With high iron ore prices behind us and ASX mining stocks at the receiving end in the broader market, China’s stimulus came as a silver lining. The Australian resources sector surged with ASX investors piling their money in beaten down and not so beaten down mining stocks. ASX mining shares surged responding to China’s fiscal and economic measures.
Mineral Resources Limited (ASX: MIN)
Mineral Resources Limited recently confirmed the execution of the sale of a 49% interest in the Onslow Iron haul road following the receipt of the upfront cash consideration of $1,100 million from MSIP on 24 September 2024.
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.
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.
Champion Iron Limited (ASX: CIA)
For the quarter that ended on 30 June 2024, Champion Iron Limited reported robust performance across several metrics.
Production of high-grade iron ore concentrate reached 3.9 million wmt, up 18% from the previous quarter and 14% year-on-year. Sales set a record at 3.4 million dmt, marking a 16% quarter-on-quarter increase and 34% year-on-year growth.
The gross realized selling price was US$125.3/dmt, close to the P65 index average of US$126.1/dmt, while the net realized selling price rose 20% from the previous quarter to US$99.2/dmt, and 15% year-on-year.
C1 cash costs were $76.9/dmt, consistent quarter-on-quarter but down 5% from the previous year. EBITDA surged by 113% quarter-on-quarter and 175% year-on-year to $181.2 million.
Net income more than tripled to $81.4 million, a 215% increase from the prior quarter and 388% from the same period last year. EPS increased by 220% quarter-on-quarter and 433% year-on-year to $0.16.
The acquisition of new mining equipment and railcars signals a proactive approach to increasing production capacity and addressing operational bottlenecks. This will likely boost Bloom Lake’s production and sales capabilities, contributing to future revenue growth and improved operational efficiency.
In line with its long-term strategy to maintain efficient resource management, the company anticipates an increase in the stripping ratio in the coming quarters. While this may lead to higher operational costs and potentially reduce short-term profitability, the focus on effective resource management is expected to enhance production levels over the long term. This strategic approach aims to optimize resource extraction and ensure sustainable operations, ultimately supporting stronger performance and growth in the future.
Source: Company’s Report
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