The IGO Ltd (ASX: IGO) share price is down more than 1% after the resources company announced a large impairment.
IGO owns and operates the Nova nickel-copper-cobalt operation and Forrestania Nickel operation, both in WA.
The ASX mining share is also invested in a lithium-focused joint venture with partner Tianqi Lithium Corporation. This venture comprises a 51% stake in the Greenbushes Lithium Mine and a 100% interest in a downstream processing refinery at Kwinana that produces battery-grade lithium hydroxide.
Impairment of exploration assets
IGO has done a detailed review of its exploration portfolio and the company expects to include an impairment against these assets in the FY24 result.
The business has been doing a detailed examination of its portfolio of exploration tenement holdings and land positions. IGO said the review is focused on “rationalising the portfolio” and “ensuring the company’s resources are allocated effectively to the targets which are most prospective for commercial success.”
IGO said the work to decide the size of the final impairment charge is incomplete and will be subject to audit review.
The ASX mining share expects the size of the impairment of the exploration assets to be in a range of between $275 million to $295 million for the full year.
IGO disclosed the impairment relates to the revaluation of the Silver Knight and Mt Goode nickel exploration assets as well as the “broader exploration rationalisation”.
The company said this “non-cash impairment” will not impact IGO’s FY24 EBITDA and will be recorded in the company’s upcoming FY24 audited financial result which is due to be released on 29 August 2024.
Of course, it should be noted that IGO did spend that money at some point in the past, so it is now saying that money didn’t bear any fruit. However, it needs to invest in exploration to find resource deposits – sometimes there may be a dud.
Final thoughts on the IGO share price
IGO shares are 61% cheaper than it was a year ago. If resource prices rebound, then this could be a contrarian opportunity, but it’s impossible to know what’s going to happen next.
Brave investors may see value here, but there are other ASX growth shares I’d rather buy.
