IGO to mothball Cosmos nickel mine

By Jack McGinn
Wednesday, 31 January, 2024 - 07:02
Category: 
Mining

IGO’s Cosmos nickel mine has become the latest victim of the nickel price crunch, with the company revealing it will shift the project to care and maintenance from the end of May.

In a statement released alongside the company’s quarterly, IGO said a thorough review of the project had revealed a reduction in life of mine, delays getting the mine in to full capacity and forecast increases in operating and capital costs, along with depressed prices, had forced its hand.

The news comes a month after IGO halted construction on a mechanised ore handling system at the project; a decision made days after new chief executive Ivan Vella came on board.

IGO spent $62 million on mine development at Cosmos last quarter.

Mr Vella said the company still had faith in the Cosmos asset, but that production would need to be halted.

“This is not the outcome anyone at IGO wanted, however we cannot ignore the operational and financial risks involved in continuing to develop Cosmos in the current environment,” he said.

“We still believe there is value in Cosmos, however, in this nickel environment we need to be disciplined with our allocation of capital, while retaining our optionality to restart if market conditions improve.”

An impairment of between $160 million and $190 million is expected against the Cosmos assets in the company’s first-half results, to be released in February.

IGO said it would explore some redeployment opportunities for staff at Cosmos, but that there would be redundancies. It’s understood around 200 IGO staff and contractors are employed at Cosmos.

A review into the acquisition of Western Areas – the $1.3 billion deal which brought Cosmos and the Forrestania mine onto the company’s books – is ongoing.

IGO has also flagged a “small impairment” against Forrestania, with reassessments of value at both projects primarily attributed to a rapid fall in nickel prices, which have come off 50 per cent in the past year.

The company had flagged $968 million worth of impairments against Cosmos and Forrestania prior to today’s news.

The announcement comes days after IGO and Greenbushes joint venture partner Tianqi revealed spodumene sales from their major lithium mine would be down 20 per cent on previous estimates.

The Cosmos closure comes following a quarter during which group sales revenue fell 28 per cent to $178.7 million, due to an 18 per cent fall in the nickel price and lower sales volumes at the Nova and Forrestania mines.

Underlying earnings were down 58 per cent at $153 million, with net cash 38 per cent lower quarter on quarter at $276 million.

The Cosmos closure is the latest in a series of nickel project closures in Western Australia, following moves by the administrators of Panoramic Resources at the Savannah project, First Quantum's decision at Ravensthorpe and Wyloo Metals’ move at its Kambalda operations.

IGO said Forrestania and its Nova nickel mine remained cashflow positive at current market conditions. 

A battery metals crisis meeting between industry figures and state and federal government ministers was held in Perth last week, amid ongoing concerns over the future of the sector. 

Battery mineral woes

Companies: 
IGO
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Ivan Vella