No-moat Mineral ResourcesMIN, or MinRes, maintained all fiscal 2025 volume and cost guidance with the release of first-quarter fiscal 2025 results. And it says it has made significant progress on plans to reduce operating costs and strengthen its balance sheet. With $4.4 billion in net debt, gearing elevated at 124%, and net debt/EBITDA at 4.2 at end-June 2024, bolstering the finances while lithium prices are so low is a priority.
We previously expressed concerns around the level of gearing, only partially assuaged by there being no significant debt maturities prior to 2027 and drawn debt comprising entirely of US dollar bonds that have no financial maintenance covenants. The good news on this front is that MinRes has now completed the sale of a 49% interest in the Onslow Iron haul road for $1.3 billion and has received the $1.1 billion upfront cash consideration. Further, it has agreed to sell two oil and gas exploration permits and 50% of its remaining petroleum assets to Hancock Prospecting for $1.1 billion. Upfront cash consideration of $804 million is expected by end-2024, with the balance due during fiscal 2025 subject to certain resource thresholds being met.
We increase our fair value estimate by 3% to $64. The sale of the petroleum interests nets more than we’d ascribed. While this only somewhat eases balance sheet concerns given considerable spending planned for Onslow iron and weak lithium prices, it’s certainly helpful. The market appreciated the news, with MinRes shares up as much as 18% at the time of writing. The shares had been flagging given controversy around payments made to MinRes’ founder and Managing Director Chris Ellison over 15 years ago related to pre-2006 IPO sales contracts. We see limited material impact for MinRes, given this is effectively ancient history.
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