Mineral Resources cancels dividend as profit plunges on lithium crash
Mineral Resources will not pay a dividend for the first time in more than a decade, as founder Chris Ellison talks up the company’s transition to lower cost iron ore.
Minerals Resources is pinning its hopes on a transition to lower cost iron ore mining over the next year, after cancelling its dividend for the first time in more than a decade as plunging lithium prices punched a hole in its profits.
MinRes revenue came in at $5.28bn, up 10 per cent on the previous year, while underlying net profit fell 79 per cent to $158m.
Net debt more than doubled to $4.43bn, up from $1.89bn the previous year.
Founder and managing director Chris Ellison said on Thursday that with the price of lithium at the lowest it has been in six or seven years, “no one in the industry is making any money’’.
The companywas paid $US1279 per tonne for its lithium last financial year, down 76 per cent on the $US5267 it was paid the previous year.
MinRes shares tumbled 8.1 per cent on Thursday to $40.61, hitting a 12-month low and well off the $79.76 high the shares were trading at as recently as May.
Mr Ellison said the focus for this year on the mining front was to ramp up iron ore mining at the company’s Onslow operations, after deciding earlier this year to shut down its high cost Yilgarn iron ore operations after 13 years.
“We have traditionally had relatively high cost iron ore operations compared to our peers,’’ Mr Ellison said.
“Obviously the large mining organisations had the first pick of the great deposits in iron ore – high grade and heavy haul rail.
“So we haven’t had that. We’ve been high cost. We’re transitioning as an iron ore miner from high cost in the Yilgarn, in excess of $100 a tonne, to about $45 free on board at Onslow, so give us another year, the Yilgarn will be shut, Onslow will be at nameplate capacity and mining services will be generating probably double what it did last year.’’
The Onslow operations shipped their first ore in May this year and construction of a dedicated haul road is expected to be completed in October.
MinRes has previously announced the sale of a 49 per cent stake in the haul road to Macquarie Infrastructure Partners for $1.3bn.
Mr Ellison said Onslow would generate strong returns, “through commodity cycles and underpin significant growth in our services and infrastructure earnings’’.
“The sale of the haul road stake further strengthens the MinRes balance sheet and demonstrates the company’s unique ability to recycle capital,’’ Mr Ellison said.
“We expect to deleverage 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 per cent, driven by record production and new external contracts, with its growing infrastructure focus spearheading a new era of future growth.’’
Mr Ellison said the company was not interested in acquisitions in the struggling lithium sector.
“Given the stubborn lithium price and our remaining investment in Onslow Iron, we will continue to take a conservative approach during the 2025 financial year, deferring expansion projects and focusing on cost reduction and cash preservation,’’ he said.
“This approach was reflected by the board’s decision to not declare a final dividend for the 2024 financial year.’’
Underlying EBITDA in the mining services division came in at a record $550m, up 14 per cent, on growth in external crushing and haulage volumes and lithium production volumes.
“Iron ore achieved underlying EBITDA of $394m, up 113 per cent on higher achieved prices,’’ the company said.
“Lithium recorded underlying EBITDA of $384m, down 71 per cent, impacted by weaker lithium prices despite record lithium volumes.’’
The company said the outlook remains “very positive’’, particularly for the core mining services division.
“MinRes enters the 2025 financial year 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.
“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.’’
UBS, which has a sell rating on the stock, said the earnings were broadly in line with consensus but “capex and cost guidance was soft, given a weak commodity price backdrop and elevated gearing’’.
Consensus was for a 9c per share dividend while UBS had forecast no dividend.
