Embattled miner seeks to lock in prices for operations owned in partnership with China’s biggest steelmaker
Chris Ellison's Mineral Resources is locking in iron ore prices while it races to fix a vital hauling route.
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Mineral Resources is locking in iron ore price strength in a sign it thinks current premiums for the steelmaking ingredient are unsustainable while it tries to get its $3.5bn Onslow Iron project in Western Australia running at capacity.
Chris Ellison-led MinRes intends to hedge up to a third of its iron ore production over the next six months to provide some certainty as it grapples with liquidity issues and a probe into its managing director’s related party dealings.
MinRes has also talked up its relationship with Morgan Stanley Instructure Partners as it races to finish repairs to a private haul road essential for carting iron ore to port facilities at Onslow.
Perth-headquartered MinRes needs the haul road resurfaced and is targeting a 35 million tonnes-a-year run rate for three months before June 30, 2026 to qualify for an additional $200m payment from the Morgan Stanley fund.
MinRes sold a 49 per cent stake in the 150 kilometre-long haul road to its Wall Street partner last year for $1.3bn, and says it is in the final stages of making repairs and upgrades at a cost of about $230m.
It has a small window to hit the target required to qualify for the $200m incentive before and after the onset of the cyclone season in WA’s Pilbara region.
Parts of the road were flooded and badly damaged in heavy rain during the cyclone season in the Pilbara, and MinRes has relied heavily on public roads and contractors to get iron ore to port while doing remedial work which has limited the use of its fleet of jumbo road trains.
Iron ore prices climbed above $US100 a tonne for the first time in two months in mid-July and continue to hover just under that mark, despite concerns about the strength of the Chinese economy and the impact of US tariffs.
MinRes chief financial officer Mark Wilson said on Wednesday that the company was looking to lock in a benchmark floor price of $US99-$US100 a tonne for the first half of 2025-26.
“The actual percentage of volume, we’re targeting to go up to a third, but we’re not there yet,” he said. “It’ll be less than that. If the prices come back, then we’ll lock some more in. At the moment, it would be between 1mt-1.5mt at that sort of price.”
China’s Baowu Steel Group, the world’s largest steelmaker, is a partner in Onslow Iron and has been buying 75 per cent of the MinRes share of production plus taking its own share of about 18.7 per cent.
Onslow shipments hit 2.7mt in June, representing an annual run-rate of 32.4 million tonnes a year. MinRes said it planned to hit nameplate capacity in the September quarter, but issued full-year guidance of 30mt-33mt.
New MinRes chairman Malcolm Bundey has made strengthening the company balance sheet a key priority along with tackling governance issues which largely stem from Mr Ellison’s involvement in a tax evasion scheme, improper use of company resources and related-party transactions, including with Ellison family members.
Its June quarter results showed MinRes had liquidity of $1.1bn, with leverage falling.
Net debt fell only marginally to $5.35bn in the June quarter, including a $200m foreign exchange gain which is in danger of being reversed.
MinRes achieved a price of $US79 a tonne for its iron ore, down 11 per cent on the previous quarter and representing a 20 per cent discount on the 62 per cent iron benchmark price.
Mr Wilson said MinRes would have an opportunity to “run [the haul road] hard” before the start of the cyclone season.
“Whether that’s November or December, you can assume we’ll be going for it before then. If, for whatever reason, we can’t get there, we’ll have another opportunity to do that in calendar year 2026 once the season is finished around the end of March,” he said.
The MinRes share price plunged in March after it revealed a first-half loss of $807m and the repair bill for the road.
It has also tinkered with the design of jumbo road trains capable of carrying up to 300 tonnes of iron ore at a time after six rollovers between August and March led to a temporary safety shutdown.
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Originally published as Embattled miner seeks to lock in prices for operations owned in partnership with China’s biggest steelmaker
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