MinRes upbeat despite debt, corporate watchdog probe

Mineral Resources says it will be generating “significant cash” by the end of the year as it shrugged off concerns.

MinRes managing director Chris Ellison.

Mineral Resources says it will be generating “significant cash” by the end of the year as it shrugged off concerns about debt and a governance probe by the corporate watchdog.

MinRes chief financial officer Mark Wilson, announcing the company’s quarterly update on Thursday, said he was comfortable with the company’s net debt position of $5.1bn and the outlook for its iron ore, lithium and mining services operations.

Mr Wilson said he would not comment on an investigation by the Australian Securities and Investments Commission into managing director Chris Ellison.

ASIC last year launched an investigation into MinRes, which has come under scrutiny from the ASX and investors over whether it met disclosure obligations around matters involving Mr Ellison. In November, MinRes announced a plan to replace him as managing director sometime in the next 12-18 months.

MinRes reaffirmed its guidance for 2025 with its flagship Onslow Iron project in the Pilbara progressing towards a production rate of 35 million tonnes per annum.

“I can see the cash that’s going to be generated in the second half and I’m comfortable with where we are,” said Mr Wilson.

“I know (the debt) is a number and I know it’s a big number but by June, this business will have been fundamentally transformed from where it was three or four years ago.

“I’m comfortable with the net debt number. I think our bondholders remain very supportive and are confident and comfortable with the position. But as always, we will keep an eye on the market and on commodity prices. If we need to move, we can.”

Mineral Resources’ Mt Marion lithium mine in Western Australia.

Mr Wilson said Onslow Iron would generate significant earnings while its mining services division provided a substantial annualised rate of earnings underpinned by long life contracts.

“What I would ask the market to consider is what the shape of the business looks like,” he said. “We have lots of choices available to us if we need.”

Citi analyst Kate McCutcheon said MineRes’ net debt of $5.1bn was above a consensus estimate of $4.5bn while its cash of $700m was below an expected $1bn. Meanwhile, the company’s capital expenditure of $1.4bn was more than expected.

“Costs are running above guidance generally with the company needing to deliver a better second half,” Ms McCutcheon said.

Mr Wilson said the group was going to be generating “significant cash going forward” and its choice would be whether it reinvests or whether it applies it to the balance sheet.

“There’ll be an element as always of sustaining capital expenditure but we’ll have a choice,” he said. “My view is that the maintainable earnings from the business by the end of June are at a very different level and a very different quality than they were a couple of years ago.

“That gives me a high level of comfort in terms of the ability to support the debt that’s on the balance sheet. That doesn’t mean that we won’t continue to monitor and track and look at the market. What I’m trying to say is that we’ll have that choice the underlying earnings will be fundamentally different.”

MineRes said liquidity at the end of 2024 was expected to be $1.5bn, consisting of more than $700m in cash and a fully undrawn $800m revolving credit facility. Within its mining services division, second quarter production volume was flat at 68 million tonnes from the previous quarter. Overall production volumes benefited from the ramp up of Onslow Iron but was offset by lower volumes at the Yilgarn Hub iron ore mine and Bald Hill lithium project as those operations transitioned to care and maintenance.

Originally published as MinRes upbeat despite debt, corporate watchdog probe