Mineral Resources Limited has been down since the beginning of 2024, and it shed substantial 26% in August alone. Therefore, what has changed which compels investors to put it on radar? The company’s Onslow iron ore project starting a ramp-up towards contributing from mid-FY25 is not the sole factor. With its strategic focus on high-margin iron ore projects, operational efficiency, and adaptability in the lithium market, Mineral Resources is well-positioned for substantial upside potential and remains a compelling investment choice in the resource sector.
Mineral Resources Limited (ASX: MIN)
On September 10, 2024, Mineral Resources Limited (ASX: MIN) announced that it had received full approval from the Foreign Investment Review Board to sell a 49% share of the Onslow Iron haul road to Morgan Stanley Infrastructure Partners for $1.3 billion. The deal includes an additional $200 million in deferred cash, contingent upon Onslow Iron achieving a run rate of 35 million wet metric tonnes per annum by June 2026. The upfront payment of $1.1 billion will allow MinRes to cancel its $750 million undrawn bridge facility.
Previously, Mineral Resources in its FY24 annual results for the period ended 30 June 2024, reported a 10% increase in revenue to $5.28 billion for the period, driven by growth in Mining Services and higher iron ore revenue, though this was partly offset by lower lithium prices. Underlying EBITDA fell 40% to $1.06 billion, reflecting a 20% margin.
Mining Services achieved a record EBITDA of $550 million, up 14%, due to higher production volumes. Iron Ore’s EBITDA surged 113% to $394 million, while Lithium’s EBITDA dropped 71% to $384 million despite record volumes. Statutory NPAT fell 53% to $114 million, impacted by $99 million in impairment charges, but was partly offset by a $378 million gain from the MARBL joint venture restructure. Underlying NPAT was $158 million. Operating cash flow before financing and tax rose 9% to $1.91 billion, bolstered by $600 million in iron ore prepayments, resulting in a strong cash conversion rate of 124%. The company’s net debt increased to $4.43 billion from $1.90 billion, while liquidity remained strong at $2.83 billion, including $908 million in cash and $1.93 billion in undrawn debt facilities.
In Mining Services, production volumes grew by 9% and the company secured several new contracts. In Iron Ore, Onslow Iron began shipments, and revenue increased by 20%. Despite a 76% drop in lithium prices, shipments grew and expansions were made. In Energy, significant drilling achievements were reported, including record flow rates and a new advanced rig acquisition.
Mineral Resources is well-positioned for a strong FY25, primarily due to the completion and ramp-up of the Onslow Iron project, expected to significantly enhance cash flow and support debt reduction. The Mining Services division will see major growth through its innovative operations and toll fees, while earnings from Tier 1 clients are expected to rise. The Iron Ore division will benefit from low-cost, long-life operations at Onslow Iron. The Lithium division is focused on cost reduction and flexibility to adjust production as market conditions improve, while ongoing drilling aims to enhance resources. The Energy division is progressing with onshore natural gas projects and exploring further opportunities. Additionally, MinRes plans to unlock value from its portfolio, exemplified by the $1.3 billion sale of a stake in the Onslow Iron haul road, with a significant upfront payment expected in the first half of FY25.
Source: Company’s Report
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