More nickel job losses as IGO flags near wipeout on $1.3b buy

Brad ThompsonJan 31, 2024 – 10.54am

New IGO boss Ivan Vella. Trevor Collensnone

IGO is shutting down its troubled Cosmos nickel project in Western Australia amid mounting job losses across the sector which is grappling with a market oversupplied with cheap Indonesian nickel.

New IGO boss Ivan Vella. Trevor Collensnone

Perth-based IGO will write down the value of the nickel asset by up to $170 million as the fallout continues from its disastrous acquisition of Western Areas.

IGO now faces writing off 90 per cent of the $1.3 billion it paid for the Western Areas nickel assets about 19 months ago. The company already slashed nearly $1 billion from the value of the Western Areas assets last July after disclosing higher than expected capital and operating costs.

It is understood there were about 200 workers on-site at Cosmos in December, when IGO cut back mine construction work just days into Ivan Vella’s tenure as managing director.

“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,” Mr Vella said on Wednesday.

IGO has been hit by the double whammy of falling nickel and lithium prices, and attended crisis meetings for both sectors in Perth last Thursday where Resources Minister Madeleine King raised the prospect of production tax credits and other federal assistance.

Mr Vella acknowledged “significant challenges and uncertainty with both nickel and lithium experiencing a downturn in the cycle” but backed the quality of IGO’s assets, which include the Nova nickel mine and a share in the Greenbushes lithium mine, longer-term.

IGO’s review found Cosmos’ mine life would be shorter than the 10 years originally envisioned, and that there would be delays in getting the mine to full capacity to fill the processing plant and further increases in operating and capital costs.

It is placing Cosmos into care and maintenance but will try to finish some work at the site, which is close to Liontown Resources’ Kathleen Valley lithium project in the northern Goldfields.

IGO’s nickel update comes two days after it confirmed production at the Greenbushes lithium mine in WA’s South-West was likely to be “marginally reduced” in the next five months because the mine’s co-owners had ordered lower volumes than expected.

The nickel and lithium producer recorded higher production costs across its operations in the three months to December 31 as underlying EBITDA fell 58 per cent quarter-on-quarter to $153 million.

The Cosmos woes take job losses announced across the WA nickel sector since December to more than 1200.

Andrew Forrest-owned Wyloo announced last week that it was closing down nickel operations in WA it acquired for $760 million last year, and mining giants BHP and Glencore have sounded the alarm about the future of their own mines.