Kwinana Refinery Impairment Casts Shadow Over IGO’s Otherwise Strong Quarter
IGO Limited reported robust operational performance in Q4 FY25 with improved safety and higher production at Greenbushes and Nova, while facing significant impairment at its Kwinana lithium refinery.
- Strong safety improvements with reduced injuries and severity
- Greenbushes spodumene sales up, achieving 60% EBITDA margin
- Nova nickel production rises with lower unit cash costs
- Kwinana refinery underperforms, expecting $70-90M impairment
- Debt facility reduced and extended; board renewal underway
Operational Highlights and Safety Gains
IGO Limited closed FY25 with a strong operational quarter, showcasing notable improvements in safety culture and production efficiency. The company reported a 50% reduction in injuries and a significant decline in injury severity, reflecting the success of its renewed focus on safety basics and leadership engagement. This cultural shift underpins IGO's commitment to protecting its workforce while maintaining operational momentum.
At the Greenbushes lithium mine, spodumene sales increased by 12% quarter-on-quarter, fulfilling delayed shipments and delivering a robust EBITDA margin of 60%. Production remained stable despite challenges such as heavy rainfall impacting feed grades, with throughput compensating to maintain output. Meanwhile, the Nova nickel operation recorded a 22% increase in nickel production and a 23% reduction in unit cash costs, driven by operational initiatives to manage the complexities of mining an end-of-life ore body.
Kwinana Refinery Struggles and Impairment
Contrasting the positive operational trends, the Kwinana lithium hydroxide refinery continued to face significant challenges. Operating at just 35% of nameplate capacity in the June quarter due to equipment failures and downtime, the refinery failed to meet production guidance for the year. IGO has expressed low confidence in the refinery’s ability to achieve sustained improvement and anticipates a further impairment charge between $70 million and $90 million, fully impairing Train 1 assets. Discussions with joint venture partners are ongoing to determine the optimal future pathway that minimizes cash outflows.
Financial Performance and Capital Management
Financially, IGO reported underlying EBITDA of $62.3 million for Q4 FY25, nearly doubling from the previous quarter, supported by higher contributions from Nova and a fair value gain on listed investments. However, free cash flow declined sharply to $2.4 million, influenced by timing of supplier payments and the absence of a prior quarter tax refund. The company maintained a strong balance sheet with net cash of $280 million as of June 30, 2025.
In line with its strategic refresh, IGO renegotiated its revolving credit facility, reducing it from $720 million to $300 million and extending maturity to July 2028. This adjustment aligns with a new liquidity threshold of $500 million to balance growth flexibility and shareholder returns, which remain targeted at 20-40% of underlying free cash flow under certain liquidity conditions.
Exploration and Corporate Developments
Exploration efforts continue with a sharpened focus on discovery and tenement rationalisation, including withdrawal from several joint ventures and reduction of tenure in key regions such as Paterson and Fraser Range. Notable projects like Cosmos, Forrestania, and Kimberley are progressing with drilling and fieldwork, though assay results remain pending.
Corporate governance is also evolving, with a board renewal process underway involving retirements and targeted recruitment to support IGO’s refreshed strategic direction. Executive leadership changes include the appointment of Suzanne Retallack as Chief People and Sustainability Officer, bringing extensive global mining experience.
Outlook and Guidance
Looking ahead, IGO has maintained FY26 production guidance for Greenbushes spodumene at 1,500-1,650 kilotonnes and cash costs between $310 and $360 per tonne. Nova’s life-of-mine nickel production guidance remains steady at 15,000-18,000 tonnes. The company plans to continue embedding its new exploration business model and advancing operational improvements, while closely managing the challenges at Kwinana.
Bottom Line?
IGO’s operational resilience is clear, but the Kwinana refinery’s future remains a critical watchpoint for investors.
Questions in the middle?
- What strategic options will IGO and its JV partners pursue for the Kwinana refinery?
- How will the board renewal impact IGO’s long-term strategic direction?
- Will exploration efforts yield new discoveries to offset end-of-life challenges at existing mines?