IGO Limited (IGO) Earnings Call Transcript

Thank you for standing by, and welcome to the IGO June 2026 Quarterly Activities Report. [Operator Instructions] I would now like to hand the conference over to Mr. Ivan Vella, Managing Director and CEO. Please go ahead.

Thanks, Darcy. Good morning, everyone, and thanks for joining us for IGO's June quarter and the wrap-up of financial year '26. I'm joined this morning by Ian Rowe, newly appointed as our Interim CFO. He'll be available to cover a few remarks on our finances, but also take some questions at the back end of our opening remarks. Ian has been with IGO for some time and knows the business very well. And over the coming months, he'll join me for some of our engagements with investors and analysts so you can get to know him better and have a chance to talk through some of the questions around the business. June is always a good point to reflect back on the financial year, and we finished with really strong momentum in safety and performance at Nova and a solid quarter at Greenbushes, all resulting in a strong balance sheet. We recognize there's still important challenges for us to work through at Kwinana and obviously, a continued focus on Greenbushes as we work to drive towards the full potential of that amazing asset. Obviously, the fire in the quarter at Greenbushes was another key event we had to work through. I'll cover more on that later. It's great to see that, that recovery is largely complete. We expect the plant to start ramping up soon. Beyond that, I want to also reflect on what we've achieved, we've really tightened up and simplified our business over the last 12 months and a few transactions we talked about post the quarter that sets up Nova for a really good finish. Key message for today is IGO is simpler, more capable and disciplined business than it was a year ago. We've got some very key areas of strength and a small number of issues that we're still working through to position us for the future. On our results summary, there's five key takeaways I wanted to work through for today's results. Firstly, our safety performance has improved materially. That's supported by our visible leadership and strong discipline. Our group TRIFR reduced to 3.7. And as of today, our business is over 200 days recordable injury-free. The business has gone nearly a year without a significant potential incident. That's astonishing achievement. I'm very proud of what the team has been able to deliver, strong focus since I started this business on safety, and I think the results today, as we close FY '26, are a credit to them. It's no surprise that, that safety performance correlates strongly with production performance and cost performance. And if we look at Nova, it had an outstanding finish to the financial year ahead of our life of mine production guidance and well below cost guidance. And as we approach end of life and end of mining, it only gets more complicated, and I think that speaks to the performance and discipline of the operations team at Nova. We're also very pleased to announce the divestment to Global Lithium at the end of the quarter or just after the end of the quarter. Together, our operating performance and this transaction are great examples of our approach and the track record we want to continue to build on. Third, Greenbushes finished strongly with production at the top end of our revised guidance, excellent margin, thanks to stronger realized pricing and the recommencement of distributions from Windfield to TLEA. The fire at CGP3 was disappointing and a real setback, particularly given the plant was wrapping up extremely well and in fact, well ahead of our plans before the incident. I'll cover more on that Greenbushes update further in remarks. Fourth, Kwinana production was impacted by a major planned shutdown. Lithium hydroxide production volumes reflect this. The refinery remains a challenge more broadly. Addressing the performance and finding a pathway to resolution of Kwinana is and continues to be a key priority for me in the business. Finally, the financial result underpinning all of this was very solid. Our underlying EBITDA was $118 million, taking it to $286 million for the year. Net cash increased 18% to $387 million, leaving us very well positioned for disciplined portfolio optimization and growth. A couple of more remarks on safety. I'm delighted with the improvement that we've seen over the last 2 years and in particular, in the last 12 months. As you know, this has been a strong area of focus for me. Thanks to the sustained effort and visible safety leadership, we've delivered a step change in performance. And I would say we're now in the territory in terms of broader industry performance that everyone should be expecting from us. TRIFR 3.7, down 24% in the quarter and 63% over the year. It's particularly pleasing given the number of challenges that the Nova team had to work through as they push towards the end of life for the mine. And it's also important to call out and credit our partners, contract partners operating at the site, in particular, Barminco, which has helped deliver this outstanding change and revenue performance. Greenbushes and Kwinana safety performance remain key areas of focus. They are not operating at the same levels, and we continue to work with Tianqi, our partners, and the businesses to strengthen their safety controls, performance and leadership team. At Nova, as I said, we delivered an outstanding operational result, finishing ahead of our life of mine production guidance and below cost guidance. Key point is that Nova continues to deliver reliable production, disciplined cost control, strong cash generation late into its mine life, which is a very unique performance, something that we're very proud of, really reflects well on the team, their focus all the way to the end. Quarter-on-quarter production is as expected following a planned April shutdown with unit cash costs increasing 29% due to the lower production profile and shutdown-related costs. Sales revenue increased 18% on the back of higher copper sales volumes and higher byproduct pricing. EBITDA was lower quarter-on-quarter with the result impacted by an increase in our rehabilitation provisions and retention and redundancy provisions associated with our upcoming end of mine life. Naturally, we expect a number of these adjustments to our EBITDA to unwind as we close out the transaction with Global Lithium, and we'll report on those in due course. The production results reflect an exceptional focus and discipline from the Nova team and our contract partners and something that they should be very proud of what they've achieved as we move towards that final stage of mining closure. We're also very pleased to announce after the quarter that we agreed to divest Nova to Global Lithium Resources once our mining operations are complete. This is a very positive outcome for IGO, Global Lithium, the local community, traditional owners and other stakeholders who have supported Nova over the past decade. We continue to focus on our full closure planning right up to finalization of that agreement with Global Lithium. That included extensive stakeholder engagement covering our traditional owners and local community and government. Looking forward, we've upgraded our Nova life of mine guidance through to the expected end of production in -- late in the December quarter, and guidance is now 19,000 to 20,000 tonnes of nickel production, cash costs of AUD 4.25 to AUD 5 per pound of nickel. Just to be clear, this is guidance for the life of mine across the FY '26 and FY '27 period. So simple deduction of the FY '26 actuals gives you implied production of about [ 4,000 ] to 5,000 tonnes of nickel production in the FY '27 period. The Greenbushes delivered a strong finish to FY '26 with production at the top end of that revised guidance that we introduced last quarter, 80% EBITDA margin for the quarter. We saw an uptick in the mine grade last quarter as we move back into the core of the orebody, which is positive and something I signposted. Recoveries and mill uptime meant that some of the benefits of that were not fully reflected in the production, and we expect that to flow through and improve in this quarter and beyond. With the strategic options review continuing, Talison continues to progress those work streams that we've talked through quarter-on-quarter. And I think a key area that I was pleased to see good progress was in the mine, taking the design, productivity, a number of changes to continue to work towards unlocking the full potential and productivity of Greenbushes. The June quarter showed some really positive trends in mining productivity. I've been down to the site 3 times over the last quarter, and it was good to see that steady improvement. Mine production was also supported, as I said, by that move into the high-grade area, as we previously signposted. Production was increased 10% to 387,000 tonnes, with CGP3 contributing approximately 71,000 tonnes. The plant was ramping up extremely well ahead of the fire in June. Most importantly, no one was hurt in that event, and the plant is now expected to restart in the coming days. The investigation has been finalized and the team will naturally ensure that all of the learnings are embedded in their work going forward. Spodumene sales increased 12%, reflecting delayed shipment from the prior quarter being accounted for in the June quarter, while the average realized spodumene price increased to USD 2,286 per tonne. The result reinforces the quality and cash generation potential of this world-class asset, particularly through a period of stronger realized pricing. Windfield resumed distributions during this quarter with a dividend of AUD 390 million declared on 100% basis. The business also continued to build considerable cash receivables with these very favorable prices flowing through. At the same time, Greenbushes still has meaningful improvement work ahead across safety, maintenance execution, plant performance, stability and recoveries and the broader mine to mill discipline that we expect to deliver significant uplift in performance. At the same time, the operational improvement life of mine optimization also remains critical. While the team did obviously have some focus on the recovery of CGP3, which delayed some of that activity, they continue to progress that broader life of mine optimization activity, and we look forward to sharing more on that in due course. We continue to work closely with our partners through the joint venture, TLEA and Talison to help them as they build out a more stable and consistently high-performing operation. Looking into financial year '27, Greenbushes guidance that we've set has been laid out on the slide. spodumene production between 1, 500 -- sorry, 1,550,000 tonnes to 1,750,000 tonnes of spodumene at an SC6 basis, cash costs between AUD 380 and AUD 440 per tonne and our development sustaining and improvement CapEx, including deferred waste, range between AUD 250 million and AUD 300 million. Our guidance reflects that ongoing CGP3 ramp-up and improvement work still required across the operation. And as we see how CGP3 comes out of the restart, we can obviously refine our expectations. On the lithium downstream, we foreshadowed last quarter that production has been impacted by a major plant shutdown designed to improve plant performance. The lithium hydroxide production was 897 tonnes for the quarter. The lower production volumes reflected in significantly higher conversion costs for the quarter, as you would have expected. Sales volumes were also lower in line with production. The average realized price has improved considerably to USD 19,543 per tonne Production costs also were elevated with the refinery offline for a good part of the quarter. EBITDA loss of $88 million on a 100% basis, including the negative inventory adjustment of about $37 million (sic) [ $35 million ]. Further shutdown is underway through July and August, which will reduce our September quarter production. FY '27 guidance for Kwinana is set at lithium hydroxide production of 9,000 to 11,000 tonnes, conversion costs ranging from AUD 16,000 to AUD 18,000 per tonne and sustaining improvement capital of AUD 75 million to AUD 90 million. With that, I'll hand over to Ian to talk through some highlights from our financials and then pick up on a few points.

Yes. Thanks, Ivan. It's good to be speaking with you this morning, and I look forward to meeting many of you over the months ahead. Look, we closed FY '26 with real financial momentum. Nova finished the year strongly, and as lithium prices recovered, the earnings power of Greenbushes came through clearly. For the quarter, group sales revenue rose 18% to $141 million, driven by higher copper sales volumes and byproduct prices at Nova. Our share of net profit from TLEA increased 38% to $121 million, reflecting the strong realized spodumene price and an 18% EBITDA margin at Greenbushes. Importantly, Windfield resumed dividend distributions during the quarter, a clear marker of the asset's cash generating strength as pricing has recovered. Group underlying EBITDA was $118 million for the quarter and $286 million for the full year. That includes around $31 million of year-end adjustments at Nova relating to both an increase in the year-end rehabilitation provision and the retention of redundancy accruals tied to the end of mine life. The [indiscernible] component will transfer on completion of the Nova divestment, so it is largely a timing item. Adjusting for those, the underlying result was in line with our expectations. The one standout area that I'd really like to call out is our cash performance. Underlying free cash flow nearly doubled to $70 million during the quarter and net cash increased to AUD 387 million (sic) [ $387 million ]. For the full year, we generated $134 million of underlying free cash flow. This capital discipline and cash build is deliberate. On the one hand, it reinforces what a wonderful asset Nova has been, generating strong cash flow right to the end. On the other, it reflects the balance sheet flexibility that we are being intentional about, as we prepare for life beyond Nova. Naturally, we'll have more to say on capital management with our full year results next month, but this discipline will hold us in good stead as we build scale of business. With that, I'll hand back to Ivan to step through our growth priorities in more detail.

Thanks, Ian. Yes, a couple of final remarks and then we can open up for some Q&A. Our growth agenda builds on that strong base that I've talked about a simpler, tighter business focus on copper and lithium. We are pursuing growth through three routes: exploration, which is, I guess, a real category in IGO, BioHeap, which I've provided a little bit more detail in our quarterly, and disciplined M&A. On exploration, we cleaned up our portfolio, reset our focus on where we're operating a tenement package and ultimately bring a focus on high-quality copper and lithium opportunities. The FY '27 exploration budget is AUD 35 million to AUD 40 million. BioHeap is another growth pathway. This is technology -- sulfide leach technology developed more than 25 years ago, presents a very timely opportunity to address some of the structural challenges in the global copper industry. And we recently redirected some focus on this technology. It was originally created with a focus on nickel, and it clearly works across a number of different base metals, anything presenting as sulfides. And so as we work through proving that out, demonstrating and understanding its economic potential, we'll provide more updates. But we believe it's an important area to focus on and looking to unlock low-grade sulfide deposits where the technology might offer a different pathway to value. Very early days. There's plenty of technical and commercial work underway, and there will be some very clear milestones before any material capital commitment. And M&A remains, of course, one potential route for growth in critical minerals, aligned to our strategy, but we remain highly selective and disciplined. We'll only pursue opportunities where the strategic fit, distinctive IGO advantage where we bring real value to the table. And as you'd expect, disciplined capital allocation. Nothing has changed in this space since I joined the business 2.5 years ago. So in summary, FY '26 finished strongly and leaves IGO positioned well, stronger, simpler and in better shape looking forward for the future. Our safety performance continued to improve through the year and of course, correlates or mirrors very well with the kind of production and operating performance that we've demonstrated at Nova. It's delivered ahead of production guidance and below cost guidance for the period where the challenge was only greater as we moved into the final stages of mining for the ore body. And we announced the divestment of Global Lithium, obviously, with no shared maintenance, no overlap and no increased costs carried as we look forward. Greenbushes has delivered a stronger final quarter, supported by the CGP3 ramp-up, strong pricing and 80% EBITDA margin. Plenty more to do, as we've talked about, but it's nice to see a better quarter and some real improvements starting to flow through the operations. And IGO, as Ian called out, has ended the year with net cash of $387 million. So plenty of work to continue doing. We've got a very focused business, continuing to look through those few challenges that are remaining on our list and then looking for the best pathways and opportunities for growth. With that, I'll turn it over to some Q&A.

[Operator Instructions] Your first question today comes from Hugo Nicolaci from Goldman Sachs.

Look, first one from me just on the timing of cash flows between the lithium JVs. You've noted the cash that came out of Windfield in the quarter, also highlighting that CGP3 is restarting. Your '27 CapEx at Greenbushes is lower and Kwinana year-on-year guidance is pretty similar. Is there any reason we should be aware of that the cash sweep mechanism from TLEA up to IGO shouldn't see that cash come through ahead of August?

Hugo, look, it was great to see, obviously, with the market recovery in lithium and the cash starting to really build up rapidly in Talison, in Windfield for that start flowing through to shareholders. And that's obviously very recent, nice to see some cash flowing into TLEA. We'll obviously then take some decisions at the TLEA level. The Board will consider that as we start to look forward and see how the market behaves. So there's nothing beyond that, that I can comment on, and there's nothing more substantial or other publications that you should consider. I guess, obviously, a function of that market recovery that we've all been pleased to see and now starting to see that cash flow through.

Got it. We'll wait for August then on that timing. And then just maybe one for Ian, just sort of picking through the Windfield cash flow a little bit more. You made the comment around the receivables build. If we look at the cash balance you've reported the last couple of quarters, it does imply that there's a significant working capital piece or maybe it's tax in terms of that cash flow piece. Are you able to just elaborate a bit more on what those moving pieces are and if we should see that working capital headwind unwind in the coming quarters and support, prices being equal, a bigger step-up in cash flow coming out of the Windfield JV?

Yes. As Ivan said, Hugo, we can't give you too many specifics other than the working capital position is really strong. Trade receivables have gone up significantly at the Windfield level. So we do expect that cash to convert over the next quarter.

Your next question comes from Mitch Ryan from Jefferies.

My question is just how should we be thinking about the ramp-up profile of CGP from here following the fire? And maybe from a more granular perspective, what volumes are in the guidance for FY '27 from CGP3?

Thanks, Mitch. We obviously will -- we hope that it will ramp up very quickly to where it left off. It was performing extremely well. And there's no reason to expect it won't. Naturally, I can't sit here and make any guarantees until we see it start up. But the team has done an outstanding job on that ramp-up. We were headed, before the fire, for an extremely good quarter. It was performing very strongly and well ahead of the plan and the ramp-up curve that you would expect. We indicated to get to 100% by the end of the calendar year. So no change to that. There's nothing there that says we should be surprised, but I'm obviously not able to comment until we actually see startup and how it behaves. One of the things I know the team was very focused on was getting obviously the recoveries completed as quickly as possible, not just because we want the production, but because the longer the plant stands idle, the more potential for issues to emerge. And so with 7 weeks, they've obviously kept a close focus on the assets, make sure everything is healthy and ready doing final checks at the moment. So I guess we'll get back to it and hopefully start seeing some very strong production from August onwards.

Okay. Are you able to provide any of the metrics around what you were seeing before the fire, either volume recoveries, throughput?

Yes. Well, I'm not going to give you specific numbers, but I can tell you, as I said, when I say we're well ahead of the ramp-up curve. And I think in the last quarter, I said we're in that final part of ramp-up, which always takes a bit longer. But basically, we have seen that plant demonstrate its potential recoveries, throughput, et cetera, very effectively. So we're extremely pleased with that one.

Your next question comes from Austin Yun from Macquarie.

Just a question on the production profile for financial year '27. Should we anticipate lower volume in the next quarter, given that you're going to restart CGP3? And also, how you're progressing with the high-grade mining area? Any color would be very helpful. Just the reason why I'm asking just because I think the market is going to be fairly tight in August and September. So keen to see if the operation has any plan to take advantage of rebounding in lithium prices.

Thanks, Austin. Thanks for the market forecast, too. It's great to hear. Certainly, we look forward to that. The -- starting with the mine, as I said, I've been down there 3 times in the quarter, and getting down there quite frequently, and I'm really pleased with the progress there. They are back into the high-grade core of the mine. They are being disciplined in how they provide feed to the ROM pads and the blending. We're seeing that obviously flow through and improve the performance in the plants. There's still work going on with recoveries. I'm sure there'll be a question coming. I guess, without getting into too many specifics, it was great to see post quarter, I was down there, some real improvement in CGP1 where they've had some challenges that they've got on top of, and we're back on front foot on recoveries. But getting back to your point on the high-grade core, they're there now. That pushback is complete, and they're in a good place looking forward. In terms of production performance, I mean, the team, they'll produce everything they can and continue to drive that asset to its full potential. Our guidance indicates based on the plans that we have from Talison, what we expect to be an appropriate range. And as we see more from that improvement program, we can obviously then tighten or revise that as needed. But at this point, that's, I guess, what we think it makes sense for FY '27.

Your next question comes from Daniel Morgan from Barrenjoey.

Just looking to expand on the shuts and rectifications that, I guess, the team is planning at Greenbushes. Is it -- are the other concentrators non-CGP3? Just what is the timing and the -- what would success look like from those?

Dan, can you just clarify? Are you talking about just improvements in general or when you say shutdowns, I mean, they're on a normal shutdown cycle. There's nothing new or special coming up in the plan beyond the normal cycle. I think -- maybe just if you can clarify your question.

Yes, sorry. I think in the release, you were referring to taking a lot of the learnings from CGP3 and then applying them to the other concentrators. I mean, obviously, CGP3 has ramped up well.

Yes. Sorry, Dan. That makes sense. Look, I was really referring to the cause of the fire. As that investigation is completed, there will be a suite of learnings and they're hard ones. It's really difficult to see that kind of impact on our asset. But ultimately, there will be a set of learnings that we want to make sure it rolls right back through the entire site, obviously, in particular, the other plants.

And just on the dividend decision made at the Windfield level. Can you provide any insight into like what was factoring into the magnitude of that dividend and what the right -- like should we take this as a proportion of free cash flow as sort of a go-forward rate from Windfield? Or is there -- what other considerations were made in the Windfield dividend decision?

Okay. There's a very structured capital framework that we apply at Windfield. The Board received a recommendation from Talison based on the -- I won't go through the list. You guys know the kind of pieces you take into account, and that recommendation was accepted by the Board. We'll obviously continue to see that quarter-on-quarter. With the kind of price environment, we expect to see very strong cash generation and flow from the asset. So that was basically the first big check that Windfield's cut for a while. It was great to see that as it signposts, as we've seen, obviously, significant build in receivables, working capital position, which is no surprise as the price rolls through. And of course, that gets to a point where that just turns into cash and starts to flow quarter-on-quarter. And I'm preempting the other question you might be contemplating, or someone else is, and that's around the debt at Windfield, and that's something that the Board will always consider and look at to optimize. At this point, we feel pretty comfortable with the level, but that's something we'll consider as things progress, and we'll see how the market evolves.

[Operator Instructions] Your next question comes from Ben Lyons from Jarden Securities Limited.

I just like to press a little bit further on Hugo's initial question, please. And just noting that about AUD 200 million is going to drop in the TLEA this time around. I'm just really interested in what the IGO position is as you head into that TLEA Board meeting. You've essentially flagged flat CapEx guidance at Kwinana. And so clearly, we're not facing into a massive capital-intensive rebuild of the refinery. And those operating guidance metrics that you've provided also imply reduced cash burn at Kwinana as well. So I would have thought there's a very high probability that TLEA distributes to the IGO bank account this time around. Just interested in your perspectives as you get into that meeting.

Yes. Thanks, Ben. Look, all valid observation, as you look through the accounts and the performance, and then we'll take that through some close consideration with the Board. I can't, at this point, signpost our dividend position from TLEA. I have to step through and consider. And the one piece that you probably didn't mention, which we've always got to contemplate, is what the forward market looks like as well and confidence in that. There's a lot of volatility in lithium. We've seen probably even more so in the equities and the actual underlying market, but plenty to take into account at that next Board meeting. No doubt that will be a topic of discussion.

And maybe just flipping back to the Talison level. Still waiting for an unwind of the concentrate inventories from Greenbushes and sort of keep pushing it out quarter-on-quarter. The question gets asked every quarter, I guess, should we just -- is there any reason why there's a surplus of concentrate being held at site or at the port? Is there ongoing port congestion? Or should we just eventually expect those concentrate inventories to unwind?

Yes. I think it's more just the flow of production, Ben. The port does present a challenge for the team time on time. It is congested. There are challenges there and they're continuing to work to optimize that as we ramp up production further, not just for CGP3, the other productivity initiatives, that's only going to get harder. So there is a stream of work focused on that as part of the broader SoR. There's no intention to hold inventory, of course. Every tonne we can get out on the ship, we see to it. And given the overall FY '26 performance was below the production plan and the guidance, you can imagine our customers, TLEA and Albemarle, feeling that. So they're calling for that reduction. There's no sort of holdback. It's a question of just getting logistics to work and get as much out as possible.

Your next question comes from Levi Spry from UBS.

Just wondering about some of the longer-term plans at Greenbushes, including are you sort of planning on releasing the optimized long plan in September?

You just broke up a little bit there, Levi, talking about sort of the life of mine optimization, SoR work.

Yes. Just wondering if you're still planning on releasing some of the longer-term metrics and some of the optimized life plan as per earlier guided to in September.