Ground Breakers: Lithium, nickel plays up on strong results, Coronado pays special coal divvie
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IGO’s (ASX:IGO) September quarter results have, as expected, been overshadowed by the loss of industry titan Peter Bradford, whose shock death this month drew an outpouring of grief from Australia’s mining community.
IGO shares have gone on to hit a record high since that unfortunate moment, a testament to Bradford’s commitment to its shift to battery metals, which saw the company perfectly time its $900 million exit from the Tropicana gold mine and purchase of a roughly quarter stake in the world’s largest lithium mine, Greenbushes.
The $12 billion battery metals giant saw underlying EBITDA rise 54% quarter on quarter and NPAT lift 136% QoQ to $253m, with net debt falling 26% to $396m in the September quarter.
That came after the $1.3 billion acquisition of Western Areas, which boosted its nickel production 50% to 9761t, while spodumene concentrate production at Greenbushes rose 7% to a record 361,000t at costs of US$253/t, delivering a dividend to IGO of $106m.
The average realised price of spod in the September Quarter was a heady US$3,729/t, against a contract price of US$4187/t, due to a delayed shipment from June.
On the downside, the Cosmos nickel complex acquired in the WSA takeover is starting to look like a mighty expensive job, with a new estimate suggesting it will cost $370-400m above the $425m implied in the takeover’s independent expert report by KPMG in April.
That will see costs incurred by IGO since taking over the project of $493-523m above the $302m spent to June 2022, with a total cost of $795-825m.
That includes $150m of scope changes associated with a ramp up in processing capacity from 750,000tpa to 1.1Mtpa, $140m for timing and $95m for “rectifications, omissions and escalation”.
Production at IGO’s lithium hydroxide JV in Kwinana with Tianqi rose 122% to 195t, around half of that battery grade, though the long ramp-up time means commercial production will not be achieved until the end of calendar 2023.
16,220t could be attributed to NIC’s share of production, with record quarterly RKEF sales of US$319.2m, up from US$315.4m in the June quarter.
That came after a big lift in production from the new Angel RKEF lines, where a power plant was commissioned ahead of schedule during the quarter, with RKEF quarterly EBITDA of US$45.3m on a 100% basis, down from US$84.9m in the June quarter due to lower nickel pig iron prices.
However, NIC has broken with the inflationary tradition of miners in the third quarter, with costs dropping over 15% from US$14,989/t in July to US$12,662/t in September due to lower power costs at Angel and changes to met coal composition in its rotary kilns.
At the same time, NIC is transitioning from being a pure class 2 stainless steel supplier to producing nickel matte for the EV battery market, with the transition of two RKEF lines at the Hengjaya plant.
“This gives us direct exposure to the class 1 nickel market and the SHFE/LME pricing fundamentals which have traded robustly this year,” NIC MD Justin Werner said.
“Importantly our matte production is already contracted out to a third party until March 2023, with strong % payabilities of the SHFE price that improve at a higher SHFE price.
“Our ability to switch production and diversify with exposure to the class 1 and class 2 nickel markets and their different pricing dynamics, makes us unique amongst global listed nickel producers, and we look forward to delivering first results for our matte operations in the December quarter.”
The 70% owned Oracle plant is expected to begin producing in November, with NIC planning to hit quarterly production of over 30,000t of nickel a quarter by mid-2023, competitive with global majors like BHP and Glencore.
Despite its growing production profile, $2 billion capped NIC is down 50.21% year to date, having been captured in the fallout of the March short squeeze and market travails surrounding its biggest shareholder and business partner, Tsingshan.
Coronado Global Resources (ASX:CRN) says discussions remain ongoing on the major merger of the US and Australian coal miner with US-based Peabody, less than a month after reports of a possible merger between the two emerged.
The potential for tie-ups has risen as coal prices have climbed to record highs in 2022, with a dearth of development-ready projects meaning growth is likely to come from corporate activity.
It comes as Coronado issues more returns to shareholders on the back of the coal boom, with an unfranked special dividend of US$0.134212 per CDI, worth around US$225 million to be distributed, as well as a US$200 million offer to purchase senior secured notes.
That is almost double the US$125.7m ordinary dividend announced in August, despite revenue falling 15.3% to US$875m in September due to lower met coal pricing. Inflationary pressure and rain at the Curragh mine in Oz also saw costs lift to US$87.6/t year to date, with revenue YTD of US$2.854 billion.
Coal miners struggling to source new projects or gain approvals for expansions in the contentious commodity have turned to payouts to keep shareholders happy as their wallets have swelled.
CRN produced 18.6Mt of ROM production and 11.6Mt of saleable production across its Aussie and Stateside operations, with 12.4Mt of sales including 7.5Mt in Australia year to date.
It sold 4.1Mt in the September quarter, with saleable production of 4.1Mt and ROM production of 6.4Mt, up from a weak June quarter.
It has begin the process of shifting sales of some grades from its main met coal markets to thermal coal markets due to an unusual premium for the normally discounted energy coal price.
CRN’s sales mix has shifted from 82.2% met and 17.8% thermal coal in 2021 to 78.4% met and 21.6% thermal year to date in 2022. The Australian premium low vol hard coking coal met coal price fell 43.9% from US$445.5/t in June to US$249.8/t amid weakening global steel markets, while US met coal prices fell 33.1%.
The company’s realised met coal price across the US and Aussie markets fell 21.2% from US$321.2/t in June to US$253/t in September, but prices are still 143.8% higher on a year to date basis.
Meanwhile, CRN has revised its production guidance down from 18-19Mt to 16.9-17.1Mt for 2022, with mining costs lifting from US$79-81/t sold to US$81-83/t per tonne sold.
That came due to the impact of wet weather at the Curragh mine in Queensland, where the nearest town Blackwater has received 391mm of rain in six months since the start of April, 3.3 times the 10-year average.