Former Rio Tinto Aluminium boss Ivan Vella joined IGO as managing director in 2023 and has spent the previous six months mapping out the corporate’s future.
IGO operates the Nova nickel-copper-cobalt mine in WA and is a 49% companion in Tianqi Lithium Power Australia (TLEA) with Tianqi Lithium, which holds 51% of the Greenbushes lithium mine and 100% of the Kwinana lithium refinery, each in WA.
The “considerate” new technique focuses on upstream mining of lithium, copper and nickel, which Vella described because the standouts within the battery metals house.
IGO additionally thought-about different battery commodities together with graphite, cobalt, uncommon earths and manganese.
“Our conclusion is to not exclude them utterly however to focus closely on the three huge worth swimming pools the place we expect we are able to generate probably the most affect,” Vella stated.
EV transition underway
Chatting with analysts in Sydney on Wednesday, Vella stated the vitality transition and the adoption of electrical autos would drive demand for battery supplies.
He stated EVs in China had surpassed 40% market share and had been now cheaper than inner combustion engine autos.
Whereas adoption in China is superior, it’s slower in the remainder of the world, a pattern IGO believes will evolve as adoption challenges are addressed.
“They’re completely different worlds with completely different drivers,” Vella stated.
“We have to be constructing a enterprise that’s resilient for each, that may benefit from each.
“What we have to do is consider how we place our enterprise to realize returns by way of the cycle, in that context, the place there’s quite a lot of variation in the best way these markets will develop.”
Lithium unstable
Costs for spodumene have fallen beneath $750 per tonne from as excessive as $6000/t in 2022.
Whereas Vella described lithium as “ubiquitous”, he stated it will be core to vitality storage sooner or later.
“After we speak about lithium, there’s quite a lot of uncertainties, quite a lot of unknowns,” he stated. “We predict there’s a really enticing progress story there.
“The trade, we expect, will scale 3 times within the subsequent decade or so.”
IGO believes that kind of progress would require 80 new initiatives, primarily based on a manufacturing price of 20,000 tonnes of lithium carbonate equal.
Vella stated provide facet challenges had been nonetheless underappreciated.
“On the present costs, there’s not quite a lot of incentive for anybody to construct something,” he stated.
In keeping with Vella, the lithium market was nonetheless immature, which might require gamers to “embrace volatility over the following decade” till demand progress tapered off.
“Should you’re going to be within the enterprise of lithium, we expect it’s one thing you actually need to come back to phrases with and kit round,” he stated.
IGO will look to have a pipeline of lithium initiatives centered on upstream mining with “fastidiously constructed” downstream publicity.
Vella stated returns within the downstream house could be more difficult.
“We recognise that is an built-in trade and we have to be very considerate about how we combine with the trade and with our clients,” he stated.
Copper fascinating
IGO already has copper publicity by way of Nova, which produced 9922t within the 12 months to June 30.
IGO’s need for copper has been evident up to now with the corporate beforehand in talks with Glencore in 2022 to amass the CSA copper mine in New South Wales, an asset finally acquired by Metals Acquisition.
Vella acknowledged copper was an important commodity for the vitality transition.
“It’s enticing for us round diversification,” he stated.
Chief monetary officer Kathleen Bozanic stated “each man and his canine” needed extra copper publicity.
“We don’t wish to compete out there – everyone seems to be competing,” she stated.
Vella prompt exploration success had the most important potential for worth uplift in copper.
Nickel nonetheless within the combine
Vella stated nickel remained enticing, regardless of the flood of low-cost manufacturing coming from Indonesia.
“All of that creates a market that has some degree of cap on it, in our view,” he stated.
Nova nonetheless makes cash on the present weak nickel worth.
“It’s all in regards to the high quality of the useful resource,” Vella stated.
“We want we had a pair extra [Novas]. We do know what beauty like on this house.”
IGO has initiated new research on the mothballed Cosmos undertaking, centered on what it will take to make the undertaking price aggressive.
“The present view is except we have now a special mining method there, it’s going to be tough,” he stated.
Exploration a lever
In August, IGO recorded a A$286 million ($192.5 million) impairment on its exploration property.
Nonetheless, exploration is a key pillar of the brand new technique.
Newly appointed chief progress and industrial officer Brett Salt stated he believed the corporate had a number of exploration benefits: tenure, individuals, relationships and propriety instruments and information.
The corporate’s exploration package deal is in depth and covers 2% of Australia.
IGO will spend A$50-60 million on exploration this monetary yr, down from A$65-75 million within the 2024 monetary yr.
Salt stated IGO could be extra centered in its exploration applications.
“It’s not a lot in regards to the alternative there, however the prioritisation,” he stated.
M&A thought-about
IGO has a protracted historical past of transactions. It offered its 30% stake within the Tropicana gold mine in WA to Regis Sources in 2021 for A$903 million, which paved the best way for its $1.4 billion entry into lithium later that yr.
The 2022 acquisition of nickel miner Western Areas for A$1.3 billion has already been written down.
“Clearly, we recognise Western Areas didn’t go nicely,” Vella stated. “It was not our biggest hour however we have now modified from it and advanced.”
Bozanic stated the corporate would use Greenbushes and Nova because the benchmarks when contemplating additional acquisitions.
“We’re not in a rush. We will afford to be affected person due to the standard of these property,” he stated.
The looming closure of Nova within the subsequent two years has had many speculating that IGO would flip to M&A.
Within the absence of additional acquisitions or a fast-tracked discovery, Vella conceded it was potential IGO could not have an asset it operated itself within the coming years.
“We’re not going to get to fixing issues that haven’t emerged but,” he stated.
Whereas all IGO’s property are in WA, Vella stated the board was open to contemplating different jurisdictions.
“Mining begins with the orebody and also you’ve acquired to go the place the orebody is,” he stated. “We clearly recognise we might have to think about going additional afield.”
As of June 30, IGO had A$468 million in money and a A$720 million undrawn debt facility.
Regardless of the monetary firepower, Bozanic stated the corporate could be disciplined.
“It’s more durable to seek out the correct property somewhat than getting the funding for these property,” she stated.
‘Prime-down view’
IGO will now flip its consideration to growing what it’s calling the IGO Playbook, which is able to basically marry the brand new technique with its tradition.
Many analysts had been hoping for extra particulars on the CGP4 growth at Greenbushes however Vella stated the technique day was “not the time nor place for it”.
Canaccord Genuity analyst Tim Hoff described the technique day as a “top-down view of the world, versus an investor day with particular element”.
“The technique supplied framework however finally the elephant within the room stays the shortage of worth accretive growth initiatives below IGO’s direct management,” he stated.
“If IGO doesn’t get fortunate on exploration, or finds one thing to purchase, then its 2035 imaginative and prescient may stay simply that.”