The IGO Ltd (ASX: IGO) share price is currently down around 5% after the ASX mining share gave its quarterly update.
IGO is a nickel and lithium producer.
Quarterly update
The business said that its underlying EBITDA (EBITDA explained) rose by 19% quarter on quarter and that the underlying free cashflow soared 34% to $381 million.
IGO’s cash pile jumped 76% to $775 million, with the net cash position being $415 million after repaying $90 million of debt.
Total nickel production was 9,549 tonnes, which was an increase of 14% quarter on quarter.
Total (lithium) spodumene concentrate production was 395kt, an increase of 11% quarter on quarter. The quarterly performance from Greenbushes was “strong”, with the full year production being above the top end of the FY23 guidance range. This sort of performance could help the IGO share price in the future.
The company also noted the appointment of Ivan Vella as Manging Director and CEO, starting in December 2023.
Sadly, during the quarter there was also an accounting impairment of the acquired Western Areas assets of between $880 million to $980 million, which it told investors about after the quarter had finished.
It also said that at Kwinana, the ramp up of train 1 experienced “ongoing technical challenges following the scheduled shut down during the quarter, which resulted in a lower than expected quarter of production.
Capital management policy
IGO said that with the ongoing transformation and strong financial performance, it is adopting a formal capital management policy.
It wats to provide reliable and consistent returns for shareholders, while maintaining both balance sheet strength and flexibility to respond to organic and acquisition opportunities as they arise.
A lot of its capital will be prioritised for investing in the ‘sustainability’ of its operations, servicing its debt, growing the business organically and exploration activity.
IGO may use debt or a capital raising to fund certain growth opportunities such as acquisitions.
In terms of the dividend, when IGO has less than $1 billion of available liquidity (cash and useable debt), it will target a dividend payout ratio of between 20% to 40% of underlying free cash flow.
When it has over $1 billion of liquidity, the board of directors will consider special dividends, share buybacks, debt reduction, acquisitions, or a combination of these.
Final thoughts on the IGO share price
I like the commodities that IGO is involved with, it has a focus on decarbonisation resources, which could have a strong demand profile for the foreseeable future.
If I were looking at IGO as a potential investment, this dip of the IGO share price could be a good time to pounce.
