I wouldn't quite put it as dire but they are essentially in...

I wouldn't quite put it as dire but they are essentially in survival mode for the time being until one or both of the lithium spod and iron ore market turns.

Given the dire state of the Chinese property market and the weak general economic outlook there, I don't see iron ore recovering any time soon. In fact, I've been surprised at how long it has actually taken for iron ore to be sold down. I had sold both FMG and BHP a year ago betting on iron ore weakness - just goes to show the market pricing can go against one's bet for a lot longer in spite of underlying economics. It is also unfortunate timing for MIN that it had sunk all that capex to bring Onslow online, only for the iron ore spot to tank.

Lithium will also be challenging in the short term, especially for MIN since it sits quite high up on the cost curve (Wodgina and Mt Marion costs average around 850/t). What is great about the MIN business model is the fact that it has a stable, recurring earner in its mining services business that essentially helps to underpin the other businesses during the troughs of mining cycles.

Given the state of its iron ore and lithium business, I think a bigger priority will be given to its energy division in the next 2-3 years because it has the potential to be another stable, recurring earner. This is especially so based on AEMO's WA gas supply/demand outlook, with gas price expected to remain high enough for domestic producers to enjoy a very attractive return on capital.

So do I think MIN's stretched balance sheet will stop them from potentially having a stab at STX? I don't think so. If CE prioritises energy while essentially putting lithium and iron ore on ice, it actually makes sense for them to get as much gas as possible. Remember the revised domgas policy implies that if domestic market is fully supplied, then excess gas can be exported. Therefore it is actually in MIN's interest to ensure the domestic market is fully supplied, and it can only do that if it has sufficient gas to support a 250TJ/d plant for many years to come.

Do I think MIN will actually take a stab at STX? Who knows? Between MIN, Hancock, WES and even BPT, each of them has their own compelling reasons to take out STX. But will anyone actually make the move? It's as good as anyone's guess.

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