Mineral Resources : FY25 Half Year Results Presentation Transcript
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MinRes FY25 Half Year Results Presentation - Transcription
Chris Ellison, Managing Director:
Hi, good morning and welcome to the MinRes Half Year Results. I'm Chris Ellison, Managing Director of MinRes. I'm going to be joined by Mark Wilson, CFO. I'm going to run you through the first half performance of the business from an operational point of view. Mark's going to take us through the financials. I'll cover off then on where we're heading, where I'm taking the business over the next six to 12 months, and highlighting the priorities that we've got. And then we'll have some Q&A towards the end. I'll try and be fairly brief. I'm sure everyone's fairly anxious to get down to some of the questions you'd like us to answer if we don't cover it off in the report.
The past six months have been pretty tough, and looking forward to the next six months. We've got some really good things happening in the business. We're ramping up Onslow Iron. It's been a great success, the Project. I'm going to say we've probably got the design and the construct on that thing. We've probably got a good 95% right across the board. We've got substantial capacity built into that project with over 40 million tonnes of capacity out at the mine on mining crushing. We've got plenty of capacity on the haul road. The transhippers are good for about seven million tonnes per transhipper, and we're getting better and better.
Clearly, I mean, we had no cyclones last year. This year, as luck would have it, when we first opened the Project, we've had five. How lucky can you get? Collectively, the water we've had across that road is probably the worst the region's ever had in over 40 years. We're dealing with it, we're managing it. It's not going to affect the ramp up much. It's probably pushed us back a month or six weeks to where we want it to be. And we're probably, in the overall scheme of things, going to be missing a minuscule three million tonnes. So not a big deal. Trucks are running, and life is still going on.
Onslow, as you know, it's cashflow positive, and these cash flows coming out of this business are going to be substantial moving forward for a long, long time. They're going to help us de-leverage the balance sheet. We're also primed to profit from the lithium assets as we see the MinRes mines reducing their costs. Oil and sustaining costs have been coming down month by month, and we'll talk about that shortly. And we've seen the markets incrementally increasing in demand, and the prices are slowly improving.
Look, for me personally, the issues that I've faced over the last six months, we're done on them. They're behind me, and I'm finished. They're behind the business. The Board's provided clarity to the market where it stands. I don't think we could be any clearer. They're backing me to move the business forward, and the Board and I are clearly in lockstep. Our focus is on creating value for our shareholders alone, and I'm going to walk you through where we're taking the business to be able to achieve that.
First half summary, a bit of a mixed half. The revenue was up, underlying EBITDA at $302 million, down from around 55%. Mining Services delivered a record EBITDA, nearly $380 million, an outstanding result. But we've said from '24 through to '26, that business is doubling. Already a very strong long- term annuity business, just getting better and better. The commodities made a small loss, but under $30 million. Iron Ore and Onslow made money. Yilgarn, of course, high cost, and just become unprofitable to be able to keep that going. So we made the decision to close that down.
Bald Hill; we decided we wanted to pull some tonnes out of the market, and the Bald Hill costs were slightly higher than the other two, so we've shut that down. And we've started to realise some really great cost benefits coming out of Mt Marion in December for the second half. It's going to be much, much better, and we'll talk about how we've achieved that.
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MinRes FY25 Half Year Results Presentation - Transcription
Balance sheet remains our key focus. Strong liquidity in the business. We've got over $1.5 billion available to us. There are no new projects happening over the next 18 months to two years, and our focus is simply on banking cash and minimising spend. And of course, there'll be no dividend coming out of us. Average ROIC over the last 19 years has dropped down to about 9.25%. But regardless, we've got some assets parked up that aren't earning cash, and as they come online, we'll get back closer to where we want to be with our 20%.
Operational review; we're going to cover off on the operational progress across the business. Again, at the AGM, I outlined the focus for the year was on balance sheet, Onslow ramp up, pulling costs out of Lithium and growing the Mining Services business. And we've made good progress across the board on all of those areas.
Another standout performance, of course, from the first half by Mining Services. I mean, this business over the last 19 years has continued to grow around 15% per annum. In some years, we've got a lot better than that, and we're in the midst of doing that again. It's not just a contractor anymore, it's becoming a major infrastructure owner of quality assets. A lot of the contracts it has are on a lot of great assets, with 20 to 30 to 40 years in duration.
So we had record production, EBITDA of $350 million, production volume, 136 million tonnes, steady year-on-year. We increased the volumes from Onslow on the ramp up, so that added to the value of the Mining Services, but then we shut down the Yilgarn and Bald Hill, of course, and that was a negative production EBITDA. It was sitting around about $2.60 a tonne, which is up from the $2.20 last half. And that is, of course, influenced by shutting down some marginal costs that we had down in that Yilgarn region, and bringing on Onslow. First EBITDA on the haul road for the tolling, sitting around $29 million for 100% ownership.
Mining Services is built on innovation. It's the world's largest crushing contractor. We've got over 29 plants running through our joint ventures and our external client sites. We're the world's largest operator of single engine jumbo road trains. We've got 110 in operation. Of those 110, we've got about 80 now on the Onslow project, but we've also got about another 31 with external clients spread across three different sites. We've been operating these larger units now for close on five years, both internally and externally, and they've been a great success for us.
And of course, the 20,000 tonne transhipper is sort of the world's first in terms of innovation. And as we all know, they are operating above expectations. We've got three operating off Onslow, and right now we're commissioning the fourth unit up there, and the fifth is only a few months away.
We've got a really great, strong relationship with external clients, and it's all built on being able to deliver performance, and being able to provide services at a lesser cost than our clients can. And that's simply because we focus and specialise in that area, where we've got the design build capacity to be able to get product on the ground at a capital cost that's reflective of our charges.
So we commenced two new contracts during this half. We've got four crushing contracts that were renewed, and we've got three other contracts that are under negotiation, so strong business, going well.
The Iron Ore business; first half 9.7 million tonnes exported across three hubs. Central Pilbara, steady operations, 4.9 million tonnes shipped at about A$74 FOB. Iron Valley, we took full ownership of that from BCI, and Wonmunna, we opened up another new pit, so everything just sort of steady state in the Central Pilbara.
Yilgarn, of course, 2.3 million tonnes shipped, and that cost us some money. 780 people from that region, I'm proud to say, were redeployed across other sites as we're ramping up Onslow Iron. And we have the Project - sorry, and the sales process is underway for the Yilgarn region. We've got a
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MinRes FY25 Half Year Results Presentation - Transcription
number of interested parties, and there is no doubt that smaller, more focused parties with a much smaller focused operation will be able to make some money out of that going forward. And we're supportive of trying to keep that region where we've got employment coming in. It's so important for those country areas.
Onslow Iron; the ramp up has gone to schedule in the first half, excluding the cyclones we've had of course that have hit us in January, February. Produced 6.3 million tonnes, the project shipped
4.6 million. MinRes share, 2.5 million at FOB of $77 per tonne on the ramp up of, where we're sitting in that run rate at around December of about 18 million tonnes. The product we've got coming out of there is well received by customers, 85% realisation. Project cash flows are positive from November and growing with every month.
So, a bit of detail around Onslow Iron. It's the biggest and most innovative project we've ever delivered. As we know, it's taken up some capital and some effort. So, huge progress, pit to ship. The project ramp up to 35 million continues, and we'll talk about that shortly. As at December, we're running at an 18 million tonne run rate. We've got three NextGen crushing plants. Each of them is capable of delivering about 13 million tonnes per unit. We've had them idling at 13.3 million tonnes. So certainly capable of delivering a bit over 40 million tonnes capacity. And with a couple of mods, we'd probably get them to about 45.
The auto truck loading system continues its commissioning. We've got four lanes in there, so we can simultaneously load four units at a time. We've got two of those operational now, and we'll progressively do the other two as we move forward towards the end of February and early March. The airport's operational, the resort is fully occupied, 500 couple rooms that we're very proud of, we're creating better diversity in our workforce, and of course, a much safer work environment for our female staff to be in.
So the haul road; operational, we've got 71 trucks on that. We'll talk about where we're going with that in a sec. All the port infrastructure is complete. It's got a very comfortable capacity at 35 million tonne run rate. And three transhippers operational, as I said, about 21 million tonnes capacity out of those three units. And TSV 4 is commissioning. And of course, they're providing a service beyond expectations. We've loaded over 26 ships in the first half while we've been ramping up.
So Onslow haul road, as I said, we've had the worst rain events through January into early February. And downtime, we lost about eight days of loading in January and another seven days in February through those cyclones. We've had a huge volume of water dumped on us. We've now got a very clear indication of where all the water pools around that road, and how long it takes to move away when you get that sort of rain. We've had some scouring and some washouts, but regardless of that, the road is still operational and we are carrying out repairs on the road.
So the other issue we had, too, was we had a cyclone sitting up at the Cocos Islands for a few days, and it just sat there and generated a four to five metre swell that sent it right down the Pilbara coast. So none of that was helpful, and we're overcoming it, and it's not going to interfere with the ramp up of the Project much. As I said earlier, we're probably going to drop forecasting about three million tonnes of overall production, which is nothing in the overall scheme of things.
The Onslow haul road, it's the most substantial heavy haul road that's ever been built in the world. Of course, we're using internal - internal, when I say internal, national designers, civil designers and international experts were involved in the design of the road from all aspects. It was reviewed by Main Roads and also the Australian Road Research Board were heavily involved. And through all of that, I mean, we got it built well. It's about 95 or 96% right, except for these washouts. And then we've recently decided that if we put another asphalt coating on top of it, around 40 to 50 millimetres in thickness, it'll make it bulletproof for a long time, and it'll reduce our operating costs by about $20 to $25 million.
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MinRes FY25 Half Year Results Presentation - Transcription
We have to do that sooner rather than later. We want to do it on the ramp up so that gives us minimum disruption and we can manage the traffic around that. It'll take us through till probably end of August to get all of that done in a way where we don't interfere with the production.
To give a bit of context, we've done about 18,000 plus trips up to the port. About three million kilometres have been travelled. So I mean, considering, the road's held up incredibly well. And look, by the time we finished that, we're going to do where we got water ingress and damage. We're going to do some, what they call cement stabilisation. And then, as I said, we'll lay some more, some more asphalt over the entire surface, which will give us a long-term bulletproof road.
The other thing that is really important to acknowledge is that we don't want to do it in patches over a couple of years, because until we can get everyone off this road, we can't start the autonomous journey. And of course, the autonomous journey does two things. Most importantly, no humans on the road, so no risk to human life once we get the trucks autonomous. And then the second most important thing too is that it is a fairly significant cost saving when we get the drivers out of it.
So we're going to be spending about, over this next six months, about $170 million for patchwork and the coating. And then we're probably going to add about another $60 million-ish in FY26, and that'll pretty much wrap us up. So I hope that gives you a good understanding of the road. So it's not that big a deal in the overall scheme of things, and it's something that's highly manageable and controllable. It's a civil issue. It's not where you've got engines falling out of the sky or anything dramatic that's a problem that's going to put the Project at risk. It's just something that we're going to manage.
So Lithium for first half '25, I think we've probably got the best hard rock business in the world. We've got in excess of 340 million tonnes of resource sitting in the ground. Less than 25% of Mt Marion has been drilled out across the prospective ground. I've spoken about that before. And of course, at Wodgina, we're mining in a pit that's one of 17 prospective targets. So we've got a couple of hundred million tonne of reserve and resource sitting in the Wodgina pit. I'm sure you've got some questions about that.
Pretty tough conditions we've had over the last 12 or 18 months. We've had a downturn on the price of spodumene, mainly because the demand anticipation coming out of the US and Europe was not as strong as what it was anticipated going back a few years ago. We've focused over the last 12 months on reducing costs. So we've reduced the workforce by over 25% across our Lithium Business. We've stood down over 150 pieces of equipment that we're moving on, and we started to realise some great cost benefits coming out of this operation, particularly when we got through to December. So both mines were profitable in December, and they're going to continue to improve as we move forward over the next six months.
Mt Marion; we shipped 100,000 tonne of SC6 equivalent, US $667 a tonne FOB. We reduced costs, improved recoveries with better ore feed down in that region. We lowered our throughput to match the demand, and we've got additional mag separation we've put in, which has helped us in removing a lot of the iron content before it goes into the plant. And of course, we paused the underground decline.
Wodgina; we shipped 101,000 tonnes, US $628 FOB. We slowed the mining down, of course, to match the market conditions. We're now running two trains with quality ore feed, and we're going to be able to do that continuously. We've only been able to achieve that from December going forward. So again, Wodgina was profitable and cashflow positive in December, and we expect Wodgina is just going to continue to improve and get better and better over the next 18 months. So by the time we get to 18 months out, we'll have enough fresh, continuous feed for three trains. In fact, we've got enough for four, and Train 3 will be turned on subject to demand and pricing.
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MinRes FY25 Half Year Results Presentation - Transcription
We also expect that the lithium market is going to continue to incrementally improve. We don't think that it's going to get anywhere back to where it was, but it's certainly going to get back over the next couple of years to a pretty decent business. Bald Hill, of course, we shut that down, and we shipped 60,000 tonnes out of there before we put it into care and maintenance.
Energy; we sold off two of our 10 tenements in the Perth Basin to Hancock for $780 million. We've created a great JV with them, and we're going to be in partnership in both the Carnarvon and the Perth Basin going forward, and we will jointly go and find some more gas in those regions.
The opportunity to earn another $327 million is subject to drill results that we get out of the Moriary Deep prospect. We drilled that in January. The results take a number of months to be able to analyse and get a clear understanding of where we are, and we're currently drilling Lockyer-6, and we're currently down probably about 3,800 metres, and we're heading about four and a half kilometres deep, so we'll get down to the target depth probably by the end of this week. It willll probably take us through till the end of June to come out and analyse what those results are.
Carnarvon Basin, highly prospective. It's adjacent to the Chevron offshore tenements, and we completed an aerial survey of the Ashburton region late last year.
So people in our workplace, sustainability, all incredibly important to us. It's an area I think MinRes has done a huge amount on over the last five years. Safety and wellbeing; we sit in the top 5% of the mining industry in what we've been able to achieve. Our TRIFR is up to 3.83. That's pretty much impacted by the ingression of 2,500 people that were brought into the business to be able to build the Onslow Iron project. And as you know, we've scaled that down substantially. But commending our people on the way they managed the safety through that Project. It went extremely well. We did have one subcontractor on the job that regrettably we lost.
Mental and physical health for our people remains a strong focus. We've got four doctors, three nurses at head office. We've got six nurses and 13 paramedics spread across our site. And we have seven in- house psychologists, five of them are on FIFO going onto our site. It's become a very integral part of our business in looking after our people. The mental health area is getting a great result. We've had 622 consults with people over that six month period. Very important to us that we make sure that we're there to support our people.
Diversity; we're growing the workforce in the future. We've currently got 121 apprentices employed, 31 trainees, and we've got 38 uni graduates in the business full-time. We've also got another 23 part- time uni grads that are working within the business. 22.3% of our workforce are female and 3.5% are Indigenous.
Employee experience in the business; we're getting better and better at creating a safer, better environment for all of our people, both in the head office and around our sites. We're investing in industry leading facilities for our people to support retention. Retention is incredibly important with our people. We've put the resort style accommodation into Onslow. We've got 500 couple rooms up there. Very important that we've created a community type environment, and it's going better than expectations.
Head office, a platinum well-rated facility where we've got great facilities where people come into the office in the morning, and they've got a whole range of facilities to be able to make their stay more pleasant, and to make them want to be in the office. We've recently opened up a new daycare, 105 children can be accommodated in the daycare. We consider it's probably the best in Perth. It's an educational daycare, and the parents and the kids are loving it.
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MinRes FY25 Half Year Results Presentation - Transcription
MinRes Air; 340 flights in the first half, great feedback. Most important thing we're getting out of that, is the reason we started this is so that we could deliver our people to sites at a time of our choosing. And that meant that we have had much, much less downtime in the changeover of our process plants and our mining fleets, saving us tens of millions of dollars a year. The bonus with that, of course, is that we get our people directly to and from site efficiently and in comfort where they're well taken care of. So employee experience continues to grow, which is really important to us as a team.
Sustainability; we think WA is probably the most ethical jurisdiction in the world. It's exceptional working conditions for people, and it's exceptional environmental standards and a high calibre of mining company that knows how to rehabilitate and manage and look after the environment.
We're focused, of course, on cleaner energy. We're looking at cutting emissions wherever we are. We're focused on that right across the business. And we are more focused probably on reducing our diesel burn across the business. Not a lot more options coming out of how we do that. We've got the solar, we've got the wind, we're using all of those tools that are available to us. And we are trying to reduce, as I said, those emissions in every way we can.
We introduced a carbonisation fund last July. So all MinRes operations are charged for every tonne of carbon that they emit into the atmosphere. This incentivise the business to be more energy efficient, but we also in turn use those funds to be able to put into green energy, and to be able to multiply the speed that we're moving out of emitting emissions.
Early projects, fuel reduction, automation, electrification of equipment, and of course, green energy sources, continuing to grow our Traditional Owner partnerships. I had the pleasure, again, of giving out some contract awards over this half. So we've awarded six new agreements with Traditional Owner businesses. We try and get them on five to 10-year type agreements. And it's all about making sure that we create long-term sustainable jobs, so that our Traditional Owners and partners in the region we work with can afford to have the housing and the health, and all of the benefits that we all have grown accustomed to.
So that's sort of where we've been over the last six months. I'm going to hand over to Mark now and he'll take you through the financials. Thanks, Mark.
Mark Wilson, Chief Financial Officer:
Thanks, Chris, and good morning, everybody. My name is Mark Wilson, I'm the group CFO for MinRes, and it's a pleasure to be here this morning with you to walk you through the financial results for the half.
There's a lot to get through. I'm going to start just with a few comments on governance. Last week, the Board provided an update on the progress being made around internal processes and controls to strengthen governance. I'm not going to speak for the Board on these matters, but what I will say is that progress is being made. It's progressing well, and it's progressing with their oversight and with the full support of the management team.
In terms of the new Chair, that recruitment process is well progressed. It's being undertaken with the assistance of an international search firm, and the Board anticipates making an announcement by the June quarter at the latest.
In terms of the Ethics and Governance Committee, that continues to be supported by internal and external resources and it's progressing the recruitment of a new governance focused internal function that will report directly to the Board.
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MinRes FY25 Half Year Results Presentation - Transcription
Turning to the financials, and beginning with the P&L, and as always, there's a full reconciliation available in the appendices of our underlying statutory results. As Chris mentioned, the Group delivered an underlying EBITDA of $302 million for the half. There are a few aspects I just want to call out.
First is the Mining Services result. As Chris said, $379 million. That's a record for us. The production volumes were consistent period-on-period, but the result was delivered as Onslow turned on. That's a Project that's going to last for decades.
In terms of the commodities, Chris called out the small losses in Iron Ore. I do want to emphasise or point out that the Yilgarn loss was $87 million. So sitting within that $302 million profit was an $87 million loss from the Yilgarn as we moved that operation to care and maintenance. That loss was almost fully offset by Onslow and by the Pilbara Hub, with Onslow delivering $54 million of EBITDA for us in that half. So the total Iron Ore EBITDA loss was $9 million. Lithium was a loss of $15 million but each of Mt Marion and Wodgina were actually marginally profitable for the half.
In terms of the corporate and the inter-segment, corporate come down to outflows of $53 million through the half, which is half the prior period. We expect over '25 for the full year that to be about $110 million, reflecting the savings that we've identified. We'll talk through that in a little bit more detail later.
In terms of reported NPAT, that was a loss of $807 million, driven predominantly by impairment charges taken on Bald Hill and on Yilgarn, moving to care and maintenance, and $230-odd million of post-tax translation impact on foreign currency, on the bonds.
The next slide takes you through effectively the delta in the performance of the underlying EBITDA. You can see there the strong impact of the adverse movements in lithium.
In terms of cash flow, as reported in our quarterly a few weeks ago, we finished the quarter, finished the half with a closing cash balance of $720 million. We did have a negative cash move, operating cash movement, an outflow of half a billion dollars. That was largely related to the increase in the Onslow carried loan of $300 million and a working capital impact of half a billion dollars, with trade payables decreasing as capex started to unwind.
In terms of investments, obviously, as Chris said, we realised $1.7 net billion of cash from the sale of the haul road, and also of the gas transaction offset by the payments to Red Hill and BCI for Iron Valley. In terms of capex for the half, $1.4 billion, of which $300 million just under, referable to the carried loan. Most of that capex, not surprisingly, on Onslow was outlined on that slide.
Turning to the balance sheet. The next few slides cover the balance sheet. We recognise it's a concern for many of you. We hear those concerns. I want to talk you through how we think about it.
In terms of the balance sheet, you can see capital employed has grown to $8.9 billion over the period. It's funded in part by recycling of capital from existing assets within the Group. Sitting on the balance sheet is a $794 million loan payable to us by the joint venture parties at Onslow. That loan is paid from 80% of their pre-tax free cash flow. Repayment of that loan has begun. It started last half. We expect to receive that loan back over the next few years.
In terms of the debt, the net debt number, as you can see, has grown to $5.1 billion. On the following slide, we've tried to make it as easy as possible for you to follow that transition period-on-period. You can see the impact of the investment proceeds, the capital expenditure, the working capital movements and so on. And as you know, and as we've talked about on the quarterly call, $300 million of the movement was referable to the foreign exchange translation impact of the Aussie dollar falling at balance date to $0.62.
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MinRes FY25 Half Year Results Presentation - Transcription
I just want to spend a bit of time on this slide because it's important. Chris and I took a decision in 2019 as to how we would look at the balance sheet going forward. We took a decision to go to the US bond market to fund the growth of the business. We made that decision because of the flexibility that market provides us. In 2019, were able to secure or obtain eight-year unsecured money with no credit history.
We've had incredible support from that market since that time. The first of those bonds that we've raised matures in May '27. From May '25, a few months' time, it's callable at par by us. That gives us enormous flexibility in terms of how we think about that instrument, our ability to repay it, refinance it, extend it, repay it in part. We have enormous flexibility going forward with that instrument.
We have no financial maintenance governance on those bonds, as I've said previously; none. We have, as you can see from the chart on the right, the bonds have traded above par since we last went to that market in the tail end of '23. That market understands the benefits of the ramp up of Onslow and its ability to service the commitments we're making going forward.
I want to emphasise that the movement in and out of that market is very quick. We can refinance very quickly. It's a very streamlined process. Sitting behind the bond structure that we have is the revolving credit facility, $800 million. We have nine banks in that facility. It's a fully secured facility, so it sits at the top of the capital structure. It is secured by over $10 billion worth of assets. We had other banks who wanted to join that facility, but we didn't make room for them. The relationship with each of those banks is incredibly strong and supportive.
The next slide calls out a few considerations that I just want to point you to, as you think about the balance sheet. We believe we've reached peak leverage. We believe that our earnings will grow with the ramp up of Onslow, and that you will see that net debt to EBITDA ratio come down naturally. We also believe the debt will come down as we generate free cash from Onslow and the rest of the business.
Sitting on the balance sheet, as I said, is that $800 million carry loan. $250 million of that is considered to be current. That means in the next 12 months, I expect to receive payments from our JV partners of over $250 million. In addition, as Chris called out, we have the potential to earn over $500 million in additional consideration on the road and gas transactions.
I said it on the quarterly call; I want to repeat myself again. The quality of the earnings that this business is generating now and the quality it will generate into the future, fundamentally different to where we were a few years ago. We've had to invest heavily to do that. We've had to fund our JV partners to do that. But it's been a great decision that sets the business up for decades to come. From that earnings growth, from the cash generation, we can see a clear pathway to our target of gross leverage of two times in coming years.
Turning to guidance. Chris has talked through these, so I'll just move through it quickly. Chris referenced three million tonnes coming out of Onslow in 100% terms. Our share, we think, is a little bit less, obviously. So we're calling down guidance at Onslow to 8.8 to 9.3 million tonnes, previously
10.5. We've got FOB costs going up a couple of dollars a tonne, just because of the impact of the next six months with less efficiency than we would have otherwise had. And the flow on impact is a call down to Mining Services productions of 15 million tonnes. We're maintaining guidance for all other operations.
In terms of capex guidance, we said on the call recently that capex was weighted for the first half. In August, we guided to about $1.9 billion. We subsequently identified in September, $300 million in cost savings across capex and opex. To date, we've realised over $150 million of opex savings annualised. That's come out of headcount reductions, IT, off-hiring of gear no longer required, and so on. We did
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MinRes FY25 Half Year Results Presentation - Transcription
identify $180 million of capex savings in September. We put a halt to a whole range of programs, exploration programs, upgrades, particularly at the Lithium projects, and we put projects on hold that we had intended to incur.
We announced the transaction with Hancock in, well, October, and those funds give us a little bit more flexibility. We are committed to drill as a result of that deal. That's about $50 million of extra spend. But just as Chris said, a reminder that we have contingent outcomes resting on the outcome of those drilling results, which could be significant.
We have increased our spend at Onslow. The road is going to cost us some money, as Chris said. It's a 30-year operation. It's the right time to make this decision now. We could have deferred it, we could have delayed it, we could have pushed it back, we could have increased the road risk of degradation over time. That would have been the wrong decision. It would have been a short-term decision. That's not how we run this business. The cost of that repair, this half, as Chris said, will be pushing up towards $200 million.
The remainder of the spend at Onslow is tied to a whole range of items. There's autonomy, increased capacity through the system, the bottlenecking, costs at the airport and so on. But overall, that construction project is well over 90% complete.
With that, I'm going to pass back to Chris to talk about our outlook and how Onslow will transform the business going forward. Thank you.
Chris Ellison:
Thanks, Mark. Thanks very much. Okay, let me walk you through briefly on where we're heading over the next six to 12 months.
First of all, Mining Services outlook. Again, this is the heartbeat of the MinRes business. We focus on this. It's part of everything that we do in our joint ventures. It's been a phenomenal track record this business has had over 32 years, and we have never been in a better position than we are right now.
The chart shows you the progress we've made over the last five years. We've got compound EBITDA growth of around 21% per annum, despite having some idle assets sitting out there in the Onslow Project ramping up. A lot of talk, a lot of negative talk around this business, which I'm not going to say it doesn't get annoying. But is this possibly the best Mining Services business on the planet? And it's got phenomenal growth ahead of it.
More than 70% of its long-term contracts sit in the 20-year plus range. I believe that there's no organisation that gives better value to our clients. I mean, better value, better service, we can get product for them continuously on the ground. We've never shut a mill down. Our operations are flawless. Through the quality of the people that we have, the relationship we have with the clients is incredible. We've never had a legal dispute with our clients, and we're very savvy about what they want. It's a great business, and I know I'm a little passionate about it, but we really focus on this.
It's probably, without doubt, without saying, it's in the strongest growth period it's ever been in. I've probably said that four or five times over the years. It just keeps getting bigger and better. Onslow Iron, of course, it's a game changer. I mean, it's the real model. It's what we aim for. And again, that model has brought a project to life for our joint venture partners that otherwise would never have happened. And we've done it in a very innovative way with very unique equipment.
And of course, the Mining Services annuity stream is totally not dependent on commodity prices. I mean, their rates and charges are there for the long term. Significant opportunities sitting externally. And we anticipate exceptional growth going forward for, look, to the next three to four years where we can see we're talking.
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MinRes FY25 Half Year Results Presentation - Transcription
Onslow Iron; it's a brilliant Project. And by the way, just back on Mining Services, fast forward, I mean, get me through to July, August this year, this is a pretty miserable time at the moment with the inbounds that we've got. But get me through to July, August next year and have a look what Mining Services will be producing and what Iron Ore will be producing. If you have a look at a PE ratio of 10 on our Mining Services business, I would say that we are a touch undervalued, and that'll give us a whole different complexion our debt ratio.
So Onslow Iron, 35 million tonnes, three earning streams are coming out of that for MinRes, of course. On an average year, it'll make us around $1.5 billion a year. MineCo, this CFR cost into China around US $46 a tonne. So it's about $30 FOB, $9 for shipping, and about another $7 in royalties. With spot around $100, we'll received a price of about US $79 a tonne. So that's a 15% discount for impurities, and another 7% discount for moisture. So that delivers us a margin of about US $33 a tonne, or about US $1.2 billion for the EBITDA for the JV. MinRes' share of that is around about $1 billion a year. So get us through to June, July, August of this year, about $1 billion coming out of Mining Services, about another $1 billion coming out of Iron Ore, and fingers crossed on where we're heading on the others.
So the four life of mine contracts sitting in the Mining Services, so that's crushing, haulage, port services and transhipping, about $280 million a year EBITDA sitting in there. And of course, the toll road, on a 51% basis, it's about $144 million a year EBITDA, and about the same goes to our partner. And by the way, I mean, that was a really good decision we made going back some time ago, we bought Morgan Stanley on board. They're infrastructure partners, they've got a 49% share in that road, and a great partner. I mean, we've been very fortunate over the years to be able to choose some pretty amazing joint venture partners. So the relationship is very strong and it'll continue to grow.
Lithium outlook; challenging market conditions, we all know that, lithium is in the toilet. We responded quickly to the downturn, international investment lithium going into projects has certainly stalled, so not a lot of new lithium coming on the market. And it's sort of lost its gloss, one could say.
Also, we've seen some price movement from mid last year coming forward. So we sort of bottomed out, there were some sales going through at $720-730. Our last cargo that we sold in February, SC6 equivalent was US $920 a tonne. So we can see incremental movement, and we are certainly feeling the demand curve is growing.
We have a long-term focus on maximising the hard rock portfolio. We think it's probably close to the best in the world. We've got three operating plants, of course, one on care and maintenance. And we've got a huge amount of resource in the ground, untapped, undiscovered. We'll be putting more drill rods in the ground, not in the immediate future, but 12-18 months down the track, we'll be looking at trying to improve that.
The other thing too; we have no offtake agreements with anyone. I've always been very strong on that with our Iron Ore, with the exception of Onslow. We've kept that where we sell into the spot market. That's where we maximise best value and we can move with market prices and we react very quickly.
Near term focus on the Lithium is simply being able to cut costs and maximise recoveries, and make sure that we're getting good feed to the plants. And by the way, I mean, we're taking the dirt as it comes. So there is no high grading going on in these mines. I mean, we're mining these responsibly with a view for the next 30 to 50 years.
Mt Marion outlook, the next 18 months, probably got to put another stage of WHIMS in there, very low cost to be able to do that. I think we've got them sitting in storage. A float plant study going on, we're looking at what it would do if we added a very small incremental floats plant down there. We've got several million tonnes of ground dirt sitting in the pit that we could get at for a very low cost. And then there is a certain amount of tonnes that go through Mt Marion that doesn't react to the dense
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Mineral Resources Limited published this content on February 19, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 21, 2025 at 05:28:02.041.