Mineral Resources (MIN) – Strong operational result

Mineral Resources offers mining services in Australia, Asia, and internationally, as well as having its own operations in iron ore and lithium. Mineral Resources was founded in 1992 and is headquartered in Osborne Park in Perth.‍

‍

Mineral Resources (MIN) posted March-quarter volumes in its iron ore, lithium and mining services businesses that all exceeded Ord Minnett and market expectations, while realised prices for its commodities also topped consensus estimates. The company upgraded FY26 volume guidance for its Onslow iron ore and Wodgina and Mt Marion lithium divisions, and for its mining services business that provides pit-to-ship handling and haulage for both Mineral Resources and external customers. Mineral Resources reported net debt at $4.5 billion as at 31 March, down from $4.9 billion in the December quarter, but we expect this to fall further to $3.3 billion by 30 June if, as we expect, the strong operating performance and impetus from robust lithium prices continues. Along with the lithium sell-down proceeds from Korea’s POSCO, this should push the company’s net debt to underlying operating ratio (ND/EBITDA) down to 2.1x, just above its target of less than 2x, from 2.8x as at 31 December.

‍

The Onslow iron ore operation will soon take possession of two more transhippers – vessels used to transport 20,000 tonnes of iron ore at a time from the Port of Ashburton to much larger bulk carriers anchored 40km offshore – with the first arriving in June and the second in August, taking the total number of transhippers to seven. Their arrival should increase the port’s shipping capacity to as high as 40 million tonnes per annum, although anything beyond that rate will be difficult without significant upgrades to land-side infrastructure. In lithium, a resumption of work on the northern underground decline at Mt Marion is under consideration, with a decision likely very soon, while Wodgina is still set to start three-train operations in the June quarter of FY27.

‍

Meanwhile, Mineral Resources sees the mining services division as having a positive outlook for several years to come, with two external contracts recently renewed, although the sharply higher cost of diesel means costs in the June quarter will trend towards the top end of the company’s full-year guidance. We see a unit cost impact of $4–7 a tonne on its iron ore operations, and a $60 a tonne impact on its lithium business. Post the result, we have incorporated actuals, a lower cost of debt and higher operating costs. Across the forecast horizon, this leads to a 3.3% upgrade in our EPS estimate for FY26, a cut of 7.3% for FY27, and an increase of 4.7% in FY28.

‍

As a result, we raise our target price on Mineral Resources to $67.00 from $65.00 but downgrade our recommendation to Accumulate from Buy on valuation grounds given the stock’s almost 20% surge in April.

‍