IGO Report
Hi MM, Can we please have MM's latest views on IGO following its report, including what levels MM sees it as a Buy? Thanks, Darren
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Answer
Hi Darren,
IGO posted new multi-year lows on Thursday following its half year results which didn’t paint a pretty picture:
- Revenue down 35% to $275 million.
- Underlying NPAT was -$85m
- Closing cash balance was $246m, with no debt
- Obviously, no dividend.
The issue with IGO at the moment is the share price is still factoring in higher lithium prices. The current share price is implying long-term lithium spodumene prices significantly greater than spot prices (US$1,325/t vs US$860/t). The risk remains that investors lose patience waiting for a lithium price recovery.
With IGO’s cash balance sitting at $246m, and the company losing $$ it’s a high risk play. We prefer Pilbara (PLS) as a pure lithium play given, they have ~$1.4bn on the balance sheet. However, when lithium turns, the more highly leveraged plays will do better. i.e. for now, PLS is the safer way to invest in the theme, however when prices start rising, IGO and to a greater extent, Mineral Resources (MIN) will likely outperform, so it’s more a case of being guided by the Lithium price.
