IGO Ltd. said it expected to record an impairment charge related to the acquisition of the Western Areas (WSA) assets, namely the Forrestania and Cosmos projects, in its FY23 financial statement. Having concluded the purchase price allocation process and the life of mine budgets, IGO can advise that it expects to record a non-cash, pre-tax impairment expense of between A$880 million ($595 million) and A$980 million ($663 million) in its financial results for the year ending June 30, 2023. The impairment relates to the reassessment of the accounting value at both projects to reflect higher capital and operating costs, challenges to the mine production schedule and delays in development at Cosmos. IGO Has withdrawn the guidance provided on October 31, 2022, with respect to Cosmos.

The company said the non-cash impairment will not impact FY23 EBITDA and will be recorded in its FY23 Audited financial results. The cash flows used in determining the impairment value are based on reserves only and consensus nickel price and foreign exchange forecasts which are materially different to spot prices. The impairment does not include changes in the market value of IGO’s shareholding in Panoramic Resources, acquired as part of the WSA acquisition.

“Recording a significant impairment against the WSA assets is disappointing,” IGO’s Acting CEO, Matt Dusci, said. “While the project development team has made solid progress to advance Cosmos toward first production, capital and operating cost escalation and unforeseen operational challenges have impacted the value of the Project. A detailed independent review of the project development strategy and mine plan has now commenced and will provide a comprehensive assessment of the risks and opportunities for Cosmos.”

IGO’s board and management team said they understood the magnitude of this impairment and they have engaged a group of leading independent consultants to assist with a comprehensive review of the Cosmos project to better understand risks and opportunities associated with the current life-of-mine plan, capital cost estimates and schedule. This review is underway and expected to be completed in the December quarter.