The realisation of Western Areas’ nickel assets hasn’t been smooth for IGO.
Asset troubles will see IGO report a non-cash, pre-tax impairment expense of $880–980 million for the 2022–23 financial year (FY23).
“The impairment relates to the reassessment of the accounting value at Cosmos and Forrestania to reflect higher capital and operating costs, challenges to the mine production schedule and delays in development at Cosmos,” IGO said.
The Cosmos project – which includes the Odysseus nickel mine – has significant potential to contribute IGO’s long-term nickel aspirations, but the asset has been hit with operational and cost challenges.
IGO will conduct a comprehensive review of the Cosmos project to better understand the risks and opportunities associated with the current mine plan, including capital cost estimates and development timelines.
The company said it expected the Cosmos review to be completed in the December quarter of this year.
“Recording a significant impairment against the WSA (Western Areas) assets is disappointing,” IGO acting chief executive officer Matt Dusci said.
“While the project development team has made solid progress to advance Cosmos towards first production, capital and operating cost escalation and unforeseen operational challenges have impacted the value of the project.
“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.”
IGO and Wyloo Metals are exploring the possibility of developing a downstream nickel processing facility in Kwinana, which would combine a nickel refinery with a plant producing nickel-dominant precursor cathode active materials (pCAM) for the battery supply chain.
But Citi analysts suggest the Forrestania and Cosmos impairment spells danger for the downstream venture, with the investment bank ascribing no value to IGO’s pCAM aspirations in light of the write-down.
IGO will provide more details on the impairment when it releases its June quarterly report, set for release on July 31.
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