Shares of IGO rose on Friday, after the lithium producer reached an agreement with its Chinese joint-venture partner Tianqi Lithium to cease all works at one of its lithium hydroxide plants in Western Australia.
Shares of the Australian battery metal producer were up as much as 4.6% to A$5.450, as of 0039 GMT.
IGO warned of an additional net loss in its first-half results earlier this week, citing a decline in value of its troubled Kwinana refinery, which includes lithium hydroxide plant 2 that was expected to produce 24,000 metric tons per year, but has been plagued by design issues and weak lithium pricing.
Citi analysts noted that the announcement was “not a surprise and removes an overhang”.
The focus now shifts to other performing assets in Kwinana, they said, adding that investor sentiment towards Kwinana is already weak, and stopping downstream activities could simplify the capital return story.
Some mines that produce lithium, used in electric vehicle batteries, have curtailed operations or delayed expansions after a 90% drop in prices over the last two years, while other loss-making mines have maintained production, largely because they have the support of Chinese battery-makers.
A growing list of producers have been reviewing lithium operations in Australia since last year amid a rout in prices that is expected to result in more production cuts, which included the likes of Arcadium Lithium and Albemarle.
Tianqi Lithium, in a separate announcement on Thursday, determined in a board meeting that “continuing with the construction of Lithium Hydroxide Project Train II is not economically viable”.
On Friday, it stated it sees a total impairment provision of around 1.412 billion yuan ($193.74 million) “for construction in progress and right-of-use assets” at the plant.
($1 = 7.2880 Chinese yuan renminbi)
(By Shivangi Lahiri; Editing by Sriraj Kalluvila, Shailesh Kuber and Rashmi Aich)
