Leading Australian mining services provider Mineral Resources (ASX: MIN) has this morning reported strong third-quarter operating results across its divisions and said it remains largely unaffected so far by the COVID-19 pandemic.
Releasing its March quarterly activities report, Mineral Resources said the mining services arm had performed strongly, with the division on track to achieve a similar earnings before interest, tax, depreciation and amortisation in the second half of this financial year to the $172 million EBITDA performance in the first half – on the basis there is no disruptions from COVID-19.
Iron ore production during the third quarter, of 3.4 million wet tonnes, was up 3% on the previous quarter and 28% on the corresponding period in 2019, despite operational impact due to rainfall at Koolyanobbing. The average iron ore sales price, at $US75 per dry tonne, was only 5% lower than in the second quarter. The Mt Marion lithium mine produced 111,000 wet tonnes of concentrate and shipped 99,000 wet tonnes.
HIGHLIGHTS:
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The coronavirus (COVID-19) crisis did not materially impact MRL’s operations during Q3 FY20. At this time, it is unclear what impact it will have on the remainder of the calendar year, including on demand and consumption for either iron ore or lithium.
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Safety performance continued to improve, with a Total Reportable Injury Frequency Rate (TRIFR) for the last twelve months of 3.36. This represented an improvement of 16% compared to the performance in FY19.
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Our Mining Services business continues to perform strongly. We expect second half Mining Services EBITDA to be similar to the first half ($172m) on the basis that there is no disruption from COVID-19 over Q4 FY20.
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Total iron ore production of 3.4 million wet metric tonnes (wmt) was 3% higher than Q2 FY20 and up over 28% on the prior corresponding period (Q3 FY19). Iron ore shipments of 2.9 million wmt were 12% lower than Q2 FY20.
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Average revenue received of US$75 per dry metric tonne iron ore was achieved during the quarter, 5% lower than Q2 FY20.
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While we began to benefit from lower energy prices during the quarter, we have also invested in measures to protect the health and safety of our workforce from the effects of COVID-19. Full year operating cost guidance for our commodities business remains unchanged.
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Mining operations at Koolyanobbing were impacted by heavy rainfall during the quarter while shipments were lower due to a slower than expected ramp up of rail capacity. Koolyanobbing is forecast to produce at an annualised run rate of 11 million tonnes per annum (Mtpa) during Q4 FY20 with additional dump trucks commissioned and additional rail capacity brought on line. Due to the lower shipments during the third quarter, export expectations from Koolyanobbing have been lowered 19% to between 7.1 to 7.6 million tonne (mt) for FY20.
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Iron Valley produced 1.7 million wmt of product for the quarter, up around 20% on each of the prior period and the prior corresponding period. The additional production will support higher shipping tonnages in Q4 FY20, with export expectations for FY20 increased 9% to between 6.6 to 7.0 mt.
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Mt Marion Lithium Project produced 111,000 wmt and shipped 99,000 wmt of spodumene concentrate during the quarter. An updated production outlook for FY20 was completed, based on an optimised mine plan which includes lower processing throughput to achieve a higher yield from ore processed and continues to include 4% spodumene concentrate production.
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MRL agreed a series of arrangements with BCI Minerals Limited (ASX: BCI, BCI) that will enhance MRL’s iron ore footprint in the Pilbara region, including the purchase of the Buckland Project from BCI for cash consideration of up to $20 million and the optimisation of the existing Iron Valley Agreement whereby BCI will participate in the capital investment required to extend the mine life at Iron Valley.
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MRL entered into an Asset Sale Agreement with Resources Development Group Limited (ASX: RDG, RDG) to transfer a 100% interest in its non-core Ant Hill and Sunday Hill manganese assets to RDG in return for MRL receiving scrip equivalent to a 75% shareholding in RDG. The transaction is anticipated to complete by the end of FY20.
