IGO Ltd (ASX: IGO) shares are on the slide on Wednesday morning.
At the time of writing, the battery materials miner's shares are down 9% to $7.03.
Why are IGO shares sinking?
Investors have been selling the ASX 200 mining share this morning in response to the release of its quarterly update.
According to the release, the company reported underlying EBITDA of $153 million for the quarter. This is down a sizeable 58% quarter on quarter.
Also falling heavily was its underlying free cash flow, which was down 118% to negative $96 million. Though, the company still has $276 million in net cash and a $720 million undrawn debt facility.
This weak result was driven largely by lower production and higher costs for its Greenbushes operation, together with significantly weaker spodumene prices. In fact, management notes that Greenbushes sales came in $1 billion lower quarter on quarter at $1.3 billion.
Furthermore, the company's Kwinana Lithium Hydroxide Refinery didn't recognise any sales during the quarter. As a result, it recorded an EBITDA loss of $169.2 million for the period. Nevertheless, management notes that Kwinana's product remains qualified and further qualification with potential customers is continuing.
Elsewhere, the company's nickel production was largely flat during the quarter at 7,118 tonnes. Unfortunately, this means that it has downgraded its FY 2024 nickel production guidance to 28,500 – 31,000 tonnes (from 29,000 – 32,500 tonnes).
Cosmos operation update
Also weighing on IGO shares today is news that it is putting its Cosmos Project on care and maintenance following a review.
That review found a reduction in the expected life of mine, delays in getting the mine to full capacity, and further increases in operating and capital costs. In addition, management notes that commodity prices have deteriorated significantly since the review commenced, which have impacted the economics of Cosmos.
IGO's managing director and CEO, Ivan Vella, commented,
This is not the outcome anyone at IGO wanted, however we cannot ignore the operational and financial risks involved in continuing to develop Cosmos in the current environment. We still believe there is value in Cosmos, however in this nickel environment we need to be disciplined with our allocation of capital, while retaining our optionality to restart if market conditions improve.
The company expects a total impairment charge to be in the region of $150 million to $175 million.
IGO shares are now down 52% over the last 12 months.
