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.
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