Forum Topics MIN MIN What price to get interested a

Pinned straw:

Added 2 months ago

I'm not a resources investor but I know that this business was considered the highest of quality miners not long ago...

Obviously Chris was very naughty. I understand the business faces some headwinds with regards debt and Iron ore prices...

So... When does the price look interesting to those who know resources better than I?

Gaz

BkrDzn
Added 2 months ago

When one or both of those problems go away.

18

thunderhead
Added 2 months ago

It looks interesting already, though it is obviously high risk with its debt load in the face of volatile and uncontrollable commodity prices.

If you assume the Lithium and Iron Ore prices normalise by 2027, and that MinRes can resort to monetising its assets to reduce its debt burden (and ideally avoid a very dilutive cap raise at these depressed levels), then it should do well from here when OnSlow ramps up fully.

20

Bear77
Added 2 months ago

That's a lot of assumptions that need to go right for you @thunderhead - and it depends on what you mean by Lithium and Iron Ore prices normalising. Most analysts and even BHP themselves are saying that iron ore prices are far more likely to stay around current levels or go lower through the rest of this year, not higher, due to reduced demand, China stockpiles already being high, and extra supply coming online this year and even more supply coming online over the next 5 or 6 years. There are similar arguments about lithium - that the abundance of supply that is either coming online or can be brought online rapidly from projects that are fully built but have been put on C&M due to low prices - is likely to keep prices depressed despite increasing demand.

With Iron Ore you have increasing supply that is coming online regardless of whether the iron ore price is US$50 or US$150/tonne - the costs are sub-US$30/tonnne, so Simandou and the other big projects that are coming online are going to proceed, even if the iron ore price is half of what it is now. Simandou is coming online towards the end of this calendar year and is expected to bring 60 million tons of additional iron ore per year to the market once it fully ramps up - which could take 30 months (see here) and that's just one project. And that's against a backdrop of a decrease in Chinese demand for iron ore and the market isn't convinced that India and the rest of the world is going to take up that slack - after all, there's iron ore everywhere, and a lot of it is higher grade than the ore MinRes sell. More on this below (AFR article).

With Lithium you have DLE tech that is making lithium extraction from brines much more affordable and providing the ability to produce battery grade lithium from lithium deposits that were previously considered to be unsuitable for batteries. While MinRes have stakes in two of the largest hard rock lithium deposits in the world, there is plenty of other supply available around the world and much of it is not currently producing but could be producing within months if lithium prices tick up a bit. The availability of a reasonably swift lithium supply response to higher lithium prices is likely to put a cap on how far lithium can rise - but sure, the price will go up and down, it will be cyclical, no doubt, but what level is "normal"? Normal is probably around where lithium has been trading for the last year.

There is a heap of sense in the response yesterday from @BkrDzn - when answering the question: With the business facing high debt and low iron ore price headwinds, When does the MIN price look interesting? Joshua's answer: When one or both of those problems go away.

Also TH, what assets can MinRes monetise now by selling them without destroying significant shareholder value? They have already sold 49% of the haul road and all of their energy (gas) assets. They don't want to sell any of their mining services business, because that's been the only consistently profitable part of the company. They won't get good prices for their iron ore or lithium assets while iron ore and lithium prices are where they are, or go lower. What's left?

The debt will take care of itself IF they can get the OHR (Onslow Haul Road) fixed and then ramped up to full capacity, as we've discussed, but that's a big if right now.

That OHR is what they're focusing on right now, and rightly so, that should be their main focus because that road is likely to make or break the company.

Surely there are easier places to make money than this company TH. Honestly, do you really think this one is worth the risks? They have massive debt, their debt was larger than their own market cap last Wednesday (of last week, the day they reported), they are about to get a new Chairman, their two commodities are challenged in terms of being confident of near or mid-term higher prices, they have bugger-all corporate governance, they have the nations newspapers sensationalising every misstep they make and piece of bad luck that comes their way, and they've staked their own future on Onslow Iron Ore, a project that had more than 40 different studies done on it, and all of them except one said the project couldn't be built and run profitably, i.e. not at a loss, something Chris Ellison has been proud to remind people - MinRes are the only people that could have built this and run it profitably, because of their engineering know-how etc. Maybe, but they have not done that yet. They've built it, sure, but it's not finished, and it it's not yet profitable. Instead it has dragged the whole business down to a statutory loss for the half year just ended while blowing out their debt even further.

And they have clearly cut corners with the haul road construction because the first decent rain made sections of it unusable for a period, and required extensive repairs and they said last week they have decided to spend another $300m (not in the original budget) to reinforce sections of the road with concrete and seal the entire road with asphalt, so really, was the road built with durability in mind, or just built as cheaply as possible to enable the trucks to start rolling?

One of the reasons why the project was considered uneconomic before MinRes took it on, was likely that anybody who could Google weather stations in the area and look at rainfall data for the past 5, 10 or 20 years, would have quickly seen that very heavy rainfall and localised flooding is common through that area during most years, so if you're going to build a 150 km long haul road through there that is suitable for heavy use by loads of road trains (like in the images below), the road would need to be designed and built to withstand those extreme weather conditions that do regularly occur, and is going to cost a LOT to build. MinRes are doing that weather-proofing NOW, but it wasn't what they priced up and built to start with, hence the road construction, repair and upgrade costs blowing out by so much, along with MinRes' debt.

The extra $300m they announced last week they are now going to spend to upgrade and weather-proof the road is going to be spent in this current half, so the spending's not done yet, and Chris said they're going to keep running trucks (road trains full of iron ore) down the road while they're doing these upgrades, which isn't ideal, i.e. the traffic management will obviously cause significant delays and there's no way they can ramp up the tonnes in a meaningful way while they're still upgrading the road.

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Chris Ellison has been very effective over the years at taking on risk and for the most part coming out on top, and he's still rolling the dice, but this time it's for billions of dollars instead of millions, and he's been having a run of bad luck, which has clearly been exacerbated by some poor decisions.

He's been worth backing in prior years, but it is entirely conceivable that this time is actually different.


Further Reading (from December):

Iron ore faces ‘riot point’ in 2025 as Rio Tinto floods the market

by Alex Gluyas, Markets reporter, AFR, Dec 26, 2024

Iron ore is tipped to trade below $US100 a tonne for most of next year as new supply from Rio Tinto’s long-awaited African project adds to giant stockpiles at Chinese ports, and US tariffs whack steel demand in the world’s second-largest economy.

While markets are divided about the size and effectiveness of stimulus from China – the world’s largest buyer of iron ore – pundits broadly agree that Beijing will roll out further fiscal support in 2025 that should cushion the price of the steel-making ingredient from even heavier falls.

af64c6e550cb89907a777c7f1035e0456302ea.png

The Simandou mountains in Guinea will bring a fresh wave of supply to the market from next year. Rio Tinto


Iron ore’s bearish outlook follows a turbulent year for Australia’s key export, which started 2024 above $US140 a tonne before dropping to $US89 a tonne in September and then recovering to $US110 in early October as Chinese stimulus hopes hit fever pitch.

With the spot price trading at around $US104 a tonne at the year’s end, iron ore has shed more than a quarter of its value this year making it one of the worst-performing major raw materials.

Still, it’s proved more resilient than expected in December after China’s top leaders pivoted on monetary policy for the first time since 2011. This was despite November activity data painting a more sober picture after reporting weaker-than-expected retail sales, fixed asset investment and credit data.

Goldman Sachs expects that China’s economic growth will come close to Beijing’s 5 per cent target for the full year, but noted much of that strength will come from a front-loading of manufacturing and exports ahead of potential US tariffs.

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So while physical iron ore markets have tightened heading into the new year, the broker expects that to be temporary, given fundamentals still point to an oversupply. It has forecasted the iron ore price to fall to annual averages of $US95 a tonne in 2025 and $US90 in 2026.

“US tariffs on China, changing nature of Chinese stimulus and new low-cost supply [will] push the market into further surplus and weigh on prices,” said Goldman Sachs commodities strategist Aurelia Waltham.

Mounting stockpiles

Indeed, China imported 101.86 million tonnes of iron ore in November, meaning the total for the first 11 months of 2024 was almost 9 per cent higher than the five-year average for that period. This contrasts with China’s steel output, which was down almost 2 per cent this year.

This means that China’s steel output is continuing to contract despite iron ore imports rising to near-record levels, exacerbating the mountain of inventory piling up at Chinese ports.

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“This all reaches a potential riot point in 2025 when the first iron ore from [Rio Tinto’s] massive Simandou project comes onstream and starts ramping up to full capacity by 2028, flooding the global market,” said Westpac’s head of commodity strategy, Robert Rennie.

Rio Tinto’s long-awaited $34 billion African iron ore project – the largest to be commissioned since Vale’s S11D in 2016 – is scheduled to start production late next year and steadily expand the surplus plaguing physical markets.

Westpac believes prices will be capped in the range of $US105 a tonne to $US110 a tonne as markets move into 2025, before eventually sliding towards $US90 a tonne and below next year.

Still, Westpac’s bearish outlook is far above the typically conservative Treasury forecasts, which economists and analysts said was too low.

In its Mid-Year Economic and Fiscal Outlook, Treasurer Jim Chalmers maintained the government’s assumptions from the May budget that iron ore would fall to $US60 a tonne by the end of the September quarter in 2025.

That was challenged by the Department of Industry Science and Resources’ quarterly outlook, which predicted that iron ore would average $US80 a tonne in 2025, and then drop to $US76 a tonne in 2026.

The federal government uses the free-on-board price, rather than the more widely cited cost and freight price. A $US60 a tonne FOB price is equivalent to a $US67 to $US71 a tonne CFR price.

AMP is among the most bearish on iron ore next year, predicting prices will drop to $US80 a tonne by the middle of 2025.

“The current iron ore price seems too elevated based on demand and supply fundamentals,” said AMP’s deputy chief economist, Diana Mousina.

Ms Mousina is watching for the size of China’s stimulus in terms of the yuan and percentage of gross domestic product, as well as how much is directed to consumers. This would provide an offset from the negative impacts of higher tariffs.

Others are more optimistic about Beijing’s plans to unleash further stimulus next year, with KPMG predicting it will lift iron ore to $US125 a tonne by mid-next year.

“There has been the recognition that broader-based support across traditional sectors, like the real estate and infrastructure development, are necessary in order to underpin economic growth in China,” said KPMG’s chief economist for Australia, Brendan Rynne.

Morgan Stanley is also confident that prices will stay above $US100 a tonne next year, pointing to the resilience of iron ore markets since China’s initial stimulus announcements at the end of September.

Port stocks in China have fallen by 3.4 million tonnes over the past month as steel mills re-stock ahead of the Chinese New Year.

That sets the scene for relatively healthy steel output heading into the first quarter of 2025, according to the US broker, which is tipping iron ore will end next year at $US110 a tonne.

--- ends ---

Source: https://www.afr.com/markets/commodities/iron-ore-faces-riot-point-in-2025-as-rio-tinto-floods-the-market-20241210-p5kxc4


The following image was taken at Simandou more recently - compare the image below to the one above in that AFR article:

5b75634e14ec83d91f9d3d7fa77409891800dc.png

Plenty of development there in recent months.


So, you'll see a range of iron ore price predictions in that December article above. In the articles I've read since, nobody seems to have got more bullish, but a few of them have become more bearish. BHP's CEO, Mike Henry talked 10 days ago about how BHP are well positioned should the iron ore price go lower than where it is now; I'll reproduce the analyst question and Mike's full answer:

RAHUL ANAND, MORGAN STANLEY: ...a second one perhaps for Mike. Mike you've talked about Copper SA and I guess I'll just wait for the capital intensity and updates around that. But if we just talk about your outlook for commodities in general that you outlined today and you've talked about global growth as well, I guess one theme that's currently being discussed is obviously the potential for supply side reforms 2.0 in China and last time we had the supply side reforms, iron ore went close to half, as opposed to where it was pre the announcement.

So, one thing that came through in the last cycle that this happened was basically that the higher-grade iron ore products did perform better. So, I guess my question is, in terms of the levers you have available to pull, is it broadly just the cost base of the business that you continue to focus on? Or is there anything you can do, in terms of mine plans, to perhaps better your grade in a situation where the margins start to change and you start to see better realisations for the higher-grade iron ore side of things? That's my second, thanks.

MIKE HENRY, BHP: Okay, so we've made a lot of the industry-leading cost performance for five years running now, in part because we want that to be an indicator of the ultra-focus within BHP on operational excellence and you see that shining through, most evidently in iron ore, but also our other businesses. However, it hasn't been the only focus in iron ore. We were also clear when we laid out the strategy or the ambition to become the world's leading iron ore producer, a parallel ambition to improve the average quality of our product suite and that saw us choose the South Flank development over other options that were available to us at the time because South Flank was going to give us higher average Fe content and a higher proportion of lump, so a premium valued product.

Sure enough, the market scenarios we were forecasting or predicting at that point of time have unfolded or largely been realised or are in the process of being realised. So we've already taken steps to improve the average quality of our product suite. There are some things that we can do and continue to look at, like beneficiation in some instances, but there will be ultimate geological constraints on just how far you can push quality. We're comfortable that we've improved overall relative to where we were five to seven years ago. We have industry-leading margins and the fact that we're at the low-cost position globally and certainly the best placed within the Pilbara, leaves us very well positioned and with a strong business, even if we see short-term disruption in the market where we see iron ore prices come off more than people are currently expecting.

The final point I would make is there is a pretty significant bench of higher cost iron ore supply, so we're looking at, Vandita, probably about 180 million tonnes, between US$80 and US$100 a tonne, so it takes quite a bit to push through that, but like I said, we've got an iron ore business that's constructed for all scenarios and is going to be a very strong business into the future. 

--- end ---

Source: Page 3 of: https://www.bhp.com/-/media/documents/media/reports-and-presentations/2025/250218_hy25investorandanalystbriefingqatranscript_session1.pdf [18 Feb 2025]


So he's not explicitly calling for a lower iron price, but he's said there and elsewhere lately that BHP are prepared for it, should it happen. And he's not saying that he expects the iron ore price to be significantly higher by the end of this year; the gist of what he's been saying is that the iron ore price is around where they (BHP) thought it would be and BHP is comfortable with that, or if it falls further.


Further Reading: https://www.abc.net.au/news/programs/the-business/2025-02-18/bhps-ceo-calls-on-australian-governments-to-do/104952244


Just saying @thunderhead- if everything goes right for MinRes from here, you could make some good coin, sure, but what do you seriously think the odds of that happening are? And do you want to risk your hard-earned with those odds?

28

BkrDzn
Added 2 months ago

On prices normalising, for lithium, that does have to go up from here as half of the cost curve is underwater and there isn't a negative demand story there. The hard part is how long does it take to normalise as despite some higher cost low quality mines going offline, there are several expansion plans from larger groups wither lower cost operations still in motion.

IO is trickier as new supply is low end of the cost curve whilst demand (Chinese steel production) is challenged thus and determining what the normalised price is is much more uncertain than lithium (imo) and could be readily argued that price is lower than current prices.

Being contrarian on mean reversion in commodity prices can be wonderfully profitable trades but when a company is not levered to the hilt. Recaps are often the catalysts to put in the floor and/or drive a sustained re-rate if the underlying assets aren't impaired. A good example was BSE in 2016, refinanced at the cyclical low in min sands and went on to 7x as the assets were good. A bad example is 29M which has recapped twice and is at all time lows despite the strong copper price environment as the underlying assets struggle. MIN is more likely to be a BSE than a 29M once the balance sheet overhang is sorted one way or another.

29

UlladullaDave
Added 2 months ago

Being contrarian on mean reversion in commodity prices can be wonderfully profitable trades but when a company is not levered to the hilt. 

Amen to that! You want operating leverage not financial leverage in a turn-around.

The basic set up has to be that the company has the resources to wait out the turn in the commodity price.

25

Randy
Added 2 months ago

Excellent posts @Bear77 and @BkrDan. I think you gents have hit the nail on the head regarding the serious predicament MinRes finds itself in. Key issues:

  • A very heavily leveraged balance sheet (which may have been OK had Iron Ore & Lithium been at a stronger point of their respective commodity cycles and spinning off cash to pay down debt)
  • Increasing challenges & cost over-runs to resolve the Onslow haulage road issues (terrible timing for a company in a precarious position of high debt & nervous lenders, combined with very battered & fragile shareholder confidence in the company & its leadership).
  • Unresolved & ongoing serious governance issues, which are likely to continue making headlines & distracting management & the Board, as well as undermining confidence in the company.


Just very hard to see the company getting the clear air it needs to address these issues. Shorts have sat up and taken notice, and dived on the company to exacerbate & exploit the company's situation (see yesterday afternoon's AFR article below). These bloody hedge fund vultures care nothing for what Australian companies & jobs they destroy in the process of making a quick buck - and they will do everything they can now to force MinRes into a deeply dilutive cap raise (catastrophic for existing shareholders) to make off like bandits on the short-side.

(I am always incredulous at who are the bloody long investors lending their shares to these guys - which can only damage the value of the long position they hold by orders of magnitude more than any meagre share-lending fees they receive from the borrowers! Super Funds no doubt - the stupidity and gall or lending their fund members shares without permission & against their members best interests - I simply cannot understand it. IMO super funds should be forced to obtain members specific consent to do so.

Anyways, the system being what it is - I would advise great caution on this one. They are in a very dangerous position, and the shorts will do everything they can to force their hand. Not sure what other non-core assets they might be able to sell to reassure nervous lenders & market - only other option might be to bring in some strategic/cornerstone liquid investor to underpin the shareprice & maybe do a cornerstone placement at these levels (not a discounted one the market would require). Perhaps a major offtake customer in Lithium or Iron Ore would be willing to do this - but highly uncertain & far from a given.

I think MinRes is firmly in the too hot to handle basket at the moment. Things could very possibly continue to get worse for them - and it is hard to see their path out of their predicament right now. Have to be super careful of psychological "anchoring" (it was cheap before, now it's really cheap) thinking - which we're all susceptible to - as if a Cap Raise happens it will have to be significant & dilutive & will throw all previous valuation numbers (on a per share basis) out the window.

Sitting tight & watching.

Randy

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https://www.afr.com/markets/equity-markets/three-charts-reveal-how-minres-ellison-is-feeling-the-market-s-wrath-20250226-p5lfd1 

Three charts reveal how MinRes’ Ellison is feeling the market’s wrath

Alex Gluyas and Peter Ker

Feb 27, 2025 – 4.04pm

Mineral Resources’ beleaguered founder and managing director Chris Ellison has been battling spot fires on all fronts and is now feeling the wrath of financial markets.

This week, the miner became Australia’s most shorted stock as hedge funds heaped more pressure on the share price, which has collapsed 30 per cent this year. MinRes bonds have also slumped as lenders lose confidence in the company’s ability to repay its loans.

Chris Ellison, shown with chief financial officer Mark Wilson (left), fronted the media last week for the first time since October. 

The heavily indebted diversified miner and crushing contractor is already contending with weak prices for iron ore and lithium as well as a cost blowout at its flagship Onslow private road that it uses to haul product to port.

As the once formidable Ellison bats off questions about whether MinRes needs to raise equity, he is also being investigated by Australia’s corporate regulator amid allegations of corporate failings and a related party transaction first revealed by The Australian Financial Review in October.

Shares in the former market darling have since tanked 49 per cent to $24.17, jeopardising Ellison’s billionaire status. His 11.5 per cent stake in MinRes is now worth about $558.9 million compared with $2 billion in 2023. He would officially lose his billionaire title if the shares drop to about $21, according to a Financial Review Rich List analysis.


The share sell-off accelerated last week after the miner axed its interim dividend and reported a first-half loss of more than $800 million, double what analysts had been predicting. The stock tanked 20 per cent on the day.


With the company’s net debt now sitting around $5.08 billion, investors have long pondered how it would repay the loans when lithium and iron ore mines are struggling to break even amid weaker commodity prices. Those concerns were exacerbated when MinRes admitted last week that it would cost $230 million to repair and resurface the weather-damaged Onslow haul road .

That extra spending has struck fear into the hearts of MinRes’ lenders, triggering a slump in the market price for the company’s bonds due for repayment in May 2027.


The price at which bonds trade is an important indicator of sentiment, and last week’s nosedive took the price of the May 2027 bonds to their lowest level since December 2023. Other MinRes bonds have also slumped to their lowest level since September.

Shorts are circling

The disappointing earnings and balance sheet concerns have caught the attention of hedge funds, triggering a huge spike in short positions. Short selling is a strategy used by funds to profit from a falling share price by borrowing the stock from existing holders and selling it, and then buying it back at what they hope will be a lower price.

The amount of MinRes shares out on loan jumped from 13.1 per cent to 19.24 per cent between February 14 and February 21, making it the most shorted stock on the ASX, according to S&P Global Market Intelligence.


That bumped uranium producer Boss Energy to second place, which has 16.1 per cent of shares out on loan, followed by fellow uranium miner Paladin Energy at 15.7 per cent.

The surge in short positions could be a bet that MinRes could try to solve its debt and liquidity problems by issuing more shares. Short-sellers often target companies they believe will need to raise capital via a share issuance because the extra supply tends to depress the share price.

Investors have long assumed that MinRes would never issue new shares as long as Ellison remained at the helm because, as the largest shareholder, he would have to spend his own money to afford his allocation of shares, or face dilution that would shrink his stake.

But a looming leadership reshuffle could change the company’s mind. According to MinRes’ official plan, Ellison will cease to be an executive by April 2026, and chairman James McClements will depart this year.

Ellison was asked by Barrenjoey analyst Glyn Lawcock last week whether he would support a share issuance if the next chairman of MinRes demanded one this year. He could only say that he would support the chairman.


Alex Gluyas is a markets reporter based in our Melbourne newsroom. Connect with Alex on Twitter. Email Alex at alex.gluyas@afr.com

Peter Ker covers resource companies for The Australian Financial Review, based in Melbourne. Connect with Peter on Twitter. Email Peter at pker@afr.com

19

thunderhead
Added 2 months ago

Wow @Bear77 . That is quite a rundown, and I will need more time to digest it.

I only said it is interesting - I am not prepared at this stage to commit capital behind it even at what seem like significantly depressed levels. The market is cognizant of the risks, and so am I. However, these (very) hairy situations also offer the potential for the greatest upside if things go even moderately better than expected.

I think the odds are something akin to a coin toss, perhaps a bit better. The debt situation is still manageable out to 2027 as it is covenant free, though the risk of a dilutive capital raising can't be ruled out.

For Lithium, a lot of supply will inevitably come out of the market at current price levels, and that should improve the outlook for the spodumene price over the next 18-24 months.

Iron ore is a lot trickier especially with the macro situation in China, but Onslow's production ramp and associated crushing business (despite the haul road weather-danage related delays) should lead to a substantially larger business looking out a few years (b/e in Iron Ore is in the mid 50s/ton, so prices need to keep above that level, anything substantially better will result in good upside).

It is worth a small speculative position perhaps, but I wouldn't be braver than that.

22

thunderhead
Added 2 months ago

+1. Good contribution from @BkrDzn too :)

15

Scott
Added 2 months ago

I listened to the presentation, which is on their website.

Here's their view which they Chris and CFO put across very confidently - which I am sure they wanted to do.

Haul Road

  • They're had 4 cyclones and the most rain in 40 years. The road is still in tact and being used. Water pooled where they hadn't expected and they are addressing that.
  • Additional layer of asphalt to be done by Aug (I think). They want to do before going autonomous with the trucks so there are no people on the road. They reckon will improve fuel economy.
  • Chris made the point that at first the market was nervous about the transhippers, then the trucks and now its the road.

Debt

  • First tranche of debt matures in mid 2027. There are no covenants on the debt.
  • CFO said they will probably act early to refinance.
  • Reckon there is a wall of private money in the US (where it is financed) looking for a home. MinRes have already been approached.
  • CFO says they have lots of levers to pull if needed

Earnings

  • Chris said that at $100/tonne for iron ore and Onlsow at 35mt (which is this half) with no contribution from lithium they will make $2bn EBITDA. $1bn from mining services and $1bn from iron ore
  • In FY23 they made $1.7bn EBITDA with an EPS of 3.73. Using $3.73 EPS the current P/E in the 6's. Of course there's a lot of assumptions in using FY23 as a basis.

My take

  • re the haul road. They have over 20 years of executing engineering. Odds are that they will do it again.
  • Assuming they deliver the engineering, it reduces it to a question of commodity price & your thoughts of Chris


29

actionman
Added 2 months ago

Scary report in the AFR this morning. Sounds like a single point of failure to me.

Leaked report a glimpse into MinRes’ troubled road to nowhere

Slicing through the Pilbara at a cost of hundreds of millions of dollars, the Onslow road, which opened last year, was meant to be paved with gold. Instead, it is crumbling

To achieve MinRes’s shipping targets, triple-trailer road trains each weighing more than a fully laden Airbus A350 aircraft have to leave every five minutes, every hour of the day, for the next three decades.

The haul road was only officially finished late last year. So how could it already be crumbling?

The road is rutted, which means that the sub-base is moving, and there is deformation further down. Asphalt will not fix anything because the base needs to be done first,”

https://www.afr.com/companies/mining/leaked-report-a-glimpse-into-minres-troubled-road-to-nowhere-20250227-p5lfm8

24

Randy
Added 2 months ago

Hi @actionman - illuminating article on the haul road problems & more than a little frightening for the company's shareholders.

While many shareholders are probably rightly incensed - the final section of the article got me thinking about Morgan Stanly's position - having only just bought 49% of the haul road only last year. I imagine they would be ropable. While Ellison is his usual combative self about the topic of recompense - I would think MSIP would be very seriously considering suing MinRes for misleading conduct and misrepresentation (basically a pretty solid case of Estoppel .. 1) representations were made, 2) were misleading or inaccurate, 3) they relied on these to their detriment)). With the numbers (and very short timeframe to major headaches) involved - I would think they'd have a pretty strong case to prosecute. It's one thing for Chris to say they had their chance to do their DD to their satisfaction, it's altogether another if crucial information or known issues were covered up (would make for a very motivated seller of a half-share of the toll road - happy to cut a good deal to save themselves 50% of major repair works likely to be needed very soon).

The truck movement numbers are also quite frightening (such an intense trucking & shipping schedule - so little has to go wrong for these numbers to be blown out). Obviously these projected volumes have now been wound back - but one wonders if they may need to be wound even further back. And gets even more colourful if MSIP have built in take-or-pay style contract similar to Aurizon & coal companies shipping volumes of some years back (can get very expensive when you aren't shipping much product but still have to keep paying minimum haulage volumes on it).

Given the poor recent record of company disclosure and governance - I think they are going to have a very hard time winning back the market's trust and confidence, until there is a complete airing of all dirty laundry & refresh of executive/board to regain truly independent oversight & proper governance. Let alone repair of the company's heavily indebted balance sheet... with the short-sellers having moved in & the market running scared - I think this could come to a head far quicker than expected - fleeing investors, nervous lenders & sinking share price is going to really put the company under tremendous pressure....

Randy.

*******************************************

Morgan Stanley rides shotgun

Last year, Morgan Stanley Infrastructure Partners, an investment unit of the Wall Street bank, paid $1.1 billion for a 49 per cent stake in the road. MSIP could tip in another $200 million should certain haulage targets be met.

(The road also operates as a private tollway that can be used for a fee of $8.04 per tonne of iron ore that passes along the route.)

In its Friday statement, MinRes said the consultant’s report has been available to prospective buyers of the stake in the road who had “considered the review and MinRes’ response to identified risks, and conducted due diligence with the support of their own independent experts”.

Last month, in a call with analysts, Ellison was more defiant. MSIP, he said, had no recourse to claw back its money should MinRes fail to meet its forecasts for haulage along the road. “If I could get youse to more focus on the share price – if you could get that up that would get my debt ratio down – that’s your part,” Ellison told the analysts on the call.

There are now unanswered questions about whether MSIP insisted on putting “take or pay” provisions into its contract with MinRes. They would guarantee revenue from MinRes regardless of how much iron ore is transported along the road. Morgan Stanley has consistently refused to comment and has directed questions to MinRes.

“It’s a sad confluence of a conflicted management team and chair who do not appear to have always acted in the best interests of shareholders,” says Jarden analyst Ben Lyons, whose long term – and accurate – bearish outlook on MinRes has attracted the ire of Ellison,

“A company whose cash flows are entirely at the mercy of two commodity prices – lithium and iron ore. There’s poor disclosure, and a completely inappropriate balance sheet structure which is over-geared and now also displaying short-term liquidity issues.”

Lyons noted Onslow was critical to MinRes’ attempts to solidify its balance sheet because it “is vastly more leveraged to iron ore prices than lithium”.

Investors have followed Lyons’ advice and savaged Ellison and MinRes over explanations around the road. The company’s shares, which nudged $80 last May, are now changing hands below $23. A new group of short sellers – investors who bet on the share price to fall – have arrived, making MinRes the most shorted on the ASX, according to S&P Global Market Intelligence.

With a market capitalisation of $4.5 billion, MinRes is worth less than its $5.1 billion net debt, increasing the prospect it will raise money at a depressed price.

“The market has become keenly aware that MinRes is carrying far too much debt for a commodity producer, and with the equity value now trading well below net debt, an equity recapitalisation becomes increasingly difficult ... and increasingly dilutive,” said Lyons. “We expect further underperformance even without factoring in the potential for equity dilution.”

MinRes said: “We have a number of other levers at our disposal to release further capital if needed, and we are not contemplating raising equity."

It was a road that was meant to be paved with gold for MinRes. Instead, its Onslow project is yet another headache for the already beleaguered Ellison.

20

Scoonie
Added 2 months ago

“It’s underquoting. If they’re going to redo the whole road, a conservative cost is about $2.3 million per kilometre. The road is rutted, which means that the sub-base is moving, and there is deformation further down. Asphalt will not fix anything because the base needs to be done first,” they said.

 Would agree with the above, if the subgrade is weak and moving, laying asphalt on top will only see in time the asphalt just break to pieces. 

And just how far down is needed to be excavated and the wet and unsuitable material replaced and for what length is not said.  Cement stabilisation and asphalt is likely a legitimate fix in parts.  

Microsoft Word - Specification 515 - In Situ Stabilisation of Pavement Materials 30 Sep 2021

 Probably three rough categories of repair/upgrade needed: an at depth complete road reconstruction, cement stabilistion and an asphalt top to the existing spray seal where the road is in good condition.

 The question is just how much of each is needed and the cost.

 As a small mercy, at least this is an engineering problem that can be technically fixed, unlike their governance/management ones.  

Bloody fine mess MIN have got themselves into.

24

navrock1
Added 2 months ago

Thanks Scoonie. Agree with everything you are saying.

I have seen the road in person when I was that way for work and its a serious bit of infrastructure. Roads are not something I know a lot about but hopefully its minimal re-do for their sakes.

There is a parallel public road running alongside (for part of it atleast) which tells me things are feasible noting a key difference being the load of heavy trucks running frequently.

A bit of bias from my end as a holder of both MinRes and Adrad shares (build the radiators in the trucks), I am hoping the road issues are resolved and the project is successful in the long run.

24

Bear77
Added 2 months ago

So I think most of us can agree that the Onslow Haul Road (OHR) is the greatest risk to MinRes right now, and if you don't agree, then please read the following and see if it presents anything new that you may not have considered.

First, here's the update that MinRes released yesterday: Onslow-Iron-Update.PDF [03-March-2025]

That update is a direct response to the following article:

Leaked report a glimpse into MinRes’ troubled road to nowhere

Slicing through the Pilbara at a cost of hundreds of millions of dollars, the Onslow road, which opened last year, was meant to be paved with gold. Instead, it is crumbling.

by Mark Wembridge and Mark Di Stefano, AFR. Mar 3, 2025 – 5.00am

Plain Text Link: https://www.afr.com/companies/mining/leaked-report-a-glimpse-into-minres-troubled-road-to-nowhere-20250227-p5lfm8

aed261eafc7fe6a67fb47ceae5b2222ceb31dd.png

The radio chatter started just a few hours after the maiden road train left Mineral Resources’ flagship Pilbara iron ore mine bound for a port 147 kilometres to the west. The surface of the company’s new road was already deteriorating, the truck drivers warned each other.

It’s no ordinary road. Described by MinRes, a major diversified miner and contractor, as one of the country’s “most impressive pieces of transport infrastructure”, the Onslow haul road is the only way to get the iron ore from the company’s biggest mine, Ken’s Bore, to its customers.

To achieve MinRes’s shipping targets, triple-trailer road trains each weighing more than a fully laden Airbus A350 aircraft have to leave every five minutes, every hour of the day, for the next three decades.

The haul road was only officially finished late last year. So how could it already be crumbling? Since August, five trucks have crashed on the road network, MinRes has slashed iron ore production forecasts, and new costs have emerged.

Last month, MinRes shares slumped more than 20 per cent in one day after the company said it would have to spend $230 million repairing and resurfacing the road. That revelation left investors and brokers asking if MinRes had taken too many risks with its $3 billion Onslow project.

ae79690413fcf1f62a5b0f6989de3d55a5a2f0.png

Mineral Resources said it needs to repair and resurface its 147-kilometre iron ore haul road. 


But MinRes, which is run by billionaire mining mogul Chris Ellison, has had plenty of warnings about the road, and the mine and the port. In one report handed to the company last February and obtained by The Australian Financial Review, Min Res is warned over 225 pages and two dozen examples that it was underestimating the project’s risks. The report, by mining advisors AMC Consultants, has never been released.

It is that report – known as Project Mulloway, a nod to the game-fish found in Western Australian waters that are favourite of Ellison’s – that estimates that a truck has to leave every five minutes around the clock to hit MinRes targets. That would mean, AMC concluded, “more than 550 ‘truck passing interactions’ every hour on the haul road, day and night”.

“Any disruptions along the haulage path, or at the port, will require this departure interval to be reduced in order to catchup on the lost loads,” the report reads. In other words, so much hinges on so little going wrong.

Last year was a difficult one for Ellison. The Financial Review revealed the blunt-speaking billionaire from New Zealand’s South Island had engaged in an extensive offshore tax evasion scheme, a move that had also enriched him at the expense of the company he founded. A board review found he had ordered company employees to work on his boat and manage his finances. He apologised and said he would resign by the middle of 2026.

MinRes chairman James McClements is also leaving. Meanwhile, the Australian Securities and Investments Commission is in the midst of a formal investigation into the company’s handling of the tax issues.

But it is the Onslow road that threatens to bring the company undone.

An existential gamble

MinRes staked almost everything on its private haul road between its Ken’s Bore mine and the port near Onslow. Other Pilbara iron ore producers – Rio Tinto, BHP, Fortescue and Gina Rinehart’s Roy Hill – use rail to connect mines to port. MinRes opted for a road, due to the huge cost of building rail infrastructure to Ken’s Bore, a more isolated site than other projects.

But the construction of the Onslow project has saddled MinRes with big debts. To service the $5.8 billion it owes, the company needs regular cash from taking the iron ore along the road to port and to customers.

8bd9e8595e631a685831bab619699bc65c8339.png

MinRes was founded by Chris Ellison. He says he will step down next year. Trevor Collens


MinRes, in which Ellison still has an 11 per cent stake, has often marvelled at its own project. When the first iron ore was shipped, in May, the company said it was a milestone achieved less than a year after ground was broken at the Ken’s Bore mine. The “innovative mining and transport infrastructure” was designed and built by MinRes, the company said.

Ellison has previously said the road was built to exacting standards and was designed to withstand the Pilbara’s torrential cyclonic downpours. This year, he blamed those downpours for damaging the road, forcing a costly upgrade from bitumen to asphalt. It was “once in 40-year” bad weather, he said.

The road, the construction of which was brought in-house after contractor QH & M Birt walked off the job over concerns about the quality of materials used, was “about 95 or 96 per cent right”, Ellison added.

The AMC report estimated that the total cost of the project’s “haul roads, overpasses, bridges and tunnels” was $568 million. That would mean the repair bill is about 40 per cent of the original price.

Long-time Pilbara road construction managers are sceptical about the $230 million repair price tag. Speaking on condition of anonymity, they said the bill should be at least $100 million higher for such major work.

“It’s underquoting. If they’re going to redo the whole road, a conservative cost is about $2.3 million per kilometre. The road is rutted, which means that the sub-base is moving, and there is deformation further down. Asphalt will not fix anything because the base needs to be done first,” they said.

A passing risk

The AMC report was commissioned as part of a process to sell half of the road, and a long-term revenue stream, in a bid to cut MinRes’ debt. It warns that the width of the road was not ideal for such large trucks. The lanes are four metres wide. The trucks are 2.5 metres wide. That meant there was only a small gap as the trucks passed one another, increasing chances of a collision.

“Assuming the [trucks] try to drive in the middle of their lanes, this only leaves 75 centimetres on either side for clearance. Two passing [trucks] will have only 1.5m of clearance,” the report reads. “Wind forces, poor vision, and normal trailer sway ... could reduce this clearance distance significantly, especially if the [trucks] pass during cornering.”

7436ae02185955d87873db3ec3c24a886854ce.png

There have been a number of truck rollovers on the road. 


At speeds of 70 kilometres per hour, trucks would pass each other every 2.5 minutes – something AMC considered “a major risk to the project given that the 148km haulage route is the major lifeline of the project”.

About 80 trucks currently operate on the road. It is expected to rise to 110, with ambitions to eventually run fully autonomous trucks on the route.

To get its ore to overseas customers on time, MinRes would have to load a 200,000 tonne vessel every 54 hours. Its 220,000-tonne storage space at the port amounted to just over two days worth of haulage.

The AMC consultants made other observations, too. There was a “lack of road drainage criteria and modelling”, they said. “[Mineral Resources] cost and revenue assumptions are opaque, based on internal historical data and Onslow joint venture negotiations,” the Project Mulloway report added.

In a statement on Sunday, a MinRes spokesman said “no fatal flaws” had been identified, and adding that upgrade works were going on including cement stabilisation of some sections and asphalting of the entire road.

“MinRes is confident these measures will ensure the haul road can withstand the unique conditions, deliver nameplate haulage capacity and significantly decrease maintenance costs over the long term,” he said.

“The review identified a number of risks within the study, which were responded to in full and were considered in detail by MinRes in the finalisation of project planning. Many matters identified by the review were resolved in the design, construction and operational schedule of the project.”

Morgan Stanley rides shotgun

Last year, Morgan Stanley Infrastructure Partners, an investment unit of the Wall Street bank, paid $1.1 billion for a 49 per cent stake in the road. MSIP could tip in another $200 million should certain haulage targets be met.

(The road also operates as a private tollway that can be used for a fee of $8.04 per tonne of iron ore that passes along the route.)

In its Friday statement, MinRes said the consultant’s report has been available to prospective buyers of the stake in the road who had “considered the review and MinRes’ response to identified risks, and conducted due diligence with the support of their own independent experts”.

Last month, in a call with analysts, Ellison was more defiant. MSIP, he said, had no recourse to claw back its money should MinRes fail to meet its forecasts for haulage along the road. “If I could get youse to more focus on the share price – if you could get that up that would get my debt ratio down – that’s your part,” Ellison told the analysts on the call.

There are now unanswered questions about whether MSIP insisted on putting “take or pay” provisions into its contract with MinRes. They would guarantee revenue from MinRes regardless of how much iron ore is transported along the road. Morgan Stanley has consistently refused to comment and has directed questions to MinRes.

“It’s a sad confluence of a conflicted management team and chair who do not appear to have always acted in the best interests of shareholders,” says Jarden analyst Ben Lyons, whose long term – and accurate – bearish outlook on MinRes has attracted the ire of Ellison, “A company whose cash flows are entirely at the mercy of two commodity prices – lithium and iron ore. There’s poor disclosure, and a completely inappropriate balance sheet structure which is over-geared and now also displaying short-term liquidity issues.”

Lyons noted Onslow was critical to MinRes’ attempts to solidify its balance sheet because it “is vastly more leveraged to iron ore prices than lithium”.

Investors have followed Lyons’ advice and savaged Ellison and MinRes over explanations around the road. The company’s shares, which nudged $80 last May, are now changing hands below $23. A new group of short sellers – investors who bet on the share price to fall – have arrived, making MinRes the most shorted on the ASX, according to S&P Global Market Intelligence.

With a market capitalisation of $4.5 billion, MinRes is worth less than its $5.1 billion net debt, increasing the prospect it will raise money at a depressed price.

“The market has become keenly aware that MinRes is carrying far too much debt for a commodity producer, and with the equity value now trading well below net debt, an equity recapitalisation becomes increasingly difficult ... and increasingly dilutive,” said Lyons. “We expect further underperformance even without factoring in the potential for equity dilution.”

MinRes said: “We have a number of other levers at our disposal to release further capital if needed, and we are not contemplating raising equity."

It was a road that was meant to be paved with gold for MinRes. Instead, its Onslow project is yet another headache for the already beleaguered Ellison.

--- ends ---


Here is MinRes' response (there's a link to it at the top of this post, and again below - below page 2):

592f0fbb5d1fc3a927e9c27fc8b2ee4f5602c6.png

First page above, second page below:

a588b2a72f05058f0da043fbff7ed0c94c5725.png

Source: Onslow-Iron-Update.PDF [03-March-2025]


They BOTH can't be right. There's a gulf of difference between what the AFR are suggesting is wrong with the road, which is a LOT, and what MinRes is saying is wrong with the road, which is a lot less.

And the AFR is beating this dead horse, sure, and it's a favourite pastime of theirs to keep kicking companies and company founders when they're down, and it makes great click-bait I suppose, but the article is based on credible sources, it isn't just made up out of thin air.

The truth is somewhere in the middle I suspect, but I would lean more towards what the AFR is suggesting than what MinRes is suggesting.

Imagine, if you will, just for a few seconds at least, what MinRes would LIKELY say IF the OHR was anywhere near as bad as what this AFR article is suggesting it is. Of course they are going to spin this as positively as they can. They are not going to give us the worst case scenario. That would be very counter-productive for them. They believe they can fix the road, and so they should, but the questions are:

  1. How much is that going to cost?
  2. How long will it set back the ramp-up of the road?
  3. How much extra debt will they rack up during this period?
  4. How does that affect the rolling over (refinancing) of their 2 billion of debt that is due to be repaid in calendar 2027? (i.e. 2H27 + 1H28 are both in CY27, see chart below left).
  5. If they can't get similar terms with the refinancing, for example if they have to roll it over at higher interest rates, how much longer is it going to take them to repay ALL of their debt ($5.8 billion of debt currently)? And will that impact lending covenants either on the existing debt if there are any covenants, or covenants that are attached to the debt when it is refinanced?

If they need to refinance, and they will, there will almost certainly be lending covenants attached to the debt as part of that refinancing. MinRes aren't the same credit risk today that they were when they negotiated those debt facilities, so who is going to give them a blank cheque now with no lending covenants? Chris was bragging last year that over in the USA people were begging to loan money to him. I imagine that may have changed somewhat since then.

This is why on the recent analysts call on the day of their H1 results, he told the brokers and analysts that MinRes could fix the road but the analysts and brokers on the call needed to get "my" share price up to reduce "my" debt ratio, "That's your part." He's clearly well aware that the lower the MinRes share price falls, the worse the terms are going to be when they need to refinance.

Reminder: [their debt as it is today]

186f7932670c9f47f0c378f21e2520de1fd615.png

Source: MinRes H1 of FY2025 results presentation, Feb 18, 2025.

Those 5 questions assumes that they can fix the road and that they can keep it running day and night to schedule, in other words run it at the intended rate of 35 mtpa (35 million tonnes of iron ore per annum), with one fully loaded triple-trailer road train weighing more than a fully laden Airbus A350 aircraft leaving Ken's Bore for Onslow every five minutes, every hour of the day, every day of the week, for the next three decades, just to achieve MinRes' current shipping targets.

That also means that at speeds of 70 kilometres per hour, these 2.5 metre wide road trains would pass each other every 2.5 minutes on a road that has 4m wide lanes, which is considered narrow for trucks of that length considering the impacts of dust and rain on visability, plus wind and normal trailer sway, and it would be even worse on the corners. The road does have corners. Every accident will negatively impact the schedule further obviously.

MinRes have around 80 trucks that currently operate on the OHR, but that is expected to increase to 110, and they have made it clear that they want to run fully autonomous (driverless) trucks on the road once they sort out all of the issues and are achieving their designed run-rate (35 mtpa or above).

So, it ain't going to be easy! They needed everything to go right, and it hasn't. And one of the reasons has to be that they did NOT build the road to withstand severe weather conditions despite saying that they would.

In their response to the AFR article, MinRes said yesterday: "As is standard, the review identified a number of risks within the conceptual study, which were responded to in full and were considered in detail by MinRes in the finalisation of project planning.  Many matters identified by the review were resolved in the design, construction and operational schedule of the project."

They also said: "The consultant’s review was completed in February 2024 and placed by MinRes in the virtual data room used to facilitate due diligence for the Road Trust’s sale process. Participants in that process considered the review and MinRes’ response to identified risks, and conducted due diligence with the support of their own independent experts. Morgan Stanley Infrastructure Partners ultimately decided to invest up to $1.3 billion for a 49% stake in the Road Trust1, which the Company considers to be a strong endorsement of Onslow Iron’s credentials"

I note that the journo's all say that Morgan Stanley Infrastructure Partners (MSIP) have consistently declined to comment, and have referred all enquiries to MinRes.

Consider those two paragraphs there where MinRes are essentially saying that all of the design issues that the consultant (AMC) highlighted were addressed in the design of the road, and further, the fact that MSIP paid $1.1 Billion - with another $0.2 Billion ($200 million) to come if the road is running at 35 mtpa by June 30th next year (so, up to $1.3 Billion in total) - after doing their own DD which included having access to that AMC report - is a strong endorsement of how MinRes have gone about it so far.

So MinRes is saying, if we hadn't addressed these issues that the consultant raised, Morgan Stanley (MSIP) would not have stumped up that cash would they?!

Consider that against the position MinRes now find themselves in with the road after the recent heavy rains and flooding in the area, remembering that in the consultant's report that MinRes have had since February last year, so for just over 1 year now, AMC said:

  • There was a “lack of road drainage criteria and modelling”.


Like I said, they can't BOTH be right.


"Mea culpa" - I woz Wrong - Clarification:

  1. I said here last week that the road (OHR) was 150km long. It is actually 147 km long.
  2. I also said last week that MinRes had announced in the past fortnight that they would spend an additional $300 million to fix the road - including asphalting the entire length and reinforcing sections with concrete. That figure was actually $230m, not $300m.

There is zero doubt in my mind it will cost more than $300m if they do it PROPERLY, but that's not what they said - they said $230m.

And while we're on that - the AFR article yesterday morning also questions just how accurate that OHR repair and upgrade estimate from MinRes is:

"Long-time Pilbara road construction managers are sceptical about the $230 million repair price tag. Speaking on condition of anonymity, they said the bill should be at least $100 million higher for such major work."

“It’s underquoting. If they’re going to redo the whole road, a conservative cost is about $2.3 million per kilometre. The road is rutted, which means that the sub-base is moving, and there is deformation further down. Asphalt will not fix anything because the base needs to be done first,” they said.

--- end of excerpt ---

So probably closer to $330m than $230m if they fix it properly. Let's see if they do.


Disc: Not held.

31

Randy
Added 2 months ago

Excellent post & analysis @Bear77 - you're spot on about the sizeable gap between AFR's assertions & MIN's assertions. Like you say - the truth will probably end up being somewhere in the middle, however it's obviously a big ask of investors to trust Ellison & MIN's board over independent journalists after some of the governance issues & history of unethical dealings with the company brought to light over the past 12 months.

Just thought I'd add latest article in AFR today re Ratings downgrades on the company. This is the problem with high leverage - can really compound their challenges if the business hits a challenging patch. Quite the pickle they've gotten themselves into.

Disc: Not Held

MIN ASX: Fitch Ratings downgrades Mineral Resources as its debt and costs soar


Fitch downgrades MinRes as its debt and costs soar

Mark Wembridge

Resources reporter

Mar 5, 2025 – 8.26am

Mineral Resources’ lengthy list of headaches has been exacerbated after Fitch Ratings downgraded the loss-making miner’s unsecured debt and flagged higher risks to its strained balance sheet.

The embattled miner, which recently posted an $807 million interim loss, cut its iron ore production targets, warned of ballooning costs and axed its dividend, had its default rating cut one notch by Fitch to “BB-” with a negative outlook.

A “BB-” rating suggests “an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time”, Fitch said.

MinRes has to spend hundreds of millions of dollars upgrading crucial haul ore to port. 

“The rating downgrade reflects MinRes’ high leverage and increased deleveraging risks over the medium term,” Fitch said. The agency warned that MinRes’ net leverage was expected to worsen to 7.3 times earnings before interest, tax, depreciation and amortisation by the financial year-end, from 4.9 times a year ago.

The diversified miner’s gross debt has ballooned to $5.8 billion, partly due to higher costs to get its $3 billion Onslow Iron Ore project off the ground. To counter this it has sold off a slate of assets including the $1.1 billion buyout of its West Australian onshore gas assets to mining billionaire Gina Rinehart, and the $1.1 billion sale of a 49 per cent stake in its deteriorating Onslow iron ore haul road.

The country’s largest crushing contractor has seen costs blow out by $230 million to repair and resurface the road, which began operations in October. The road is a vital source of cash for MinRes, creating a transport link for its iron ore from the Ken’s Bore mine in the Pilbara to the port near Onslow and on to customers overseas.

“The negative outlook reflects the execution risks associated with its planned cost improvements, capital expenditure discipline and production ramp-up at its Onslow iron ore project that may keep leverage above our expectations, which could lead to negative rating action,” Fitch said.

The miner is struggling under the weight of debt that exceeds its $4.3 billion market capitalisation, and analysts and ratings agencies have warned about the ASX-listed group’s ability to service those borrowings.

In its interim results last month, MinRes booked a $232 million writedown from a currency-related revaluation in its $US3.1 billion ($4.9 billion) in bonds due to a weaker Australian dollar.

Meanwhile, founder Chris Ellison is being investigated by the Australian Securities and Investments Commission, which is probing allegations of corporate wrongdoing and an offshore tax evasion scheme.

MinRes shares have fallen from almost $80 last May to about $21 on Wednesday, having lost one-third of their value since the interim results were released after the market closed on February 18.

The miner has become Australia’s most shorted stock as hedge funds heaped more pressure on the share price. MinRes bonds have also fallen as lenders lose confidence in the indebted miner’s ability to repay its loans.

MinRes is already contending with weak lithium prices, prompting it to pare back production of the key battery metal and shutter some of its operations. Iron ore prices have also wobbled on the back of weakening demand from China’s wobbling property sector.


Mark Wembridge covers resource companies for The Australian Financial Review, based in Perth. He formerly worked for the Financial Times in London and Hong Kong. Connect with Mark on Twitter. Email Mark at mark.wembridge@nine.com.au


19

Randy
Added 2 months ago

Always interesting to see at what prices some of the Insto's see value at...

In today's AFR - Looks like L1 Capital has been accumulating MinRes shares of late & increasing its holding.

From my very limited knowledge of L1 - they do seem to have a higher risk tolerance than many other fundies/Instos - I've seen them take some very counter-trend deep value positions before in stocks - two of which worked out very well for them with time.

However would still have to say their conviction takes a degree of courage with all the current uncertainty - guess that's their play - converting uncertainty & time into dollars (with the big assumption that everything works out & the uncertainty is resolved with time).

Also interesting was the speculation about why CE might be liquidating private assets like property & boats at the moment - to ensure reasonable liquidity with which to participate in the event a capital raising is needed.


MIN ASX: L1 Capital doubles down on MinRes’ falling stock

Rear Window


L1 Capital chases MinRes’ sinking stock


Mark Di Stefano Columnist

Mar 9, 2025 – 5.42pm

As a company on its knees, MinRes and Chris Ellison will take supporters wherever they can find them.

Happily then, Melbourne-based L1 Capital led by Raphael Lamm lodged filings late on Friday revealing that it was doubling down on the company.


James Hawkins and Raphael Lamm of L1 Capital. Eamon Gallagher

The hedge fund disclosed that it bought more than 3.1 million shares over the past few weeks – increasing its stake to 9.19 per cent. L1 is the largest MinRes shareholder without the Ellison name.

The share-buying spree occurred in the days following MinRes’ first half results on February 18, which included the embarrassing revelation that it would need to spend $230 million re-surfacing its Onslow haul road.

L1 bought 359,097 shares (at $25.31) on market for $9 million on February 20. It then kept buying, nabbing $7.3 million worth of shares the next day (at $26.63). The following week, as MinRes’ stock continued sinking, L1 bought $27 million (at 22.69). Last Friday, it scooped up another $8.4 million (at $21.06 and $20.99).

L1 doesn’t have a reputation for chasing losses. But really, if Lamm and L1 liked MinRes enough to be buying millions of shares at $32 in December last year, they must love it at $21!

In November last year, Lamm and L1 all but excused Ellison’s cascading misdeeds, when the MinRes board said the company founder would step down. With the board statement barely ink-dry, Lamm said he thought the Dark Lord of Dunedin could stay.

The stunning collapse of the MinRes share price means Ellison has got that sad designation of “former billionaire”. There are still deals to be done. He’s sold his luxury catamaran Anya recently, and is flogging off properties. Rumour is the chopper could be next. The question everyone is asking: Why does Ellison need the money?

Paying lawyers like Martin Bennett is surely costly, particularly with ASIC investigators on his tail. But there’s also the increasing possibility that the company, sagging under $5.8 billion in debt, will need to do an equity raising. Does Ellison need the dry powder to take part in any new share issuance? He owns 11.49 per cent of MinRes, and diluting that further would make it easier for vultures to raid the company.

For now, Ellison has Lamm and L1. They’re willing catchers of the falling knife.

Mark Di Stefano is Rear Window columnist, based in the Sydney newsroom. He previously worked at BuzzFeed, the Financial Times and The Information before joining the Financial Review as a media and tech correspondent. Connect with Mark on Twitter. Email Mark at mark.distefano@afr.com

19

actionman
Added a month ago

It doesn’t look like the transport problems are going away any time soon.

AFR: A sixth jumbo road train has crashed on Mineral Resources’ iron ore haul network in Western Australia’s Pilbara, raising further questions over the safety and design of a road that provides critical cashflow for the loss-making miner.

The latest crash is likely to heighten fears about whether MinRes can keep to its already reduced iron ore shipment forecast, as well as raising concerns over the miner’s ability to service its $5.8 billion of gross debt.

22

landdownunder
Added a month ago

Having worked on mine sites in the Pilbara ( FMG ,BHP) any incident / accident is thoroughly investigated. Moreso than an incident elsewhere... in my humble observations.

One accident is unfortunate, after a little investigation there have been ..... a couple more in a relative short time, that's a problem.

There are many reasons that could have contributed to these accidents.

The transport problems (road) can be fixed in the blink of the eye,

Other problems are above my paygrade.

Fan of MinRes, not a holder.


15

landdownunder
Added a month ago

i lied...i am holding in SM.... hang my head in shame.

8

thunderhead
Added a month ago

a2083587b1b1579c07d65ca713fd40b303ca62.png

H/t - @taxloss on X

16

Bear77
Added a month ago

Three weeks ago, I provided a link here to a MoM podcast where they played the video and audio of the last paragraph of that answer to Jonathon Sharp's question @thunderhead (in the MinRes earnings call on the day of their results) over in this forum about MinRes: MIN FH25--some scary numbers

Click on Chris Ellison's nose below to play that part of the poddy and hear Chris say those words:

2287bf5d14ec63dc310e45d2948342f5592f93.png

"...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."

16

mikebrisy
Added a month ago

@actionman I'm not really following $MIN closely, but the following statement really made me sit up:

"AFR: A sixth jumbo road train has crashed on Mineral Resources’ iron ore haul network in Western Australia’s Pilbara, raising further questions over the safety and design of a road that provides critical cashflow for the loss-making miner."

Much of my career experience has been in resources (oil and gas) and to me it is almost unthinkable in the modern age (certainly for resources companies in developed countries) for 6, consecutive high potential incidents to go ahead without significant intervention.

I assume that a"jumbo road train crash" is a potentially fatal occurrence. So why isn't there a higher profile response on this? Why hasn't the Regulator stepped in?

Do any other StrawPeople with greater operational knowledge about this have a view. It all seems very surprising to me.

19

Randy
Added a month ago

Thanks for posting that Podcast @Bear77 - really enjoyed the hosts discussion - in particular about just how sensitive MinRes's overall financial outcomes are now to Onslow's operating assumptions (given the very heavy debt load, substantial production volumes needed to service it, and likely implications of their current predicament on future borrowing costs from any refinancing).

Was good to see the company get a much-needed SP bump this week following UBS' sudden change of heart & slapping a Buy rating (from a previous Sell) on the company. While one can certainly see some value at these levels through a certain lens - the fact remains there remains no tangible evidence of any real solution to the serious balance sheet challenges & heavy reliance on troubled Onslow project (it really does need to mostly meet some pretty aggressive production forecasts in order to generate any real FCF to shift the dial on debt & market confidence it will be able to service it).

The cynical part of me can't help but wonder (in this transactional Trumpian age) if UBS is simply positioning itself favourably (and in CE's' good graces) for what it may see as an inevitable cap raise in the coming 3-6 months. From a bankers perspective it is likely to be a large & attractive raise to be involved with, and perhaps the company wants to be seen to be in their corner & a first door to knock on when the time comes.

Still watching & waiting with interest... (Disc: Not Held)

14

mikebrisy
Added a month ago

Rudi from FN Arena has just posted the following on X:

"RBC Capital on Mineral Resources $MIN: "The disruption to iron ore transportation at the Onslow haul road is a negative, as it impacts FCF generated from the project, which is critical for the company to de-gear near-term as Onslow ramps up.

"The disruption stems from ongoing issues with the trailers on the road trains tipping, which has yet to be rectified. MIN has retained FY25 Onslow iron ore guidance (link, which was lowered in 1H result due to wet weather), and still expects to achieve nameplate capacity (35Mtpa) in 1QFY26 (we have a more conservative view, RBCe 2-3Q FY26 to hit nameplate).

"While the investigations are ongoing, from the current provided information, we expect a 5-7 day impact (state government agency involvement) and increased FY25 unit costs (we also sit above for FY25 unit costs at ~$80/t). It is unclear if the tipping is localised to certain parts of the haul road (which are likely to be resolved with speed limits), and/or will the upgrade resolve these issues.

"Importantly, there were no injuries, haulage is continuing via contract or vehicles using alternative routes, and the transhippers will continue to load vessels during this period. The key operational catalysts for the haul road will be the road upgrade scheduled to be completed by Sept 2025, and continued ramp-up over FY25.

"Over the 12-24 months, the strategy is clear: prioritise the balance sheet, reduce capex spend, operate the asset for cash flow. We forecast MIN to start de-gearing in 1HFY26 as iron ore capex declines and the Onslow project ramps up."

#stockinfocus $MIN #investing #equities #XJO


I've highlighted the "importantly there were no injuries" item, to emphasise that sometimes those assessing operational matters in safety-critical business operations can miss the point. The decision-making about this operation should be based on the potential for harm (including death) not that 6 accidents have occurred and no-one was hurt.

I am now reading in Th Australian that the Regulator has stepped in,... as I expected.

6e54703e134af76a23743f7f93bc883d60cd11.png



23

Slideup
Added a month ago

No doubt that this is another disappointing development in the haul road saga. Couple of things worth pointing out the image used in the AFR article isn't of yesterdays accident. The image used implies a nasty accident, but this image was from the rollover in November. From todays Minres release they make it clear it was just the back two trailers that tipped and the prime mover and first trailer remained upright. Still a problem though, but different.

2c0db02b118d4a53da1f945d1b64bfed626a12.jpeg

They said in the Q1 quarterly that 4 of these accidents didn't happen on the haul road, but rather on service roads etc and that they were all due to driver error. It would be interesting to know how many trips these trucks have done, I think CE said at the H1 call that they have done more than 3M km on the haul road. This divided by 150k gives 20000 trips, so 6 accidents gives an incident rate of 0.03%, too high for sure but does put it into context, and we have been lucky that no one has been injured in any of these accidents. You can see why it is so important for Min to get these trucks fully autonomous as soon as possible.

The other buffer they have with the haul road is the storage facility in Onslow they have 220KT at the storage shed and another 250KT stockpile on the outskirts of town. So basically a bit over 2 ships worth buffer until they run out of ore, unfortunately their are three ships in port either being loaded or waiting to be loaded. The ships have been loading these bulk carriers at a steady rate, but if this haul road stop lasts the 5-7 days then the loading will also stop or slow dramatically.

20

actionman
Added a month ago

@mikebrisy I previously spent 20 years of my career working in heavy vehicle monitoring including working with authorised officers in the field for compliance and enforcement. What would happen in this case is effectively it would be escalated to the minister for a decision. The lead regulator involved will be WorkSafe since it’s a private road. If it was a public road, this would’ve stopped immediately.

IMHO it will be a political decision to risk safety for productivity and business viability. So some of it would be contingent on the media response and public perception vs relationships with the mining industry.

Regulatory risk is 100% here. Not held.

20

Bear77
Added a month ago

Good comments all. As @Slideup points out, MinRes have been quick to point out that driver error has played a part in every one of the 6 accidents so far, and that some of them have been on service roads due to the main haul road being either worked on at the time or otherwise unusable (such as flooded).

Another factor is that these have been on a road rather than a registered minesite, where there is different and arguably greater government department oversight in relation to any incidents that either do result in harm to people, or have the potential to harm people. If these accidents happened on a registered minesite, the WA Department of Energy, Mines, Industry Regulation and Safety (DEMIRS) would be involved and they usually shut down production while they investigate such incidences, however if my understanding is correct, they don't have any jurisdiction over a haul road between a mine and a port, even if it's privately owned by a miner or a mining services company, because the road itself is not part of any registered minesite.

For this reason, we see WorkSafe WA become involved instead (as @mikebrisy and others have pointed out today), as they are responsible for administering the Work Health and Safety Act 2020, which covers all workplaces within the state, including mines. While the haul road is not a registered minesite, it is a workplace for those road train drivers, so is covered by WorkSafe as a privately owned road on which employees of the road owner are engaged to work.

MinRes have been issues with at least one notice by Worksafe WA according to media reports today, relating to controls and risk-mitigation on the haul road, and have now shut down ("paused") the haul road temporarily, which is very likely to do with WorkSafe WA ordering them to do so until they can demonstrate that they have adequate controls and risk-mitigation procedures and policies in place to ensure these accidents do not keep happening.

MinRes have had a few run-ins over the years with both DEMIRS and with WorkSafe WA, including over a fatality at FMG's Christmas Creek minesite in August 2013 that saw FMG strip that crushing contract from MinRes and instead do the crushing and loading themselves. FMG have not used MinRes since that incident. Crushing Services International (CSI, a division of MinRes) was fined just $115,000 over the electrician's death. Commentary at the time from both employees and other industry insiders (including from FMG) suggested that MinRes prioritised production over safety, and that safety procedures were often either very lax or totally nonexistent much of the time. They were seen as cowboys within the industry and one broker referred to them as the "Dodgey Brothers" of Mining Services, albeit a very large and succesful version of Dodgey Bros. I know that was over a decade ago, but scuttlebut continues to emerge even today that MinRes still do not prioritise safety to anywhere near the same degree that many of their clients (such as BHP and RIO) do.

Further Reading:

https://www.afr.com/companies/mining/minres-cash-flows-threatened-after-truck-crash-forces-road-closure-20250319-p5lkpd [17-March-2025, 1:22pm, 12 minutes ago as I post this]

https://thewest.com.au/business/mining/mineral-resources-onslow-iron-haul-road-hit-for-six-with-another-truck-rollover-c-18079476 [18-March-2025]

https://www.afr.com/companies/mining/latest-minres-truck-crash-heaps-more-pressure-on-loss-making-miner-20250318-p5lkfx [18-March-2025]


Disc: Not holding.

18

Bear77
Added a month ago

Good to know that @actionman - great to get some industry experience perspective. In relation to the minister being in a position to rule on this, I know that in the past Chris Ellison has been held in high regard within WA political circles and has had a fair amount of influence, which some believe may have influenced some government decisions that have benefitted MinRes at various times, however I'm totally unaware of whether that is still the case after the allegations and revelations that have surfaced in the media and been "addressed" by the company over the past 6 months. I imagine that much depends on how MinRes respond to the notice(s) that WorkSafe WA has served on them in terms of satisfying the minister (and WorkSafe WA) that they (MinRes) now have ADEQUATE controls and risk-mitigation procedures in place to avoid any further incidences.

13

Bear77
Added a month ago

MinRes cash flows threatened after truck crash forces road closure

by Mark Di Stefano and Mark Wembridge, AFR, Mar 19, 2025 – 1.22pm

Unease over whether highly indebted Mineral Resources will be forced into an equity raise has heightened after authorities closed the miner’s Onslow iron ore haul route due to the sixth crash on its ill-fated road network.

Closure of the crash-plagued road will cut the diversified miner’s already diminished iron ore shipments and squeeze critical cash flows at a company already tottering under the weight of $5.8 billion in debt.

fd6ce49a2e9784afac82dbda2eb136165d05a7.png

Six trucks have crashed on Mineral Resources’ private haul road network, forcing authorities to close the route. [photo is of a previous incident]


The latest crash occurred on Monday afternoon when the rear two trailers of a 330-tonne triple road train rolled over not far from the company’s Ken’s Bore mine in Western Australia’s Pilbara region.

The 147-kilometre road is used to transport iron ore from the mine to a port near Onslow and onto customers abroad, providing crucial income at a time when MinRes’ lithium division is bleeding cash.

The miner said it was continuing to transport iron ore to port via contractor vehicles using alternative routes, and its transhipping boats would continue to load its ocean-going vessels to send ore overseas.

“MinRes has strengthened controls and traffic management on the haul road and currently expects to resume haul road operations without impacting full-year Onslow iron volume guidance,” the miner said.

RBC analyst Kaan Peker warned that the closure would impact MinRes’ cash flow, “which is critical for the company to de-gear near-term as Onslow ramps up”.

MinRes confirmed that no one was injured in Monday’s rollover, and the incident is being investigated internally. WorkSafe has not specified a timeline for the road’s closure.

Shares in MinRes, which rebounded last Friday after broker UBS suggested that they had bottomed, fell 12 per cent on Wednesday morning to $21.92. The stock recovered in later trade to be down about 7 per cent. Last May, the shares changed hands for almost $80 each.

Analysts have flagged concerns about MinRes’ straining balance sheet, and the miner’s ability to service debt that outweighs its $4.3 billion market capitalisation. The company has denied it will be forced into an equity raise to shore up its finances.

The embattled miner recently had its default rating cut one notch by Fitch to “BB-” with a negative outlook.

The road, which is part of its $3 billion Onslow project, was touted as a game changer for the miner by opening up less accessible iron ore deposits. Outlay on the route would quickly be recouped by the fees that the infrastructure would earn – the private toll road earns $8.04 per tonne of iron ore that drives over it.

Yet the country’s largest crushing contractor has already been forced to cut its shipment forecasts for the road by as much as a quarter. Last month MinRes posted an $800 million interim loss – double the loss expected by analysts.

The haul road showed signs of deterioration when it commenced full operations in October, and multiple crashes have raised further questions about its safety. The contractor hired to build the road walked away mid-job after a disagreement over the materials being used, leaving MinRes to complete the work in-house.

Despite assurances from MinRes founder Chris Ellison that the road was “quite exceptional”, drivers on the road quickly identified deterioration on the surface.

The company then shocked investors last month when it warned it would spend $230 million to repair and resurface the new road. Ellison blamed the repairs on torrential rains during cyclone season, although data from rain gauges around the road did not fully support this assertion.

Morgan Stanley Infrastructure Partners, an investment unit of the Wall Street bank, paid $1.1 billion for a 49 per cent stake in the road.

Ellison is under investigation by Australia’s corporate watchdog over allegations that he engaged in an offshore tax evasion scheme to enrich himself at the expense of the company he founded. He has agreed to step down as managing director by mid-2026.

--- ends ---

Source: https://www.afr.com/companies/mining/minres-cash-flows-threatened-after-truck-crash-forces-road-closure-20250319-p5lkpd

12

Slideup
Added a month ago

@actionman, Is that correct that the minister would get involved at all. What would be escalated for a decision- the report after the investigation or whether the road can be reopened earlier? At this stage it is an open investigation.

I was under the impression that Worksafe would be operating independently to investigate and come up with a report/shortcomings/infringements etc. I'm not familiar with how the state regulators in WA work, but isn't WorkSafe an independant authority that is housed within the department of Mines, Industry Regulation and Safety (DMIRS)?

DMIRS already had an open (as of last year) investigation into the earlier rollovers, so this might just fall within the existing investigation, or Worksafe maybe taking over the earlier investigation.

I would have thought the minister would want to be arms length of any decision as there is little upside for them to get involved

14

actionman
Added a month ago

@Slideup Yes and No. For simple cases you are correct. But I think this is a bigger issue than it sounds.

Recently I've been interacting with the WorkSafe Group (DEMIRS) with regard to being a combined regulator since 2022 bringing general WH&S, mining and dangerous goods under one umbrella. They are well funded, very organised and keen to reduce the number of fatalities in WA work sites.

I don't exactly know about this particular issue, but in my experience, any such regulator has an "enforcement pyramid" of escalating sanctions (see Malcolm Sparrow, Fundamentals of Regulatory Design). Repeated non compliance findings will escalate up from education, warnings, fines, prosecution and eventually licence suspension. The regulator has different levels of authority to approve each sanction. Prosecution for a high profile entity would at least make the ministers attention. Licence suspension is even more severe and if it had a major economic impact (think Star Casino) I believe it would become political even though that wasn't stated publicly. You'd think it's a simple flow chart of rules, if this then that... but it's not. This is only my personal opinion from experience. Many years ago I have been asked by a minister why particular companies vehicles were being inspected for compliance by Authorised Officers. These are called "Ministerials" and the regulator drops everything to answer them. Who knows where they come from.

I'm saying that MinRes is an economically significant business in WA and imposing a sanction that would interfere with their viability, such as shutting down the only road out of a mine, would go via the minister in some form.

Here's what can happen fairly quickly. https://www.afr.com/companies/transport/how-disaster-after-disaster-brought-mcaleese-down-20160829-gr3du5.

A fuel tanker owned by McAleese subsidiary Cootes was involved in a fatal crash in the Sydney suburb of Mona Vale on October 1. 2014. Within days, 12 Cootes' trucks were initially taken off the road after inspections by regulators resulted in 26 defect notices. Eventually most of the fleet is stood down. The New South Wales premier, Barry O'Farrell, said the number of braking problems identified so far in trucks owned by Cootes Transport was unacceptable. The business eventually collapsed.

21

BkrDzn
Added a month ago

@actionman Given your experience/understanding of the department. What number of fatalities and/or frequency of them would have to occur such that the ministerials/politicians are forced into action and have to consider suspending MIN's licence until the road it properly upgraded?

12

Slideup
Added a month ago

thanks for the explanation @actionman, that all makes sense.

The only saving grace for Min so far is that no one has been injured in any of the incidents. I'm actually pretty surprised the price held up yesterday as the unknown consequences of this investigation are potentially much more severe than just a cost overrun.

14

Bear77
Added a month ago

Mining Iron Ore from Ken’s Bore

Should be profitable and more,

If they built that Haul Road right,

And the trucks run day and night,

 

But every time a truck flips,

Shorters get happier, licking their lips,

And investors start to squirm,

As the odds of a cap raise firm,

 

When the road gets shut down altogether,

And this time Chris can’t blame the weather,

MinRes’ outlook is dealt another blow,

And the punters keep asking, how low can they go?



P.S. TechBunny, we miss you! It's been 5 months!

27

Bear77
Added a month ago

19-March-2025: Onslow-Iron-Haulage-Operations.PDF

24-March-2025: Onslow-Iron-Haulage-Operations-Resume.PDF

Mineral Resources accepting less experienced truck drivers on higher wages at Onslow Iron haul road

by Adrian Rauso, The West Australian, Fri, 21 March 2025, 7:34PM.

14b66d1c9d1bae90f1fe884a9a5c52544d5428.png

A jumbo truck on the Onslow haul road. Credit: MinRes/TheWest

Mineral Resources has lowered the bar to be hired as an Onslow haul road truck driver, despite a spate of truck rollovers caused by “operator error” along the issue-ridden $2.6 billion private road.

The West Australian can also reveal that since early Wednesday MinRes has only made one transhipment of Onslow iron ore, a fraction of its normal export rate.

The miner and mining services provider is on the hunt for drivers to transport iron ore across its 147km pit-to-port Onslow Iron haul road, which is currently closed as WA’s safety regulator probes why in the space of seven months six jumbo trucks have toppled over on the main thoroughfare and connected service roads.

MinRes is offering truck drivers $166,500 per year with a $15,000 “contract completion bonus” and “$13,128 operational bonus”, according to an active job advertisement posted on the company’s website earlier this month.

8d348e235e6fd82927b0ec3535ec4373abed8a.png

One of the trucks that rolled over. Credit: Twitter/X

Applicants need to have at least “three years’ recent experience multi-combination driving history” and a “minimum six months heavy haulage experience within a mining or similar environment”.

But during January, in a now-deleted job advertisement obtained by The West, MinRes wanted its Onslow drivers to have at least “five years’ recent experience multi-combination driving history” and a “minimum 18 months heavy haulage experience within a mining or similar environment”.

The pay offer detailed in the January job advert was not disclosed, but in the March advert there is mention of “increased rates, plus new bonuses, plus incentives”.

A MinRes spokesman confirmed the company was now willing to hire less experienced drivers and offer higher wages in light of a “competitive labour market”.

“In recognition of the competitive labour market and the project’s phased transition to autonomous haulage, we recently broadened the applicant pool and improved remuneration,” he said.

“All multi-combination (MC) operators at Onslow Iron have industry experience, with many previously employed at other MinRes sites across Western Australia.

“In addition to holding a MC licence, operators must complete MinRes’ intensive MC driving training program prior to commencement.”

The West understands the “operational bonus” is not new, but the “contract completion bonus” has been created as an extra pay sweetener to entice would-be applicants worried that their trucking job will soon become obsolete.

--- ends ---

18

actionman
Added a month ago

@BkrDzn hard to say. It's not black and white. The WorkSafe Commissioner will be focussing on any fatalities and serious injuries.

So I am suggesting that a repeated pattern of fatalities and serious injuries that is not being addressed by the recent enforcement measures will motivate them to act. This is when it could potentially escalate and become more politically influenced. If people were marching in the streets then there would be swift and severe action IMHO so to some extent I would read the media coverage to gauge the level of possible public concern. It may also depend on the root cause. If incidents were not linked that would allow them more rope. But if they were the same root cause (such as a poor road!) that would be worse for them because the sanctions aren't working.

As it was for Cootes transport when their truck made front page news buring on the M2 in Sydney's leafy North Shore after causing a double fatality due to no brakes. Cootes had fatalities previously also, so it was the second major incident for them due to poor brakes and they were effectively forced out of business very quickly.

Not held

17

Randy
Added a month ago

Interesting article in the AFR - regarding L1 Capital's views on MinRes, and why they see current price as attractive & have been increasing their holdings.

(Note L1 started buying more shares around $32, then kept buying aggressively at several price points in the $20-28 range I believe. Now the 2nd largest holder behind CE at over 9%).

Always interesting to hear the contrarian viewpoint during sentiment extremes (both super bullish or super bearish) - and test ones current thesis / thinking.

Having seen company's share prices stay irrational or heavily discounted for prolonged periods - I just cannot yet share their strong conviction. They are in Chris' camp that a Cap Raising won't be needed - and if this turns out to be true - then I would agree current SP should prove pretty attractive buying in time (especially given the quality of the core mining contracting business).

However I'm not as confident of this assessment - given Onslow's current maintenance/capital issues & logistical challenges, growing headwinds in Iron Ore with Chinese economic challenges & increasing African supply, Lithium markets current challenges & their very heavy debt load. While the mining services business will likely keep performing strongly - the truth is it HAS to. And the company having effectively gone "All-In" on Iron Ore at Onslow with heavy debt funding - means they really need the mine to perform at or close to what was envisaged.

I honestly hope for existing shareholders L1 is right, need to raise capital is avoided, and confidence is restored in Onslow & governance with time. In the peak of Qantas' poor customer behavour and negative impact on their brand - it very much felt hard to imagine that things would get better for them, and their brand could recover. However I woudl posit that Qantas operates in a near-monopoly (very tight & cozy oligopoly) like position - so can get away with a lot more sins than one player in a more fragmented competitive market in which they are more commodity price takers.

Guess time will tell - will go either one of two ways (will have to raise capital or won't need to), mostly dependent on how things play out at Onslow. Very tricky to value companies with such potentially divergent outcomes for their equity holders ("to dilute or not to dilute").

MIN ASX: Mineral Resources faces Qantas-like negative hysteria, says L1’s Landau

MinRes facing Qantas-like negative hysteria, says L1’s Landau

Mark Wembridge

Resources reporter

Mar 27, 2025 – 4.30pm

A top Mineral Resources investor has rejected suggestions that the highly indebted miner will be forced into an equity raising, saying the 40 per cent collapse in the share price over the past month was “excessive”.

L1 Capital co-chief investment officer Mark Landau likened the negative market sentiment to Qantas 12 months ago before a rebound in the airline’s shares. The fund manager told clients on a webinar that the investment team had taken advantage of the sell-off in MinRes to build up the fund’s stake to 9.2 per cent, making L1 the second-largest shareholder behind founder Chris Ellison’s 11.5 per cent.

Raphael Lamm (left) and Mark Landau, co-founders of L1 Capital. Eamon Gallagher

“The MinRes situation reminds us of the hysteria and negativity that we saw with Qantas 12 months ago ... when they were trading around $5. Since then, Qantas has returned more than 90 per cent, it’s been one of our best performers in the portfolio,” Landau said.

“We think it’s a very similar situation with Mineral Resources, where you see a lot of parallels with the sentiment and the valuation upside. We thought [the share price fall] was a fantastic buying opportunity.”

MinRes’ embattled board has come under fire for allowing gross debt to grow beyond $5.8 billion, dwarfing its market capitalisation of $4.7 billion and raising questions over its reliance on fluctuating commodity prices.

The miner posted an $807 million interim loss in February, and has wound back most of its lithium operations due to a slump in prices for the key battery metal, prompting analysts to query MinRes’ balance sheet strength.

MinRes shares, which changed hands at almost $80 last year, have fallen to $21 recently, but are back above $24. The stock was recently the most shorted on the ASX, although recent bullish updates from the likes of UBS and L1 have seen those shorts start to be dialled back.

“The consensus view is that they’re likely to do a capital raising in the next few months,” Landau said. “Our view, and that of the company, has been that a capital raising is not really necessary, as there are no debt rollovers until 2027, there’s no debt covenants on its US bonds.

“The bonds are trading close to par, means that there’s no sign of stress from bondholders. The company also has several asset sale options, if it’s required, which would be a much better option than raising equity at a very depressed share price,” he said.

Landau also dismissed concerns over the miner’s crumbling Onslow iron ore haul road, noting that the $230 million cost to repair the infrastructure was necessary capital expenditure.

“That was obviously a disappointing update, but in the context of a very large business, we believe it was a relatively modest negative,” he said, noting that the 40 per cent share price slide was “an excessive reaction and not reflective of the valuation impact that the company is likely to endure”.

Landau did not mention MinRes’ corporate governance troubles whereby Ellison will step down as managing director over allegations that he enriched himself at the company’s expense. Chairman James McClements is also due to step down in the coming months.

Landau also took a contrarian view on MinRes’ lithium assets, which he said were significantly undervalued. He placed a valuation of $2.5 billion on MinRes’ lithium division, which includes a 50 per cent stake in the Wodgina lithium mine near Port Hedland in Western Australia’s Pilbara region, although the market believes the division is worthless.

Mineral Resources’ problems run deeper than a hedge fund attack

Mark Wembridge covers resource companies for The Australian Financial Review, based in Perth. He formerly worked for the Financial Times in London and Hong Kong. Connect with Mark on Twitter. Email Mark at mark.wembridge@nine.com.au

16

Karmast
Added a month ago

@Randy L1 Capital's fund is an interesting one. You certainly can't accuse them of index hugging (being a long short fund) and they definitely have high conviction...

Their fund was valued at about $1.6 billion last month. If they own about 11% of MIN, that means MIN actually makes up about one third of the total fund. That's a huge bet. And it means they probably have huge bias / endowment effect going on. If it comes off they'll do spectacularly well.

But despite having great long term performance, the last 3 years they have been big under performers. If this doesn't come off they might be the latest in a long list of high profile fundies, that were hot...and then not (ala Magellan, Platinum, etc)


14