MinRes pulls trigger on $3bn Pilbara iron ore mine, backed by China’s biggest steelmaker

MinRes has pulled the trigger on the development of a new $3bn iron ore mine near Onslow in WA, backed by China’s biggest steelmaker, Baowu.

Mineral Resources and Chinese steelmaking giant Baowu have ticked off on the development of a new $3bn Pilbara iron ore project, with the first stage of the project expected to ship 35 million tonnes of iron ore a year.

The ASX-listed group deli­vered its full-year results on Monday, maintaining its $1 a share dividend despite falling iron ore prices hitting its profit, which declined by 72.5 per cent to $349.2m for the full financial year.

MinRes booked underlying earnings before interest, tax, depreciation and amortisation of $1.02bn for the year, down 46 per cent, with surging lithium prices not making up for soft markets for lower-grade iron ore shipments.

The Chris Ellison-led company booked underlying net profit of $400m for the year, on revenue of $3.4bn, down 8 per cent.

Mr Ellison said the result was still the second-best financial performance in MinRes’s history, and came despite “headwinds of iron ore price and inflationary cost pressures and the pandemic still affecting our everyday ­operations”.

The results came as MinRes and Chinese steelmaking giant Baowu ticked off on the development of a new iron ore mine and associated infrastructure in the Pilbara, with the joint venture partners making a final investment decision on the $3bn MinRes-led Onslow Iron project.

The decision to push ahead with the project comes despite the tumble in iron ore prices, which averaged about $US138 a tonne through last financial year, but have since fallen to around $US105 a tonne as Covid-19 lockdowns in China slowed economic activity in the world’s biggest steelmaker.

MinRes currently owns 40 per cent of the complex joint venture that controls the Onslow iron ore project, with the balance held by a second partnership including Baowu, South Korea’s POSCO and US investment group AMCI.

Under the new agreement announced on Monday, MinRes will cover $1.3bn of the estimated $3bn cost of building the mine and port infrastructure, and emerge with a 57 per cent stake in the final development.

Mr Ellison said on Monday the company expected production costs from the project would be about $32.23 a tonne, excluding royalties. But MinRes will also run the iron ore mining operations, as well as haulage and the port, and will charge the joint venture $7.74 a tonne in infrastructure fees.

MinRes said it expected the 35 million tonne a year project to be shipping its first ore by the end of 2023.

“Project preparations are on track; early works have commenced and long-lead items have been ordered in line with the project schedule. We look forward to maintaining the momentum as we enter the construction phase, as we aim to meet our target of delivering first ore on ship by December 2023,” Mr Ellison said.

The MinRes founder said the company would sell half of its share of the mine’s output to Baowu, which also has the rights to take another 25 per cent of the project’s output under a life-of-mine offtake agreement.

MinRes expects to ship about 11 million tonnes of iron ore from Port Hedland from its existing Pilbara iron ore mines in the current financial year, and another 6.7 to 7.3 million tonnes from its iron ore operations in the Yilgarn region of WA.

It booked $2bn in revenue from its iron ore operations for the full year, down 35 per cent for the year, and iron ore EBITDA of $64m.

MinRes lithium operations beat out its iron ore earnings by a solid margin, with its share of revenue from concentrate shipped from its Mt Marion mine, along with a single shipment from its Wodgina mine, generating ­EBITDA of $382m.

The company’s move to turn some of that lithium concentrate into lithium hydroxide at Chinese treatment plants generated another $154m in EBITDA

MinRes shares fell 1.7 per cent to $63.99 on Monday.

Originally published as MinRes pulls trigger on $3bn Pilbara iron ore mine, backed by China’s biggest steelmaker