Independence Group NL (ASX:IGO)

Peter Bradford
Market Cap (AUD): 3.17B
Sector: Materials
Last Trade (AUD): 5.36 +0 (+0%)
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1. About

Independence Group NL is a leading ASX-listed exploration and mining company with a strategic focus on high-quality assets of scale and longevity, and an evolving strategy to align the business to the structural shift to energy storage.

The Company’s focus is on its 100% owned, world-class Nova nickel-copper-cobalt operation, its 30% interest in the Tropicana Gold Mine, a Joint Venture with AngloGold Ashanti, and its portfolio of belt scale exploration projects in Western Australia and the Northern Territory.

2. Business model


The Group operates the following divisions:[1]



Revenue ($’000)

% of Revenue

% of Operating Profit/ (before Tax)

Profit drivers[2]

Tropicana Operation




A result of higher AUD dollar gold prices and more gold sold.

The drivers for the higher gold sold include higher ore milled, and improved mill feed grades attributed to the grade streaming strategy commenced towards the end of the financial year

Long Operation




Total revenue decreased by 8% during FY18, due to decreasing mining activities.

majority of ore continuing to be mined from long hole stoping. Payable cash costs including royalties (net of copper credits) were higher at $4.87 per payable pound of nickel

Jaguar Operation




Due to lower zinc and copper production, combined with results for only 11 months of the year. This was partially offset by higher AUD dollar zinc and copper metal prices compared to the previous year. Segment operating profit before tax decreased by $20.6 million over the prior year predominantly due to lower segment revenue, partially offset by higher general administration costs.

Production from the Bentley underground mine was lower than the prior period predominantly due to the divestment at the end of May 2018, missing out on the final month of production. Higher grade stopes became available late FY18 which led to a strong finish to the year with ore mined for the month of May 2018 reaching a record production rate of 50,849 tonnes

Nova Project




Nova revenue for the period was $348.8 mn which was derived from nickel, copper and cobalt sales. Concentrate for the
period was sold to Glencore International AG (Glencore), Trafigura Pte Ltd (Trafigura) and BHP Billiton Nickel West Pty Ltd (BHPB Nickel West), with sales amounting to 14,074 tonnes of payable nickel, 8,455 tonnes of payable copper and 217 tonnes of payable cobalt

New Business and Regional Exploration Activities





3. Strategy


Key strategies include:[3]


  • Strategy focused on the environmental, social and governance (ESG) aspects of the business
  • Strategy to reshape Independence Group or IGO as Group like to call ourselves, to focus on high-quality projects of longer life and larger scale
  • Strategy is to become a globally relevant, premium producer of energy storage and distribution minerals
  • To create long-term shareholder value through the discovery, acquisition, development and operation of low cost and high grade gold and base metals projects, with an emphasis on the production of metals and minerals that will link IGO into the energy storage supply chain

4. Markets


The Group operates in markets including:[4]


Industry (Australia)

Industry Revenue

Growth rate (Annual 13-18)

Nickel Ore Mining

$2 billion (2017)


Gold Ore Mining

 $16 billion (2018)


Silver, Lead and Zinc Ore Mining

$4 billion (2017)


5. Competition


Major competitors include:[5]


  • Western Areas Ltd (ASX:WSA)
  • Mincor Resources NL (ASX:MCR
  • Emu NL (ASX:EMU)
  • Panoramic Resources Ltd (ASX:PAN)

6. History



January: Listed on ASX raising $4 million

  • Tropicana joint venture agreed
  • September: Long Operation acquisition completed with production starting October 2002



Independence Group NL Acquisition of 19.96% of Matrix



IGO Buys Location 48 Sub-lease & Surrounds



IGO: Acquires Royalty and Non Fe rights



Tropicana project development decision



Jabiru Metals takeover completed (Jaguar Operation)



First Gold production from Tropicana



Acquisition of Sirius completed



BUX & IGO entering into Fraser Range Joint Venture

IGO announcing takeover bid for Windward Resources



ABM Resources NL providing an update on the Lake Mackay Joint Venture being managed by Independence Group NL



Acquired JV interest in Creasy Group Southern Hills tenements

7. Team


Board of Directors[7]


Peter Bilbe – Non-executive Chairman

Peter Bradford – Managing Director and Chief Executive Officer

Geoffrey Clifford – Non-executive Director

Peter Buck – Non-executive Director

Keith Spence – Non-executive Director

Neil Warburton – Non-Executive Director

Debra Bakker – Non-Executive Director


Management Team


Scott Steinkrug – Chief Financial Officer

Matt Dusci – Chief Growth Officer

Sam Retallack – Head of People & Culture

Keith Ashby – Head of Governance & Risk

Joanne McDonald – Company Secretary

Ian Sandl – General Manager – Exploration

Andrew Eddowes – Head of Corporate Development

Kate Barker – General Counsel

read more

8. Financials


2018 Full Year Results Presentation


Financial Year 2017/18 (ended 30 June):[8]



Revenue ($’000)

% Change

Operating Profit/(Loss) (before Tax) ($’000)

% Change

Nova Project





Tropicana Operation





Jaguar Operation





Long Operation





New Business and Regional Exploration Activities










9. Risk


Major risks include:[9]


Exposure to economic, environmental and social sustainability risks

The Group has material exposure to economic, environmental and social sustainability risks, including changes in environmental regulatory legislation.


Other external factors and risks

  • Operational performance including uncertain mine grades, seismicity ground support condition, grade control, in fill resource drilling, mill performance, and experience of the workforce;
  • Contained metal are estimated annually and published in a resource and reserve statements, however, actual production in terms of tonnes and grades often vary as the ore body can be complex and inconsistent.
  • Active underground mining operations can be subjected to varying degrees of seismicity. This natural occurrence can be represent significant safety, operational and financial risk, To manage this substantial amount of resource and technology are used in an attempt to predict and control seismicity.
  • Exploration success or otherwise;
  • Due to the nature of an ever-depleting reserve/resource base, the ability to find or replace reserves/resources presents a significant operational risk.
  • Operating costs including labor markets and productivity;
  • Labour is one of the main cost drivers in the business and as such can materially impact the profitability of an operation.
  • Changes in the market supply and demand of the products;
  • Any change in the supply or demand impact on the ability to generate revenues and hence the profitability of an operation.
  • Change in the government taxation legislation;
  • Changes in health, safety, and environmental regulations;
  • Environmental issues and social expectation; and
  • Assumption of estimates that impact on reported assets and liability values


Foreign currency risk

As the Group’s sales revenues for base and precious metals are denominated in United States dollars (USD) and the majority of operating costs are denominated in Australian dollars (AUD), the Group’s cash flow is significantly exposed to movements in the AUD:USD exchange rate.


Commodity price risk

The Group’s sales revenues are generated from the sale of nickel, copper, zinc, gold, cobalt, and silver. Accordingly, the Group’s revenues, derivatives, and trade receivables are exposed to commodity price risk fluctuations, primarily nickel, copper, zinc, gold, cobalt and silver.



Nickel ore sales have an average price finalisation period of three months until the sale is finalised with the customer.


Copper and Zinc

Copper and zinc concentrate sales during the year had an average price finalisation period of up to three months from shipment date.



It is the Board’s policy to hedge between 0% and 50% of forecast gold production from the Company’s 30% interest in the Tropicana Gold Mine.


Diesel fuel

It is the Board's policy to hedge up to 75% of forecast diesel fuel usage. Diesel fuel price comprises a number of components, including Singapore gasoil and various other costs such as shipping and insurance. The total of all costs represents the wholesale or Terminal Gate Price (TGP) of diesel.


Cash Flow and fair value interest rate risk

The Group’s exposure to interest rate risk is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates.


Credit risk

Gold bullion sales

Credit risk arising from the sale of gold bullion to the Company's customer is low as the payment by the customer (being The Perth Mint Australia) is guaranteed under statute by the Western Australian State Government. In addition, sales are made to high credit quality financial institutions, hence credit risk arising from these transactions is considered to be low.

Nickel, copper and zinc concentrate sales

Credit risk arising from sales to customers is managed by contracts that stipulate a provisional payment of between 90% and 100% of the estimated value of each sale. Provisional payments are made via an unconditional and irrevocable letter of credit, governed by the laws of Western Australia, and are expected to be received within a few business days. Title to the concentrate does not pass to the buyer until this provisional payment is received by the Group. Final payment is dependent on the quotation period of the respective purchase contract, and is also made via an irrevocable letter of credit. Due to the large size of concentrate shipments, there are a relatively small number of transactions each month and therefore each transaction and receivable balance is actively managed on an ongoing basis, with attention to timing of customer payments and imposed credit limits. The resulting exposure to bad debts is not considered significant.

Nickel ore sales

The Group has a concentration of credit risk in that it depends on BHP Billiton Nickel West Pty Ltd (BHPB Nickel West) for sales revenue from the Long Operation. During the year ended 30 June 2017, all nickel ore sales revenue was sourced from this company. The risk is mitigated in that the agreement relating to sales revenue contains provision for the Group to seek alternative revenue providers in the event that BHPB Nickel West is unable to accept supply of the Group’s product due to a force majeure event. This has been further de-risked as the Nova Operation could accept ore from the Long Operation for processing and concentrate production. The risk is also further mitigated by the receipt of 70% of the value of any months’ sale within a month of that sale occurring.


In respect of financial assets and derivative financial instruments, the Group's exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Exposure at the reporting date is addressed below.


Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.


  1. ^ Annual Report 2018, P. 74
  2. ^ Annual Report 2018 P. 38 - 40
  3. ^ Annual Report 2018 P. 4, 5 & 35
  4. ^
  5. ^
  6. ^ Annual Report 2015 P. 4-5
    Annual Report 2016 P. 30
  7. ^
  8. ^ Annual Report 2018 P. 74
  9. ^ Annual Report 2018 P. 42, 103 - 107