LA Private

IGO reports non-cash impairment of assets from Western Areas and Cosmos

IGO Limited (ASX:IGO) has provided an update regarding the impairment of assets acquired from Western Areas (WSA) in June 2022.

The company has finalised the purchase price allocation process and the life of mine budgets for the Forrestania and Cosmos assets.

As a result, IGO expects to record a non-cash, pre-tax impairment expense of between A$880 million and A$980 million in its financial results for the year ending 30 June 2023.

The impairment is attributed to the reassessment of the accounting value at Cosmos and Forrestania, reflecting higher capital and operating costs, challenges to the mine production schedule, and delays in development at Cosmos. Consequently, the previously provided guidance on Cosmos has been withdrawn.

Importantly, the non-cash impairment will not impact FY23 EBITDA and will be recorded in the Company’s FY23 Audited Financial Results.

It should be noted that the cash flows used to determine the impairment value are based on reserves only and consensus nickel price and foreign exchange forecasts, which differ significantly from spot prices.

The impairment does not include changes in the mark to market value of IGO’s shareholding in Panoramic Resources acquired from the WSA acquisition.

In response to the significant impairment, IGO’s Board and Management team have engaged leading independent consultants to conduct a comprehensive review of the Cosmos Project. The review aims to assess risks and opportunities related to the current life of mine plan, capital cost estimates, and schedule. The review is currently underway and is expected to be completed in the December Quarter. IGO plans to provide further details of this review in the June Quarterly Results, scheduled for release on 31 July 2023.

IGO’s Acting CEO, Matt Dusci, expressed disappointment over the impairment but emphasised the importance of the Cosmos asset to the company’s nickel business. Dusci highlighted that a detailed independent review of the project development strategy and mine plan has commenced, aiming to provide a comprehensive assessment of risks and opportunities for Cosmos. IGO intends to keep the market informed as the review progresses.

Dusci added, “As a long-life nickel asset, Cosmos remains important to our nickel business and provides potential downstream optionality via our aspirations to develop an Integrated Battery Materials Facility in Western Australia.”