Mineral Resources considers Pilbara port option alongside iron ore partial sale
Chris Ellison’s Mineral Resources is again considering the partial sale of its iron ore division.
Chris Ellison’s Mineral Resources is again considering the partial sale of its iron ore division, as surging prices for the steel making commodity boost the company’s bottom line and MinRes looks to grow exports by providing port infrastructure to stranded Pilbara deposits.
MinRes shipped a record 7.9 million tonnes of iron ore from mines in the Pilbara and Yilgarn regions of WA in the first half of the year, generating earnings before interest, tax, depreciation and amortisation of $582m.
The MinRes managing director told analysts on the company’s Monday earnings call that MinRes was considering a partial selldown of its iron ore division as it looks to build new ports and associated infrastructure in the Pilbara.
“We would certainly consider something around a partial sell down, or a joint venture, and those things are being considered,” Mr Ellison said.
MinRes first floated the prospect of selling down its iron ore assets as it launched its Carina iron ore mine in WA’s south in 2011 at the peak of the first iron ore boom, but missed the chance as prices fell as the company ramped up production. But the resurgent iron ore price, along with plans to build a new port that could ship 25 to 30 million tonnes a year of iron ore from Ashburton in the Pilbara, has brought the plans back.
Mr Ellison said MinRes would likely retain some ownership of its iron ore assets, but said MinRes was actively considering joint venture deals, partnerships and the eventual partial sell down of its iron ore division, which is set to ship 19.5 to 20.5 million tonnes of ore for the full financial year.
He said MinRes expects to begin work on a new port at Ashburton by the middle of the year, when final approvals are received from the state government, with the port planned to service the Kumina and Bungaroo South iron ore projects.
But establishment of the port could also deal Chinese steelmaking giant Baowu into WA’s iron ore sector, offering a gateway for ore produced at projects acquired in Baowu’s $1.4bn takeover of Aquila Resources in 2014.
MinRes also bid for Aquila at the time, and is believed to have quietly revived discussions with its owners over a potential partnership or joint venture that would allow Aquila’s iron ore to reach the market without the need for Baowu to spend billions on building its own port and rail network linking its mines to a new port at Anketell, as originally planned.
Mr Ellison said the Ashburton port would use smaller barges to move ore out to much larger bulk carriers sitting off the Pilbara coast, known as transshipping, saying MinRes believed the port costs would be half what it currently pays to use Port Hedland’s Utah Point berth.
“The cost of transshipping is not that big a deal, and that’s a business we want to get into because the focus on that is to be able to exploit stranded tonnes, and there’s a lot of them around Australia,” he said.
MinRes has also pitched plans to build two new iron ore berths at Port Hedland, which could add another 50 million tonnes of export capacity to its capability. But that project is less certain to go ahead, with BHP, Fortescue Metals Group and Gina Rinehart’s Hancock Prospecting also eyeing the development opportunity.
Last year’s surging iron ore price boosted Mineral Resources to a $519m net profit for the half year, with the company declaring a $1 a share interim dividend on the back of the strong result.
The miner and mining services provider said revenue for the period rose 55 per cent to $1.5bn as it exported a record 7.9 million tonnes of iron ore in the period, up 17 per cent on the back half of 2019, with the company also lifting lithium production at its Mt Marion operations despite low prices for its lithium concentrate.
MinRes received an average $459 a tonne for its lithium concentrate in the period, down $230 a tonne from the previous comparable period.
MinRes booked underlying net profits of $430m, up 233 per cent on the first half of the previous financial year on the back of the strong iron ore price, with underlying earnings before interest, tax, depreciation and amortisation up 131 per cent to $763m.
Its iron ore division delivered the bulk of the earnings, with EBITDA of $582m, with the company receiving an average $154 a tonne for its shipments.
MinRes shares closed down 20c, or 0.5 per cent on Monday at $36.80.
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