Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mineral Resources Ltd (ASX:MIN, Financial) achieved record mining services revenues of $5.3 billion, up 10% year-on-year.
- The company successfully delivered the Onslow Iron project on budget and ahead of schedule, a significant achievement given global supply chain disruptions.
- Mineral Resources Ltd (ASX:MIN) doubled its mining services business, winning more contracts than ever, which is expected to significantly boost future revenues.
- The company has created a robust infrastructure business with long-term contracts, some extending up to 50 years, providing stable and predictable income.
- Mineral Resources Ltd (ASX:MIN) has a strong focus on safety and well-being, ranking in the top 5% of the industry for safety management and statistics.
Negative Points
- The company is facing incredibly low lithium prices, significantly impacting earnings and leading to no final dividend for the year.
- Return on Invested Capital (ROIC) was down to 5.3% for the year, although the company expects improvement as new assets start earning.
- Mineral Resources Ltd (ASX:MIN) is experiencing a downturn in headcount, with plans to reduce staff between now and Christmas.
- The company is pulling back on capital expenditures and production in its lithium operations to conserve cash, which may impact future growth.
- There is significant uncertainty in the market, particularly with lithium prices, making it challenging to predict future financial performance.
Q & A Highlights
Q: Can you provide an update on the lithium business and the expected all-in sustaining cost?
A: The capital expenditure in the lithium business is necessary to position us for a stronger market when prices recover. We expect lithium prices to improve early next year, but if they don't, many operations may shut down. The ultimate goal for all-in sustaining costs will depend on the ore body and capital investments, but we are focused on optimizing costs.
Q: Is there any remaining CapEx to complete Onslow to 35 million tonnes per annum beyond FY25?
A: After Christmas, we expect to spend around $100 million on tidy-up work and communications. This should be the final significant expenditure to complete the Onslow project to its 35 million tonnes per annum capacity.
Q: What has changed regarding the expansion to 50 million tonnes at Onslow, and what does this mean for future CapEx?
A: The decision to pause expansion to 50 million tonnes is due to the drop in iron ore prices and the downturn in the lithium market. We will not proceed with further expansion until we see improvements in both the balance sheet and market outlook. The construction workforce will be managed accordingly, and we will continue with necessary approvals and engineering work.
Q: How are your joint venture partners reacting to the current market conditions and CapEx plans for lithium?
A: We have had productive discussions with Albemarle, our joint venture partner, and we are aligned on the need to conserve capital while continuing necessary development work. Both partners are committed to managing the business prudently during this downturn.
Q: Can you provide more details on the mining services margins and future expectations?
A: We expect to achieve $2.20 per tonne in mining services margins within the next 18 months to two years. This is driven by innovation and efficiency improvements. While it will be challenging to continue increasing margins, we are confident in our ability to maintain strong performance.
Q: What is the strategy for the gas assets, and are there plans for asset sales?
A: The initial plan for the gas assets was to be self-sufficient. We have found significant gas reserves and are exploring options for LNG export. We have no immediate plans for asset sales but will consider opportunities that align with our long-term strategy.
Q: What operational changes are being made at Mt. Marion to improve product quality and reduce costs?
A: We are implementing several improvements at Mt. Marion, including ore sorting and whims to enhance feed quality and plant performance. These changes will help reduce costs and improve margins over time. We are also progressing with underground development to access higher-quality ore.
Q: How is Onslow performing operationally, and what are the current shipping rates?
A: Onslow is ramping up as planned. We are currently moving 1 million tonnes per week, with a run rate of 18 million tonnes per annum expected by December. We are progressively increasing shipments and expect to reach a 35 million tonnes per annum run rate by mid-next year.
Q: Given the cyclical nature of the market, why not push ahead with growth projects despite the downturn?
A: While we recognize the cyclical nature of the market, our focus is on conserving cash and managing the business prudently. We are maintaining development work and keeping operations running to be well-positioned when the market recovers. This approach balances cash flow management with long-term growth potential.
Q: What are the plans for sustaining CapEx and growth CapEx in mining services for FY25?
A: Sustaining CapEx for FY25 is around $0.5 billion, and we will optimize this based on market conditions. The $235 million growth CapEx in mining services is primarily for external projects, reflecting strong demand for our services. This includes some work related to Onslow but is largely focused on external contracts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
