IGO shares sink 14%. Here's what just spooked investors?

IGO shares fall as lithium operations offset a strong Nova performance.

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.

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.

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.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

Female miner in hard hat and safety vest on laptop with mining drill in background.
Materials Shares

Why are Lynas Rare Earths shares crashing 6% today?

Are Lynas Rare Earths shares a buy, sell, or hold now?

Read more »

Businessman planning and analysing investment data.
Materials Shares

Forget PLS, this ASX lithium stock could rise 80%

Is this lithium miner about to roar higher? Here's what Bell Potter is predicting.

Read more »

Couple using their digital tablet together.
Materials Shares

Orica updates on North American supply and land sales

Orica secures key North American supply and updates on land sales, supporting future growth and shareholder value.

Read more »

Man analysing data on his laptop.
Materials Shares

Forget BHP and buy this ASX copper stock

Bell Potter thinks there could be big returns on offer from this stock.

Read more »

A brightly coloured graphic with a silver square showing the abbreviation Li and the word Lithium to represent lithium ASX shares such as Core Lithium with small coloured battery graphics surrounding
Materials Shares

Why are Core Lithium shares crashing 8% on Thursday?

A busy morning of announcements has investors taking notice.

Read more »

a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the Pilbara Minerals share price continue to fall
Materials Shares

PLS shares have surged 85% in a year. So why are short sellers circling?

Could the bears be getting ahead of themselves?

Read more »

Senior farmer in overalls standing beside flood area on field.
Materials Shares

Why is this ASX share crashing 8% on Wednesday?

A positive earnings outlook hasn't stopped the selling.

Read more »

A man and woman sit next to each other looking at each other and feeling excited and surprised after reading good news about their shares on a laptop.
Materials Shares

3 reasons to buy BHP shares for 2027

I take a closer look at what could keep this mining giant growing well beyond 2027.

Read more »