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The share price of battery materials miner IGO Ltd (ASX: IGO) experienced a significant uptick on Tuesday, rising by almost 6.11% to AU$7.82 at the time of reporting.
The surge in IGO's share price follows the release of its third-quarter update, which provided insights into the company's performance during the three months ended 31 March.
Key Highlights of the Third Quarter Update
During the quarter, IGO reported a 10% decline in sales revenue to AU$160.8 million compared to the previous quarter. This decrease was primarily attributed to a substantial 78% decline in sales revenue from the Greenbushes Lithium Mine, resulting from lower sales volumes (down 34% to 183,000 tonnes) and weak lithium prices. Additionally, lower nickel sales volumes at Nova and Forrestania also impacted the company's top line.
Despite the decline in revenue, IGO reported underlying free cash flow of AU$79 million for the period, representing a significant 182% increase from the previous quarter. This increase was mainly driven by AU$24.5 million in dividends received from TLEA and an income tax refund of AU$106.1 million.
Production Declines
During the quarter, IGO's production also experienced a decline, with spodumene production down 22% to 280,000 tonnes and nickel production down 8% to 6,527 tonnes compared to the previous quarter.
Comparison to Expectations
While IGO met expectations for spodumene production, it fell short of sales volumes. However, the company agreed to sell an additional 200,000 tonnes of spodumene concentrate to TLC post the quarter end, which appears to have positively impacted market sentiment.
Management Commentary
IGO's CEO, Ivan Vella, acknowledged the challenges faced during the quarter, citing subdued nickel and lithium markets, as well as lower sales compared to the prior quarter. Despite recording a small EBITDA loss of AU$15 million, Vella highlighted the company's strong balance sheet with AU$276 million cash on hand and no debt.
Regarding the additional spodumene sale, Vella expressed satisfaction, noting that Greenbushes is expected to operate at full production for the remainder of the year.
The significant uptick in IGO's share price reflects investor optimism following the third-quarter update, despite the challenges faced by the company. With ongoing efforts to navigate through market uncertainties and capitalize on opportunities, IGO remains focused on delivering long-term value to its shareholders.
