Chris Ellison’s Mineral Resources rockets after ruling out capital raising

Chris Ellison’s troubled Mineral Resources has reassured investors that there are no plans to raise capital, helping drive its shares up nearly 16 per cent.

Mineral Resources founder and boss Chris Ellison. Picture: Courtney McAllister

Improved clarity around Mineral Resources’ hot button issues of corporate governance and capital challenges in its March quarter report was welcomed by anxious investors, but analysts remained sceptical about its fresh Onslow downgrade and debt escalation.

Shares in the embattled mining group, run by billionaire Chris Ellison, recorded a nearly 16 per cent gain to $20.02 around lunchtime on Tuesday, making it the best performer on the bourse.

The price is still down 40 per cent since the start of the year, but investors appeared to ignore the mixed three-month period to March 31, which was headlined by a further escalation in the net debt balance of $5.4bn, from $5.1bn at the end of the December quarter, and the further downgrade to guidance on its Onslow Iron mining operations in Western Australia.

MinRes addressed investors’ corporate governance concerns, which have increased following the board resignations this month of non-executive directors Denise McComish, Jacqueline McGill and Susan Corlett.

“MinRes’ commitment to strengthening corporate governance remains unchanged,” the group, led by Mr Ellison as managing director, told investors.

“The process to appoint a new board chair, supported by Korn Ferry, is well advanced and on track to conclude in the June quarter.” The board’s nominations committee is also conducting an assessment of skills, with the new chair to be involved in any recruitment process for new directors.

A new leader will also be sought to replace Mr Ellison, an 11.5 per cent stakeholder in MinRes, who has agreed to exit his position in April following his involvement in tax evasion and misuse of company resources.

Mineral Resources founder and boss Chris Ellison. Picture: Supplied

MinRes also reassured investors there was no need for a capital raise yet, with liquidity at the end of March in excess of $1.25bn, comprising more than $450m in cash and a fully undrawn $800m revolving credit facility.

The company expects to comply with all financial maintenance covenants, which relate solely to its credit facility, as at June 30.

“Given the company’s strong liquidity and a number of other levers at MinRes’ disposal, an equity raise is not under consideration.,” it told investors.

The levers could possibly be a number of asset sales at its disposal as well as cost reductions. It has cut 1740 roles across its head office and sites since the start of fiscal 2025.

As flagged by DataRoom last week, there is speculation MinRes could be exploring a sale of its $1bn Bald Hill lithium mine in WA, which was placed into care and maintenance late last year following a strategic review on the back of a prolonged period of low lithium prices.

That’s after it abandoned a 50 per cent stake sale in its Wodgina lithium operation and tested the market for an equity raising late last year after bonds for MinRes started trading at a discount of 10c-15c in the dollar amid volatile market conditions.

It told investors on Tuesday, the first $US700m bond matures in May 2027. From May this year, “there is the opportunity to refinance at no prepayment premium,” it said.

“The company has full confidence in its access to capital markets and ability to refinance the notes in the coming years.

“The recent decrease in bond pricing, which was largely correlated with a broader decline in bond and credit markets, had no impact on serviceability nor the company’s interest expense.”

Analysts at Jarden said it was a mixed quarter.

Operationally, mining services volumes were weak at 62 million tonnes for the quarter, below analyst estimates. Iron ore shipments were in line with expectations at 5.9 million tonnes.

Onslow operations also came in below what the market had pencilled in at 3.62 million tonnes given its recent weather-related haul road problems, resulting in a guidance downgrade of 14.9-15.3 million tonnes.

Jarden analysts, led by Ben Lyons, said they continue to view the probability of the group achieving the low end of its revised Onslow guidance as “very unlikely”.

MinRes is rated as underweight at Jarden with a price target of $16.20 based on its “insufficient valuation support, stretched balance sheet metrics, and a recent escalation of persistent governance issues …”.

Price realisations for iron ore were better than expected at $US89/dry metric tonne both Onslow and Utah Point. On the positive side, lithium volumes were slightly ahead of market expectations and price realisations were robust and in line with analyst forecasts at $US845/dry metric tonne.

Onslow’s free on board cost came in at $66/wet metric tonne (including haul road toll) and Utah Point at $80/wet metric tonne.

Originally published as Chris Ellison’s Mineral Resources rockets after ruling out capital raising