There are a few brokers out there who seem to think the result beat market expectations. While this may be the case, obviously outlook is just as important, if not more.

Here's a take posted by Rudi F-V

Barrenjoey on Mineral Resources $MIN: "MIN beat expectations driven by a stronger mining services contribution (EBITDA/t of A$2.6/t for 1H25 vs A$2.0/t for FY24) and positive inter-segment adjustment. This was due to Onslow contributing a higher margin per tonne in ramp-up than in steady state.

"However, cyclone impacts lead to a downgrade to FY25 Onslow volumes, while a decision to fully asphalt the haul road (currently bitumen) to ensure performance and longevity has meant capex for FY25 is now A$2.1bn vs cons of <A$2.0bn pre the result. Higher capex and opex are likely to impact valuations."

Will be interesting to see market reaction. 

@OxyBBear it is worth considering that brokers are all over the place on $MIN.

Price targets range from $20 to $70.

About as useful as a chocolate teapot.

Down almost 13% on the open tells the story.

All good points @Bear , @mikebrisy , @Slomo the company is relying on commodity prices at least holding at current levels but upside surprise is unlikely particularly in Iron Ore to any significant amount for reasons mentioned. I am of the view that downside surprise is also a low possibility (inflation and low end supply cost constraints), but the current result and debt situation makes the outcomes of downside very significant, so the risk has jumped on this result (hence share price move) and I am glad it is just a half weight position for me, the commodity risk holding me from going to a full position.

At current commodity prices, it looks like the debt can be paid when it falls due, but that is assuming capex is relatively low. They are mid pivot in terms of their mining assets, this may be the low point, but we will have to see at the full year how the services business, Onslow and other assets perform in terms of net cash generation.

Disc: a sum what nerves holder RL

@Slomo You said: "Yes, some of the debt (A$2m) is due in just over 2 years as @Bear77 noted, then nothing for 5 years."

That's $2 Billion, not $2 Million in 2027.

Then almost another $1.8 billion the following year, in the second half of 2028 (1H29). Only $1 Billion of their total debt is pushed out to FY2030 currently.

You are correct @Bear77, A$2bn it is.

And yes, final payment is in 5 years.

After the A$2bn in 2027, another A$1.7bn due 3.5 years from now, in late 2028, then final A$1bn due in 5 years.

Slip of the keyboard and maybe just a little bit of wishful thinking on my part.

On the call now, Ellison fronting analysts.

Getting his swagger back?

How was that swagger @Slomo coz it looked like sentiment turned even more bearish after that conference call. Below is a chart of how MIN traded today (a one day chart):

It looks like they were holding around that $27 mark and the selling just accelerated after the call through to 4pm with a small rise in the CSPA at 4:10pm. But they had fallen another -$3/share (from $27 to $24) between that call and the close. Obviously they made another 12 month low today - of $23.75. The last time they were down around $24/share was July 2020, so almost 5 years ago, and they've been over $90/share since then ($92.16 close on 23-Jan-2023), so it's been a remarkable fall from grace.

I also note that at today's close there were more than 5 times as many shares for sale (lodged sell orders) as there were on the buy side, as shown above (bottom left) so it could get worse in the morning.

What were the analysts like on the call? And Chris?

Agreed @Solvetheriddle - This looks worse than what the market has been expecting, and the market was expecting it to be bad, but I guess we'll see how much worse it is when the market opens this morning.

Lots of down arrows (p.c.p. comps) there - despite mining services revenue being higher due to Onslow.

Big drop in cashflow (below), as you mentioned @Solvetheriddle - obviously no interim dividend has been declared due to the $807 million NPAT loss and the $4.10/share EPS loss (-246% down!), but any which way you look at it, MinRes' overall position has declined significantly.

Interesting to see below where the extra debt has come from over the 6 months from June 30th to December 31st, 2024.

They are at pains to point out that their debt is long-dated (below), with nothing to be repaid just yet, but it still looks to me like they need higher iron ore and lithium prices over the next couple of years to make some serious inroads into this debt. After all, there is a fair whack due to be repaid in 2027 (2H27 & 1H28), and that's just 2 years away.

They seem to be saying that this is as bad as it gets - "Peak net debt to EBITDA position expected" (see below) - however - commodity prices could have a say in that.

Source: FY25 Half Year Results Presentation

See also: FY25 Half Year Results Announcement

I know they will still have backers - and people will say it's always darkest before the dawn, but how do we know this doesn't get darker still, and the dawn's still a ways off yet?

The true believers in FMG back in the day when Fortescue were leveraged to the gills and building their own railway lines and spending like drunken sailors and racking up billions of debt before they had any serious cashflows did very, very well, if they held their nerve and didn't sell out until FMG had multibagged a number of times, but there is a major difference, and that's the timing. Twiggy Forrest could not have timed that any more perfectly to align with the increasing demand out of China that came at the exact time he needed it to. That isn't going to happen for Chris Ellison. China isn't going to be stimulating their economy through further infrastructure spending - they have clearly pivoted to a major push to increase consumption within China, and part of that is through backing Chinese businesses, particularly small and medium sized ones. We see that through their continuing relaxation of lending restrictions, although I don't think they are going to be quite as relaxed with property builders. Remember - this is a country that has overbuilt in terms of residential construction and infrastructure by trillions of dollars, not just billions - they have entire cities built that are not being used. High speed rail, airports, you name it, they've already built far more than they need - that's not going to happen again in our lifetimes.

I'm not saying that iron ore prices won't rise. They will at some point, but it's unlikely to be due to a massive infrastructure spend within China similar to the one that saved FMG from going broke and kept Australia out of recession during the GFC. There will need to be demand from elsewhere. You only get one China in your lifetime.

But it all comes back to reality (published numbers) versus expectations. Maybe the market expected even WORSE than what MinRes reported after the market closed last night. If so, they could rally. But then again... Maybe not.

Disclosure: Not Held.

@Bear77 and @Solvetheriddle while I’m not fully across $MIN, these are scary numbers.

I also can’t see the Chinese cavalry coming to the rescue, … that was an age that has passed.

With the industry’s marginal AISC in the range $80-100 at forecast 2025 demand, and no other demand catalysts in sight that I can see, is there really any prospect for iron ore prices much about $100 in the short to medium term? Equally, with the global lithium supply response reasonably elastic (as I understand it) it’s also hard to see catalysts there.

Does Chris have any asset disposal options to play?

Disc: not held

He's got plenty of assets that he could sell @mikebrisy and so has MinRes, however with every asset sale that MIN makes the NTA backing and book value of MinRes goes lower still, so they can avoid breaching their debt covenants through asset sales if they need to, but it doesn't add any value to the company, it just reduces the company's value further.

MinRes could sell more of the Onslow haul road, that road being one of the big reasons for the size of the loss for the half and the ongoing extra capex requirements this half, but Chris wants MIN to remain the majority owners of the haul road I believe - and they're already down to 51% because they sold 49% of the haul road to Morgan Stanley Infrastructure Partners last year - that transaction completed on September 24th.

They could sell a stake of their mining services business, their best and most profitable division, but that would be very value destructive for MIN shareholders (and Chris is a big one). They could sell more of their iron ore and/or lithium businesses, including some of their infrastructure - which is very significant - they own a LOT of rail, port and other infrastructure like their transhippers - but with iron ore and lithium prices where they are, it's not a good time to get a good price for any of that stuff.

The true believers will say they don't need to sell anything, they just need to ride this out. That might be true, but they've gone further backwards in the past 6 months than most expected, hence the -20.7% selldown yesterday on their report and their earnings call, so it's not beyond the realms of possibility that they have one or two more bad halves and things go from very bad to even worse. It's a massive fall from $92.16 close on 23rd January 2023 - just over 2 years ago - to a close of $24.18 yesterday. Were those who were piling in at $30 to $35 last year expecting them to go below $25? Unlikely, but even so, it's the longer term that matters most, not short term SP movements, and the future will depend in no small part on whether they DO have to sell more assets or not.

Very high risk in my view.

Even if I could forgive Chris' many sins, and I can't, I would still not buy MIN down here in the state they are in (their situation, not WA), and the commodities they are in. Their situation is not good at all, IMO.

22-Feb-2025 (11:40pm) - just catching up on the MinRes special that the MoM poddy did on Thursday and uploaded to youtube on Friday (dated Thursday 20th Feb); it's just Trav and JD, and their analysis of both the MinRes half year result and the earnings call was very interesting - including the bits of the call they chose to play.

Like this one (link): Chris Ellison talking about the Onslow Haul Road, which is the asset that MinRes are going to live or die by in terms of whether they can service their debt: "...We've got everything sort of 95%, 98% right, but then we do what we do to get it to that mark, so if you have a look at the tonnes we're forecasting, that should tell ya the road is 95% fine and we're going to keep running those tonnes down while we're doing road repairs with traffic management. We can do all of that and still move the tonnes, so if I could get youse to more focus on my share price; If you could get that up, that would get my debt ratio down, that's your part."

That's a change of tune, CE now asking the analysts he's usually so prickly with to help him get the MinRes share price up to improve the company's debt to market capitalisation (debt to market value) ratio.

For context, MinRes market cap is now A$5.3 Billion (196,518,604 SOI x $27.13/share) and it was down to $4.75 Billion on Wednesday (the day of that earnings call and their results) based on their closing share price of $24.18 on Wednesday. Their debt is now over $5 Billion, so on Wednesday - the day Chris Ellison said those words - they had more debt than their entire market cap. Not sure if that is cause for concern in relation to any debt covenants they might have, but it certainly would increase their cost of capital when they need to refinance some of that debt, which looks very likely indeed now.

A few things to note:

1. Onslow has blown out to closer to A$4 billion now, compared to the projected cost of around A$3 Billion.
2. The Onslow Haul Road (OHR) is the asset that will determine MinRes future over the next couple of years; it has to work at nameplate capacity of 35 mtpa (million tonnes of iron ore per annum) to be profitable; the project was marginal at best, which is why they did the bare minimum in terms of construction to keep the costs down, and the first decent weather event they had washed sections of it away and made other sections impassable. They are now planning to use concrete to reinforce sections of it and to cover the entire 150 km of it with asphalt, which is going to cost at least another $300 million.
3. There have been multiple truck accidents (at least 5) including rollovers on the road so far, with MinRes blaming them all on driver error. (link)
4. MinRes sold 49% of the OHR to Morgan Stanley Infrastructure Partners (MSIP) for A$1.3 Billion in September last year (link) however Chris Ellison (MD) and Mark Wilson (CFO) confirmed on the call that Morgan Stanley do not have to pay ANY of the costs associated with the road. All of the build costs plus maintenance, repairs and upgrades are 100% the responsibility of MinRes, something that wasn't known for sure by analysts before Wednesday. (link)
5. MinRes have only received $1.1 Billion of that $1.3 Billion from MSIP because $200 million is contingent on the OHR achieving its nameplate runrate of 35 mtpa by June 30th, 2026 (middle of next year) and the lads (Trav & JD) are suggesting that based on the accounting in the MinRes H1 report, it appears that MinRes are not particularly confident about receiving that $200 million next year - see here.
6. Not only did MinRes report an $807 million loss for the final six months of 2024 but they also slashed their 2025 full-year guidance of iron ore shipments by as much as one-quarter to between 8.8 million and 9.3 million tonnes, so it's not all going to plan by any stretch. (link)
7. The current cost of servicing their debt is circa A$500 million p.a. and that's just the interest on the debt, with no principal payments. Obviously, if they are in a worse position leading into 2027 when just over $2 Billion of that debt is due to be repaid ($700m in May '27, $800m in June '27 & $625m in Nov '27), and then another $1.1 Billion the following year (in Oct '28), they would need to refinance, and if their balance sheet position and market cap have both deteriorated they may well be forced to roll that debt over at less favourable terms, such as at higher rates (impacting their cost of capital). The repair and maintenance costs associated with the OHR and whether they can run it at 35 mtpa (i.e. at nameplate capacity) are likely going to be the largest swing factors to impact MinRes financial position over the next few years, unless we have a very large spike in iron ore and/or lithium prices, which seems unlikely to me.
8. On the call Chris Ellison talked a few times about a "one in 40 years" weather event that had caused so much damage to the OHR recently, however from what the lads were able to dig up from weather stations in the area, the rainfall that the area around the haul road received in that December/January period was actually fairly typical and not particularly unusual, i.e. they did get a lot of rain, sure, but historically they do get a lot of rain on some days in that area most years, so not out of the ordinary, suggesting that the road wasn't designed with durability in mind, but was rather done on the cheap, in keeping with the way MinRes tends to do things, the cowboy attitude that Chris Ellison came over to Australia with (from NZ) back in the day; he's still taking similar risks, they're just much bigger sums of money now, so when things go wrong, it's harder to paper over them. (link)
9. Body language on the call with both Chris and Mark was telling, and the way Chris shut down Mark's answers as well, such as in this example where an analyst was asking if MSIP had any claw back or penalties built into their agreement with MinRes over the haul road that underpinned their (Morgan Stanley's) investment in the event that nameplate capacity or indeed any minimum tonnage at all p.a. was not achieved, i.e. if there was any arrangement under which any capital could flow back from MinRes to Morgan Stanley if the haul road does not perform to expectations? link Just watch the body language of Chris and Mark during both the question and their responses to it.
10. In terms of possible capital raises, an analyst on the call asked that considering MinRes are supposed to get a new Board Chairman shortly (with the current one agreeing to retire), if the Chairman comes in and isn't comfortable with the debt/leverage ratio and wants to raise equity (do a CR) to extinguish some or all of that debt, would Chris Ellison be supportive of that? Chris' response was interesting: See here.

I won't go on - here's a link to the entire poddy if you want to watch it from the start:

Is the Writing on the Wall for MinRes? [Feb 20, 2025 Money of Mine Podcast]

Disc: not held.

The risks and issues have been very well covered, thank you all, but everything has a price.

Just to flip the issue of MIN on it's head I wanted to run some number on what sort of FCF would be required over how many years under various rates of return (risk levels). This is assuming an EV of $10b (so around current Market Cap + Net Debt).

The table below shows the FCF required to be generated each year based on the combination of operations going for 5 to 30 years and a discount rate of 10%, 15% and 20% based on how risky you view the situation. I have highlighted the15 year results as my preferred viewpoint, so would need $1.31b FCF if I only thought a 10% discount/return was appropriate but would need MIN to generate $2.14b FCF each year if I thought a 20% discount rate was appropriate.

If you think the OHR is going to go to poo, commodity prices are going to tank, etc and they will fail to cover debts full stop, then you should not go near it. If you don't, then then picking a point in the above table and measuring your expectations of their FCF's based on the current outlook may prove informative as to it's value at current prices to you.

Disc: I own (oh the fence, not buying more but not selling)

@Tom73 I think the main point is that MinRes don't need everything to go wrong, i.e. OHR doesn't achieve 35 mtpa, doesn't provide the expected returns and commodity prices tank. The issue appears to be that even if commodity prices remain at current levels, MIN could still be in trouble with JUST the OHR not performing to expectations.

That could be through greater maintenance and repair costs than anticipated or simply not enough tonnes being moved p.a. down the road, for a variety of reasons, or simply the total costs of operating the haul road (road and truck costs combined) being too high for the project to be profitable. With their interest payments on the $5 billion of debt, and the need to pay a fair chunk of the principal off in a couple of years from now, and both iron ore prices and lithium prices being below where Chris would like them to be - i.e. where they are right now - the OHR needs to perform to MIN's expectation. Onslow is the reason for the debt, and Onslow needs to be adequately profitable to provide a return on that massive amount of sunk capital as well as the ongoing capital being spent to reinforce and seal the road (another $300m announced last week). That's why there is so much focus on that road, because everything depends on that road.

If iron ore prices tank and lithium prices fall further that obviously makes things much worse still, but that doesn't need to happen for MinRes to get themselves into a nasty situation with this debt - the haul road could do that to them all by itself.

I agree @Bear77 and didn't mean to imply that everything needed to go wrong for MIN to be in trouble. Just looking at the FCF required to justify the current price, leaving open the assessment of the probability of those FCFs.