MinRes earnings dip, Mt Marion resources double

Mineral Resources (ASX:MIN) has announced a bump in half-yearly revenue over FY24 as it doubles the Mineral Resource Estimate (MRE) of its Mt Marion lithium mine in Western Australia. 

The 7% year-on-year revenue bump to $2.51 billion comes despite a tough lithium market, with spot prices of the battery metal nosediving from nearly US$45 per kilogram in mid-2023 to around US$13 as of 22 February 2024. 

Despite the revenue rise, MinRes’s underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) slipped 28% compared to the same time in FY23 to roughly $675 million — representing an EBITDA margin of 27%.

Underlying net profit after tax fell 49% to $196 million for the first half of FY24.

In light of these results, MinRes has slashed its interim dividend by 83% to $0.20.

However, MinRes shares still shook off some early losses to close 3.06% higher at $60.90 on 22 February, perhaps owing to the company’s Mt Marion resource upgrade.

In tandem with its half-yearly report, MinRes says it has increased the resource by 111% to 19.3 million tonnes @ 1.22% Li2O as of 31 January 2024. 

According to the mining giant, a diamond drilling program completed in the final quarter of 2023 has ‘significantly’ increased the confidence of the upper part of the North Pit underground resource at Mt Marion, which has a strike length of 500m and a thickness of between 30 and 60m. 

MinRes plans to complete another 80,000m of reverse circulation and diamond drilling in the area over the next 18 months. 

Speaking on the half-yearly results, Managing Director Chris Ellison says the company’s iron ore division helped offset some of the lithium struggles. 

“Underlying EBITDA of $674.9 million was evenly split between lithium ($271.4 million), iron ore ($266.2 million) and mining services ($253.7 million), with statutory net profit after tax of $518.0 million. 

The decision to declare an interim dividend of $0.20 aligns with our disciplined financial approach given the current environment.”

Ellison adds that the company made ‘incredible’ progress at its Onslow Iron asset over the half-year, with more than 2,000 people currently working on the project and first iron-on-ship on schedule for June 2024. 

The company’s mining services arm also supported its bottom line.

“Iron Ore was the half’s star performer as stronger prices and solid volumes drove up revenue 37 per cent to $1,329.4 million. 

Mining Services was awarded 5 new contracts and renewed 3 contracts, including our first major contract in Queensland,” Ellison says.

Meanwhile, MinRes continued on its pathway towards gas production over the half-year, with drilling at its Lockyer-5 well, the fourth of 10 planned production wells, ongoing.

Moody’s Investor Services analyst Mariano Ferrerya says the sharp decline in lithium prices over the half-year was somewhat balanced out by MinRes’ higher production volumes and lower costs. 

“Weak lithium prices and higher debt levels to fund its large capital spending program have increased MinRes’ gross leverage, which we expect to be slightly above our tolerance levels for the rating by June 2024. 

However, we expect EBITDA to increase from fiscal 2025 as the company’s lower-cost Onslow iron ore project comes online, which will support deleveraging even as iron ore prices moderate and lithium prices remain weak.”

Ferrerya maintains that MinRes’s diversity of operations provides a pillar of support for the company.

Images: Mineral Resources
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Written By Joshua Smith
Joshua Smith has years of experience in the media sector, having worked as a markets reporter, features writer, and editor since completing a Communications and Journalism degree and a Creative Writing degree. Josh is an avid board game fan and a self-professed coffee snob.