Reporting Season

IGO posts fourth consecutive year of record earnings

By Market Index
Tue 30 Aug 22, 11:11am (AEDT)
high jumper
Source: Unsplash

Key Points

  • IGO posted record underlying earnings of $717m, up 51%
  • The interim and final dividend of 10 cents was unchanged
  • Macquarie’s earnings forecasts for IGO rise 28% to 149% across FY23 to FY27

Given the fourth quarter revenue boost announced late July, news of IGO’s (ASX: IGO) robust full year FY22 results shouldn’t have come as a mammoth surprise to the market this morning.

However, there was still enough daylight within this morning’s result for the ASX 200 miner to jump 1.62% an hour out from the open.

The group posted record underlying earnings of $717m, up 51% on full-year revenue to $903m, which jumped 34%.

FY22 marked the fourth consecutive year of record underlying earnings (EBITDA) for the group, which management attributes to strong operating performance at Nova and the first annual profit contribution from the company’s investment in the lithium joint venture; Tianqi Lithium Energy Australia Pty Ltd (TLEA).

But due to the one-off after-tax gain on the sale of Tropicana of $385m in the previous year, annual net profit (NPAT) was down -40% to $331m.

The interim and final dividend of 10 cents was unchanged from the previous year.

Results at a glance

Source: IGO

A busy year

Having benefitted from higher commodity prices, sales at the Nova operation delivered at the top end of guidance for FY22 nickel and cobalt production, yet fell marginally short of guidance for copper production.

Adding to the strong expansion of the miner’s nickel business during the year was the successful completion of nickel miner Western Areas acquisition for $1.26bn in June 2022.

This transaction delivered a portfolio of operating and development stage mines, including:

  • The Forrestania Operation, which comprises the Flying Fox and Spotted Quoll underground mines and the Cosmic Boy processing facility

  • The Cosmos Project, which comprises the Odysseus underground mine development

  • A substantial broader exploration portfolio to IGO

Then there was the lithium joint venture with Tianqi Lithium Corporation’s fully integrated lithium business, which led to the commissioning of two new concentrators at the Greenbushes operation - in which IGO holds a 24.99% economic interest - resulting in record operating and financial results for Greenbushes in FY22.

The first train at the Kwinana Lithium Hydroxide Refinery was also commissioned and produced first battery grade lithium hydroxide in May 2022.

Other highlights included:

  • Underlying earnings (EBITDA) from Nova increased 45% YoY to $631m

  • Nova nickel production was within guidance at 26,675t

  • Cash costs better than guided at $1.95 per payable pound of nickel

  • The lithium business contributed $177m of net profit

  • Cash on balance sheet of $367m at 30 June 2022 and $900m

  • Tianqi delivered IGO a share of net profit of $177m and an inaugural dividend payment of $71m

Leverage into clean energy metals

Looking back over the year’s highlights, IGO’s CEO Peter Bradford told investors that the high-quality nickel and lithium businesses, combined with the portfolio of belt scale exploration projects - focused on discovery of nickel, copper, lithium and rare earths - gives the group a great platform to leverage off the growing demand for clean energy metals.

“Our focus over the coming year will be to continue to consolidate our transformative growth over the past two years, to build lithium capacity at Greenbushes and the Kwinana Refinery and bring Cosmos to first nickel production,” Bradford said.

FY23 guidance

Source: IGO



What brokers think

IGO is up 33% over 12 months.


Consensus on IGO is Moderate Buy.


Based on Morningstar’s fair value of $14.69 the stock appears to be undervalued.


Based on the six brokers that cover IGO (as reported on by FN Arena) the stock is currently trading with 10.4% upside to the target price of $13.98.


Based on upgraded long term prices of US$1,100/t spodumene, US$15,000/t battery grade lithium carbonate, US$16,000/t battery grade lithium hydroxide, and a US75c exchange rate, UBS has raised its lithium miner earnings forecasts and valuations.


The broker retains a Buy rating and raises the price target to $15.85 from $13.00.


Macquarie, which has the highest price target on IGO of $21, has upgraded its lithium price forecasts to reflect a tightening in demand and supply and strong spot prices.


IGO is one of Macquarie’s favoured sector picks (Outperform), and the broker’s earnings forecasts for IGO rise 28% to 149% across FY23 to FY27.

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