Checking in on MIN.
Central to my thesis is that they will not need to do a damaging, dilutive cap raise at depressed prices.
This seems on track for now with the new Chair saying as much and hinting at CE staying longer.
CE would not be keen on dilution, to say the least and still seems to hold sway in the boardroom.
Anecdotally consensus in the market seems to be that they will turn to assets sales (possibly in lithium) to fund upcoming debt repayments.
I think this would be suboptimal and will be resisted given current market conditions.
There’s nothing to suggest MIN has become less opportunistic in buying and selling assets.
Another option is to monetise their carry loan but again this is likely a suboptimal approach if it can be avoided given the haircut they’d likely take.
That said they’ll need to do something as current repayment schedule can’t be met from operations.
Debt Refi
If no cap raise and no asset sales they will need to refinance debt.
In the Q4 call the CFO said pricing is probably about 8.5% for new MIN bonds but this could tighten as the market gets more comfortable with Onslow progress.
I had a look and all 4 bonds in the market are trading at a premium. With a WACC of 8.6% on this historic bond debt, 8.5% seems realistic ATM.
Next repayment of ~A$1bn is due just over 18 months from now in May-27. Then another ~A$1bn in 24+ months in Nov-27.
These can be called and refinanced at MIN’s option within 24 months of maturity, so from Nov-25 they can effectively refinance A$2bn for 5-8 years leaving nothing to repay until Oct-28 (A$1.8bn on 3rd bond maturity).
If Onslow continues to progress as management now expect this could be enough to start paying down the refinanced outstanding bonds as they fall due.
Another refi could still be required along the way depending on commodity prices and operational progress.
This is a necessarily big picture view and it’s not ideal to be scratching around for sources of repayment on A$5bn of debt but that’s likely the source of the opportunity I’m seeing.
Lots of moving pieces still to fall into place – operational, governance, and of course commodity prices. Each of these seems to be trending in the right direction for now…
Disc: Held.
