IGO Ltd (ASX: IGO) shares are having a tough time on Tuesday.
In morning trade, the battery materials miner's shares are down 1% to $5.94.
This latest decline means that its shares are now down 61% over the past 12 months.
Why are IGO shares under pressure today?
Investors have been hitting the sell button today after the company completed a detailed review of its exploration portfolio.
As a reminder, IGO has previously announced that it has been undertaking a comprehensive exploration business review. This has included a detailed examination of its portfolio of exploration tenement holdings and land positions.
It notes that the review was focused on rationalising the portfolio and ensuring that the company's resources are allocated effectively to the targets which are most prospective for commercial success.
What were the results?
According to the release, following the review, IGO expects to record an impairment against these assets in its FY 2024 financial results.
At this stage, the determination of the final impairment value is incomplete and will be subject to audit review.
However, IGO has laid out its expectations for what could appear when it releases its results
It estimates that the impairment charge to its exploration assets will be between $275 million and $295 million for the full year. This impairment relates to the revaluation of the Silver Knight and Mt Goode nickel exploration assets, as well as the broader exploration portfolio rationalisation.
The non-cash impairment will not impact IGO's FY 2024 EBITDA but will be recorded in the company's audited financial results when they are released on 29 August 2024.
Should you buy the dip?
While analysts at Goldman Sachs have not yet responded to this update, the broker currently sees IGO shares as a great option for investors looking for battery materials exposure.
Last week, its analysts retained their buy rating with a new price target of $7.15. This implies potential upside of 19% for investors over the next 12 months.
It likes IGO due to its low costs and compelling lithium expansion potential. It said:
Greenbushes is the lowest cost lithium asset in our coverage; Production growth more than offsets increasing strip ratio: The addition of CGP3 (under construction) and CGP4 (planned) should take Greenbushes production capacity from ~1.5Mtpa today to ~2.4Mtpa (excluding tailings processing of ~0.3Mtpa), and they are planned to be funded from existing Greenbushes debt facilities, combined with Greenbushes cash flows (though we factor in below nameplate).
We reiterate our belief that further Greenbushes expansion remains one of the most economically compelling brownfield lithium projects, where the JV also retains significant optionality around extending/converting the TRP, while the resource likely underpins even further expansion (i.e. CGP5, subject to market conditions). Further, we note on our mass balance analysis that JV partners may need further Greenbushes expansions.
