IGO Limited says it will cease development on the troubled Cosmos nickel mine it has spent more than $500 million working on since purchasing it just two years ago, in part due to plunging prices for the battery metal.
The mine 30km north of Leinster in Western Australia will be placed in care and maintenance mode by the end of May, IGO announced on Wednesday.
IGO said a review had reduced the expected life of the mine, while there had been delays in getting the mine to full capacity to fill the processing plant and further increases in operating and capital costs. At the same time, nickel prices have deteriorated.
While some workers will be offered new roles elsewhere, others will be made redundant, IGO said, without giving specifics.
"This is not the outcome anyone at IGO wanted, however we cannot ignore the operational and financial risks involved in continuing to develop Cosmos in the current environment," IGO managing director and chief executive Ivan Vella said.
"We still believe there is value in Cosmos, however in this nickel environment we need to be disciplined with our allocation of capital, while retaining our optionality to restart if market conditions improve."
IGO expects to declare an impairment charge against Cosmos in the region of $150 million to $175 million.
IGO purchased Cosmos in 2022 as part of its $1.3 billion acquisition of Western Areas, with the mine at the time slated to go into production in mid-2023.
Cosmos and the Forrestania underground nickel mine, also in WA, were Western Area's main assets.
IGO took a $968 million impairment on them last year, citing higher capital and operating costs, challenges to the mine production schedule and delays in developing Cosmos.
"By definition, the material nature of this impairment means that mistakes were made, and all of us on the board and the executive leadership team accept accountability for this situation," IGO chairman Michael Nossal told shareholders in November.
According to IGO's quarterly reports, the miner has spent $501.5 million on construction and mine development at Cosmos since acquiring it, including building a processing and paste plant, an aerodrome, and mining shafts and shaft infrastructure.
IGO said on Wednesday that Forrestania remained cash-positive despite the current market conditions, as it has prices hedged until December.
