How Is IGO Navigating Kwinana’s Setbacks Amid Strong Greenbushes Performance?
IGO Limited reported a robust operational quarter with improved safety and solid production at Greenbushes and Nova, offset by challenges at its Kwinana lithium refinery and an expected asset impairment.
- Safety metrics improved with 3-month TRIFR down to 5.1
- Greenbushes achieved 60% EBITDA margin despite weather impacts
- Kwinana refinery operating at 35% capacity with $70-90M impairment expected
- Underlying EBITDA rose 83% to $62 million driven by higher nickel and copper sales
- FY26 production guidance set for spodumene, nickel, and lithium hydroxide
Safety and Operational Highlights
IGO Limited’s June quarter results reveal a company making tangible progress on safety and operational fronts. The three-month Total Recordable Injury Frequency Rate (TRIFR) improved significantly to 5.1, down from 9.9 in the previous quarter, reflecting sustained leadership and safety initiatives. Over the full year, injury rates and severity have declined markedly, underscoring IGO’s commitment to protecting its workforce.
Operationally, the Greenbushes lithium mine continues to deliver strong margins, with a 60% EBITDA margin in the quarter despite heavy rains that limited access to higher-grade ore. Production volumes remained stable, and sales increased due to delayed shipments from the prior quarter. Meanwhile, the Nova nickel and copper operation showed operational improvements, with production and sales rising and unit costs falling, bolstering confidence in its life-of-mine guidance.
Challenges at Kwinana Refinery
In contrast, the Kwinana lithium refinery faced significant operational hurdles. Utilisation remained low at just 35% of nameplate capacity, hampered by equipment failures and unplanned shutdowns. The company expressed low confidence in achieving sustained improvements at this asset, prompting an assessment of its carrying value. IGO anticipates a further impairment charge between $70 million and $90 million, representing the full remaining value of Train 1 at Kwinana.
Financial Performance and Capital Management
Financially, IGO reported underlying EBITDA of $62 million for the quarter, an 83% increase from the previous quarter, driven by higher nickel and copper sales and a $17 million fair value gain on its listed investments. Underlying free cash flow was modest at $2 million, impacted by a prior quarter tax refund. The company maintains a strong balance sheet with $280 million in cash and has extended and reduced its debt facility to $300 million, maturing in 2028, enhancing liquidity and financial flexibility.
Rehabilitation provisions are under review and expected to increase by $50 to $70 million, reflecting ongoing environmental commitments. The company also announced board renewal plans, including a reduction in board size and the retirement of three directors ahead of the AGM, signaling a strategic governance refresh.
Outlook and Strategic Moves
Looking ahead, IGO provided FY26 guidance targeting spodumene production of 1,500 to 1,650 kilotonnes, nickel production of 15,000 to 18,000 tonnes, and lithium hydroxide production of 9,000 to 11,000 tonnes. Capital expenditure plans are set accordingly, with significant investments earmarked for Greenbushes and ongoing operational improvements at Nova.
The company is progressing the Forrestania transaction with Medallion Metals, retaining rights to explore and mine nickel and lithium and to receive royalties on future gold production. The exclusivity period extends to August 2025, with completion targeted late in the year, subject to conditions.
Overall, IGO’s quarterly update paints a picture of a company balancing operational successes with challenges, particularly in downstream processing, while maintaining a clear strategic focus on growth and value delivery.
Bottom Line?
IGO’s next chapter hinges on resolving Kwinana’s challenges and executing growth projects amid a strong safety and financial foundation.
Questions in the middle?
- Will the Kwinana refinery turnaround plans restore confidence and profitability?
- How will increased rehabilitation provisions impact IGO’s future cash flows?
- What are the strategic implications of the Forrestania transaction for IGO’s portfolio?
