IGO Ltd (ASX: IGO) shares have come under pressure on Friday after the company released its March quarter update.
The stock is down 13.6% to $7.38 at the time of writing, giving back some of its recent gains.
Even with today's drop, the IGO share price is still up around 7% over the past month.
Here's what came through.
Image source: Getty Images
Strong cash flow and earnings at Nova
According to the release, IGO reported a clear improvement in financial performance across the quarter.
Group sales revenue rose 45% to $119.7 million, supported by stronger pricing and higher volumes from its Nova operation.
Underlying EBITDA came in at $119 million, up on the prior period. Free cash flow was $35.8 million, while net cash lifted to $327 million.
A large part of that improvement came from Nova, which delivered higher nickel and copper production alongside stronger realised prices.
Nova generated $52 million in free cash flow for the quarter, with EBITDA rising 43% to $61 million.
Greenbushes still lagging
The weaker point in the update came from Greenbushes which seems to have upset investors.
Production was broadly flat at 351,000 tonnes, with lower grades, recoveries, and maintenance downtime weighing on output.
At the same time, unit costs increased due to higher stripping activity and site costs.
Even so, realised pricing improved over the quarter. The average spodumene price nearly doubled to US$1,668 per tonne, reflecting tighter lithium market conditions compared to earlier periods.
IGO also reduced its FY26 production guidance for Greenbushes to 1,375,000 tonnes to 1,425,000 tonnes, pointing to ongoing operational challenges.
In the end, prices are doing a lot of the work right now, while production is still taking time to come through.
Lithium downstream still building
At Kwinana, production lifted to 3,047 tonnes of lithium hydroxide, or about 51% of nameplate capacity.
While that's a step forward, the plant is still not running at full pace.
Costs came down as volumes improved, although the operation still posted an EBITDA loss of $7.7 million for the quarter.
There is also a planned shutdown across April and May, which will affect output in the short-term.
It is still early days, but the focus is getting the plant running more consistently and lifting volumes over time.
Foolish takeaway
The share price reaction suggests the market was looking for more from the lithium side.
Nova is doing most of the heavy lifting, with strong margins and steady cash flow coming through. That is helping support the group, but it is not enough to offset the variability across the lithium assets.
Cash has improved over the quarter, and the balance sheet looks stronger.
But Greenbushes and Kwinana still need to settle, with production and costs not yet stable.
Until that improves, the IGO share price is likely to move with how those operations perform.
