IGO (ASX: IGO) was up 1% at the open after the Nickel miner announced it had hit its production and cost guidance for the 2022 financial year, due largely to sales revenue of $278m in the June quarter.
Due to higher nickel and copper output from its Nova mining operation and strong nickel prices, the Australian miner reported an 11% lift in underlying earnings quarter-on-quarter (QoQ).
Overall, IGO recorded underlying earnings (EBITDA) of $258.4m for the three months through June (its fiscal fourth quarter), up from $232.6m in the previous quarter immediately prior, while cash costs, also within guidance, were at $2.24 per payable pound.
Nickel production was 3% higher on-quarter, at 6,509 metric tons
Copper production was at the lower end of guidance at 11,483t
Underlying free cash flow of $210m
Net debt of $533m with cash on balance sheet of $367m
$900m in new debt facilities following the acquisition of Western Areas
Inaugural dividend of $71m from Tianqi Lithium Energy Australia Pty Ltd (TLEA)
During the quarter IGO completed the acquisition of Western Areas and is progressing its integration into the broader operation.
Commenting on today’s update CEO Peter Bradford noted that the momentum for clean energy continues to grow with IGO well placed to play an important role.
“Nova and Greenbushes delivered production and cash costs within or better than guidance, first battery grade lithium hydroxide was produced at Kwinana, we received a first dividend distribution from the lithium joint venture and we progressed many organic growth opportunities across the business.”
IGO is currently implementing an optimisation strategy and plan for the Cosmos development to include additional capital development underground to create more mining areas and to expand the processing plant capacity from 0.75Mtpa to 1.1Mtpa.
Early July IGO acquired 70% interest in Matsa’s Fraser Range Tenements.
Under the terms of this agreement IGO will pay $600,000 in cash and then free carry Matsa for all exploration to completion of feasibility studies or decision to mine whichever occurs earlier.
IGO shares are down -10% over the past year and since early April is down -31%.
Consensus on IGO is Moderate Buy.
Based on Morningstar’s fair value of $12.12 the stock is undervalued.
Based on the six brokers that cover IGO (as reported on by FN Arena) the stock is currently trading with 34% upside to the target price of $13.34.
Despite downgrading stocks with exposure to iron ore, met coal, copper, aluminium, alumina, nickel and zinc, UBS retains a Buy or IGO and expects the miner to benefit from record high spot prices driving strong cashflow.
The target price increased to $12.75 from $12.25. (07/07/22).
Late June Morgan Stanley lowered its 2022 nickel price forecast by -12% and retained its Underweight rating for IGO.
The target price falls to $10.20 from $10.65.
Citi retained a Buy rating following the implementation of the $1.3bn Western Areas and lowered its target price to $15.70 from $16.20.
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