Company Reports

Commodity prices generally fell in the September-ending quarter, except for gold. Concerns about weak China end-user steel demand affected iron ore and other steelmaking commodities, while base metals prices fell on worries over slower economic growth in China and elsewhere.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine delivered earnings momentum.

No-moat Mineral Resources reported a 77% decline in underlying fiscal 2024 net profit after tax to AUD 174 million. Although sharply lower, this is around 24% ahead of our AUD 140 million expectations. Net interest expense was lower than we anticipated, with more capitalized.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine delivered earnings momentum.

No-moat Mineral Resources reported a stronger-than-expected end to fiscal 2024, and our earnings per share forecast increased by 11% to AUD 0.72. Despite this, our AUD 67 fair value estimate stands. At current very low lithium prices, there is risk of volumes being trimmed and attendant pressure on unit operating costs. MinRes shares are down nearly a third from around AUD 80 highs in May 2024, and at AUD 54, they are undervalued in 4-star territory.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine delivered earnings momentum.

No-moat Mineral Resources will cease Yilgarn Hub iron ore shipments by Dec. 31, 2024. The operation is high-cost and has limited mine life. With significant capital costs to develop new resources, it has been deemed unviable.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine delivered earnings momentum.

No-moat Mineral Resources announced the sale of a 49% interest in the Onslow Iron project’s dedicated haul road for AUD 1.3 billion to Morgan Stanley Infrastructure Partners. All up, aftertax proceeds of AUD 1.2 billion are anticipated. This is broadly as we expected, and our AUD 67 fair value estimate stands.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine has persistent earnings momentum.

We sharply lower our fiscal 2024 and fiscal 2025 earnings per share forecasts for no-moat iron ore and lithium miner Mineral Resources by 73% and 38% to AUD 0.67 and AUD 3.61, respectively. The drivers are short-term in nature and our AUD 67 fair value estimate stands. The shares are up more than 30% against February lows and at AUD 75 somewhat overvalued in 3-star territory. Early first iron ore deliveries from the Onslow iron ore project have buoyed the share price, even in the face of low lithium prices.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine has persistent earnings momentum.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine has persistent earnings momentum.

No-moat iron ore and lithium miner Mineral Resources reported a 42% decline in underlying first-half fiscal 2024 net profit after tax to AUD 224 million or AUD 1.15 per share, less than half our expectations. It was a disappointing miss and no excuses, but this is par for the course. Extreme volatility in iron ore and lithium prices, uncertainty around the timing of revenue recognition, and low-margin iron ore operations make for wild and uncertain swings in period-to-period profitability.

Our AUD 67 per share fair value estimate for no-moat Mineral Resources stands. The iron ore and lithium miner left all fiscal 2024 volume guidance unchanged following the release of fiscal second-quarter operational results.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine has persistent earnings momentum.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine has persistent earnings momentum.

Mineral Resources grew significantly following listing on the Australian Securities Exchange in 2006. Demand for crushing and screening services grew strongly with iron ore output from the major Western Australian iron ore miners. Cost inflation encouraged large mining companies to outsource capital-intensive, lower-returning processes. Mineral Resources also rapidly expanded its own iron ore mining business, though lacking the integrated rail and port infrastructure of major competitors and at a competitive disadvantage. More recent diversification into lithium production at Mt Marion and the Wodgina mine has persistent earnings momentum.

Shares of lithium producers plunged in 2023 as falling spot prices leave investors worried the 2022 boom turned bust. However, we see no reason to panic. For investors, the selloff creates an attractive opportunity to invest in lithium.

We still see general overvaluation among our listed mining coverage with the average price/fair value estimate sitting at a 9% premium, versus 10% in April. But some of the recent commodity price moves are yet to be factored into the share prices and we rate seven stocks as undervalued. Thermal coal miners New Hope and Whitehaven remain the cheapest of our coverage. Along with Glencore and South32, the firms trade in 4-star territory. Alumina Limited, Newcrest, and Teck Resources are also at modest fair value discounts.