Shares in Mineral Resources surge on record Onslow Iron output and plans for export ceiling to rise

Mineral Resources plans to boost the maximum capacity of its key mining operation and believes it has learnt from ‘painful experience’ how to handle the next unforgiving Pilbara wet season. The Chris Ellison-led miner shipped 8.6 million tonnes of iron ore from its Onslow Iron project during the September quarter — the company’s record for a three-month period since first ore was produced last May. The average cost to export a wet metric tonne from Onslow came in at $54 for the September quarter, which was on the lower end of its $54/wmt to $59/wmt target band. Costs at MinRes’ long-suffering Wodgina and Mt Marion lithium mines were also broadly lower than the market was expecting. Investors were delighted, with MinRes shares rising 11.9 per cent to $47.44 by 10am and are now up 130 per cent over the past six months. The company’s stock slumped as low as $14.05 in mid-April, tumbling from above $70 a year prior. Its share price fall was mainly driven by a spate of issues at the 147km Onslow Iron haul road that links the Ken’s Bore mine to the Port of Ashburton. The biggest issue came in the form of cyclone Zelia in February, which destroyed large chunks of the haul road — costing $230m to fix. Repairs and upgrades to the private road were completed last month, according to MinRes. Chief financial officer Mark Wilson said he was confident the crucial transport route would not fail its second wet season in a row. “One of the benefits of the somewhat painful experience earlier this year was that we got a better understanding of where the water sat and how it moves live, as opposed to our modelling,” Mr Wilson said. “And so you can assume that we’ve studied that, we’ve worked with that and we’ve tried to address that in the (repair) work that we’ve done through that period up to September.” MinRes reached its 35mpta nameplate capacity at Onslow Iron during the September quarter, triggering a $200m payment from Morgan Stanley Infrastructure Partners due next month. MSIP last year agreed to pay $1.1 billion, plus $200m if the capacity milestone was met, for a 49 per cent stake in the Onslow Iron haul road. With the haul road upgrades now complete, Mr Wilson said an output increase was on the cards if the company adds to its transshipper fleet. “What we’ve said consistently is the sixth transshipper should give us the capacity at Onslow to go to 38 million tonnes per annum,” he said. “We are trialling, and have been trying for the last month or two, channel passing of our transshippers, and we see the potential to possibly increase throughput by another 5 per cent as a result.” Analysts are expecting delivery of the sixth transshipper towards the tail end of this financial year. Onslow’s strong performance is also beginning to ease market jitters about MinRes’ huge debt pile. The miner’s end-of-quarter net debt figure remained steady at $5.4 billion on September 30 after $400m of capital expenditure during the quarter. Mr Wilson said MinRes’ debt position had peaked and investors should expect continued deleveraging over the coming quarters. He implied the company was still pursuing a sell-down of its extensive lithium interests in WA to further alleviate balance sheet pressure. “The chairman in his letter to shareholders (earlier this month) expressly referenced a willingness to consider inorganic deleveraging, and you should assume that’s something that we were continuing to do,” Mr Wilson said when asked by analysts if lithium sales could still happen. “You should assume that anything we do on any of the assets we will only transact if we see real value there. “So, we don’t need to do a transaction today.”