Nickel and especially lithium proved to be a heady and highly profitable mix for IGO (ASX:IGO) in the six months to December as it moved deeper into the former via the Western Areas takeover, while the growing concentration on the latter at Greenbushes (in WA) produced a record surge in revenue and earnings, enabling IGO to pay a record interim dividend of 14 cents a share.
The combination of the Western Areas takeover and the surge in lithium demand and prices and higher output at Greenbushes (a joint venture with Tianqi Lithium of China), saw the company report revenue and profit of $541.7 million and A$591.0 million respectively for the six-month period.
Compared with the December 2021, half year (pre-Western Areas and pre the 2022 lithium boom and surging output), IGO’s revenues were up 43% and profit up 552% from the $90.7 million reported).
Interim dividend was boosted to the reported 14 cents a share from just 5 cents a share.
And yet investors sold off the shares, which lost 7% to $14.57. Seeing the shares were up 30% in the last 12 months, a bit of profit taking was to be expected but it was a very strong result.
“We are delighted to report a highly successful and profitable half-year result, with the strength of our lithium business helping drive record earnings, record net profit and declaration of a record interim dividend,” said Acting CEO Matt Dusci said on Tuesday.
IGO told the ASX in a statement on Tuesday that the contributing factors to the results were:
- Strong earnings from the lithium joint venture, Tianqi Lithium Energy Australia Pty Ltd (TLEA), with IGO’s share of net profit after tax of $631.4 million ($14.4 million previously). Dividends received from the joint venture in the half totalled $440 million.
- Revenue generated by the Nova mining Operation for the half-year was $364.8 million, 3% lower than the prior period $377.2 million, resulting in segment profit before tax of $148.5 million.
- The revenue was derived from sales of payable metal of 8,967 tonnes of nickel, 4,543 tonnes of copper and 170 tonnes of cobalt at average realised prices of $34,085/t, $11,356/t and $75,835/t respectively.
- Cash costs (including royalties) for the Nova Operation were $3.99 per payable pound of nickel, higher than the prior period of $1.86 per payable pound, “primarily due to higher production costs and lower metal production during the period, together with the impact of the fire to the diesel power station in December 2022.
IGO said on Tuesday that the Nova operations had recovered from the power station fire in December that saw an 18 day closure.
IGO said its Forrestania mining operation (from Western Areas) contributed revenue for the half-year of $173.6 million and segment loss before tax of $17.1 million. The result for the period was impacted by provisional accounting fair value adjustments of $59.9 million.
“Cash costs (including royalties) for the Forrestania Operation of $9.80 per payable pound of nickel were higher than guided due to lower production and inflationary cost pressures, primarily relating to mining costs.”
IGO said it had cash on hand at the end of December of $590 million (up $148 million) and net debt of $175 million.
The acting CEO said “Strong lithium prices combined with a growing production profile at Greenbushes, generating outstanding financial returns for shareholders, while the team continues to focus on expanding the mine and processing capacity to deliver on future production growth.
“At Kwinana, the declaration of commercial production from Train 1 was a key milestone for the half-year and we remain focused on progressing the ramp up of Train 1 and Financial Investment Decision on Train 2 over CY23.
“Our group nickel business result was impacted by a fire at the Nova Operation in December, offset by improved nickel prices during the period. At Cosmos, we delivered a revised development plan in September and project development activity is progressing well.
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