Ann: FY25 Half Year Financial Report and Appendix 4D, page-260

Sensible analysis from Mark Taylor of Morningstar - keeps the 5 star rating and reduces fair value to $66.

Unfortunately, as we have seen this week, the market has become a something of a binary casino, with all the participants looking for an instant good or bad outcome.
Then it is followed by a torrent of buying or selling, fuelled by first to the trigger tabloid type analysis, only to get the more considered views emerging a few days later.
On top of that, we have the jaundiced view of the Fin's journalists incessant replaying and milking of a couple of ill-judged CE incidents of years ago to further provide a catalyst for panic selling.

With NAB ( mean $42, low $20, high $89) and Barrenjoey ( reaction overdone and oversold) also in the undervalued camp, looks like a good buying opportunity.

I'll assume the task of upgrading a dirt road after a typical Oz weather event will not prove to be beyond these guys and the fact that everyone has become a road building expert is reflective of just how hysterical the so called analysts have become.

While there is certainly plenty of risk about, the fact that the massive undertaking that was onslow is in production and +ve cash flow since November certainly lowers the risk profile substantially.

Good Luck,

Wazz

Mineral Resources Earnings: Profits Expunged on Low Lithium Prices, While Debt Rises

Mark Taylor

Senior Equity Analyst

Analyst Note

Mark Taylor, Published on Feb 21, 2025

Mineral Resources swung to an underlying net loss of AUD 198 million in first-half fiscal 2025 from a net profit of AUD 224 million in the previous corresponding period. The result reflects an approximate 60% plunge in average spodumene (lithium) price. Net debt hit AUD 5.1 billion.

Why it matters: MinRes tempered some guidance, including mining services production volumes by 3% to 280 million-300 million metric tons, and upped Onslow's fiscal 2025 operating costs by 3% to AUD 60-AUD 70 per metric ton. These aren't large changes on face value but do concern in the face of high debt.

• The guidance tweaks compound on prior decisions to place Bald Hill lithium and Yilgarn Hub iron ore on care and maintenance due to low commodity prices. First-half fiscal 2025 underlying EBITDA fell 55% to AUD 302 million, with margin halving to 13%.
• Net operating cash flow collapsed to negative AUD 737 million from positive AUD 495 million, considerably worse than expected, exacerbated by working capital moves. Net debt rose by 43%, with gearing high at 134%, and net debt/EBITDA a hefty 8.4 given scant first-half earnings.

The bottom line: While a lack of near-term debt maturities and no financial maintenance covenants mean MinRes should be fine for a period, it might struggle to refinance without a large equity raising if conditions remain tough when debt starts maturing in 2027—more relevant if asset sell-downs aren't possible

• We reduce our fair value estimate for no-moat MinRes by 6% to AUD 66. The market didn't appreciate the earnings loss, with the shares down more than 20% on the day. At AUD 24.45, we rate the shares as undervalued, although we caution that care should be taken around the debt risk.
• The market would appear to be pricing-in no recovery in spodumene prices and possibly also anticipating dilution to equity given MinRes' debt position. This is one clear possibility, reflected in our High Uncertainty Rating, but not in our base case.

Low Lithium Prices Erase Earnings for Mineral Resources