Shares in explorer and miner IGO hit a two-month high on Wednesday after what appeared at first to be a weak quarterly update.
Group revenue of $186 million in the March quarter was down 21% on the previous quarter, but profits leapt 378% to $41.9 million.
That spectacular surge though was due to currency gains on funds held in anticipation of the billion-dollar lithium mine purchase of a stake in the world’s biggest lithium mine in WA.
Without this contribution of more than $23 million, quarterly profits would have been 33.7% lower at $25.6 million.
The shares hit a high of $7.42 but later eased to be up 0.2% at the close at $7.29.
But the report contained good news on soaring nickel and copper production at a time when world prices are near or at multi-year highs because of rising demand from the renewables sector and constrained production capacity.
The Nova nickel and copper mine continues to outperform and even saw operating costs for the quarter come in less than previously forecast at $1.83 a pound during the quarter. That left them running at $2.07 a pound year to date.
Nova has already exceeded annual copper production guidance and could also exceed annual nickel guidance. In the nine months to march it produced 21,115 tonnes of nickel (the top of the guidance range is 21,750 tonnes).
Having produced more than 6,800 tonnes of nickel in the quarter, Nova and IGO are on track to produce more than 28,000 tonnes for the year to June, which will boost earnings nicely.
But the more significant performance is in copper where prices are currently at 9-year highs at more than $US4.40 a pound on Comex in New York.
Nova produced more than 3,000 tonnes of copper in the March quarter, boosting output for the 9 months to 9,484 tonnes, topping the top of the guidance range of 9.375 tonnes.
The mine now looks like producing more than 12,000 tonnes of copper for the year to June with the final quarter getting that price boost from the rise past $US4.40 a pound.
“Operationally, the Nova team continues to drive strong outcomes, with metal production for the quarter in line with guidance while cash costs continued to benefit from strong by-product pricing,” CEO Peter Bradford said in Wednesday’s statement.
However, the Tropicana mine is lagging and produced only 82,393 ounces of gold in the third quarter due to “higher waste movements and lower milled grade”.
IGO recently announced it was selling the Tropicana gold mine to Regis Resources for $903 million to help finance the buying of 49% of Tianqi’s Australian lithium assets for $1.85 billion. That includes the mine at Greenbushes in southern WA.
The 51% is owned by the big US lithium group, Albermarle which has established a major presence in WA lithium with the purchase of 60% Mineral Resources Wodgina mine and part of its processing business.
IGO said explained the jump quarterly profit was due to “$23.5 million of foreign exchange gains” compared to a $38.9 million foreign exchange loss the previous quarter.
The company said the gains were on funds and financial instruments held in US dollars “for the purposes of protecting the Australian dollar equivalent of the lithium transaction US Dollar purchase price”.
