Mineral Resources Limited (MIN) Earnings Call Transcript & Summary

Thank you, Josh, and good morning, everyone. My name is Mark Wilson, I'm the CFO of Mineral Resources. Joining me in the office this morning is Chris Chong, General Manager, Investor Relations. And on the line, we have our Chair, Mal Bundey. Conscious it's a very busy day today, so I'll just provide a very brief summary of the quarterly results before we move to questions. This has been another successful quarter for MinRes with all divisions performing well. The quarter underscored the strengths of the business with consistent operational performance at Onslow Iron and the agility to capture opportunities in an improving lithium market. Following strong operational performance in lithium in the first half and to take advantage of the improved pricing, we're upgrading our FY '26 volume guidance at both Wodgina and Mt Marion as outlined in the release this morning. In the iron ore division, Onslow Iron continues to operate at its nameplate capacity and the development of Lamb Creek is progressing well at the Pilbara Hub, with final exports from Wonmunna scheduled for April. Balance sheet transformation is progressing as planned. Liquidity has strengthened to over $1.4 billion, and net debt has reduced by $500 million to below $4.9 billion. The POSCO lithium joint venture that we announced in November will further accelerate deleveraging. In summary, today's report confirms that we're entering the second half with positive operational momentum, favorable market conditions and a strengthening balance sheet. With that, I'll hand back to Josh to facilitate questions.

[Operator Instructions] Our first question today comes from Rahul Anand from Morgan Stanley.

I've got two questions. First one is on the potential for the Bald Hill restart. Just wanted to perhaps ask the question a differently. I mean, bringing that project on versus bringing Train 3 on, what informs that decision to be more tilted towards Bald Hill? And if you can kind of help us understand if you've had any conversations with Albemarle on the potential restart of Train 3? That's the first one, and then I'll come back with a second.

Okay. Rahul, thanks for the question. In terms of Bald Hill, what we're doing is we're undertaking a study on that at the moment. So we're just flagging that we're doing that. It's really important that we get ourselves comfortable around the state of the lithium market going forward, just making sure. It's such a volatile commodity, we're just going to be very prudent in our approach to that. In terms of Train 3 at Wodgina, we've been saying for a while that we've been running it opportunistically when we can. That was the case through this last quarter. Over the next half, we'll continue to do that. We don't get to clean feed for a third train until final quarter of this calendar year. So we'll continue to run it opportunistically, but the head grade is going to be a bit lower this half, which is why we haven't just simply doubled volume guidance.

Got it. Well noted. And look, the other one was just around some of the financial statement impacts that you flagged. Pretty clear on the revaluation gain in terms of the bonds. But the $220 million purchase price adjustment on the haul road and gas transactions, can you perhaps help us understand that one a bit more and then also the RDG assets in terms of the noncash impairment expense, please?

Sure. So those adjustments on the purchase price flow through the P&L, although they'll come through as non-underlying. In terms of the RDG, what we're saying there is we're just looking at the carrying value of that asset, which we'll do over the next couple of weeks as we move to finalize our interim results. It had a carrying value of about $70 million at the half -- sorry, at the full year.

Our next question today comes from Kaan Peker from RBC.

Great result. Two questions from me, one on Onslow. Just looking at capital intensity from here, beyond Ken's Bore and Upper Cane, should we expect Onslow sustaining CapEx to normalize materially lower in FY '27? And then I'll come back with the second one on the lithium business.

Kaan, obviously, we'll provide guidance for '27, middle of the year. But we've been pretty consistent in terms of where we see capital intensity at that site, around $2 a tonne. So yes, we don't expect it to change materially in the short term anyway.

Sure. And then on the lithium business with Mt Marion, maybe if you can provide some indication of the recovery uplift with the flotation plant and maybe the underground restart, what are the key gating items for the PFS and what lithium price environment is required to proceed?

Yes. So we're working through that study at the moment. There's a lot of design work going into the work around the float there at Mt Marion. That work is expected to be complete in the coming months. So we'll have more information on that when we're in a position to finalize that work.

Our next question comes...

Sorry, Kaan. Sorry, Josh. Let me just -- I missed the underground piece for Kaan. Similarly, in terms of underground, we've already spent a fair bit of money and done a fair bit of work on that. We need to go back to the Board. And ultimately, that underground expected to feed about 1/3 of the feed at the mine. We haven't made a decision to take that back to the Board yet.

Our next question comes from Mitch Ryan from Jefferies.

Just with regards to your POSCO deal, can you please remind us of the effective date of that, i.e., I guess what I'm asking is, if there's a cash box structure that would not see you capturing the full uplift from the current price strength?

Mitch, yes, there is no effective date. So we captured the full uplift.

Okay. And then second question, with the increase in the lithium production guidance, can you provide some guidance on associated material movements at Wodgina and Marion, i.e., I guess, is there an increase in capitalized stripping that will come through in this financial year?

I think you can assume that if we move to take advantage of an increase in the prices that we might have a slight increase in stripping costs, but we're not expecting our overall CapEx guidance to shift, not materially.

Our next question comes from Ben Lyons from Jarden Securities.

First one is just on Onslow, please. Just on the price realization. Does that include -- like does that absorb the cost of the hedging that was put in place across the whole iron ore business and the delivery into the prepayments? Is that all sort of captured in that realized price?

Ben, nice talk. Yes, it does. It absorbs all those impacts on the -- certainly on the hedging. There is no impact on the prepayments because that's done at market.

Yes. Cool. And then just quickly on the lithium business. Maybe just interested if you can provide any observations from the commercial team at present. Obviously, your price realization was really strong across the December quarter. Just if there's any customers out there who might be prepared to put in place sort of floors in contract structures to support like a Bald Hill restart or a third concentrator at Wodgina.

Yes. It's a really interesting question around the market, Ben. It's moving quite quickly. It's volatile. Prices is up and then down from day to day. As you know, it's not a very sophisticated market in terms of depth. You do have the traders playing a more active role than we might have seen them in years past. And you've got the complexity where you've got not just spodumene, but you've got hydroxide and carbonate with different parties focused on different product needs. So what I'm describing is a complex commodity environment against which to contemplate putting in place any sort of formal structures like that. Not saying it's impossible. I'm just saying it's more complex.

Our next question comes from Rob Stein from Macquarie.

Just a quick one on Bald Hill restart. Can you give us a feel for how the labor force of the business could be remobilized, the speed of that, the cost of that given obviously, one of Min's competitive advantages is it does have a services business. So can you just give us a flavor for the speed at which Min could act there?

Rob. So just to repeat what I said earlier, we're just doing a study at this stage, but we just wanted to let the market know that. I don't want you to get ahead of yourselves in terms of baking numbers in or anything like that. But to answer your question directly, one of the great strengths of MinRes is their agility and our ability to move people and kit. And if you're a single asset operator in this environment, we've had to respond quickly to price movements. It's much more difficult for those guys than it is for us. Having said that, there's still a huge amount of work that would have to be done to mobilize and get that plant going again. And Chris is on record saying that could be up to 4 months even when we make that decision.

Perfect. And then just -- sorry, speaking about the services business more broadly, in the current iron ore market, things are obviously pretty resilient. There's been a few production issues globally. How are you seeing demand for your services, crushing plants, specifically across different regions? Obviously, there's been speculation that's occurred in Brazil in the past, that there's been inbound interest, but has that matured at all?

I think I'll repeat what I've said previously. Onslow is a wonderful credential for this business across all aspects of the mining services, not just the crushing. Clients come to us because we deliver. We deliver month after month. And you can assume that we're regularly fielding inbound inquiries from all sorts of clients, existing and new. So there are conversations that are ongoing. These things take time to come to maturity. They don't happen overnight. But yes, you should assume that we're very happy with the level of inquiry we've got.

Our next question comes from Matthew Frydman from MST Financial.

Two from me, please. Firstly, on the lithium guidance, I'm just trying to get a sense of, I guess, how much conservatism, I should say, is built into that as it does imply that the volumes of both assets are going to be softer in the second half. I mean at Wodgina, you already spoke about the lower grade being the driver there. But maybe looking at Mt Marion specifically, my recollection is the installed capacity there is about 600,000 tonnes per annum, SC6 equivalent. You're saying in the second half, it's probably going to be running at about half that rate. So is 600 still the right number without a float plant? And I guess what's the timing to get back up to that level of production?

Matt, the answer with Marion is that we operate out of different pits there. We cycle through those pits. We've had the benefit of working for some time now out of the central pits, which have higher grade and they go through the plant, the ore goes through the plant more effectively. So the recoveries are up out of those pits. Just -- and we've used the cycling through these pits to help us manage our capital needs as well over the last 12-plus months. We're now coming to the end of that central pit and particular part of it anyway and moving back into the northern pits where we have higher strip and lower recoveries with more complex [ auditing ]. So that's why we're softer on our guidance for Marion. As you said, for Wodgina, we have lower head grade basically. The guys at the site there have done an incredible job. I just want to call out they've taken recoveries up to 70% on average for the quarter, and an incredible job through a whole range of initiatives. But again, this half, we're expecting it to be a little bit softer because of the head grade.

Okay. Mark, I understand. And then secondly, on Onslow shipments, obviously flat quarter-on-quarter, running at about a 35 million tonne per annum rate annualized. But you did call out that you had some transhipper maintenance program that you implemented and also some downtime. I guess wondering what's the cycle of that maintenance program? Is that sort of a quarterly or 6 monthly sort of period of downtime that you now expect going forward? And now that all of them are back online, as you say, towards the end of December, are you pushing above that 35 million tonne rate at the moment?

Yes. So the current quarter is the most challenging in terms of weather, and we're seeing that this week. We've had a couple of days where we've been impacted by high swell and wind, which is what we expect. We plan for that. We allow for 55 days a year for downtime in one form or another. In terms of the maintenance programs and so on, one of the things that we've talked about previously is getting a sixth transhipper into the fleet, which we expect to have up and running by the middle of this year and then the seventh transhipper early into the new financial year, which will give us cover to be able to roll through that maintenance program and smooth out what is a little bit lumpy at the moment. We're regularly doing maintenance on these vessels. It's just -- it's part of the course. We just wanted to call it out because it had more of an impact in the quarter than it has previously.

Our next question comes from Paul Young from Goldman Sachs.

Probably more of the same sort of question. Just on Onslow, though, just on shipments performance and just the mines performance and trucking performance. You've had a couple of weeks in January that you're actually, I think, north of 35. So it looks like it's performing pretty well. Do you have any comments you can share with us or info around just how your trucks are performing from speed, maintenance and just testing the bottlenecks along from the mine to the port because from the site visit, it was pretty clear that the bottlenecks only sort of kicked around that sort of high 30 mark. Just some additional color on how that's all going.

Paul, nice to talk. Very, very happy with the way each part of that operation is performing from the mine, the strip is still low. The mine is performing well, going through the crushing well. Stockpiles are healthy at the site at the mine end. The haulage is going very well, no constraints on speed. The road is performing well. We're getting it into the port. So it's actually all running as we would expect and very happy. You're absolutely right that one of the things that we are focused on -- laser-focused on is how do we keep squeezing every tonne out of each day. We're looking at the way that we maintain each of these assets, the cycle times on that maintenance program, all those sorts of things. Today, the transhippers remain the bottleneck. That's why we're bringing the fifth -- sorry, the sixth and seventh transhippers on later this year as we push towards 40.

Yes, makes sense. And then just on costs, you said you achieved 52 for the half, and I probably presume a lot lower for the December quarter. I know the sort of partly denominator. Is there anything you can call out on anything elsewhere you're happy with the cost performance, whether it be on just diesel or any other parts of the cost, considering the risk now is actually to the downside on your cost guidance.

Yes. Again, we're very, very happy with costs. I mean I got asked about this a while ago, and I said that I felt that we had a pretty good grip on where our costs sat. And I think this quarter has shown that. We're guiding to the low end of guidance. In the second half, we do -- we're assuming slightly lower shipped tonnes, and we're also assuming some rise and fall impacts as we move into the new calendar year. But very, very happy with where the costs are across the board.

Our next question comes from Lachlan Shaw from UBS.

Two on lithium. So firstly, congratulations in being able to sort of comfortably with guidance. I wanted to ask the strong performance in the first half, is that more just really getting on top of things from an underlying operational point of view? Or is part of that a response to market? And then I'll come back with my second question.

Lachlan, yes. As I said earlier, we're really squeezing hard at Wodgina on the recovery side. So we've lifted that up to average that 70% and now we're pushing to go higher. So that's improved performance at the site and very happy how that sets us up going forward with that asset. In terms of Marion, we've had the benefit of better feed stock effectively, which has gone through the plant well. We have been able to run the third train at Wodgina opportunistically, probably more than we'd expected, which has helped provide those extra tonnes in the quarter. But yes, very happy with the way each of those assets are set up.

And then the second question was actually on Wodgina, third train. And previously, you've talked to ideally or thinking about getting the stripping there into place and perhaps sustainable 3 train operations from late calendar '26. And I think you've also kind of highlighted that you could perhaps go a little earlier, but there's a potential trade-off there in terms of recovery given the quality of ore feed. How is that sort of trade-off and thinking evolving at the moment? And I suppose also just in terms of the transaction, POSCO coming in upon successful completion subject to rigs in midyear. How is all that piece coming together around sort of sustained 3 train operations at Wodgina?

Yes. So we're continuing to operate that asset in partnership with Albemarle. I mean we're operating it, but that JV is functioning very well. We're pushing to use the third train where we can, and we factored that into our increased guidance for this half or for the balance of this year. The truth of it is, as I said, we still can't get to that clean ore until this fourth quarter. It might be a little bit earlier, but it will be at the front end of that quarter, not into Q3, I wouldn't have thought, just because of the logistics and the shape of the ore body. So we'll keep pushing as best we can with the 3 trains running from time -- the third train running from time to time. And that allows us to put the guidance where we've put it, yes.

[Operator Instructions] Our next question comes from Mitch Ryan from Jefferies. Mitch, you are live again for your second round question. We'll just give Mitch one more second if he's still there. As we are not hearing from Mitch, we will wrap up there. There are no further questions in the queue. And so that does conclude today's call. Please reach out to the Minerals team if you have any follow-up questions. You may now disconnect.