IGO share price moves higher on record earnings

The miner released its results for the financial year ending 30 June 2022 today. Here are the details.

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Key points

  • IGO produced its fourth consecutive year of record underlying EBITDA in FY22
  • The results were bolstered by the first-year contribution from its lithium JV and a strong performance from its Nova nickel operations
  • IGO issued production guidance for FY23 and it is forecasting spodumene production of 1.35m to 1.45m tonnes and nickel production of 34.5k to 39.5k tonnes

The IGO Ltd (ASX: IGO) share price is in the green in early morning trading after the company posted its fourth consecutive year of record underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) in FY22.

The first-year contribution from its lithium joint venture (JV) and a strong performance from its Nova nickel project were key contributors to the results.

At the time of writing, the battery minerals miner's shares are up 1.18% to $12.82 apiece.

Let's take a look at IGO's results for FY22.

IGO share price climbs as revenue, earnings soar

Highlights of IGO's FY22 financial results include:

  • Revenue of $903 million, up 34% year over year (yoy)
  • Record underlying EBITDA of $717 million, up 51% yoy
  • Strong first-year contribution from the lithium JV, Tianqi Lithium Energy Australia Pty Ltd (TLEA), delivering IGO a share of net profit of $177 million and an inaugural dividend payment of $71 million
  • Net profit after tax (NPAT) of $331 million, down 40% yoy due to a tax charge on the sale of its Tropicana asset
  • Cash on balance sheet of $367 million and $900 million in new debt facilities following the acquisition of Western Areas
  • Declared a final fully franked dividend of 5 cents per share (cps)

What else did IGO report?

The miner's move to expand its exposure to battery-making minerals has kept the IGO share price well supported.

To that end, investors will be pleased to hear that its Nova nickel production achieved a better than guided cash costs of $1.95 per payable pound of nickel. Output was within guidance at 26,675 tonnes.

The profit contribution from TLEA was also above what management was forecasting. The successful commissioning of the first train at the Kwinana Lithium Hydroxide Refinery is another highlight. The refinery produced its first battery-grade lithium hydroxide in May 2022.

Additionally, IGO completed the strategic acquisition of Western Areas on 20 June 2022, delivering an expanded portfolio of nickel assets.

IGO also declared a fully franked final dividend of 5 cps, bringing the full-year dividend to 10 cps.

This is the same as the full-year dividend declared in FY21. However, last year's result included a final dividend of 10 cps and no interim payout.

What did management say?

Commenting on the results, IGO managing director Peter Bradford said:

Our Nova Operation continued to deliver consistent production and, with the benefit of higher commodity prices, delivered record financial outcomes across all key financial metrics.

[TLEA] saw significant activity and growth during the year, with commissioning of two new concentrators at Greenbushes resulting in the delivery of record operating and financial results for Greenbushes in FY22.

The lithium business contributed A$177M of net profit and A$71M of dividends to IGO in the first year of our ownership, which far exceeds our expectations at the time of commitment to the investment, primarily due to the subsequent astronomical growth in spodumene prices.

Our high-quality nickel and lithium businesses, combined with our portfolio of belt scale exploration projects focused on discovery of nickel, copper, lithium and rare earths, gives IGO a great platform to leverage off the growing demand for clean energy metals that are needed to meet the transition away from fossil fuels.

What's next?

IGO expects to produce between 34,500 and 39,500 tonnes of nickel in FY23 at a cash cost of $4.10 to $4,70 a pound.

Spodumene production at Greenbushes is forecast at 1.35 to 1.45 million tonnes, with cost of goods sold (excluding royalties) to range between $225 and $275 a tonne.

The miner is also guiding to produce 900 to 1,000 tonnes of cobalt and 11,000 to 12,000 tonnes of copper.

IGO share price snapshot

The IGO share price has outperformed the market over the past year. The miner has gained 35% since this time last year while the S&P/ASX 200 Index (ASX: XJO) has lost 7%.

Other ASX lithium shares have also been outrunning the market. The Allkem Ltd (ASX: AKE) share price and Pilbara Minerals Ltd (ASX: PLS) share price have surged around 60% each over the period.

Motley Fool contributor Brendon Lau has positions in Allkem Limited and Independence Group NL. 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 Scott Phillips.

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