The IGO Ltd (ASX: IGO) share price has slipped into the red in morning trade on Thursday after the company posted its numbers for Q2 FY25.
Shares in the lithium, nickel and cobalt mining company are currently down nearly 3% at $5 apiece as investors process the update.
Zooming out, the stock has lifted nearly 5% this year to date. Let's dive in.
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IGO share price hit by challenges in Q2
IGO reported several key updates and headwinds for Q2 FY25, including:
- Revenue decreased 8% quarter over quarter to $131.8 million
- Pre-tax loss of $79 million, excluding all impairment at its Kwinana site
- Work halted on the Lithium Hydroxide Plant 2 (LHP2) at Kwinana due to "project economics". IGO will book a "substantial impairment" in its H1 FY25 results as a result
- Finished the quarter with net cash of $247 million and $720 million undrawn debt
What else happened in the quarter?
The IGO share price fluctuated last quarter, but the business also faced headwinds at its Kwinana site. This resulted in the decision to halt the development of the LHP2 at the project.
Kwinana subsequently booked a pre-tax loss of $105.5 million, nearly double the loss of the first quarter in FY25.
IGO says this came after management adjusted inventory values of December last year, to their "fair value at prevailing market prices".
As a result, a large decrease of Kwinana's carrying value is expected to be recognised in IGO's 1H25 results.
Meanwhile, the Greenbushes lithium mine saw production "exceeding plans" for the year. The mine processed 359,000 kilotonnes (kt) and 33kt of chemical and technical grade spodumene, respectively.
But the average realised spodumene prices were down to US$736 per tonne from US$872 per tonne in the previous quarter.
Added to this, cash costs at the mine were up 17%, hitting $324 per tonne. This resulted from "lower volumes, higher maintenance, and deferred stripping adjustments". These factors could impact the IGO share price.
What did management say?
IGO's CEO, Ivan Vella, commented on the headwinds, noting the company's "robust" position:
At Kwinana, the recent decision to cease work at Lithium Hydroxide Plant 2 (LHP2) reflects the challenges of developing downstream lithium processing capacity and the specific economics of this project, noting the capital intensity challenges in Australia.
IGO is continuing to work with our partner, Tianqi Lithium Corporation, on a pathway at Kwinana that is acceptable to both parties. Meanwhile, we are finalising the impairment we expect to recognise in our 1H25 results which we will announce next month…
…While market conditions remain challenging, IGO is in a robust position to deliver on its strategy with $247 million cash on hand.
What's next for IGO?
Looking to FY25, the IGO share price will likely be sensitive to commodity prices. But its production numbers will also play a part.
The company expects nickel production to be between 16,000 tonnes and 18,000 tonnes, and copper production to be between 6,250 tonnes and 7,250 tonnes.
Cobalt production is projected to fall between 550 tonnes and 650 tonnes.
Meanwhile, the company forecasts cash costs for nickel production to range between A$4.80 and A$5.80 per pound.
For the Greenbushes site, IGO has forecast spodumene production between 1.35 million tonnes and 1.55 million tonnes, with cash production costs ranging from A$320 per tonne to A$380 per tonne.
It also expects capital expenditures at its Kwinana site to be between A$80 million and A$100 million.
IGO share price snapshot
The IGO share price has taken a hit this morning following the release of its quarterly update.
Zooming out, the stock is down more than 33% in the past year amid a difficult market for ASX mining shares.
