lol, yes @NewyRookie my thesis is pretty much Gaurav's, but it's my money and I have to own it not him.

I agree with him but the responsibility for the investment is mine - good or bad outcome!

My favorite saying of @Strawman is "you can borrow the idea but not the conviction", so it's my conviction not Gaurav's.

I would run a $75/t iron ore scenario and think about that. Do i think iron ore will trade there? The point is we don’t know

@Solvetheriddle You also need to run the low price scenario’s under different exchange rates. which is now two unpredictable unknowns to forecast.

When I’ve thought through the low iron ore price scenarios, I can only get a sustained price of <US$75/t if the world has tipped into recession and no-one is building anything, which I think is a low probability event, which would also probably result in more central bank stimulus. In this scenario the Aussie dollar would also be expected to decline against the US so I think even US$75/t price would create a margin at Onslow and enable debt payback. I think the worst outcome for Min would be Aussie dollar strengthening into a semi-weak iron price in the US$90-100 as this would really crimp the cashflow.

It also sounds from other commentary is that the marginal price of supply is around US$90/t so much of this should be switched off if sustained low prices become a reality, similar to what Mins is currently doing with the Yilgarn mine.

On the demand side there are a few places around the world that will need a lot of steel when they stop bombing each other and decide it’s time to rebuild.

@Slideup your point on $A relief is valid, for all its faults the cost curve is really all we have to estimate long-term iron ore prices. below is the most recent i can find. the usual "intrinsic value" for commodity curves cuts in at around 90%. Of course the actual price is where demand cuts in the ST. At $130/t basically everyone making excess returns, LT this is not sustainable. China dwarfs everyone for iron ore demand so the ROW is insignificant given basic assumptions on growth. China has likely passed peak steel.

The game here aims to identify the marginal producer (same in every commodity). i spent a large part of my life attempting to do this and realised how difficult it is. when looking at the $a remember it is how the $A moves relative to the marginal producer's currency, so $A v RMB v Brasil Real etc.

the chart below shows that About $70/t cuts in at the 90% production level. Remember this is a LT estimate, where extra production is incentivised to enter the market.

ive tried to summarise a thesis into 100 words, lol

@Solvetheriddle it's important to highlight the point you've made here: "Remember this is a LT estimate, where extra production is incentivised to enter the market."

When commodity markets move in the short-term into an over-supplied imbalance, the capacity withdrawal needed to rebalance the market is driven by operating costs and decisions by operators as to how long they can weather the pain, and lag-effects to stop operations. Here the short-run marginal cost of supply for the medium cost players is important.

This is why the price, in the short-term, often significantly undershoots the full operating cost of the marginal players. In this context, the "short-term" can be 1-2 years, depending also on what is happening on the demand side and overall the strength of industry balance sheets, as well as other important considerations like FX-impacts, as has been highlighted.

I know many on here know this better than I do, but I am concerned on reading some of the market commentary at the moment (both on iron ore and also on lithium) that perhaps not all retail investors are aware of this aspect of the commodity cycle. There is a lot of anchoring going on on recent prices and charts of the last few years where reinvestment economics have dominated price dynamics, and not on the role that short-run economics plays on capacity withdrawal decisions.

For example, many industry commentators were calling the bottom on lithium at the turn of the year 2023/2024!

I'm not making any predictions, but there are material risks here to be considered.

@mikebrisy you are right for LT investors it's a difficult one. various teams i have been involved in spent countless hours (thousands) trying to find helpful correlations. the ONLY thing that consistently worked was St price momentum (in the underlying commodity). that turns you into a trend-following momentum player, that is not really my cup of tea and why i generally steer clear of this area. but to each their own, everyone can roll a pair of dice.

I know there's heaps of analysis on the bear case for MIN, but the MoM summary of the most recent meeting kind of makes me feel there's going to be a bit more hammering of the share price potentially: https://www.youtube.com/watch?v=kWNEtMq-7ic&list=PLHXV1yDW9VX9Nu7g6mQVCTL5fzzDCmg9C

@Tom73 without offering a useless 'me too', this is largely my view too. Take a long term view and I think investors entering around this price will beat the market. But it might be scary going for the next six months to a year. The fact that the market is valuing MIN based on its services division alone provides me with confidence that the market has shit the bed.

Possibly @Rocket6 - unless MIN do a CR - then we may see further excrement hit the ventilation device.

Or they are forced to sell off part of their mining services division. They aren't close to that yet, but there's a pathway from here to there if iron ore keeps falling.

https://x.com/berthon_jones/status/1831186505781366822 [chart of largest ASX-listed iron ore producers vs iron ore price - showing leverage - how debt hurts MIN's SP way more than the others]

https://youtu.be/MaWgO3bWYUo?t=400 (MoM poddy, Thursday 5th Sept, 2024, explains the relevance of that chart - see link above - in relation to MIN's debt).

Also - have a look at the graph here that shows that at US$750/tonne spot price for spodumene, Greenbushes is around breakeven and everybody else is losing money producing lithium (spod). PLS, MIN, LTM, LTR - all underwater at current spod prices. Yet PLS has the cash and is expanding production while Arcadium (LTR) has just announced they are going to put Mt Cattlin on C&M until the spod price moves up to a point where they can make money again.

Just checked and spod has now dropped to US$741/tonne: https://www.metal.com/Lithium/201906260003 There's a good chance that even Greenbushes, Australia's lowest cost spodumene mine/processing plant, is losing money at these prices.

And iron ore is now down to US$91.30/T: https://tradingeconomics.com/commodity/iron-ore

Falling lithium and falling iron ore prices are double headwinds for MIN. If they can withstand this storm and come out the other side without having to sacrifice any significant assets, they'll very likely be a good investment for those who can stomach that ride, but it's likely to get rough (perhaps very rough) before it gets better.

My concern is that they may have to sell assets at some point (to service their debt) that they really don't want to sell, or really don't want to sell at the prices available at the time. They could do a CR, which would have to be a big one to make any significant difference to their debt levels, and would be like ripping off the bandaid - heaps of pain up-front but less likelihood of further pain afterwards, but imagine what a CR at these levels (or lower) would do to their share price!, and the discount they would have to give to raise the cash. I think a CR is not a very likely option, and that further asset sales are far more likely IF spod prices stay at these levels or drop further and if iron ore falls significantly further, which could very well happen in the short to medium term.

I'm thinking MIN could well be picked up at even lower levels than these, despite how far they've fallen lately. I'd rather wait until the headwinds reduce and they start to get some tailwinds again. Like I've said before, I'll miss the bottom, but I'll also miss the downside between here and there.

Thanks @Bear77 for the continued reality check on MIN, your comments previously and just now on the downside risks if a CR or asset sale are need and are why it's a half not a whole position to start. We have Iron Ore prices dropping through levels that marginal produces are starting to be loss making and Lithium dropping to prices where even the lowest cost producers are at best break even.

The reasons for both prices dropping rest in China, which means that we can't necessarily rely on a rational market supply/demand response to Iron Ore and Lithium commodity prices. With normal rational market participates the supply/demand would adjust as quickly as the participates can adjust their consumption or production and prices would move back towards a middle ground or equilibrium. However, China state policy plays a large role in demand for Iron Ore and supply of Lithium and is a long way from market rational (at least in the short to medium term - long term market domination defiantly has some market rationality).

Conclusion is that both Iron Ore and Lithium prices could remain suppressed for quite some time (several years), which would put MIN in a very poor position! Thats the Bear case for sure.

I also bought a half position in PLS on Friday but have not written it up yet. I had been looking at PLS for far longer than MIN and was initially interested at $3. At $2.50 I was willing to start taking the risk that Lithium prices would remain "stupid low" for a lot longer. I have been waiting over 6 months already, watching the price slide lower and lower as Lithium prices failed to recover from industry loss making levels like any rational market should do... I see my entry as a first step but would like to buy more at $2. Unlike MIN, PLS has a strong balance sheet with penalty of cash, but it is also a pure Lithium play so needs that strength, were as MIN has Services and Iron Ore which provides more diversity and reduces the risk compared to the pure play.

Here is that graph @Bear77 provided a link to, which was from the AFR (5/9/24) and I had intended to include in my PLS write up when I got to it.

Pligangoora which is PLS's mine is just break even when you take out the Growth Expenditure and a little behind Greenbushes (Albermale). Anyone else other than these two should not be producing Lithium at current prices. I expect that supply will start coming off soon and more importantly new projects to add supply will be dropped unless they can be profitable at US$750/t like PLS's Pligangoora expansion. Rationality will eventually take hold...

So, both MIN and PLS are both risky, but at current levels I have a view that the upside outweighs the downside and both offer a good asymmetric investment opportunity. I am expecting lower prices for both - not sure how much or for how long, hence the first dip.

I can't argue with your logic at all @Tom73 - so I think we are in fierce agreement about the risks - and the fact that both Pilbara Minerals and MinRes will both recover - for me it's just about the uncertainty of the timeframe and the fact that I need to avoid paper losses for a while until I get full access to my super - in 18 months from now.

I actually took a position in PLS in late June on the basis that they had so much cash, zero debt, were still producing and if anything would likely buy something at the bottom of the cycle or expand their own production (they've done both as it turns out) but I exited PLS when they announced that acquisition because I wasn't totally convinced about the location - I'd rather see them stick to Australian lithium - expanding overseas can divert focus and can present additional challenges that can just become extra headwinds, in my experience. I had been betting that a short squeeze was coming, and what a short squeeze it MIGHT have been, with over 20% of PLS sold short (#1 shorted company on the ASX) - because my thoughts were that PLS could NOT go broke even if spod prices dropped below their cost of production, because of that huge cash buffer and zero debt, and that there were PLENTY of lithium companies that were dead-set shorts ahead of Pilbara Minerals - for clarification, I never short companies, but if, hypothetically, I was to short a lithium company, PLS would be very low on my list of lithium companies to short. Because PLS are SO strong, financially, and position on the cost-curve as well compared to their peers (without capex costs, probably lower than all except Greenbushes). But M&A always scares me when I think it's not strategically or geographically sensible (as in: does not make clear sense to me), so if in doubt, get out, was my thought process. I booked a capital loss on PLS, but not a huge one because I had bought them at fairly low levels anyway, but booking losses doesn't worry me these days - comes with the territory - and it's a necessary evil if you always want to have your investable capital in your very best ideas.

So from a true value investing POV, both MIN and PLS are buys at current levels. No argument.

As long as you have a minimum 5 year timeframe, i.e. will not need to sell to free up that capital in one or two years, because IF you do, in one or two years, it might be at lower levels than where one or both of them are today.

But over 5 to 10 years they look like buys here, no question.

It's just that near-term risk that I was trying to highlight, so nobody goes into them thinking they can't go much lower, because they just might.

Follow the @Bear77 :P

Great posts everyone! Typical of "battleground" stocks, of which MIN is certainly one, though mostly due to factors out of its control.