Unexpected issues with capital value and operating costs at two IGO nickel acquisitions has translated to an almost $980 million write-down for the financial year. Despite the hit, the company saw strong results for the quarter.
Last year IGO bought up the Cosmos project and Forrestania nickel mine from Western Areas for $1.3 billion. The purchase was made in an attempt to consolidate the nickel market amidst a volatile lithium market at the time.
But now it seems that Western Areas saw the better end of the deal, with production schedule challenges at Cosmos and underperformance at Forrestania significantly cutting the value of both assets.
It is now estimated that the assets are worth roughly $380 million.
IGO acting chief executive officer Matt Dusci called the drop in value, expected to range from $880 million and $980 million, very disappointing.
“IGO’s board and management team acknowledge the quantum of this impairment is significant and have engaged a group of leading independent consultants to assist with a comprehensive review of the Cosmos project to better understand risks and opportunities to the current life of mine plan, capital cost estimates and schedule,” IGO said in its quarterly report.
“This review is underway and expected to be completed in the December 2023 quarter and will result in a revised plan which will detail how IGO will drive optimum value from Cosmos.”
But Dusci remains committed IGO’s nickel aspirations. Cosmos, in particular, has made significant progress towards first production.
“As a long-life nickel asset, Cosmos remains important to our nickel business and provides potential downstream optionality via our aspirations to develop an integrated battery materials facility in Western Australia,” he said.
Despite the hit, IGO reported success elsewhere. The company’s Greenbushes lithium mine exceeded the top end of full year spodumene production guidance, representing an 11 per cent increase quarter on quarter.
IGO’s Nova nickel mine delivered a strong final quarter, ending just below the bottom end of guidance. Group nickel production was 9,549 tonnes, a 14 per cent quarter on quarter increase.