Got a feeling I might regret this, but I’ve totally sold out of MIN in my real portfolio. What a ride.
When I bought in a year or two ago, my thesis was that the share price pretty much reflected only the value of the mining services division, and the rest—including the Onslow operation—were like free options. I recognised the risk that the huge, debt-fuelled Onslow expansion could bring the whole thing down, but wasn’t too concerned because of the nature of the debt: bonds with repayments starting in 2027, priced at face value by the market. Having worked in business lending, I believe credit analysts are more rational about risk than equity analysts. And I like investing alongside mavericks. Before learning about his tax avoidance and personal-enrichment antics, Ellison struck me as exactly the kind of founder I wanted to back.
So much has happened since: Ellison’s colourful past came to light; their 150 km road to support Onslow literally crumbled under heavy rain; and yet Onslow is now on track to exceed forecasts and prove Ellison right. With reasonable iron-ore prices, the cashflow should pay down debt before too long. They’re also highly leveraged to a rebound in lithium prices as a low-cost producer.
But a few doubts have crept in, narrowing the margin of safety:
- Onslow’s structural challenge. No matter what Ellison says, it’s hard to believe that digging lower-grade 57.5% Fe ore, trucking it 150 km, then transferring it ship-to-ship will ever make them more than a marginal producer—vulnerable to even a modest fall in resource prices.
- Ellison’s red flags. I think I accepted his antics because they emerged gradually, but stepping back, there are a lot of them.
- The debt load. It’s huge—almost the size of the market cap for much of the time I held the stock—leaving little resilience if anything goes wrong.
Anyway, now that I’ve sold, I reckon I’ll have a heap of spare mental bandwidth. This investment occupied far more of it than it ever deserved