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Image Source: The Wall Street Journal
IGO announced on Wednesday its decision to suspend operations at the Cosmos nickel mine in Western Australia due to a significant drop in nickel prices. The company anticipates a write-down of its nickel operations by up to AUD 190 million (USD 124 million). The Cosmos mine will undergo a care and maintenance phase starting May 31, following a review that revealed a shorter expected mine life and increased operational and capital costs.
IGO has announced its projection of impairment charges ranging from AUD 160 million to AUD 190 million (USD 105 million to USD 124 million) for both the nickel operation and another named Forrestania. According to IGO, most of the write-down, reaching up to AUD 175 million (USD 114 million), will be attributed to the Cosmos mine.
The decline in battery metal prices, particularly nickel, over the past year is attributed to a lag in demand from electric vehicle (EV) manufacturers compared to the increased supply. Amid this challenging scenario, several miners have expressed their intention to reduce production and cut costs.
IGO’s Chief Executive, Ivan Vella, acknowledged the industry’s significant challenges and uncertainties, remarking that “Our industry is facing some significant challenges and uncertainty with both nickel and lithium experiencing a downturn in the cycle.”
At Cosmos, IGO aims to preserve resources for potential future mining endeavors if market conditions become favorable. The company is considering the continuation of certain exploration programs to build up known mineral resources at the site. Although the decision to suspend operations was not the preferred outcome, Vella stressed the importance of addressing operational and financial risks in the current economic environment.
“This is not the outcome anyone at IGO wanted, however we cannot ignore the operational and financial risks involved in continuing to develop Cosmos in the current environment,” he said. “We still believe there is value in Cosmos, however in this nickel environment we need to be disciplined with our allocation of capital, while retaining our optionality to restart if market conditions improve.”
Some workers at the Cosmos mine may be redeployed, while others may face redundancy. The write-down is expected to impact both the Cosmos and Forrestania nickel operations.
In June 2022, IGO acquired the Forrestania and Cosmos assets as part of its purchase of Western Areas, supplementing its existing nickel operation named Nova.
Ivan Vella, IGO’s Chief Executive, expressed satisfaction in stating, “Pleasingly, our Nova and Forrestania remain cash positive despite current market conditions.”
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