The IGO (ASX:IGO) share price is falling. Here’s why

The recent quarter looks to have been a productive one for IGO.

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The IGO Ltd (ASX: IGO) share price is down this morning after the company released its latest quarterly activity report.

IGO has reported earnings before interest, tax, depreciation, and amortisation (EBITDA) margins of 52%, while its Nova operation has exceeded guidance.

However, the IGO share price is in the red. In morning trade, IGO shares are trading for $8.98, 1.1% lower than the previous closing price.

Let’s take a closer look at today’s news from the exploration and mining company.

The news driving the IGO share price

The IGO share price is dropping after it released news of what looks to be a successful quarter.

During the period, it formed a joint venture with Tianqi Lithium. The two will work to deliver IGO’s clean energy strategy.

IGO also continued exploration activities at numerous projects in Australia and Greenland.

The company spent $63.8 million on exploration in the financial year just been. It expects to spend $65 million on exploration during the 2022 financial year.

Financial report

Despite what looks to be a strong financial performance in the quarter ending in June, the IGO share price is being driven lower this morning.

Over the period, IGO brought in $266.2 million worth of sales – 44% more than the previous quarter.

IGO also saw its underlying EBITDA reach $139.5 million. That’s a 50% improvement on its EBITDA for the previous quarter.

The company’s net profit after tax for the period was $453 million. This includes $385 million (after tax) from selling its Tropicana operation at the end of May.

Up until then, Tropicana produced 63,248 ounces of gold at an all-sustaining cost of $1,830 per ounce.

However, the amount of cash IGO has in the bank dropped to $528.5 million after it bought into the joint venture with Tianqi. The company still has $450 million of undrawn debt facilities.

Nova operation

The IGO share price is also down despite a good quarter’s production at Nova.

The company’s nickel, copper, and cobalt operation exceeded production guidance over the fourth quarter.

Additionally, its production costs over the quarter were less than was originally predicted, equalling $1.85 per pound for the full 2021 financial year.

IGO also gave guidance for the 2022 financial year’s activities at Nova. It expects it will have a higher cash cost, costing the company between $2 and $2.20 per pound of nickel produced.

In the 2022 financial year, the company expects Nova to produce between 27,000 and 29,000 tonnes of nickel concentrate, 11,500 to 12,500 tonnes of copper concentrate, and 900 to 1,000 tonnes of cobalt concentrate.

IGO is continuing exploration activities at Nova.

Commentary from management

IGO managing director and CEO Peter Bradford commented on the company’s quarter:

Over FY21, our talented and committed team have safely delivered consistently strong operating and financial performance and have successfully reshaped our asset portfolio – transforming IGO into a future-facing resources business with a strategy focused 100% on clean energy metals…

With the two key transactions now complete and a strong June 2021 quarter performance, IGO is well positioned with a cash position of $528 million and no debt. This balance sheet strength will enable us to fund future growth through exploration and disciplined mergers and acquisitions, while continuing to deliver cash returns to shareholders.

IGO share price snapshot

Despite today’s fall, the IGO share price has been performing well lately.

It has gained 40% year to date. It is also 64% higher than it was this time last year.

The company has a market capitalisation of around $6.8 billion, with approximately 757 million shares outstanding.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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