Mineral Resources Provides Upbeat Business Update At AGM

About Mineral Resources

Mineral Resources Limited (MinRes, MIN or the Company) is a Perth-based mining services provider that since listing in 2006 has evolved from a mining services contractor to now owning and operating its own commodity projects. Principally focused on iron ore and lithium, and more recently onshore natural gas, the Company is Australia’s fifth-largest iron ore producer and is the largest acreage holder of conventional gas exploration permits in the Perth and Carnarvon Basins.

The Company owns the largest pool of minerals processing equipment, parts and spares in Australia.  Its mining services offer a full suite of pit-to-port mining logistics capabilities that cover exploration, planning, mine design and construction as well as the construction and design of minerals process facilities, commodity transportation, crushing, processing, and marketing services.

AGM Business Update

MinRes provided an upbeat assessment of prospects for its world-class lithium portfolio and expressed confidence in its ability to ramp up production volume to 35Mtpa at the Company’s low-cost, long-life iron ore project in the Pilbara. The Company also highlighted that its onshore natural gas discoveries have the potential to add income diversification to a growing revenue base.

With $1.4 billion operating cash flow for the 2023 financial year, and cash at financial year-end of $1.4 billion, the Company’s balance sheet is well placed to support ongoing asset and business growth. This growth was exemplified in the 2023 financial year when revenue hit $4.8 billion (up 40 percent), underlying EBITDA was up 71 percent to $1.8 billion, and capital expenditure on assets with strong economic fundamentals was $1.8 billion.

The Company highlighted its impressive track record during the period FY20 – FY23 and pointed to a 22 percent pa average Return on Invested Capital, total asset Compound Annual Growth Rate of 31 percent pa and Total Shareholder Return of 44 percent pa since 2019.

Mining Services

This division is the foundation business of Mineral Resources and currently operates 26 mines, both external and internal to the Company, providing pit-to-port mining logistics capabilities. It is an innovator within the mineral services sector, as evidenced by its proprietary fully automated road trains and lightweight modular rail-based system that can be re-located anywhere, unlocking stranded mining assets.

MIN is in ongoing discussions with third parties for new contracts and anticipates significant growth in the medium term from its own lithium and iron ore operations. The Company expects EBITDA from its mining services business to more than double by FY24 from FY22 levels.

Lithium Production

MIN operates in one of the world’s most prospective lithium regions and its medium-term strategy is to leverage existing infrastructure by acquiring and consolidating lithium rights in the Goldfields region.  Since June 2022 Ore Reserves at the Company’s Mt Marion and Wodgina mines have increased by 107 and 12 percent respectively.  MIN plans to have 12 rigs drilling at Mt Marion by January 2024 as it actively considers the underground potential at Mt Marion.

The Wodgina mine site is running ahead of budget with record shipments in August and September. The mine currently operates 2 Trains, with Train 3 due to come online in January 2024 and Train 4 approvals about to commence, with studies underway for Trains 5 and 6.

MIN’s longer-term ambition is to develop its own lithium hydroxide plant; however, it is likely this will be achieved in conjunction with international development and technology partners to minimise technical and financial risk.

Iron ore Production

Mineral Resources is Australia’s fifth-largest iron ore producer.

MIN’s 60 percent-owned, low-cost, long-life iron ore project at its Onslow mine in the Pilbara has all approvals in place with the initial ore on ship targeted for June 2024. Production is expected to ramp up to 35mtpa over 12 months and then 6 months later produce 40mtpa, and ultimately 50mtpa production.

Natural Gas

MIN is confident that its high quality, clean natural gas reserves, which are located 15 kilometres from WA’s main gas pipeline, will commence production in the next 2-3 years.

Lithium and iron ore outlook

The irreversible global decarbonisation mega-trend ensures ongoing demand for lithium which is an essential component for rechargeable lithium-ion batteries used in electric vehicles, laptops, and mobile phones and to store energy generated from renewable sources.

According to the September 2023 Resources and Energy Quarterly, a report produced by the Australian Government sponsored Office of the Chief Economist, global lithium demand is expected to outstrip supply until 2027. The report concludes that lower long-term lithium prices from recent elevated levels are unlikely to seriously impact Australian producers like MIN. This is because for the 2023 financial year, MIN’s Mt Marion and Wodgina lithium mines reported unit production costs as a share of prices received at just 37 percent and 19 percent respectively.

China accounts for 70 percent of global iron ore imports by dollar value, so the strength of the Chinese economy has a significant impact on long-term iron ore prices. Australia has 28 percent of the world’s iron ore and accounts for about 50 percent of the world’s iron ore exports. The Chinese economy grew by just 3 percent in 2022, which was the lowest growth rate in almost fifty years. However, a recent Reuters poll of economists showed that the Chinese economy is expected to grow 5 percent in 2023 and 4.5 percent in 2024. Growth at these rates in the Chinese economy should buttress iron ore prices at just below current levels over the medium-term.

The Future

The Company can fund large-scale, long-life projects and grow mining services volumes by borrowing at 9 percent per annum, so consistently delivering 20+ percent returns imply continuing shareholder value accretion over the long-term.