Mineral Resources could raise $1.1bn through a sale of its mining services stake

Assets connected to Mineral Resources’ Onslow Iron project could be sold to reduce the company’s debt. Picture: AFP

Mineral Resources could net as much as $1.1bn through a sale of up to 15 per cent of its mining services business to get cash through the door, according to analysts.

Morgan Stanley analysts said in a research note that they foresaw the potential to sell a 10 to 15 per cent stake in the mining services business of Mineral Resources, which it valued at between $750m and $1.1bn.

The Chris Ellison-founded business remains viable at iron ore prices over $US61 a tonne from the 2027 financial year onwards.

Other options could involve a further selldown of its Onslow haul road, for its Onslow Iron ore project in Western Australia.

The remaining 51 per cent stake was likely worth more than the 49 per cent bought by Morgan Stanley Infrastructure Partners for $1.3bn, given the control premium.

MinRes could also sell $789m of Onslow Iron loan receivables or iron ore capacity above 40 million tonnes per annum.

The analysts said that they did not foresee an issue with respect to the ability by the ASX-listed Mineral Resources to service its debt, and flagged that it could possibly refinance.

Once the Onslow Iron project was at maximum output capacity, or so-called “nameplate capacity”, its ability to service debt significantly improves.

The analysts said free cashflow would cover interest payments three times in the 2026 financial year on a base-case scenario, and net debt to earnings before interest, tax, depreciation and amortisation dropping to 2.2 times next financial year from 6.2 times.

They believed the ability to service a loan would only be an issue if iron ore breaks through about $US78 a tonne.

The analysts said they expected mining services EBITDA to rise to $920m in the 2026 financial year from $662m this year.

Its lithium project, Mt Marion, would produce $120m of negative free cashflow at current 2026 spot lithium prices, so they said a shutdown would be positive.

But excluding Mt Marion, they estimated its EBITDA is at $835m.

At six times that number, it places a $5bn value on the business, which is 115 per cent of the current market value of Mineral Resources.

The moves by analysts to discuss differing funding scenarios for the ASX-listed MinRes comes after the company came under fire last year after allegations surrounding Mr Ellison’s involvement in tax evasion and misleading conduct by the company, and he stepped down as managing director.

It had $5bn of net debt at December and its share price is down 60 per cent in the past year, with its market value at $4.2bn.