Mineral Resources Limited (ASX: MIN) has announced its financial results for the full year ended 30 June 2024. It has also released its full-year accounts for FY24.
Key points:
Solid underlying financial results and cash flow despite lithium price
- Revenue of $5,278M, up 10% (FY23: $4,779M).
- Underlying EBITDA of $1,057M, down 40% (FY23: $1,754M).
- Underlying Net Profit After Tax (NPAT) of $158M, down 79% (FY23: $769M).
- Statutory NPAT of $114M, down 53% (FY23: $244M).
- Operating cash flow before financing and tax of $1,909M, up 9% (FY23: $1,750M), including iron ore customer prepayments of $600M. Excluding the iron ore prepayments, cash conversion was 124%.
- No final dividend declared.
Strong liquidity position maintained during peak investment for Onslow Iron
- Completed US$1,100M Senior Unsecured Notes Offering in October 2023.
- Executed an iron ore customer prepayment of US$400M ($600M).
- Available liquidity of $2,833M (FY23: $1,791M), including cash of $908M (FY23: $1,379M).
- Net debt of $4,428M (FY23: $1,896M).
Mining Services
- Production volumes increased 9% to 269M wet metric tonnes (wmt) (FY23: 248M wmt).
- Delivered record Underlying EBITDA of $550M, an increase of 14% (FY23: $484M).
- Awarded six new contracts and renewed three contracts.
- Entered into a binding agreement with Morgan Stanley Infrastructure Partners for the sale of a 49% interest in the Onslow Iron dedicated haul road for total expected proceeds of $1,300M.
Iron Ore
- Onslow Iron delivered first ore on ship in May 2024. Mining continued to ramp up and construction of the dedicated haul road is scheduled for completion in October 2024.
- Exports totalled 18.1M wmt across all hubs, up 3% (FY23: 17.5M wmt) and revenue increased 20% to $2,578M (FY23: $2,147M).
Lithium
- Achieved price of US$1,279 per dry metric tonne (dmt) SC6, down 76% (FY23: US$5,267/dmt SC6).
- Shipments across three lithium operations of 486k dmt SC6 (FY23: 293k dmt SC6).
- Record shipments from Wodgina (up 41% to 201k dmt SC6) and Mt Marion (up 46% to 218k dmt SC6).
- Mt Marion plant expansion commissioned and underground decline commenced.
- Acquired Bald Hill effective 1 November 2023, with 67k dmt SC6 shipped.
- Completed the restructure of the MARBL joint venture, increasing ownership in Wodgina to 50%.
- Exited investments in downstream conversion assets to focus on upstream production.
Energy
- Lockyer-5 Sidetrack-1 (ST-1) development well achieved the highest stabilised flow rate in the Perth Basin of 104 million standard cubic feet (MMscf) per day.
- North Erregulla-2 well test achieved a strong flow rate, with a current estimated potential average production rate of more than 1,100 barrels of oil per day.
- Acquired a rig that drills to a vertical depth of 5,000 metres using an automated drill floor.
Commenting on the results, MinRes managing director Chris Ellison said:
“This was the biggest year of development in our history, culminating with the start-up of the transformational Onslow Iron project.
“Onslow Iron achieved first ore on ship ahead of schedule in May, just 11 months after we broke ground at the Ken’s Bore mine site. This phenomenal achievement is a testament to the in-house project delivery expertise that MinRes has developed over more than three decades.
“Our hands-on, agile and creative culture made Onslow Iron possible and will enable the unlocking of an entire new mining region in the West Pilbara. Thank you to our people for their commitment, professionalism and ingenuity in making this vision a reality.
“Our meaningful partnerships with every level of government, communities and – importantly – the Traditional Owners of the lands that Onslow Iron is located on has helped bring the project to life. We look forward to continuing to spread the project’s benefits widely.
“Onslow Iron will generate strong returns through commodity cycles and underpin significant growth in our services and infrastructure earnings. The value of Onslow Iron has already been demonstrated by the sale of a minority share of the dedicated haul road to Morgan Stanley Infrastructure Partners for $1.3 billion.
“The sale of the haul road stake further strengthens the MinRes balance sheet and demonstrates the company’s unique ability to recycle capital. We expect to de-leverage rapidly as Onslow Iron hits nameplate capacity and becomes cashflow positive over the next 12 months.
“Overall, the results highlight the strength of MinRes’ business model, with our diverse income streams all contributing to solid group earnings, despite a depressed lithium price. Our core Mining Services division increased Underlying EBITDA by 14%, driven by record production and new external contracts, with its growing infrastructure focus spearheading a new era of future growth.
“The Lithium division achieved record shipments from Wodgina and Mt Marion, where we began the transition to an open pit and underground operation. During the year we also acquired a third lithium mine, Bald Hill, and expanded our strategic footprint in the Goldfields, providing low-cost optionality when lithium prices rebound.
“The Iron Ore division increased shipments by 3% and revenue grew 20%. In June we announced that, after 13 years, exports would cease from the Yilgarn Hub. This was a difficult decision to make and one we did not take lightly. We have prioritised approximately 1,000 employees in the Yilgarn for redeployment, particularly to Onslow Iron.
“The Energy division enjoyed further success in our natural gas exploration program in the Perth Basin. We continue to encourage the State Government to update the WA Domestic Gas Policy to incentivise investment, exploration and additional supply.
“Given the stubborn lithium price and our remaining investment in Onslow Iron, we will continue to take a conservative approach during FY25, deferring expansion projects and focusing on cost reduction and cash preservation. This approach was reflected by the Board’s decision to not declare a final dividend for FY24.
“Our management team has decades of experience through commodity peaks and troughs. I have full confidence in our ability to manage the balance sheet and keep delivering leading returns for our shareholders.”
FY25 guidance and outlook
The outlook for MinRes remains very positive, particularly for the company’s core Mining Services division.
MinRes enters FY25 with the conclusion of the construction phase of the world-class Onslow Iron project and targeted ramp-up to nameplate production of 35 million tonnes per annum from June 2025. As Onslow Iron volumes increase, group cash flow is expected to increase significantly, facilitating a rapid deleveraging of the balance sheet from early 2025.
Onslow Iron is a major growth catalyst for the Mining Services division. Earnings will grow significantly through the execution of the project’s innovative pit-to-ship operations over the life of mine, in addition to a toll fee per tonne of iron ore transported over the Onslow Iron haul road. Mining Services earnings from Tier 1 clients are also expected to expand strongly over the coming years as the business delivers on recent contracts wins and renewals.
The successful commencement of Onslow Iron will significantly increase volumes and transition the Iron Ore division to low-cost and long-life operations.
The Lithium division remains focused on maximising the value of its three upstream operations in Western Australia. In the near term, the division will concentrate on lowering costs and capital spend while assessing and maintaining flexibility to increase production subject to improved market conditions. The ongoing drilling across all three deposits and nearby tenure is expected to further improve resources and reserves.
Following the success of onshore natural gas discoveries, the Energy division has advanced to the development stage. This division looks forward to further exploration and definition of numerous natural gas and oil prospects in coming years.
MinRes will continue to invest in industry leading wellbeing initiatives to retain and attract high-quality people and promote a safe community on site.
The company always assesses options to unlock value and release capital across its diverse portfolio. A recent example is the announced sale of a 49% interest in the Onslow Iron dedicated haul road to Morgan Stanley Infrastructure Partners for expected proceeds of $1,300M. Completion of the transaction is expected in 1H25, resulting in the first $1,100M upfront payment.
