IGO Interactive Annual Report 2020

DIRECTORS’ REPORT 30 JUNE 2020 DIRECTORS’ REPORT 30 JUNE 2020 Nova’s underlying EBITDA was higher on the previous year, primarily due to the higher revenue from stronger base metal prices. Tropicana’s underlying EBITDA remained consistent with the previous year with higher realised prices partially offset by lower gold sold in FY20. Exploration and evaluation expenditure increased by 26% due to a combination of a more drill intensive exploration program in the year and increased corporate development expenditure. Corporate expenditure is up slightly due to higher enterprise systems maintenance costs and an increased investment in a graduate training program. The investment revaluation of $33.2 million recognised mark-to-market gains on listed investments. Net profit after tax (NPAT) for the year was $155.1 million, compared to $76.1 million in the previous financial year, as detailed in the chart below. • Raptor (nickel-copper-cobalt) – The Raptor Project is 100% owned by the Company, targeting geology interpreted to be prospective for Nova-style nickel-copper-cobalt mineralisation along the Willowra Gravity Ridge, covering 16,979km 2 of tenements. During the year, aeromagnetic and radiometric data was received from the Northern Territory Geological Survey for the Mt Peake-Crawford survey, where IGO funded infill lines over priority areas within the eastern tenements. The final co-funded airborne survey has been postponed due to the COVID-19 travel restrictions. • Paterson (copper) – The Paterson Project was expanded during the year with the addition of several highly prospective land packages. On 10 June 2020, an earn-in and Joint Venture Agreement was announced with Metals X Limited, covering 2,394km 2 of highly prospective tenements adjoining the Nifty Copper Mine and the Maroochydore copper resource. An additional JV with Antipa Minerals was completed subsequent to year-end on 9 July 2020 covering 1,593km 2 . This has now increased the total project area to 6,844km 2 . In March 2020, the Company also elected to exercise its option to enter into an earn-in and Joint Venture Agreement with Encounter Resources Limited. IGO has a further option to sole-fund A$15 million over seven years to earn a 70% interest in Encounter’s Yeneena Project tenements. Planning for the 2020 field program was advanced, with fine-fraction soil sampling, a magneto-telluric survey, an electromagnetic survey and several drilling programs planned. However, commencement of the field program was delayed due to the COVID-19 restrictions. The 2020 program commenced in June with the initiation of soil sampling. FINANCIAL OVERVIEW FY20 was a year of unique challenges, including devastating bushfires and the COVID-19 global pandemic. Together with all Australians, we transitioned from a heightened concern around bushfires to the emergence of a global pandemic which disrupted the way we live and work. In response to COVID-19, IGO proactively developed and implemented a response plan to safeguard the health and wellbeing of the people in our business and the broader community, whilst also ensuring business continuity and doing our bit to keep Australia’s economy strong. Throughout, IGO demonstrated remarkable resilience and adaptability. The COVID-19 pandemic did not have a material impact on the financial position of IGO with demand for our products remaining strong. The Company achieved record revenue and underlying EBITDA for the second year in a row. The Group generated total revenue and other income of $892.4 million, a 13% increase on the prior year result of $792.9 million. This was predominantly due to stronger base and precious metal prices and the resulting impact on product revenue from the Nova and Tropicana Operations respectively. Nova continued strong operational performance, exceeding guidance range on all metals, and delivering production in line with prior year levels. Tropicana production finished within guidance range and revenue was up on the previous year, despite lower comparative production, driven by a higher realised gold price. From a financial performance perspective, the Group’s Board and management monitor Underlying EBITDA (calculated as profit before tax adjusted for finance costs, interest income, asset impairments, gain on sale of subsidiaries, retention and redundancy costs, depreciation and amortisation). This measure represents a useful proxy for measuring an operation’s cash generating capabilities. Underlying EBITDA increased relative to the previous financial year, as can be seen in the following chart: Below is a reconciliation of Underlying EBITDA to NPAT for FY20. A$M FY20 $460M FY19 $341M Nova Operation Tropicana Operation Long Operation Exploration and evaluation expense Corporate and other expenses Investment revaluation Share-based payments expense (non-cash) 351 256 175 173 - (1) (73) (58) (22) (19) 33 (7) (4) (3) 400 350 300 250 200 150 100 50 0 (50) (100) NPAT VARIANCE FY20 VS FY19 76 47 54 (3) (3) (1) (7) (14) 40 1 (1) 2 (35) 155 A$M Exploration & evaluation expense NPAT FY19 Sales volume variance Price Variance Costs of Production variance Corporate Share-based payments expense D&A MTM of investments Gain on sale of Assets Impairment of exploration Net finance costs Income tax expense NPAT FY20 200 180 160 140 120 100 0 80 60 40 20 A$M 600 500 400 300 200 100 0 Underlying EBITDA Net finance costs Depreciation & amortisation Gain on sale of assets Impairment of Exploration Income tax expense Net profit after tax 460 1 (244) 4 (1) (64) 155 Depreciation and amortisation expense of $243.6 million (FY19: $237.1 million) was slightly higher than the prior year driven by higher amortisation of mine properties at Nova following a reserve update in FY20. The Group continued to build its cash reserves with interest income offsetting finance costs. 44 — IGO ANNUAL REPORT 2020 IGO ANNUAL REPORT 2020— 45