IGO
(ASX:IGO) made some very interesting comments yesterday about the medium-term potential for its expanding lithium business.
The company said that the first train of its lithium hydroxide refinery south of Perth had been “declared commercial”, according to Monday’s ASX statement.
Tianqi Lithium Energy Australia (TLEA), the joint venture between IGO (49%) and Tianqi Lithium Corporation (51%), made the declaration from November 30 (last Wednesday0. effective 30 November 2022.
“This important milestone reflects TLEA’s confidence in the capability of Train 1 to operate continuously and produce battery-grade lithium hydroxide, with recent independent testing confirming that the product’s quality meets the required standards for the lithium-ion battery industry,” IGO said on Monday.
“Product qualification and certification with potential offtake customers are ongoing, while Train 1 continues to ramp up production over the course of 2023.”
IGO said in its September quarterly report that “At Kwinana, following the successful badging of key areas of the plant during 1Q23 and gradual close-out of commissioning activities, IGO expects Train 1 commercial production for accounting purposes to be achieved at Kwinana around the end of CY23, with operating ramp-up of Train 1 to occur thereafter.”
IGO said its 2022-23 production and cost guidance for the lithium business otherwise remains unchanged and will be reviewed in the December 2022 Quarter at the end of next month.
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The company also provided an update on the fire that damaged its 10-megawatt diesel power station at Nova, south of Kalgoorlie in the Fraser Range area of WA
Nova confirmed that there were no casualties among the mine staff and support workers and an inquiry is now underway into the blaze.
“All operations at Nova are currently suspended. The fire was contained to the diesel engine room, which was extensively damaged. There has been no damage to other infrastructure, including the control room, switch room, solar PV, Battery Energy Storage and power distribution network,” IGO said..
Nova said its business continuity plan has been activated and it is working with Zenith to re-establish power supply to the operation. Zenith is reported to be trying to source mobile diesel generators for the mine and also plans to use the solar farm at the mine to run plant off renewable energy.
Before the fire, IGO had started talks with potential partners to provide off-take volumes out of its Nova and Forrestania mines (which was acquired with the Western Areas takeover in 2021) that will now aim to supplement the loss in supply caused by the fire. IGO has existing deals to supply nickel concentrate with BHP and Trafigura, but is looking to offload 50 per cent of Nova’s nickel supply and all of Forrestania’s nickel supply.
“This will be staged with the mobilisation of power generators to site. Subject to permitting and approval receipt, it is anticipated mining operations will be able to recommence in two weeks, while restoration of the full power supply to operate the processing facility is expected to take approximately four weeks.”
IGO said it expects to provide an update to Nova’s production and cash cost guidance in the December 2022 Quarterly Report due for release on January 31, 2023.rway.
IGO’s Acting CEO, Matt Dusci, commented: “While this incident will result in the Nova operation being offline for several weeks, we are thankful that all of our people are safe and unharmed.”
“I am also grateful to our Emergency Response Team for their quick and professional response and for restricting the fire to the engine room. We have activated our contingency plans and are working closely with Zenith to re-establish operations at Nova as quickly and safely.”
In its September quarter production report, IGO said it was expecting (before the fire) nickel production at Nova “to be lower in 2Q23 due to mine sequence resulting in lower grade and recovery resulting in marginally higher cash costs.”
“FY23 production at Nova is expected to be within guidance… and Nova cash costs are being impacted by lower copper by-product pricing and based on the current price outlook would result in cash costs being marginally higher than cost guidance for FY23. FY23 cash cost guidance assumed an FY23 copper price of $5.65 per pound whilst current consensus forecast pricing indicates an FY23 copper price of $5.12 per pound.”
IGO said Nova’s “cash costs increased from $2.24/lb to $3.14/lb primarily due to lower by-product credits, following lower copper and cobalt prices and lower copper sales.”
“These lower prices accounted for $0.52/lb of the variance. Cash production costs were also higher than last quarter, with favourable diesel hedging positions expiring in June 2022.”
An update on Nova’s cash cost guidance was slated to be provided as part of the December Quarter Result in late January. That will now have to take into account the damage from the fire.
The loss of at least four weeks output will boost cash costs and trim expected earnings because of the loss of mining and sales volumes as well as revenue.
IGO shares fell nearly 5% to $15.54 on Monday, with investors deeming the Nova fire to be more damaging in the short term.
