IGO shares retreat as nickel costs drive earnings miss
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More news: IGO shares lowered in morning trade after the miner dropped to a worse-than-expected full-year loss of $955 million.
Shares were down 4.5% to $5.11 at midday AEST.
RBC Capital Markets analyst Kaan Peker said IGO's underlying earnings were worse than expected, given additional costs relating to its nickel assets, including its closed operations Cosmos and Forrestania.
What they said: "This generally drove the misses for the rest of the P&L," said Peker.
"We don't expect this to have a significant negative effect on the stock performance today given that Cosmos is shuttered and Forrestania is already closed, but optically this is a negative.
"Importantly, there has been no change to guidance from the July announcement, and the company remains in a net cash position."
IGO in $955m loss after Kwinana lithium refinery impairment
The news: Mining group IGO has slumped to a full-year loss of $955 million, having delivered a $2.8 million profit last year.
The result included a $642 million hit following the closure of its part-owned Kwinana lithium hydroxide refinery in Western Australia, as well as a $115 million impairment of exploration assets and an increased rehabilitation provision of $58 million.
Analysts were expecting a softer loss of $873.72 million, according to Visible Alpha.
Total revenue fell 37% year on year from $841 million to $528 million, better than consensus estimates of $519 million.
IGO scrapped its dividend, having paid 37 cents per share last year.
The context: Revenue was driven lower by reduced sales at its Nova nickel-copper-cobalt operation and the closure of its Forrestania nickel operation, both located in Western Australia.
IGO noted that the global lithium market was weak throughout the year, but said the sector's fundamentals are "positive" with its Greenbushes mine well placed to capitalise.
What they said: "Both challenging market conditions and asset impairments, as a result of a disciplined portfolio reviews, impacted our headline result," said IGO's managing director and chief executive Ivan Vella.
"Some of these were difficult decisions, however our underlying business remains solid and we have a clear strategy for value and growth we are delivering on."
The sources: ASX, RBC Capital Markets research
