IGO was the Material Sector’s top performer on Tuesday and has now driven up over +20% from its mid-August low after reporting a strong FY23 result which included an unexpected special dividend i.e. 60cps total. This lithium and nickel miner has rapidly moved on from its billion-dollar write-down around Western Areas (WSA) delivering over $1bn in revenue for FY23 even without the need for buoyant commodity prices. Unfortunately, our initial thought is the horse has bolted from a risk-reward perspective as the performance gap has rapidly closed between SFR and IGO.
We liked IGO’s result but as is often the case in the cyclical Resources Sector this particular performance elastic band has already snapped back i.e. year-to-date IGO is up +8.5% compared to Sandfire (SFR) +19.6%. Also importantly we already have lithium exposure in the Flagship Growth Portfolio through iron ore/lithium player Mineral Resources (MIN) and as subscribers know from our Resources in FY24 Webinar this is not a sector we want to be overly committed to.
- We are unlikely to chase IGO into strength, especially while we hold Mineral Resources (MIN), although we can see them trading north of $16
MM likes IGO below $14
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We looked at a potential switch from SFR into embattled diversified miner S32 on Tuesday, a situation where we believe the performance elastic band remains stretched.
- We remain keen to hold elevated copper exposure but not at any price, plus this portfolio also holds BHP Group (BHP) and Evolution Mining (EVN) for exposure to the industrial metal.
MM is considering switching from SFR into S32
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