Shares of IGO Ltd (ASX: IGO) have seen a modest increase of 2.6% to $5.39 on Thursday morning, following the release of the company’s FY24 financial results. Although the share price has shown some resilience, the financial report reveals significant challenges faced by the ASX mining stock over the past year.
Key Highlights from FY24 Results
IGO's FY24 results reflect the impact of falling metals prices and substantial impairment charges. Here’s a detailed look at the key figures:
- Spodumene Production: The company reported a 7% decrease in spodumene production, totaling 1,383,000 tonnes for the year.
- Revenue: Total revenue dropped by 18% to $841 million.
- EBITDA: Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) fell by 71% to $581 million.
- Net Profit After Tax (NPAT): Statutory NPAT plummeted by 99% to $3 million. Notably, the substantial reduction in net profit is attributed to two major impairment charges: $200 million related to Cosmos and Forrestania assets and $120 million related to exploration assets. Without these impairments and other small adjustments, NPAT would have been approximately $319 million.
- Net Cash Balance: The company’s net cash balance increased by 13% to $468 million.
- Dividends: Total dividends for the year decreased by 50% to 37 cents per share.
Operational and Strategic Developments
The operational performance of IGO in FY24 highlighted several key trends and challenges:
- Spodumene and Nickel Production: There was a 7% decline in spodumene production and a 19% decrease in nickel concentrate production. However, lithium hydroxide production saw a significant increase of 86% to 3,508 tonnes, driven by improvements in process design and operational control at the Kwinana facility.
- Cost Increases: Production costs rose during the year, with spodumene costs per tonne increasing by 35% to $330 and nickel costs per pound creeping up by 9% to $6.16.
- Forrestania Mining: The mining operations at Forrestania are expected to conclude earlier than planned. A seismic event in June led to the decision to halt mining at the Spotted Quoll site in the September 2024 quarter and shift to care and maintenance.
- Leadership Change: On 11 December 2023, Ivan Vella was appointed as the new managing director and CEO, transitioning from Rio Tinto Ltd (ASX: ASX:RIO). Following this appointment, the IGO share price experienced a brief rally of approximately 14%.
Management's Perspective
CEO Ivan Vella acknowledged the tough market conditions faced by IGO in FY24 but expressed optimism about the company’s future. Vella highlighted the resilience of the Greenbushes operation, which continued to deliver strong margins and cash flow through its joint venture. Despite the challenges, the Nova Operation in the nickel business remained a low-cost producer, generating positive free cash flow.
Vella also hinted at a forthcoming strategic review aimed at refining the company’s direction. This includes evaluating the corporate and exploration teams to ensure alignment with the new strategic goals.
Outlook for FY25
Looking ahead, IGO has provided guidance for FY25, indicating several expected shifts:
- Nickel Production: Forecasted to be between 16,000 and 18,000 tonnes, a decrease from the previous year.
- Copper Production: Expected to range between 6,250 and 7,250 tonnes.
- Nickel Cash Cost: Projected to decrease to between $4.80 and $5.80 per pound.
- Spodumene Production: Expected to be between 1,350,000 and 1,550,000 tonnes, in line with the previous year’s figures.
- Spodumene Cost: Anticipated to remain in the range of $320 to $380 per tonne.
The IGO share price has experienced a significant decline of 58% over the past year, paralleling a roughly 63% drop in the price of lithium carbonate. Despite these challenges, the company continues to navigate a volatile market and focus on strategic investments for future growth.