IGO to cut jobs as nickel prices fall; shifts focus to lithium production

In a significant move to adapt to market conditions, Australian nickel and lithium producer IGO Ltd announced plans to streamline its executive team amid declining nickel prices. The restructuring comes as part of a strategic shift under the leadership of Chief Executive Ivan Vella, who joined the company late last year. Vella's focus is to enhance the company's lithium hydroxide production capabilities while addressing the challenges posed by its nickel operations.

Since taking the helm, Vella spearheaded a comprehensive review of IGO's operations and strategic direction. This strategic refresh follows IGO's acquisition of nickel miner Western Areas for A$1.1 billion (approximately $720.7 million) in 2022. Unfortunately, the value of IGO's nickel businesses has since been written down due to a sharp decline in nickel prices. The company has indicated that further details of its refreshed strategy will be unveiled at its annual results presentation on August 29.

In the meantime, IGO has begun restructuring its corporate and exploration teams, a process expected to lead to a smaller executive team in the coming months. "IGO has commenced a review of the size, structure, and capability of its corporate and exploration teams," the company stated in its quarterly production report.

As part of the restructuring, IGO is shifting its focus to maximize value from its lithium operations. This includes its stake in the Greenbushes lithium mine, a joint venture with China's Tianqi Lithium (002466.SZ) and Albemarle Corporation (ALB.N). The Greenbushes mine is a critical asset for IGO, and the company is keen on boosting its performance and output.

A significant part of this effort is the improvement of the Kwinana hydroxide plant, where Train 1 will undergo a major shutdown in the December quarter for enhancement works. This upgrade is projected to cost between A$80 million and A$100 million. The aim is to enhance the plant's efficiency and output, reinforcing IGO's position in the lithium market.

While IGO is placing a stronger emphasis on its lithium operations, it is also looking to manage its nickel businesses, which are transitioning to care and maintenance. The company plans to maximize cash flow from these assets during this period. The challenging market conditions for nickel have necessitated these measures, as the company seeks to mitigate the impact of low prices on its overall performance.

Despite the challenges in the nickel sector, IGO is optimistic about its lithium prospects. The company plans to increase production of lithium raw material spodumene by up to 150,000 tonnes in the next financial year, setting a production guidance range of 1.35 million to 1.55 million tonnes. However, IGO has not provided specific guidance for lithium hydroxide production at this stage.

IGO's lithium business is managed through a 49% stake in Tianqi Lithium Energy Australia (TLEA), with Tianqi Lithium holding the remaining 51%. TLEA owns a 51% stake in the Greenbushes lithium mine, with Albemarle holding the other 49%. Additionally, TLEA owns 100% of the lithium hydroxide refinery, which is crucial for IGO's strategy to enhance its lithium production capabilities.

The restructuring at IGO comes at a time when the global demand for lithium is on the rise, driven by the accelerating adoption of electric vehicles (EVs) and renewable energy storage solutions. Lithium hydroxide, in particular, is a key component in the batteries used in EVs, making it a critical resource for the future of green technology.

On the other hand, the nickel market has faced significant volatility. Nickel prices have been impacted by various factors, including changes in global supply and demand dynamics, geopolitical tensions, and shifts in market sentiment. For companies like IGO, this volatility presents both challenges and opportunities as they navigate the complexities of the metals market.