IGO Interactive Annual Report 2019

DIRECTORS’ REPORT 30 JUNE 2019 Cash flows from operating activities for the Group were $372.3 million, compared to the FY18 year of $277.8 million. This was predominantly a result of the Nova Operation’s strong production exceeding production in FY18 as well as increased production and realised gold prices at Tropicana. Nova Operation generated $289.1 million cash flows from operating activities, which was a result of 22,434 tonnes of payable nickel sold (FY18: 14,074 tonnes), 12,208 tonnes of payable copper (FY18: 8,455 tonnes) and 372 tonnes of payable cobalt (FY18: 217 tonnes) sold during the year. Tropicana Operation generated cash from operating activities of $148.0 million following the sale of 154,402 ounces of gold refined and sold. Cash flow from operating activities also included $54.1 million cash outflow for exploration expenditure, $5.6 million for evaluation expenditure, $11.5 million cash inflow for the sale of a royalty and $18.6 million cash outflow for corporate, net borrowing and other costs. Cash outflows from investing activities decreased to $82.8 million for the year, down from $105.0 million for the FY18 year. The Group spent $78.1 million on development expenditure, with the majority of that being waste stripping at the Tropicana Operation ($51.4 million) and underground mine development at Nova Operation ($26.6 million). During the year, IGO received deferred consideration totalling $26.8 million in respect of the Jaguar Operation and Stockman Project divestments in FY18. Cash flows from financing activities during the financial year included two semi-annual repayments of borrowings totalling $57.1 million. As at 30 June 2019, the Company’s outstanding debt was $85.7 million, with expected repayment by September 2020. Lastly, the Company paid dividends totalling $23.6 million during the year. At the end of the financial year, the Group had cash and cash equivalents of $348.2 million and marketable securities of $27.5 million (2018: $138.7 million and $24.3 million respectively). The Group’s future prospects are dependent on a number of external factors that are summarised towards the end of this report. NOVA OPERATION The Nova Operation commenced commercial production on 1 July 2017, five years from discovery, with FY19 being the second year of commercial production. By the end of the financial year, the majority of the underground capital development had been completed at the Nova and Bollinger orebodies, with a total underground operating and capital development advance of 5,768m for the year. A total of 1,510kt of ore was mined at an average grade of 2.25% nickel and 0.95% copper in FY19. The Nova process plant milled 1,581kt of ore at an average nickel and copper grade of 2.22% and 0.94% respectively for the year, to produce 30,708t of nickel and 13,693t of copper. Nickel metallurgical recoveries in the processing plant generally performed in line with modelled recoveries at 87.4%, while copper recoveries were 85.6% for the year. Nova revenue for the period was $501.9 million, compared to $348.8 million for the prior year. This was generated through concentrate sales during the period, sold to Glencore International AG (Glencore), Trafigura Pte Ltd (Trafigura) and BHP Billiton Nickel West Pty Ltd (BHPB Nickel West), with sales amounting to 22,434 tonnes of payable nickel, 12,208 tonnes of payable copper and 372 tonnes of payable cobalt. Nickel cash costs per payable pound, which comprises the costs of producing nickel at the mine site and includes credit adjustments for copper and cobalt sales, were $2.07 per payable pound for the year. Below is a summary of the key physical and financial information relating to the Nova Operation: NOVA OPERATION 2019 2018 Total revenue $'000 501,891 348,792 Segment operating profit before tax $'000 95,365 35,623 Total segment assets $'000 1,193,096 1,372,090 Total segment liabilities $'000 66,996 69,113 Ore mined tonnes 1,509,875 1,511,920 Nickel grade % 2.22 1.83 Copper grade % 0.94 0.75 Cobalt grade % 0.08 0.06 Ore milled tonnes 1,580,706 1,427,072 Metal in concentrate - Nickel tonnes 30,708 22,258 - Copper tonnes 13,693 9,545 - Cobalt tonnes 1,090 740 Metal payable - in concentrate produced - Nickel tonnes 21,500 15,586 - Copper tonnes 12,481 8,666 - Cobalt tonnes 354 238 Nickel cash costs and royalties* A$/lb total Ni metal payable 2.07 2.78 Nickel All-in Sustaining Costs** A$/lb total Ni metal payable 2.79 4.51 * Includes credits for copper and cobalt ** Includes cash costs, royalties and sustaining capex 40 — IGO ANNUAL REPORT 2019