IGO Ltd (ASX: IGO) shares are having a day to forget on Wednesday.
In morning trade, the ASX 200 mining stock is down 12% to $4.40.
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Why is this ASX 200 mining stock crashing?
Investors have been selling the battery materials company's shares this morning following the release of its quarterly update.
According to the release, spodumene production came in flat quarter on quarter at 340kt with a 7% reduction in cash costs to A$366 per tonne.
Also increasing was its lithium hydroxide and nickel production, which came in 36% and 22% higher quarter on quarter, respectively.
This ultimately underpinned a 15% increase in quarterly revenue to A$126.9 million and an 83% lift in underlying EBITDA to $62.3 million.
However, one area of concern was the ASX 200 mining stock's cash flow generation. It notes that its underlying free cash flow fell 95% quarter on quarter to just $2.4 million. This reflects an income tax refund in the previous quarter, lower operating cash flow from Nova, and the timing of supplier payments in the quarter.
At the end of the period, the company had a cash balance of $279.7 million. This is down slightly from $284.3 million at the end of March.
What else?
The ASX 200 mining stock flagged that it is assessing the carrying value of the Kwinana refinery assets and estimates a further impairment charge in the range of $70 million to $90 million for FY 2025, resulting in Train 1 being fully impaired.
The company notes that the impairment estimate is based on IGO's view of the future cash flows for the refinery and uses certain judgements and estimates which have been informed by its assessment of historical performance data, industry benchmarking, and technical experts.
Commenting on the refinery's performance, the ASX 200 mining stock's CEO, Ivan Vella, said:
The Kwinana lithium hydroxide refinery operated well below nameplate capacity in the quarter and did not achieve guided production tonnes for the year. Despite the strong commitment from the team at site to address operational problems and ongoing issues, IGO has low confidence in the ability of this asset to achieve meaningful, sustained improvement. We continue to work with our JV partner to determine the optimal future pathway for the plant.
One asset that Vella was very pleased with was the low cost Greenbushes lithium operation. He adds:
Greenbushes is a world-class ore body and generated a strong margin in FY25. There are plenty of challenges and opportunities as we focus on full optimisation and achieving maximum value from the asset. The new management team are focused on a range of significant operational improvements both in the short term as well as the life of mine optimisation work. Management and the JV partners are strongly aligned and working closely to deliver the pathway forward.
