This is Strawman at its best: unemotional, rational and constructive disagreement.

Personally, I'm on the fence with this one. And given my usual approach of "if in doubt, leave it out", I'm not looking to make an allocation at this point.

But an informed back and forth like this really does frame up the situation well for me, and help me understand the pros and cons. Love it!

If it helps others get up to speed, I asked chatGPT to summarise the pros and cons that have been put forward in this thread.

Key Positives:

1. Strong Assets and Cash Flow Potential:

• Iron ore projects (e.g., Onslow) have strong cash flow potential if prices remain above $100/tonne.
• Mining services (MinServ) cash flows are noted as robust compared to peers.

1. Growth and Innovation:

• The company has made successful moves into lithium and infrastructure, demonstrating a willingness to innovate and take risks.
• Lithium assets could potentially bring higher valuations if the market cycle improves.

1. Leadership and Vision:

• Chris Ellison, despite controversies, is recognized for his entrepreneurial drive and excellent capital allocation skills, which built the company into a multi-billion-dollar entity.

1. Recent Financial Improvements:

• Asset sales (e.g., energy assets) have strengthened the balance sheet.
• Cash inflow from recent deals reduces concerns about capital requirements.

1. Valuation Opportunity:

• Some analysts and investors believe the share price undervalues the company’s underlying assets and potential, offering a long-term opportunity for returns.

1. Potential for Dividend and Buybacks:

• Even if the market undervalues the company, strong cash flow could support shareholder rewards through dividends and buybacks.

Key Negatives:

1. Governance and Ethical Concerns:

• Scandals involving Chris Ellison (e.g., tax evasion, related-party transactions, and whistleblower allegations) have damaged the company’s reputation.
• Questions about governance structure and board effectiveness remain unresolved.

1. Cultural Issues:

• Reports of a toxic workplace culture under Ellison’s leadership raise concerns about sustainability and employee morale.

1. Dependence on Commodity Prices:

• High exposure to iron ore prices, which remain volatile. A significant decline could worsen financial risks.
• Uncertainty in the lithium market adds further risk to long-term valuations.

1. Ellison’s Departure:

• Concerns that losing Ellison’s capital allocation expertise may result in more conventional, less innovative decision-making.
• Uncertainty about leadership transition, given his influence and the lack of clear succession plans.

1. Investor Skepticism:

• Share price declines reflect broader market concerns about governance and operational risks.
• Divided investor sentiment on whether the company can recover its prior growth trajectory.

1. Regulatory and Legal Risks:

• Ongoing scrutiny from ASIC and unresolved whistleblower complaints could lead to further reputational and financial damage.

1. Balance Sheet Risks:

• High debt levels still pose a risk, requiring strong operational performance to deleverage effectively.

1. Market Sentiment:

• Current share price trends suggest a lack of confidence in the near-term outlook, with some investors avoiding the stock entirely.

This mix of strong assets and leadership contrasts with significant governance and market risks, creating a polarized view among investors.

Great discussion and very informative indeed.

I will add just one point which relates to valuation (CE and governance issues aside).

That is the Iron Ore price expectations, which is for me the most important driver of the valuation. Lithium prices can stay where they are forever, and it wouldn’t be good but MIN could sill be worth double it’s current price if the Iron Ore price stays around these levels.

MIN will have a break even around US$50/t, so the question is how likely is the price to drop below US$70/t on a sustained basis and impact value. Lots of points raised about supply and demand factors but no one has mentioned:

INFLATION

2018 was the last time Iron Ore was below US$70/t and brief lows in 2015 were under US$50/t. In a very low inflation world (2%) these bottoms may continue to hold some weight a decade later, but inflation over the last 3 years alone pushes this price reference back equivalent to a decade at low inflation rates.

It’s just another point, but commodity prices are ultimately subject to the power of inflation, it’s just that due to high volatility, it’s very hard to see it on price graphs and so no one talks about it!

PS: I note oil is different, but this is due to price fixing well above cost to supply. Only a minor issue or not an issue for most other commodities.

Fair points @Rocket6. I did agree that Gaurav is more right than wrong, that short-term share price movements don't determine whether a long-term investment thesis is right or wrong, and that Gaurav did very well indeed with Coal - that was all in my post last night. My concern regarding Gaurav's thesis on PLS was that his view (which I shared originally) was that PLS had so much cash and were great capital allocators, so should be the last lithium miner standing if prices stayed lower for longer, yet PLS then went and spent $560 million on Latin Resources for a project in Brazil where PLS had no assets. Sure, they did it with scrip rather than cash, but they are still going to be spending money developing that project and it will also take at least some of their management's focus off their Australian assets at a time when they have been running at a loss here due to low lithium prices.

With MIN, I also think Chris will end up staying on; I believe that's exactly why they they chose the 18 month timeframe, so that the heat comes out of the argument and in 12 months time they can say that Chris has learned his lesson and they believe they need to keep Chris around, either in the MD role or another one, such as being in charge of strategy and M&A, but in some capacity where he basically continues to run the company and define its strategy.

I wouldn't be surprised if the MIN Board had quietly suggested this might happen in their discussions (leading up to the AGM) with those larger shareholders who strongly want Chris to stay on at MIN, as I note it was the individual retail investors who spoke up at the AGM in support of Chris, not the fundies and insto's, who had mostly already made their views known.

I think MIN is a very different proposition without CE, and of course the MIN Board are also aware of that. However, even if he does not go anywhere, is he really going to think and act in the same way now, with so much more scrutiny on both what he does, and who he does it with? Maybe he doesn't change, but at the very least the Board will want much more detail and will be very aware that all related party transactions need to be either avoided or thoroughly disclosed.

My own reason for avoiding the company now is the lack of governance and the systemic nature and pattern of CE plus his family and friends making personal profits out of the company which the remainder of the shareholder base has not shared in, but leaving that aside, even if that didn't bother me, I do not think the mindset and risk taking that CE has displayed in the years leading up to this, that has certainly played a large part in what MinRes has become, is going to necessarily continue on into the future, purely because there will be additional scrutiny and Chris is not going to feel like everything he does always works out very well eventually, so he's not going to have that same confidence and bravado that he did.

It's just going to be different now, with or without CE.

In terms of companies being heavily shorted, I also tend to have a good look at those as prospective investments, and it's one of the reasons I did invest in PLS before they did the Latin Resources acquisition, because the shorters aren't always right and when they're wrong we often get a decent short squeeze which can turbocharge our gains. My point about PLS being shorted, and I didn't make this as clear as I should have, is that I thought they were being shorted mostly because they were a large and liquid lithium play and it was a convenient way for people to short lithium, but I now believe that a secondary reason that Pilbara were being shorted was because of the risk that they would make a bad M&A play, i.e. spend their billions of cash on something that did not add value to the company, i.e. was not earnings accretive, and that is indeed what they did with Latin Resources IMO, albeit via scrip, not cash, but via scrip when their share price had already come down a heap, i.e. was low, so whichever way I looked at it, I thought it was a dumb capital allocation decision on an asset that made very little sense at that point. So once they did make the bid for Latin, that signalled to me that the investment thesis was busted, because the investment thesis was based on PLS management being smart and strategic capital allocators, and that Latin acquisition didn't fit that description IMO.

So, my thoughts are that the shorters were actually right about PLS on this occasion, which is why I included the fact that PLS were heavily shorted in addition to the M&A in the context that Gaurav reaffirmed PLS as a BUY after the Latin Resources acquisition announcement, when in my view the acquisition announcement meant that the shorters were clearly right this time. Again, just my view.

Not everybody agrees with that assesment clearly, but judging by what the the PLS share price has done since that announcement, a fair chunk of the market does. But differences of opinion is indeed what creates opportunity in the market.

I also have been contrarian in the past, because going against the market can prove very profitable if you are right and they are wrong, however even if PLS do come good in a few years, it seemed obvious to me at the time that the market was going to sell them down further on that Latin Resources acquisition announcement, and that's exactly what happened. So to me there is opportunity cost in holding a company that I think is going lower in the short term, even if they might go higher in the long term.

I used to hold companies through cycles, but not mining companies any more, due to opportunity costs; I'd rather try to place that investable capital in something that is far more likely to increase in value in the short and medium term. There might be a time to invest in PLS, but I didn't think that time was right after that Latin Resources acquisition announcement when I could see clear immediate downside risk.

I want to invest in companies where I can (a) trust management, including (b) trusting that they have been and will continue to be smart allocators of capital, and, for me, MIN fails the first part (a) and PLS fails the second part (b). But horses for courses. Different opinions and investment styles are what makes the market.

I think even Gaurav's call on coal wasn't quite as brilliant (though ultimately successful) as is often painted. Though I've heard it said he 'picked the bottom in 2021', his original buy call was actually in March 2019 @ $2.97. For a year after that the price slid to a low of $1.02 (a loss of about 65%), then sideways for another 14 months before finally starting it's run in May 2021:

https://www.intelligentinvestor.com.au/recommendations/an-opportunity-in-new-hope/144654

Some great insights here and very useful, thoughtful disagreement and nice of @Strawman to add some Artificial to the member Intelligence on the platform.

@Bear77 I've especially got a lot of value out of your insights on this one - as I am on the other side and have been buying around current prices. So very pleased that, even though you don't hold, you're following and negative on it for very good reasons.

Regarding the retail holders generally wanting CE to stay and Instos being vocal in saying he should go, it's hard to distinguish the virtue signaling from genuine disgust but my guess it's primarily the former. Especially from those who don't / won't / can't hold MIN in the first place - why not tout your ESG credentials to plug your fund with some free publicity?

On the CE governance issues, @Solvetheriddle's insights that you'll never really see what goes on inside a company from the outside ring very true to me.

This is a large part of the reason why I think the opportunity is so good in MIN - the cultural / governance issues are on full display and unsavoury to say the least - immoral, possibly illegal, etc.

Debt

The debt gets a lot of press and for good reason but there seems to be an assumption that this will need to be repaid in full as the bonds mature. I am not expecting they will need to roll any funding but I am expecting that if they do need to that will not be difficult if things keep going as they are - even with lower iron ore prices / Onslow profits (this is a likely reason they would need to issue more bonds / raise more debt / equity).

Reason for this thinking is that the debt, while unsecured, is effectively backed by the CSI cashflows which are relatively insensitive to prices, only to volumes. The volumes they crush are on track to go from 300 to 800 Mtpa over 5 years - with estimated EBIT rising from $600m to $1,600m p.a. so raising another $1-2m debt with this sort of cashflow should not be an issue before the last bonds mature in May-2030.

Lithium

On the Lithium front, it was interesting that they mothballed Bald Hill - their marginally highest cost, but also their only 100% owned Lithium mine. The other 2 JV Li mines include crushing and services contracts so these are a source of income (and learning for innovation in the Li crushing space) even if there are low / no profits from selling the commodity.

The closure of Bald Hill seems to viewed as a negative by the market which surprises me. Maybe it's just part of the pile on - suggesting mismanagement from a supposed excellent manager. See he mistimed the Lithium market cycle - he's not even a good manager - so not good at anything! Scalp please!

CE and MIN operate on a very different timeframe to the news cycle so for journalists to suggest they have botched their lithium strategy because they mothballed a mine (even though with the benefit of hindsight they clearly did overpay for assets by being too early) gives me the sort of contrarian confidence that @Rocket6 referred to.

Disc: Held

Not sure if the below XL paste will make sense to anyone but me but here's some analysis I did on MIN Debt.

All numbers are in AUD '000s unless shown otherwise.

This includes the unsecured bond - amounts, interest rates and maturities.

Net Debt

Upshot is that MIN have borrowed > $5bn, mostly in bonds with staggered maturities from 2.5 to 5.5 years from now.

In addition they have undrawn funding available of almost $1.9bn and another $1.9bn received or due this month from upfront payments on asset sales.

Current Cash, Undrawn facilities & Upfront payments on sales = $4.7bn which could almost cover the $4.8bn in outstanding bonds.

Capex

For context Capex peaked at $3.3bn in FY24 and is forecast to be $1.9bn in FY25 before falling further.

Of this $0.6bn was sustaining / maintenance Capes in FY24, to be $0.5bn in FY25.

So Growth Capex of $2.7bn in FY24 and $1.4bn planned in FY25 being invested with a ROIC target of 20% vs Cost of Debt @ < 9%.

Income

Onslow Iron should remain EBITDA positive above US$55 per tonne. At US$100 per tonne they should make US$1bn EBITDA at capacity (due by Jun-25). At US$80 per tonne they should make US$0.6bn EBITDA.

Mining Services projected to be making EBITDA of AU$0.6bn in FY25 up to AU$1.6bn in FY30 = AU$6.6bn over that period.

I assume Lithium mining will break even / cover costs for a year or two - will likely be mothballed, ramped up or sold down as market conditions dictate.

@Slomo good work i see where you are coming from. The two issues that I see is 1. Regarding debt, i do not see it as a default/capital raise problem. Still, under some scenarios they will find it hard to extinguish the debt in a timely manner, meaning the ops are amortising the debt over a very long period--not great. its one scenario, i think you are right in that a potential crisis has now been avoided under almost all but an extreme scenario. Secondly, regarding closing operations, i think its a case where you want the industry to rationalise production but that is someone else who shutters, not you. the remaining producers get the benefit. It indicates MIN realise they are at the to of the cost curve. having said that some commodity industries cannot work out who is supposed to close (eg Aluminium) because of a flat cost curve and they slaughter each other. so a mixed bag for MIN on Li. As has been pointed out the Fe operations and price are critical.

held

as an addendum, i really have no interest in opinions and grandstanding by the media, or others, or (unsurprisingly) share price targets by brokers, I am interested in facts going forward and scenario analysis. especially important for MIN at this point.

This is the MinRes recording from ABC "The Business". To correct my earlier comment, the old guy just wanted to throw a punch at somebody, not management He since walked back on that statement.

https://www.abc.net.au/news/programs/the-business/2024-11-21/chris-ellison-fronts-shareholders-at-minres-agm/104632746

But can totally understand what he is going through when you put your life savings into a company that would generate some returns on your investment.

I wonder if things would be different if MinRes had kept their equity stake with Develop. Then there would be potentially Beament as successor. Suppose one can wonder...

I think what you need is a total board renewal at MinRes. In meantime I will still watch for a reentry at a lower price and then X-fingers that board renewal comes sooner rather than later.

07-Dec-2024: The following is a free article from the Intelligent Investor, by Gaurav Sodhi, published on November 5th, so 5 weeks ago, and sent out in II's "Pecuniary Interest" free fortnightly newsletter for former members (such as myself) and people who they hope might be interested in their trial subscription offer; this particular newsletter was sent to me on Fri 8th Nov:

https://www.intelligentinvestor.com.au/recommendations/mineral-resources-unhappily-ever-after/154029

Mineral Resources: Unhappily ever after

The consequences of the past few weeks will change MinRes forever.

By Gaurav Sodhi·5 Nov 2024

Key Points

• Ellison will leave
• Chair of the board will leave
• How will the business change?

For 20 years, the story of Mineral Resources has been a fairy tale. A mercurial founder who became a businessman; the businessman who became a billionaire. Now, in the final act, the founder has fallen. The fairy tale is over.

The MinRes board announced its findings into various scandals involving the managing director, Chris Ellison. It found that Ellison had not acted with integrity and had used company resources for personal benefit. Ellison will step down as MD within 18 months while a hunt for a replacement begins.

He will pay penalties worth almost $9m, $3.8m of which will go to the company. He will also forgo $6.5m in options, while a request for $3.1m in fresh equity payments has been pulled.

In all, Ellison's bad behaviour will cost him his job and more than $10m in income. It's a satisfactory outcome for what has been a baffling series of misjudgments and errors.

The chairman of the board will also leave within a year, and we expect several board changes to follow. Commitments to stronger governance have been made. These are all more forceful actions than we had expected.

A mere five months ago, MinRes's stock was at $80 and the notion of Ellison leaving was unthinkable. It's worth considering what has changed.

Financial risks have fallen

Operationally, the business is arguably less risky now and in a stronger financial position. The sale of a 49% interest in its Onslow haul road has been approved and finalised. About $1.1bn in cash will hit the balance sheet shortly.

MinRes also announced the effective sale of its energy business for up to $1.1bn, with $800m to be paid upfront and the rest in contingent payments. This is a business most investors had valued at zero, and its sale should remove any questions about a capital raising. The balance sheet is stronger now than it was then.

Iron ore prices remain above US$100 a tonne, where they will generate stupendous cash flows from the Onslow project.

We note that while MinRes owns 60% of the project, it financed the whole venture and is therefore entitled to 80% of project cash flows until the debt is repaid. If iron ore prices persist at current levels, accelerated debt repayment should be expected.

Lithium remains in the doldrums although MinRes has savagely cut costs at its three mines. At Wodgina and Mt Marion, the two largest, output is likely to fall as expenditures have not allowed fresh rock to be cut. This is sensible considering where prices are.

If investors were perfectly rational, the combination of asset sales, project development and commodity prices should lead them to conclude that the business's position had strengthened, and risks had fallen.

Yet the loss of Ellison is devastating for confidence and for the future direction of the business.

The maverick

Ellison's track record of capital allocation is unmatched in the industry. Over many years, he has shown a penchant for madness along with a license to act on that disposition.

How else could an upstart crusher, who started crushing ore for marginal mines, end up with the best and biggest as clients. How else to explain the manic moves into lithium when no one was interested, into iron ore without any infrastructure or energy without any experience. No professional manager would make those moves; it was borderline reckless to do so, yet each time it has paid off.

Ellison's wild streak was ultimately his undoing. The board and management sound like they will be more professional and conventional from now on. That is necessary. The business will gain the governance structures and oversight that it has clearly lacked for years.

Yet it will undoubtedly lose something for it. How will a more professional board and management allocate capital? Will they chase projects unafraid of mistakes, or will they dull the entrepreneurial edge that has been the hallmark of this business?

These are important questions, and they are impossible to answer today. We need to rethink what we are willing to pay for the business.

What to pay

In simple numbers, we think the mining services business is worth about $40 a share; iron ore about $30 a share; and lithium about $20 a share. It's hard to get a valuation much less than $90 a share with realistic commodity prices. There is undoubtedly value at today's share price.

We suggest caution, however. In the short term, the business remains vulnerable to sustained falls in the iron ore price. Until Onslow is running, and the debt repaid, risks remain.

The larger risk is how the trauma of the past month will change the business. As we have suggested, gaining better governance may mean losing the magic that built the business into what it is today.

The best way to deal with that risk is to manage your portfolio limits. We suggest a 4-5% position size is plenty, and conservative investors should consider a lower weighting. We are cutting our Buy price from $65 to $45 and our Sell price from $120 to $90 as we lower our future return on capital assumptions.

With Ellison's departure, the battle for MinRes is now over. The fight to get Onslow ramping, and cash flowing, is still ongoing. There is no guarantee of a happy ending. The fairy tale is over. BUY.

Disclosure: The author owns shares in Mineral Resources.

The Intelligent Investor Australian Equity Income Fund (ASX:INIF), Intelligent Investor Australian Equity Growth Fund (ASX:IIGF), Intelligent Investor Select Value Share Fund (ASX:IISV) owns shares in Mineral Resources Limited (ASX: MIN).

IMPORTANT: Intelligent Investor is published by InvestSMART Financial Services Pty Limited AFSL 226435 (Licensee). Information is general financial product advice. You should consider your own personal objectives, financial situation and needs before making any investment decision and review the Product Disclosure Statement. InvestSMART Funds Management Limited (RE) is the responsible entity of various managed investment schemes and is a related party of the Licensee. The RE may own, buy or sell the shares suggested in this article simultaneous with, or following the release of this article. Any such transaction could affect the price of the share. All indications of performance returns are historical and cannot be relied upon as an indicator for future performance.

--- ends ---

Disclosure: I do not hold MIN at this time, and have them on an "Avoid" list now. I note Gaurav's "conservative" $90/share MinRes valuation "with realistic commodity prices" and that he's reduced II's (Intelligent Investor's) recommended buy price for MIN from $65 to $45 and their sell price from $120 down to $90, however I strongly feel those numbers are not very realistic in the short-to-medium term. I estimate MIN could recover to between $50 and $60/share, but I don't think they're going back up to $90 any time soon. The company already had people who wouldn't go near them BEFORE all of these revelations about their founder and his friends and family benefiting at the expense of ordinary MinRes shareholders, and that group of people who won't consider MinRes to be within their own investable universe has certainly grown a lot larger in the past couple of months.

I should also note that Gaurav published that piece in early November (5th) and there have been more allegations that have surfaced since then, and most of those have been admitted to by the MinRes Board at their AGM on Nov 21st. I don't know if Gaurav's opinion on MinRes or his price targets have further evolved/changed as a result of that (since Nov 5th) but it should be remembered that he did write the above piece in early November. That's the context of it.

MinRes has tried to bounce a few times, but seems to get whacked back down each time, although not back to under $30 again, so far.

It does look like the share price is settling into a channel between $30 and $40/share now, but when we zoom out to a 5 year chart (below), it just looks like the company is in a strong downtrend that has yet to be broken.

I'm not into TA much at all, but I do know that's a downtrend, and I guess what current and prospective investors in MinRes need to ask themselves is what's going to turn the market's frown upside down when it comes to this company, i.e. what are the near-term catalysts that should cause a positive market rerating of this company?

For a longer term play, they're probably OK, if you hold your nose and don't mind being underwater in the near term, and also don't mind the stink (another reason to hold your nose), but perhaps there's opportunity cost in holding them right now. After all, if the company remains in your own investable universe (they're no longer in mine, but each to their own) you don't HAVE to hold them through the doldrums; you could instead just buy back in when they have some tailwinds again instead of headwinds, and you might even be able to pick them up at even lower levels. And you could put that money to work in something with better near-term potential in the meantime.

@Bear77 I find Gaurav's comment:

"It's hard to get a valuation much less than $90 a share with realistic commodity prices. There is undoubtedly value at today's share price."

rather strange.

I know he's always been super-billish on $MIN and CE, but contrast his view with the rest of the analyst community. 12-month price targets average $44.31, ranging from $31.20 - $67.00 (n=16; tradingview.com). Clearly, quite a few others don't find it that hard to get a valuation below $90.

The statement is also odd, when you consider that all of these analyst views represent central cases or "expected" valuations. If you asked them all to publish a range of likely scenarios around their expected valuations, you'd get an even wider spread. Sure, some high cases would go well over $90, but equally some low cases would go well below $30.

But what a difference a couple of years can make. Two years ago, the range of valuations in the analyst community was $75 - $125. Now $MIN hasn't changed that much, we've just moved into a different phase of the commodity cycle.

I think this case illustrates the challenge of investing in integrated miners. Analysts, with their short horizons, are unduly skewed by where you are in the cycle. This is even true of the large investment banks that have smart commodity research teams that model the industry cost curves in detail, which is what you need to model the price cycles (even if it doesn't make you any better at predicting them!) For example, Macquarie have most recently predicted that lithium supply and demand will be back in balance by 2028. Really? Good luck with that.

I'm not a mining specialist, but over the decades I've found exactly the same phenomenon in oil. The forward curve is a very poor predictor of the actual future oil price, even though the financial markets which it serves have a volume some 10x the physical markets. So, it is important!

So just because the unanimous body of analysts violently disagree with Gaurav, doesn't mean that Gaurav is wrong. After all, his valuations of $MIN have been relatively stable over recent years. A good valuation should move around a bit because at the low point in the cycle, your near term cash flows are lower and at the high point they are higher, and so with the time value of money, this should impact the value of all future cashflows.

A few year's back. I tried the II service on a special offer. However, I didn't renew, because it's difficult to get underneath their recommendations, the basis of which are usually quite opaque. I gave this feedback on the "Tell us why you are leaving" survey. Having knocked them, I have to balance this and say that several years ago Gaurav published a compelling note which put me on to $LOV,... which eventually paid for my subscription 15x.

Coming back to $MIN, did he really mean what he wrote, or was it just sloppy language?

To be clear, I don't have a view on fair value of this one.

Disc: Not held

Agreed @mikebrisy - and your comment about Gaurav putting you onto LOV back in the day rings true with me also - but different companies, not LOV for me. In my case it was mostly mining companies like Alumina Limited (AWC), South32 (S32) and Pilbara Minerals (PLS) at various times in prior years where Gaurav's write-ups helped me understand the future value based on expected demand vs supply, and the sum-of-the-parts valuations of those companies, and I did make money on all three, although I did also have a couple of losing trades on PLS and S32 as well, but overall I made money and the money I made was multiples of what I paid for my II subscription.

However, as I said in my post last night, I strongly disagree with that "minimum $90" val that Gaurav had for MIN in early November. Far too bullish, despite him saying "The fairy tale is over", which I believe it is in terms of MIN being that same entrepreneurial and high-risk taking company where the majority of that risk taking pays off big time for shareholders. Firstly, they have gone hard into iron ore and lithium mine ownership and also very hard into logistics and infrastructure in the case of iron ore in particular at a time during which the prices of both iron ore and lithium have not only declined to levels they likely did not expect, but have the headwinds to stay down here or even go lower for some time to come. Lower prices for longer is not what these investments were based on, but it's what they've got to deal with right now.

On top of that, the culture has obviously got to change at MIN, and CE is going to face a significantly increased level of scrutiny from his Board and from the broader market, so I doubt he'll still have the bravado and the "10 foot tall and bulletproof" mindset that he's had in the past. In short, MinRes has to be viewed as a totally different investment proposition today than it did two years ago. Even two months ago. And their outlook has NOT improved, it's got significantly worse, IMO.

Just one quick example of where Gaurav has made another call that hasn't worked out so well, has been PLS where he couldn't understand why Pilbara was consistently the most shorted stock on the ASX with over 20% of their shares sold short for months, beyond the obvious fact that PLS were the largest and most obvious ASX-listed pure-play lithium name, so they were an obvious company to short if you were negative on lithium due to a view that supply vs demand would keep the price low, and possibly drive it even lower in the near-term.

Gaurav's bull points on PLS were that they had a good M&A track record (investing counter-cyclically in good strategic assets that made a lot of sense in relation to PLS' existing assets), had zero debt, and billions (at the time) of net cash on tha balance sheet, so while they were borderline profitable, moving to unprofitable, at the lithium prices at that point in time, of all the lithium plays you could back on the ASX, PLS seemed to have the rock solid balance sheet and huge cash warchest to enable them to be the last lithium producer standing while those around them went to the wall. PLS looked like the strongest player in the sector, despite not having the cheapest costs. Pilbara's costs were low enough and they could withstand a period of lower lithium prices.

What actually happened was the PLS kept producing at the same rate even when they became loss making, rather than curtail production until prices rose, and they kept investing in their own growth - not too worrying so far - and THEN PLS announced they were acquiring Latin Resources Ltd (LRS.asx) for the equivalent of 19.95 cents per share in an all-scrip deal, which represented a 66.3% premium to its undisturbed share price at the time. Certainly more counter-cyclical M&A, tick, but LRS' assets were in Brazil, not Australia, so the market was quick to sell down PLS even further when that deal was announced in mid-August.

Perplexing decision by PLS management in August and certainly changed my opinion of their management - I removed PLS from my investable universe well before I removed MIN.

Gaurav penned an update for PLS on 30th September, after that Latin Resources acquisition announcement, and claimed that despite the lithium market having declined further, PLS were still best placed to withstand the lower prices for longer. He moved his Buy price from $3.50 to $3 and said PLS were a HOLD up to $7. PLS closed at $3.27 that day, but now, 10 weeks later, they've just closed (on Friday) -31% lower at $2.25.

Short term share price movements don't determine whether a longer term investment thesis is right or wrong, however I would suggest that management deciding to do an acquisition of a Brazilian lithium project using their own scrip (shares) when their shares have been smashed and are being heavily shorted is somewhat of a red flag.

Gaurav has been more right than wrong over the years I reckon, but I haven't been overly impressed with his continued backing of MIN and PLS despite the fact that his original investment thesis for each of those companies appears well and truly busted now, to me at least. He has modified his theses and his target buy and sell prices, sure, but it seems more like thesis creep to me than a logical and rational exploration of the new facts and how they impact the thesis in terms of whether the original thesis still holds up.

I probably sell out of companies too quickly now, when I see trouble, but it's only because I've been burned in the past from engaging in thesis creep and holding on to losing positions for longer than I needed to and losing more money than I needed to.

As George Soros said, it's not whether you're right or wrong [or even how often you're right or wrong] but how much money you make when you're right, and how much you lose when you're wrong, so my focus in recent years has been more about loss limitation. You can't avoid losses altogether, they are part of the game, and unavoidable, but we can certainly take steps to limit the extent of those losses, and one obvious step is to re-examine the investment thesis each time any significant new data comes to light [or event occurs] and see if the thesis is still solid, and sell out if there's signifcant doubt about that.

And my view is that Gaurav's and my investment theses for MIN and PLS six months ago are busted, and I'm out, but Gaurav is not; he's just adjusted his price targets in response to the new data and events. As you say Mike, Gaurav may well prove to be right, over the next few years. He certainly got his thermal coal play calls right a few years ago. But I do not share his bullishness for either MIN or PLS now.

@Solvetheriddle and @Bear77 great perspectives on $MIN (and $PLS).

For the record, I am not contemplating an investment in $MIN. I only tend to invest in resources in deep troughs and we aren't in one, as Iron Ore >$100,

The kind of scenario I'd invest in would potentially be deep trouble for $MIN - were it to occur in a year or so. I know that means I might not invest in resources for another 5-10 years, but that doesn't bother me.

I've always been suspicious of $MIN. I get nervous when CEO's start to get lionised by market commentators. After all, as you say, they are all human. When this happens the external narrative can turn them into something they never were. And what's worse, is when they start believing that themselves.

Regarding $MIN, it seems an untenable situtation for people to be talking about the need for culture change, yet the CEO remains in place for 18 months. There is no culture change without a change at the top, and that probably includes the board as well. A red-faced mea culpa for past misdemeanours coming to light is pretty meaningless. Also, the $MIN board doesn't look like I'd expect a board of a $7bn miner to look like.

I understand your comment @Solvetheriddle about the importance of a good capital allocator in an industry with a terrible record for capital allocation. But I wonder to what extent the foundations are in place: mining services; iron ore; and lithium, with options for incremental capital allocation around these core parts. Surely a half decent CEO can now run this business? There is a big difference in capital allocation to 1) foundational, greenfield assets vs. 2) incremental capital to maximise lifetime value. The latter is a more operational role, less reliant on commercial brilliance.

Anyway, I think this one is largely academic for me, for now. I can't see myself investing here any time soon.

Bullish Iron???? I was reading this thread today. Not sure if we see Iron below $100.

This may be the saving grace that MIN needs.

https://x.com/EdConwaySky/status/1864981479891054973

Not sure that the iron required for LFP batteries is going to move the dial much regarding the iron ore price. There's not much iron required for lithium iron phosphate (LiFePO4) battery cathodes compared to the iron used in building and infrastructure construction, such as structural steel and the "reo bar" used in concrete pours. Iron used in batteries will never fully compensate for reduced demand for steel in construction.

Also, it is China that has specialised in LFP batteries and they're about to be in a trade war with the USA with massive tariffs slapped on Chinese imports into the USA, especially vehicles.

I think a sub-$100 iron ore price is still a very real possibility in 2025.

@mikebrisy fully understand where you are coming from. My top 10 holdings are quality compounders with little or no hairs on them, most of the time fair or fully priced, the next group are cheaper with obvious hairs (turnarounds, operational/management issues etc), and there is no need to measure the value added from each group too closely, its a landslide. lol

Agree about the iron in the batteries. It will merely replace the fall in ICE vehicles.

I think China will find a way through those tariffs but it will take time.

Never underestimate the resilience of China.

Iron Ore popping on more China Stimulus

Calls for under $100 and MIN < $30, FMG < $15 still premature at this stage

China really wants the party to roll on.

Borrowing a Star trek quote

Resistance (against IO price falls) is futile...

Hope China has something left in the armoury when the tariffs start biting in 2025.