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#Bull Case
Added 2 weeks ago

18-June-2020:  Bull Case from Anthony KAVANAGH from Chester Asset Management:

Can Mineral Resources be a $40 stock?

No, we aren’t projecting a USD150/t iron ore price. Last year we wrote, A Different Kind of Portfolio Manager, wherein we argued Mineral Resources (MIN) was heavily discounted, trading at ~AUD15/share vs our AUD26/share valuation. Given the wide discount there wasn’t much need for over-enthusiasm on the upside but this note serves as an update and provides us the opportunity to revise one of the issues we had with our first note, the Mining Services' valuation. Yes, we’re allowed to have issue with our own work. Rarely is the sequel better than the original but just as Adam Sandler made Grownups 2 sometimes the original was that bad/no-one saw it that it doesn’t hurt to have another go. For time poor readers we have worked backwards from our original note, providing an update on our valuation, followed by the detail on Lithium, Iron Ore and Mining Services, before rounding out with earnings implications.

Valuation Update

Combining our work below into a valuation is easy enough but within our analysis we are left with some key questions which materially influences the fair value outcome, hence the multiple valuation scenarios below. These include:

a) Whether to accept the iron price implied by Fortescue Metals (FMG)?;

b) What is a reasonable multiple and hence valuation of MIN’s Mining Services segment as more contracts become sticky Life of Mine (LOM) type infrastructure deals?; and

c) How much of the theoretical value of future projects: Marillana, West Pilbara and lithium downstream, including the associated Mining Services upside is reasonable?

--- click on link above (top of this straw) for the rest of this article, published on Livewire on June 18, 2020 ---

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#Reports & Presentations
Last edited 2 months ago

24-Apr-2020:  Quarterly Activities Report

Q3 Highlights

  • The coronavirus (COVID-19) crisis did not materially impact MRL’s operations during Q3 FY20. At this time, it is unclear what impact it will have on the remainder of the calendar year, including on demand and consumption for either iron ore or lithium.
  • Safety performance continued to improve, with a Total Reportable Injury Frequency Rate (TRIFR) for the last twelve months of 3.36. This represented an improvement of 16% compared to the performance in FY19.
  • Our Mining Services business continues to perform strongly. We expect second half Mining Services EBITDA to be similar to the first half ($172m) on the basis that there is no disruption from COVID-19 over Q4 FY20.
  • Total iron ore production of 3.4 million wet metric tonnes (wmt) was 3% higher than Q2 FY20 and up over 28% on the prior corresponding period (Q3 FY19). Iron ore shipments of 2.9 million wmt were 12% lower than Q2 FY20.
  • Average revenue received of US$75 per dry metric tonne iron ore was achieved during the quarter, 5% lower than Q2 FY20. 
  • While we began to benefit from lower energy prices during the quarter, we have also invested in measures to protect the health and safety of our workforce from the effects of COVID-19. Full year operating cost guidance for our commodities business remains unchanged.
  • Mining operations at Koolyanobbing were impacted by heavy rainfall during the quarter while shipments were lower due to a slower than expected ramp up of rail capacity. Koolyanobbing is forecast to produce at an annualised run rate of 11 million tonnes per annum (Mtpa) during Q4 FY20 with additional dump trucks commissioned and additional rail capacity brought on line. Due to the lower shipments during the third quarter, export expectations from Koolyanobbing have been lowered 19% to between 7.1 to 7.6 million tonne (mt) for FY20.
  • Iron Valley produced 1.7 million wmt of product for the quarter, up around 20% on each of the prior period and the prior corresponding period. The additional production will support higher shipping tonnages in Q4 FY20, with export expectations for FY20 increased 9% to between 6.6 to 7.0 mt. 
  • Mt Marion Lithium Project produced 111,000 wmt and shipped 99,000 wmt of spodumene concentrate during the quarter. An updated production outlook for FY20 was completed, based on an optimised mine plan which includes lower processing throughput to achieve a higher yield from ore processed and continues to include 4% spodumene concentrate production.
  • MRL agreed a series of arrangements with BCI Minerals Limited (ASX: BCI) that will enhance MRL’s iron ore footprint in the Pilbara region, including the purchase of the Buckland Project from BCI for cash consideration of up to $20 million and the optimisation of the existing Iron Valley Agreement whereby BCI will participate in the capital investment required to extend the mine life at Iron Valley.
  • MRL entered into an Asset Sale Agreement with Resources Development Group Limited (ASX: RDG) to transfer a 100% interest in its non-core Ant Hill and Sunday Hill manganese assets to RDG  in return for MRL receiving scrip equivalent to a 75% shareholding in RDG. The transaction is anticipated to complete by the end of FY20.

COVID-19 Update on Operations

The coronavirus (COVID-19) crisis is causing significant damage to communities across Australia and the world. Since the outbreak in January 2020, MRL has continuously monitored developments around the world along with guidelines introduced by the Federal and State Governments and the health authorities to minimise the risks that COVID-19 present to us.

In April 2020, we purchased gold-standard testing equipment and commenced swab screening for all of our fly-in fly-out (FIFO) workforce for COVID-19 as part of our total approach to minimising the spread of the virus. Our aim is to ensure that anyone travelling to our sites is free of the virus.

  • Screening is being conducted at drive-through locations in the Perth metropolitan area, so that workers do not have to leave their vehicle during the process. Qualified nursing staff with full medical PPE clothing and equipment undertake all collection. The samples collected are being processed in a National Association of Testing Authorities (NATA) accredited laboratory for analysis.
  • The COVID-19 screening process is part of Mineral Resources’ standard ‘fit for work’ regime, and will remain in place until the Commonwealth and State Governments declare that the coronavirus is no longer a risk to our community
  • The MRL machines are capable of performing a high volume of tests and we have offered the screening process to other resource companies to ensure this pandemic does not force the closure of Western Australia’s mining industry

This initiative complements other actions taken on our sites, further details of which are available at

--- click on link above for more ---

Disclosure:  I hold MIN shares.

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#Reports & Presentations
Added 6 months ago
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Last edited 3 weeks ago

17-June-2020:  Completion of restructure of non-core manganese assets   and   Resource Development Group Limited: Completion of Asset Acquisition from Mineral Resources Ltd

More M&A from Chris Ellison's MinRes (MRL, ASX: MIN), this time resulting in MIN gaining a controlling (75%) stake in Resource Development Group (ASX: RDG), a company which was was co-founded by its Chairman & MD, Andrew Ellison, the brother of MRL (MIN) Managing Director Chris Ellison, who "recused himself from all MRL Board discussions relating to the transaction with RDG".

I thought that was a typo and that he had "excused" himself, but it turns out that "recused" is a real word, and has been used appropriately, and it means to be excused, removed or omitted from involvement due to a perceived conflict of interest.

This deal means that RDG has acquired a 100% interest in the manganese tenements Ant Hill and Sunday Hill, both located in the Pilbara region of WA, and MRL (MIN) now controls 75% of RDG.  Following completion of the transaction with RDG, MRL has appointed Mike Grey, Mark Wilson and Paul Brown as non-executive directors of RDG’s reconstituted board.  Andrew Ellison will remain RDG’s Managing Director. 

Mineral Resources’ Chairman Peter Wade commented: 
“We are pleased to have completed this transaction with RDG, which will allow MRL to realise value from the non-core manganese assets today while preserving long-term optionality”. 

“As we have flagged previously, MRL will support RDG in its aspirations to grow the volume and value of project work within the mining, energy and infrastructure sectors at a level that is complementary to MRL’s own contracting and mining services focus.” 

Might as well keep it in the family.

MIN has been regularly hitting new 12-month highs over the past couple of weeks.  RDG briefly shot up last Wednesday (June 10) to equal their 2.6 cps year-high closing price that they had previously set on April 17, although during that day (April 17) they did get as high as 2.9 cps intraday.

I have never held RDG shares, but I do regularly trade MIN shares.  Not holding them currently.  I feel that MIN has more downside than upside in the near to mid term as Vale in Brazil get their iron ore production back online.  More supply without much of a further demand increase should, all other things being equal, result in a lower iron ore price.  MIN regard themselves as being a mining services company, and they are, but they also own and operate a number of iron ore mines themselves as well, so they have plenty of exposure to iron ore.

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#Reports & Presentations
Added 4 months ago
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#ASX Announcements
Last edited 9 months ago

25-Oct-2018:  Wodgina Site Visit Presentation - see here

23-Oct-2018:  Wodgina Mineral Resource and Ore Reserve Update - see here

22-Oct-2018:  Acquisition of Kumina Iron Ore Project (from BCI) announcement - see here

22-Oct-2018:  BCI:  Iron Ore Divestment Update - Sale of Kumina Iron Ore Project - see here

18-Oct-2018:  MIN 2018 Annual Report to Shareholders - see here

19-Oct-2018:  Correction to MIN Annual Report (Synthetic Graphite Project) - see here

I haven't posted any straws on MIN for about a year, but their more recent announcements can be viewed from here.

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#ASX Announcements
Added 3 months ago
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#Bear Case
Last edited 4 months ago

Some time in the second half of CY 2018:

That AFR story from June 2018 paints a reasonable bear case for MinRes (MIN).  They've now reported and they're trading a couple of dollars lower than they were a couple of months ago.

Here's the thing - I don't trust Chris Ellison like I trust the management at MND or GNG, but I do trust Ellison to do what's in his own best interests.  He's got somewhere between $300m and $350m worth of MIN shares (over 21 million shares), so most of his personal wealth is tied up in MIN.  He can afford a volatile share price, but he will make sure the MIN SP is up when he next wants to sell some shares. 

He last sold shares in November (28th to 30th) and it was 1,862,766 MIN shares at $19.82 average price, for a cool $37 million.  And that was only 8% of what Chris held at that time, so it wasn't a massive sell-down - for him, but he certainly got a good price!   He also has another 365,462 performance rights under the MIN FY16 & FY17 LTI (long term incentive) Schemes that will vest at various times over the next couple of years.  Chris will make sure they vest. 

You have to expect plenty of volatility with MIN, but you can still make money from owning them.  They can be traded or a long term hold.

18-Sep-18:  I'm not currently holding MIN shares, but I often do.

19-Mar-20:  I'm holding them again - bought back in after they reported in September 2019.

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