Lithium has been repositioned as IGO’s core focus, ahead of copper and nickel, while it expects to brace for extreme volatility as supply and demand imbalances play out.
Lithium has been repositioned as IGO’s core focus, ahead of copper and nickel, while it expects to brace for extreme volatility as supply and demand imbalances play out.
The anticipated strategy refresh comes in response to its changing portfolio and shifts in the commodity markets, as the miner mothballs two of its nickel assets and its Nova mine nears the end of its life. It also holds an attractive stake in the Greenbushes lithium operation.
There was a strong energy transition and electrification thematic to the 10-year plan, with chief executive Ivan Vella bullish on future demand for battery materials while also warning that long-term lithium price volatility should be expected, given the market's immaturity.
“The industry we expect will scale three times in the next decade or so, and that rate we don't know for sure, but what's more important is how that's supplied, and how the industry steps up to meet that demand,” Mr Vella told analysts and investors.
“That translates roughly to 80 new projects, unfunded, each at 20,000 tonnes [lithium carbonate equivalent] per year, which is significant.
“While lithium might be quicker and easier to develop than copper, for example, there's still a lot to it, and I suspect that some of those supply side challenges are underappreciated when we do the spreadsheet maths of a supply curve and how that plays out.”
Mr Vella said there was not a lot of incentive for building projects at current prices. Spodumene concentrate is sitting around the $US745 a tonne mark.
He said he expected lithium to be highly volatile throughout that cycle, adding there wasn’t another commodity that had grown in the same manner.
“It's enormous growth, and the demand supply imbalances will play out and create volatility, so we need to recognize and embrace that,” Mr Vella said.
“That will be a nature of the business that we're in for at least the next decade.
“This shouldn't be a surprise and if you're going to be in the business of lithium, we think that that's something that you really need to come to terms with, and you need to gear around.”
IGO is in the midst of moving its Cosmos and Forrestania nickel projects onto care and maintenance and extracting the last of its Nova asset over its remaining two year mine life, against of background of a weak price environment for the battery metal ingredient.
The miner’s short-term focus, the room was told, was on its stake in the Greenbushes hard-rock lithium mine and Kwinana joint venture operations ahead.
IGO owns 49 per cent of the Tianqi Lithium Energy Australia (TLEA) business, which owns 51 per cent of Greenbushes operator Talison alongside Albemarle.
While taking answers from the room, IGO’s Brett Salt said it was very clear that the miner wanted to grow in lithium with Tinaqi, and that the joint venture was the vehicle.
Mr Vella said the Greenbushes operation provided a blueprint for further pursuing lithium. IGO will be targeting the battery metal through its redefined exploration efforts.
Its primary focus would be on upstream mining and processing, with what it called carefully considered downstream exposure.
“To be to be successful in lithium, we really think you need to be highly cost competitive. We start with a reference point in Greenbushes,” Mr Vella said.
“It's obviously fantastic and that geology is very unique, so I'm not saying that we've got another one up our sleeve, albeit everyone wishes they do, but we have a reference point of what good looks like.
“Through that, we have a good understanding of the costs and the kind of performance that we need to be successful through the cycle.”
Further, Mr Vella said he didn’t believe that subsidies and tariffs were going to be sufficient to change the industry economics.
“It comes back to mining 101, get back to the basics and look at the resource, look at the technology used to extract it, and look at the standards to which you develop that mine,” he said.
Mr Vella said in terms of pursuing copper, the miner was more focused on exploration and early-stage development options rather than an M&A pathway.
Nickel has shifted to the third commodity of interest under IGO’s refreshed strategy, with a short-term focus on getting the most value out of Nova.
Mr Vella said nickel was still attractive, in terms of industrial and vehicle demand, but the world had changed in recent times, pointing to the supply deluge out of Indonesia.
“The supply story out of Indonesia is very strong and the businesses that have developed there have got very low costs, very strong options to continue to grow,” he said.
“All of that creates a market which has got some level of cap on it, in our view, and certainly to deliver attractive returns will be more difficult.
“This really comes back to getting into a resource, if you're going to pursue nickel, that can deliver sustained, long-term returns.
“I think Nova is a great analogue, for example, I wish we had a couple more. It's a wonderful asset b unfortunately, it runs out.
“But we do know what good looks like in this space, so it's an area of interest, but we need to be very disciplined about our presence in this market.”
IGO is progressing studies around the future of Cosmos, with an eye to potentially restart operations upon defining the resource and lowering costs.
