IGOing (ASX:IGO) along very nicely

Company News

by Glenn Dyer

Miner and resource investor IGO (ASX:IGO) finished the year to June with a wet sail, with good news all round – higher revenue, higher underlying earnings, the Western Areas takeover completed and the first battery grade lithium hydroxide from its new refinery south of Perth.

The company said sales revenue for the three months of $278 million was up 13% from the prior quarter and edged up from the $266 million from the June, 2021 quarter.

For 2021-22 IGO reported total sales revenue of $900 million, just short of the $912.1 million reported for Covid-hit 2020-21.

Underlying EBITDA for the June quarter rose 11% quarter-on-quarter to $258 million (and up significantly from the $140 million in the June, 2021 quarter). But profit after tax of $107 million was down 19% from the March 2022 quarter.

However that was a little misleading as net after tax profit for the June, 2021 quarter of $453 million included a $385 million post-tax gain on sale of the Tropicana Operation.

Excluding that net profit was around $58 million, $49 million less than the $107 million reported for June quarter this year.

IGO said consistent strong operating results at Nova (Nickel) and Greenbushes (lithium/spodumene) were behind the rise in quarterly revenue and earnings.

That debt was fuelled by the ASX 200 miner’s $1.26 billion acquisition of nickel miner Western Areas. The company ended the quarter with $367 million of cash on its balance sheet and $900 million in new debt facilities. The acquisition was completed on 20 June.

And the $1.26 billion takeover of Western Areas Limited for cash consideration is in the process of being bedded down and made small contributions to revenue and earnings in the three months to June.

IGO reported that its full 2021-22 nickel production came in within guidance at 26,675 tonnes. Copper production of 11,483 tonnes came in at the lower end of guidance, while cash costs were better than guidance at $1.95 a payable pound.

On the lithium front, the company produced its first battery grade lithium hydroxide (LiOH) at Kwinana.

IGO said this milestone opened the door for qualification processes to commence with respective offtake customers. The plant is still in the proving up stage and IGO says once it is settled, it will issue guidance for output and costs.

Nova reported record quarterly revenue and underlying EBITDA of $277.9 million and $209.8 million respectively, while IGO’s share of net profit from TLEA (The Greenbushes JV) increased 68% to $101.8 million from $60.5 million in the March quarter.

But the company’s extensive investment portfolio was hit by the stockmarket slide in the quarter.

IGO said that after several quarters of consecutive growth in the mark-to-market value of IGO’s listed investments, the value of IGO’s listed investments decreased $23.6 million in the quarter, which was a bit more than the $21.3 million rise in their value in the March quarter.

IGO said it booked $65.7 million in combined transaction costs and provisional stamp on the acquisition of Western Areas.

The latter helps explain the fall in after-tax profit in the quarter to $107.2 million from $133 million in the March quarter.

Greenbushes spodumene concentrate production was 25% higher from the march quarter at 338,000 tonnes and 1.135 million tonnes for 2021-22. Costs for both the quarter and the year were within guidance, IGO said.

IGO CEO Peter Bradford said in the statement “We have delivered a strong finish to FY22 with safe and consistent operational performance across the business, combined with stronger metal prices, resulting in another highly profitable quarter.

“Nova and Greenbushes delivered production and cash costs within or better than guidance, first battery grade lithium hydroxide was produced at Kwinana, we received a first dividend distribution from the lithium joint venture and we progressed many organic growth opportunities across the business.

“In parallel, we have completed the transaction to acquire Western Areas and have made substantial progress with the integration of Western Areas into IGO.”

In 2022-23 IGO said it expects to spend $75 million on exploration activities.

IGO shares rose 0.2% to $9.98. 

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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