Why the quarterly result was really good, and the mkt is not onto it

MIN Result was at the top of guidance
If we consider the above table to start with:
From left to right: Pibara Hub, 76 FOB versus guidance 76 to 86, Onslow 63, versus mid point guidance 65;
Onslow production 8, versus guidance 7.8 to 8, Mt Marion FOB 902 versus midpoint 920, Wodgina 849 versus mid point 845. Mining services: Margin was $2.20 versus guidance $2.10 to $2.20. So on all but one key metric MIN where at the top of their guidance range.

Now the detail on why the result is really good:
I'll just order these in terms of what i think is most important to least:

1: Debt refinancing costs have dramatically decreased, 12% down to 8.5% or less, meaning there will also be no capital raising, and MIN can deploy large free cash flow where ROIC> WACC
At the 3 rd quarter conference call, things were not that great with low Onslow shipping volumes, Trump tariffs etc, and CFO Mark Wilson said if he had to refinance the 2027 bonds the rate may be around 12%!

The story has completely changed now. Onslow volumes are up, and EBITDA/Debt dramatically down. Wilson said yesterday if he had to refinance today the rate would be estimated at 8.5% and he actually expects that to come down further over the next few months. Last night the Nov 2027 bond traded at 101.56, with a yield to maturity of just 7.2%. It tells you the bond holders now think this investment is basically safe.

In a tussle between who is correctly valuing the company with the debt and equity holders, i will almost always back the debt holders, as they have access to much better information sets!

This data is all really significant. It means MINs will likely roll both its 2027 bonds in Fy 26 probably in a 7.5% to 8.5% range, which means MIN will have more liquidity to deploy to value added expansions such as taking Onslow to 50 m t pa, where ROIC is probably 80% +.

And secondly, there is no capital raising. So the shorts are stuffed as their main hope was there would be a capital raise and that's how they'd make profits.

2: Onslow, cost and volume guidance, $57 FOB
The FOB cost performance was outstanding at $57. They shipped 23 m t pa for the quarter, which is only 65% of nameplate capacity of 35 m t pa. There are a whole lot of FOB costs in the system that are fixed: transhipper crews, staff at Ports and Cooks at Ken's Bore etc. So when they get the volume to 35 m t pa, it is very easy to see FOB costs coming down to $54 (before autonomy) and $49 after autonomy, and possibly even lower than this.

Volume guidance for FY 26 was excellent at 30 m to 33 m t pa. As i said yesterday, it basically implies they are operating at 35 m t pa nameplate capacity from Oct to Dec and April to June in Fy 26, given say a 30 m t pa performance during cyclone season. They will get 2 runs to knock off the $200 m bonus payment from Morgan Stanley.

3: Onslow Mineco is highly profitable ($950 m free cash flow per year, and MINs gets 80% of this)
I have redone the quick maths i did on this yesterday.
MOZ and Travis both agreed "the carry loan doesn't lie".
The carry loan was $789 end of q 3, and $764 at end of q4.

Having rethought about it, i don't think the $200 m spent on the road in q 4 is included in the carry loan as the road is exclusively owned by MIN, with them charging a toll to Mineco.

However, the carry loan is also subject to interest that i understand is about 7.1% per annum. So adding the interest for the quarter, the carry loan increases from $789 to $803, and then reduces to $764, which means $39 m was generated of free cash flow from 80% of Baowu's share of free cash flow, where Baowu owns 40% of Mineco). If we say Onslow was operating at 50% of capacity (accounting for costs efficiencies from producing 23 m t of nameplate of 35 m t pa), then
Mineco generates: 39/.32*12/1.5= $975 m of free cash flow a year at nameplate capacity. (.32 is 80% of Baowu's 40% share).
Even if we take a worse case scenario, where we assume no efficiencies in production, Mineco generated ($39 m/.32* 12*35/23)= $750 m of free cash flow per annum assuming nameplate capacity. And MIN is entitled to 80% of this free cash for the next 3 or so years until the carry loan equals zero!


4: Availability of Jumbo triple trucks at Onslow; increase from 84 to 120 (43% increase), usage increased from 48 to 84 or by 75%!
At the end of qtr 3, MIN had 84 trucks available and average Jumbo triple truck usage of 48, of a planned total fleet of 120.
Now they have 120 available of a total fleet of 140, and average usage over the quarter was 84. It means they have just taken delivery of a whole lot of Jumbo triple trucks which will reduce their haulage costs and reliance on the contractor trucks (which cost i think cost about an extra $4000 to haul each 100 t).

And the jumbo truck usage going forward will be a lot more efficient; eg they're likely to shortly get usage of the trucks up to about 90% or more, which will significantly increase mining services EBITDA

5: Lithium Costs lowest ever
Wodgina SC6 cost of $641, lowest ever, and Mt Marion again good at $717; looks like permanent operating cost reductions at both mines. The final quarter operating costs for both mines significantly below average costs for the year: Mt Marion $717 is 20% below $902 average. Wodgina $641 versus $849, 24% below year average.

6: Cap ex greatly reduced, $500 m sustaining cap ex
On the call, Mark Wilson said indicative Cap ex was about $1 bn for Fy 26, of which $500 m is sustaining cap ex, and $500 m growth cap ex. My guess and or hope is the $500 m growth is mainly about taking Onslow from 35 m t pa to 50 m t pa, Eg expenditure to buy 2 transhippers etc). I love this type of cap ex spend as the ROIC is probably about 80% or better.
The $500 m sustaining cap ex is a little higher than i had hoped, but fine. I had $250 m sustaining cap ex for mining services and Onslow long term. I understand about $190 m of the cap ex was to develop some new mine site; so overall it looks ok.

The cap ex will easily be covered by the Min Res free cash flow this year, with MIN still de gearing probably in a range of reduced debt of about $500 m to $1 bn by the end of Fy 26.

MOZ podcast is brilliant
I would encourage everyone if they haven't already to watch the MOZ video.
And if you've already watched it, watch it again.

Keep watching it over and over until you can recite and understand every conversation in the video, and then you'll have a reasonable understanding of MIN!

It is even more relevant after the quarterely result.
The insights are brilliant, prescient and MOZ is a very clear and logical thinker.

What makes it even more impressive was MOZ started from the position of shorting the stock, and after all the analysis and research he did he realised MIN was greatly undervalued, and he's put 100% of his portfolio into it.

As Warren Buffet says, diversification is only for those people who don't know what they are doing!

You won't spend a better 2 hours getting to understand MIN than watching the MOZ video. Link again attached below.

Have a good day.

Dekka;