Australian battery metals miner IGO has reported a staggering net loss of A$782 million ($498.5 million) for the half-year ending December 2024, owing to significant impairments and operational challenges at the Kwinana lithium hydroxide refinery.

The substantial loss stems largely from IGO's 49% share of a A$602.2 million net loss incurred by Tianqi Lithium Energy Australia (TLEA), its joint venture with China's Tianqi Lithium. A significant portion of this loss, A$524.6 million, is attributed to impairment charges against the Kwinana refinery assets.

Adding to the financial strain, IGO also recorded a A$115 million impairment charge against its exploration assets, a consequence of a strategic review announced in September. The underlying net loss for the December half stood at A$85 million.

The Kwinana refinery, located south of Perth, has been plagued by operational difficulties since its inception. While Train 1 of the plant achieved its first battery-grade lithium hydroxide production in 2021, it has struggled to reach its designed capacity. The recent decision by TLEA to suspend the construction of Train 2, amidst market uncertainties and operational hurdles, triggered the significant impairment charge for IGO.

Despite a 153% year-on-year increase in lithium hydroxide production to 3,095 tonnes in the December half, and a 40% reduction in conversion costs to A$27,136 per tonne, the refinery posted an EBITDA loss of A$161.1 million on revenue of A$32.2 million. This financial performance has raised serious concerns about the long-term viability of the Kwinana facility.

IGO CEO Ivan Vella, who joined the company in December 2023, acknowledged the disappointing results, emphasizing the need for a thorough assessment of the refinery's operational challenges. He highlighted the importance of understanding the current status of the asset and the investments required to achieve profitability. However, the future of Kwinana remains uncertain, with analysts suggesting that closure and a complete write-down are potential outcomes if production rates do not improve.

Guidance for the current half indicates production of 7,000-8,000 tonnes of lithium hydroxide, factoring in an unplanned shutdown in January and February, with conversion costs projected at A$22,000-25,000 per tonne.

Amidst the challenges at Kwinana, IGO's 24.9% stake in the Greenbushes lithium mine remains a bright spot. The mine delivered a robust EBITDA of A$591.7 million, albeit down from the previous year's A$3.2 billion, reflecting the impact of weaker lithium prices. Greenbushes produced 798,000 tonnes of spodumene in the half-year, with full-year production expected to reach the upper end of guidance.