which owns half of the giant Greenbushes lithium mine in WA, and a lithium hydroxide plant south of Perth, generated $1.19bn in dividends paid into the company’s bank account.
The company said its Nova nickel mine delivered underlying EBITDA of $460m on the back of strong nickel pricing, with the Forrestania nickel mine acquired from Western Areas generating $110m in underlying EBITDA.
The lithium hydroxide plant jointly owned by Tianqi and IGO is still dealing with its early teething troubles, however, and IGO did not give any guidance for its output for the financial year.
The giant Greenbushes mine, the biggest hard-rock lithium operation in the world, remains the jewel in the sector’s crown, however with IGO tipping total production from the mine of 1.4 to 1.5 million tonnes of concentrate for the year. IGO owns about 25 per cent of Greenbushes.
But the slow going at the lithium refinery has also slowed the potential expansion of the facility.
IGO interim chief executive Matt Dusci told analysts on Thursday he expected the first train of the facility to be ramped up to half of its nameplate capacity sometime in 2024. Front-end engineering and design of the second train of the facility was due by early next year.
Mr Dusci dismissed suggestions IGO should join the rush towards so-called midstream lithium products, such as lithium sulphate, which were being considered by fellow WA lithium miners Pilbara Minerals and Mineral Resources, saying IGO’s share of Greenbushes gave the company better options than its peers.
“You have to remember that most of the savings you get from going to these intermediates is associated with transportation and other elements,” he said.
“So when you have Greenbushes located so close to your industrial hubs then you may not see the same sort of benefits as you do when you go into an intermediate.
“You also see (Greenbushes co-owner) Albemarle committing to lithium hydroxide as well, close to Greenbushes. So it gives you an idea of where those savings come.”
Mr Dusci said the company was in no hurry to look for offshore options to build new processing plants for excess lithium concentrate produced at Greenbushes.
“There’s margins to be had just on the spodumene and on that side of the business. Coupled with that is a cautious approach to continue to expand our downstream within the TLEA that can be done through a number of ways,” he said.
Mr Dusci said the second train at the company’s existing refinery was the initial priority, and IGO was prepared to look at further expansions after that.
IGO shares closed up 72c to $13.92.