IGO confirms the inevitable, placing its Cosmos mine on care and maintenance
\nImpairments on its disastrous Western Areas deal will now run beyond $1 billion
\nChampion Iron impresses with December results<\/p>\n
IGO (ASX:IGO)<\/a> has halted another WA nickel mine, pausing one of only two large scale developments expected to come online in the State over the next couple years.<\/p>\n It comes amid a radical decline in LME nickel pricing that has seen as much as 40,000t of current production in WA suspended or placed under threat.<\/p>\n All eyes will now be turned to BHP\u2019s (ASX:BHP) <\/a>financial results next month, to see if it maintains plans to extend the smelter life at its Nickel West division and construct a new 35,000tpa nickel, 41,000tpa copper mine at West Musgrave on the WA-SA border.<\/p>\n Acquired in the takeover of OZ Minerals, a $1.7 billion capex bill was placed on the project by its previous owner, with plans to bring it to life by 2026 due to both its mixed copper and nickel sulphide output and advantageous metallurgical characteristics.<\/p>\n Meanwhile IGO\u2019s long expected call today to put the Cosmos mine on care and maintenance will see a further $160-190m impairment on the carrying value of the Cosmos and Forrestania mines it bought in a $1.3 billion 2022 cash takeover from Western Areas, which looks worse by the day. Cosmos carried a $425m capex bill when the deal was signed, sealed and delivered, only for IGO to up its total cost estimate to up to $825m in October 2022.<\/p>\n $968m was wiped in a massive impairment announced in the miner\u2019s full year results.<\/p>\n \u00a0<\/p>\n It\u2019s been a rough ride for new MD Ivan Vella, who entered the fray more than a year after the death of previous boss Peter Bradford amid a cloud over the status of his departure as the head of Rio Tinto\u2019s aluminium business.<\/p>\n He has faced a firestorm as nickel and lithium prices nose-dived on his way into the job. The company saw a 58% drop in underlying EBITDA QoQ to $153m in the December quarter, with underlying free cash flow falling 118% to -$96m.<\/p>\n Nickel production was stable at 7118t, but maintenance saw spodumene concentrate output from the Greenbushes mine \u2014 where IGO owns 24.99% \u2014 fall 14% to 358,000t.<\/p>\n That meant costs rose 36% from $262\/t to $357\/t, with IGO already announcing a drop in output from 1.4-1.5Mtpa to 1.3-1.4Mtpa for FY24. IGO and its partners Tianqi and Albemarle have moved to shorten lag times between spodumene sales and pricing, which saw its JV partner Tianqi decide to reduce its offtake volumes. Hidden in the weeds, IGO also lowered guidance for nickel output at its Nova mine, which is still generating cash along with the ageing Forrestania assets.<\/p>\n The Forrestania mines will cost $10.50-11.50 a pound this year, though Nova output will come in at $3.90-4.30\/lb. IGO previously forecast production costs of $9.50-10.50\/lb at Forrestania and $3.40-3.90\/lb at Nova, with Nova guidance down from 21,500-23,500t nickel to 21,000-22,000t.<\/p>\n Greenbushes\u2019 sale price fell in the December quarter from U$3740\/t to US$3016\/t FOB Australia \u2014 around three times those reported by Pilbara Minerals and Mineral Resources \u2014 meaning integrated Tianqi and Albemarle would have been struggling to make margins as chemical prices nosedived.<\/p>\n Revenue from Greenbushes fell $1b or 43% in the quarter to $1.3b, while IGO and Tianqi\u2019s Kwinana hydroxide refinery continues to operate \u2018below expectations\u2019.<\/p>\n It produced 617t of lithium hydroxide in the December quarter, 286t of that battery grade, hitting a peak daily rate of 44% \u2014 below the 50% run rate IGO had flagged for the end of 2023. The quarterly number was just 2% higher than the 607t produced in the September quarter, and well below the plant\u2019s 24,000tpa design capacity.<\/p>\n While its product is qualified, low prices saw the companies hold sales, with 3076t sitting in inventory. EBITDA for the plant fell 59% to -$169.2m.<\/p>\n Vella said IGO did not take its decision to shut Cosmos lightly, blaming deteriorating nickel prices for the development. But he said the recent changes at Greenbushes would provide greater confidence on production and sales in 2024, with the new pricing mechanism bringing the asset into line with other hard rock lithium operations.<\/p>\n \u00a0<\/p>\n <\/span><\/p>\n \u00a0<\/p>\n While battery metals are in the doghouse, iron ore is back in vogue.<\/a><\/p>\n Close to an all time high, Champion Iron (ASX:CIA)<\/a> saw its shares charge 4.4% higher this morning after announcing that it had produced 4Mt of high grade iron ore from its Bloom Lake complex in December, outstripping the nameplate capacity of its magnetite operations in Canada.<\/p>\n That saw it pull in C$507m in revenue and C$247m in EBITDA, which came as it made a final investment decision on a new project that will see it produce pellets for use in direct reduce iron plants, the main \u2018green steel\u2019 technology operating globally.<\/p>\n \u201cWe are excited to implement key elements of our expansion strategy, with the receipt of an allocation of additional hydroelectric power from Hydro-Qu\u00e9bec and our recently secured additional financing. Central to this, our Board provided a final investment decision for the DRPF project,\u201d CEO David Cataford said. <\/p>\n \u201cThis carbon neutral project, which remains on schedule to be completed in calendar H2\/2025, positions the Company and the region to contribute to the accelerating green steel transition, particularly considering the recent decisions by the governments of Qu\u00e9bec and Newfoundland and Labrador to include high-purity iron ore on their critical mineral lists. <\/p>\n \u201cBloom Lake demonstrated its ability to produce at or above its recently expanded nameplate capacity, resulting in a quarterly production record and robust financial results.<\/p>\n \u201cOur team also achieved another important milestone by announcing the details of the Kami Project Study which evaluated the construction of a 9.0M wmt per year DR quality iron ore operation.<\/p>\n \u201cThe Study enables the Company to consider strategic partnerships prior to advancing the project, providing an opportunity to capitalise on the growing demand for green steel.\u201d<\/p>\n Champion Iron\u2019s output rose 17% on the previous quarter and 36% on the same period in 2022, with EBITDA up 59% QoQ, leaving the company with C$387.4m in cash, up C$70.8m on September 30. It pulled in a gross realised selling price of US$144\/dmt, compared to the US$138.7\/dmt average of the Platts 65% Fe index, with net selling prices up 15% QoQ to US$115.6\/dmt and costs of US$53.6\/dmt.<\/p>\n Jarden\u2019s Jon Bishop described December as a strong quarter for Champion Iron, but said an IRR of under 10% for Kami was underwhelming. He said the pelletisation project should improve margins further once commissioned.<\/p>\n \u201cOur favourable thesis is driven by CIA\u2019s differentiated offering in terms of \u2018green credentialled\u2019 (due to hydroelectricity and very high grade) Fe-concentrate and its ability to access growing markets for low carbon steel inputs ex-China,\u201d he said. <\/p>\n \u201cPhase II expansion looks all but ramped up to +15mtpa 66.2% Fe concentrate whilst the DRPF project should enhance margins should the project achieve commissioning timelines in 2025. <\/p>\n \u201cWe think the company otherwise boasts material expansion optionality, unfettered on account of abundant port and rail capacity.\u201d<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Ground Breakers: IGO hits the pause button on Cosmos as nickel\u2019s month from hell drags on<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Reign of fire<\/h2>\n
IGO (ASX:IGO) share price today<\/h2>\n\n
Champion Iron runs on super Canadian quarter<\/h2>\n
Champion Iron (ASX:CIA) share price today<\/h2>\n\n
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