Announcement in response to the news about CEO Chris Ellison's tax affairs:

Statement in response to recent media reports

The Board of Mineral Resources Limited (ASX: MIN) (MinRes or Company) wishes to comment on issues raised in recent media reports relating to Managing Director Chris Ellison.

The Board is committed to robust and transparent corporate governance. It has engaged external legal counsel to conduct an investigation into this matter and advise the Board. Mr Ellison has cooperated with the investigation and the investigation is well-advanced.

Since its IPO in 2006, payments made by MinRes to offshore entities connected with Mr Ellison related to pre- IPO sales contracts that were recognised as liabilities in the Company’s financial statements at the time.

As to his private tax matters, Mr Ellison self-reported to the Australian Taxation Office, repaid amounts owed and disclosed these matters to the Board. While this does not diminish what happened, Mr Ellison profoundly regrets his errors of judgment.

The Board today comprises directors who individually and collectively have a strong focus on governance and are committed to continuous review and improvement.

The Board has full confidence in Mr Ellison and his leadership of the MinRes executive team.

The Board will issue a further statement regarding this matter once its enquiries are completed.

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The board is investigating, it's actually already well advanced, and we have full confidence in the CEO. So it sounds like the outcome of any investigation is a foregone conclusion at this stage unless something else crops up (further revelations, probably. External pressure, maybe - but I'm not sure there's anyone with a big enough holding to do that, and any serious shareholders are probably investing in the existing management as much as the company itself).

The revelations are disappointing. The bullish view is these matters are in the past, seem to have been resolved, and a charitable view could be that Ellison is a rule breaker who went a bit far and learnt his lesson.

On the other hand, a rule breaker still needs to respect the law. Wary of further information to come out - these sort of things are rarely isolated incidents. It also points to just poor judgement in general, focused on the short term. Not what I want to see.

Held, but considering where to go from here.

Minres has announced the Foreign Investment Review Board has approved the sale of the Onslow haul road, and that all sale conditions have now been met.

They expect to receive $1.1 billion in the next 15 days, and use that to cancel a $750 million bridge facility. A further $200 million is expected June 2025 (assuming Onslow reaches full production by then).

Net debt is currently ~$4.4 billion.

Notes from Business Breakdown podcast on MinRes

Fraser Christie from TDM Growth Partners was interviewed on the Business Breakdown podcast to discuss Mineral Resources.

Fraser is bullish on MinRes, describing it as “one of the best performing stocks of any business listed anywhere over the last 18 years”. He believes the business is still misunderstood by many analysts.

He splits the business into two segments. The first he calls InfraCo, which builds and operates infrastructure for mines. They design and build infrastructure in house, meaning they can do it faster and cheaper compared to others who outsource these capabilities. 

The infrastructure part of the business not directly exposed to commodity prices since they charge by volume. It’s also long term, recurring revenue, typically for the life of the mine. The InfraCo business is charging a fixed fee on volumes, and so it's not exposed directly to commodity prices.

The second part of the business Fraser describes is MiningCo which owns mines for the infrastructure part of the business to operate. MiningCo includes iron ore, lithium, and some gas. 

So the idea is to acquire a mine, InfraCo develops the infrastructure to build/expand and operate the mine. MinRes can either operate the mine or sell a stake in it.

MinRes has an emphasis on efficiency. Their lithium mines are some of the lowest-cost producers in the world. The iron ore mines have traditionally been higher-cost producers, but are moving to lower-cost, higher-volume operations.

Fraser identifies two possible risks to the continued growth of the business: 

1. loss of key personnel, such as founder CEO Chris Ellison retiring, or significant turn over in key staff, and

2. debt. Fraser argues the current level of debt is sustainable, and trusts management are experienced and incentivised to manage it well.

Fraser suggests that the current price is a reasonable entry point for longer-term investors:

…the business currently has a $12 billion market cap, but they've got an infrastructure business that could be worth $12 billion stand-alone. I would say there have been various moments in time where you could own this business just on the valuation of InfraCo and get Mining Co for free.

Are we in one of those moments right now? I'll leave up to everyone else, but that has been a core part of our thesis, is that InfraCo is undervalued by the market,

 So he thinks the infrastructure part of the business alone is undervalued, and the mining business is being valued at zero.

[Held RL and SM]