IGO sinks to massive loss on lithium refinery

Australian battery metals miner IGO (ASX: IGO) has posted a substantial half-year loss following the recent suspension of an expansion of the Kwinana lithium hydroxide plant.IGO posted on Thursday a net loss after tax of A$782 million ($498.5 million) for the December 2024 half, which included its share of net loss of A$602.2 million from its partner in the Kwinana refinery, Tianqi Lithium Energy Australia (TLEA).Kwinana, south of Perth, is owned by TLEA, which is 51% owned by China’s Tianqi Lithium (SHE: 002466) and 49% by IGO.The TLEA loss included an impairment of A$524.6 million against the Kwinana assets.The half-year loss also included an impairment charge of A$115 million against the IGO’s exploration assets as part of a review announced during its September strategy day. The group’s underlying net loss for the December half was A$85 million.  In January, the TLEA joint venture announced it would suspend the construction of the second train of the Kwinana plant, triggering an impairment charge for IGO.IGO did not declare a dividend. It had cash of A$247 million at the end of December with A$720 million of undrawn debt.Speaking on a conference call, IGO CEO Ivan Vella described the loss as disappointing but said the company wasn’t shying away from the results.“I guess I take some comfort that we’re getting under the covers of this business and making some tough decisions in a thoughtful way, in a calm way,” he said.Vella joined IGO from Rio Tinto (LSE/ASX: RIO) in December 2023, ahead of a “tough year” for IGO in which it suspended its Cosmos nickel development and put its Forrestania nickel operations on care and maintenance.“There’s a lot of things I didn’t expect at the outset when I joined,” he said.Kwinana future uncertainTianqi first broke ground on Kwinana in 2016 and sold part of its stake in the refinery and the Greenbushes lithium mine in Western Australia to IGO in 2021.Train 1 produced its first battery grade hydroxide in 2021 but has struggled to ramp up since then.Kwinana Train 1 produced 3,095 tonnes of lithium hydroxide in the December half, up 153% year-on-year, while conversion costs dropped 40% to A$27,136 per tonne.Revenue was A$32.2 million, while the facility posted an earnings before tax, depreciation and amortization (EBITDA) loss of A$161.1 million.“The future of the Kwinana lithium hydroxide refinery remains uncertain, with closure and a complete write-down a potential outcome should production rates not improve,” Hayden Bairstow, head of research at investment bank Argonaut said.Guidance for Kwinana for the current half is 7,000-8,000t of hydroxide, which factors in an unplanned shutdown during January and February, at conversion costs of A$22,000-25,000/t.Vella said IGO would continue discussions with Tianqi around Train 1.“What I like to see in any asset that I’ve ever worked with is clear understanding of the current status of the asset and the performance of the asset,” he said.“We know that this has been a challenged ramp-up, so the more clarity I can see with which we look through all of the problems, all of the things that need to be fixed or changed or amended, based on what we know, and we’ve had, obviously, a lot of time now to learn those things. “And then it’s about saying, okay, with that clarity, what sort of investments required to close the gap, and what sort of performance do we think can be delivered from that? And of course, that’s where it gets a bit more challenging.”Vella said there were also market and geopolitical factors to consider, including a recent move by China to restrict the export of certain lithium technologies and expertise, but said IGO would need to see a pathway to profitability.“We’ve got to get a return from every dollar that we invest and that’s the default position that we’re chasing,” he said.Greenbushes the shining lightThe Greenbushes lithium mine, in which IGO holds a 24.9% stake, recorded EBITDA of A$591.7 million, down from close to A$3.2 billion a year earlier.Vella said the operation continued to generate strong margins even at weak lithium prices.Half-year production at Greenbushes was 798,000t of spodumene at unit costs of A$300/t.Full-year production is expected to be at the upper end of guidance of 1.35-1.55 million tonnes of spodumene, while cash costs are likely to be at the lower end of guidance of A$320-380/t.“Greenbushes, which accounts for over 85% of our valuation, and our positive outlook for spodumene prices is the key driver behind our positive view on IGO,” Bairstow said.Argonaut maintained a buy rating for the company and a price target of A$6.70.IGO shares opened more than 5% lower on Thursday, touching a four and a half year-low of A$4.30 during early trade. The stock recovered through the day and closed 0.4% lower at A$4.62.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com