Australia’s IGO Announces Freezing of Cosmos Nickel Project and Reduction in Lithium Production Forecast
Australian battery metal producer IGO Ltd has announced significant strategic shifts, including putting its Cosmos nickel project in Western Australia into care and maintenance. This decision comes amid falling nickel prices largely influenced by Indonesia’s dominant position in the market.
IGO, which faced a near A$1 billion writedown in the value of Cosmos and its Forrestania mine in the last financial year, anticipates an additional hit of A$160 million to A$190 million due to the continued decline in nickel prices. "This is not the outcome anyone at IGO wanted," CEO Ivan Vella stated, acknowledging the operational and financial risks of continuing the Cosmos project under current market conditions.
The company also reported challenges in ramping up its Kwinana lithium hydroxide refinery, a joint venture with China's Tianqi Lithium Corp. The global glut of lithium inventory, which has impacted prices, led to no sales of lithium hydroxide during the December quarter. Lithium hydroxide is known to start degrading after six months, adding to the complexity of managing inventory.
In the face of market volatility, IGO has trimmed its production guidance at the Greenbushes lithium project. The forecast has been lowered to 1.3 million tons to 1.4 million tons for fiscal 2024, representing a 7% reduction from the original guidance. The company also expects a 20% reduction in sales in the second half of the fiscal year.
In early trading, IGO's shares experienced a 9% slump, later recovering to rise by 1.1% to A$7.82. This fluctuation reflects the market's response to the company's strategic decisions and the broader challenges facing Australia's nickel and lithium sectors.
IGO's move to freeze the Cosmos nickel project and adjust its lithium production forecast is indicative of the broader trend in the battery metals market. Producers are grappling with the realities of supply and demand imbalances, price volatility, and the evolving landscape of the electric vehicle industry. As the market adjusts to these dynamics, companies like IGO are re-evaluating their strategies to navigate these turbulent times.
