Mineral Resources Limited

Thank you for standing by and welcome to Mineral Resources Analyst Call covering today's release of its December 2024 Exploration and Mining Activity Report. Your speakers today are Mark Wilson, Chief Financial Officer, Mike Gray, Chief Executive, Mining Services, and Chris Chong, General Manager, Investor Relations. A bit of admin before we kick off. This is a sell-side call with analysts able to ask both text and live audio questions. To ask a text question, select the messaging icon, type your question in the box towards the top of the screen and then press the send button. To ask a live audio question, press the request to speak button at the top of the broadcast window. The broadcast will be replaced by the audio questions interface. Press join queue and if prompted, select allow in the pop up to grant access to your microphone. If you have any issues asking a question via the web, a backup phone line is available. Dial-in details can be found on the Request to Speak page or on the homepage under Asking Audio Questions. Text questions can be submitted at any time, and the audio queue is now open. This call is being recorded, with a written transcript being uploaded to the MINRES website later today. I will now hand over to the MINRES team.

Thanks Josh and good morning everyone. It's Mark Wilson, Minres CFO here. Welcome to the December quarterly conference call and thank you for your interest in Minres. I have with me this morning Mike Bray, our CEO of Mining Services and Chris Chong, our GM of IR with me. I intend to run through a few highlights first and then we're happy to take questions at the end. In terms of our summary of where we are for the quarter and for the half, starting with governance, I'm just going to say up front that you'll appreciate I can't comment further on governance matters or answer any questions on this subject today. Moving on to focusing on the highlights from the quarterly. In terms of our liquidity, that's been a key topic of focus for some time. Liquidity remains very strong. We've got $1.5 billion as of the end of December, and sitting in that balance is a $1.8 million revolving credit facility. Of note, our onslaught line carry loan, which is a receivable from MIMRES from our JV partners, which is created as we funded them into the project, has now increased to a touch under $800 million. This receivable is accruing interest at around 7.25% and it's repaid from 80% of the JV Partners free cash flow. That means that we're effectively reaping over 90% of free cash flow related to the Oslo mining operations for the first few years. But note the carry loan has started to be repaid as the mine itself is now generating positive cash flow. I'll talk on that a little bit later. The 31 December net debt total $5.1 billion. Major inflows. We received both the $1.1 billion upfront cash from the sale of the 49% stake in the road and also the initial proceeds of $780 million for the Hancock gas sale were received in the quarter. Both are significant achievements and, as I've said previously, previously demonstrated our ability to realise capital from underappreciated assets. In terms of major outflows, as previously foreshadowed, CapEx was heavily weighted for the first half, came in at about $1.4 billion, largely due to the completion of the major infrastructure for Onslow. There was a working capital impact of around $500 million, primarily to a decrease in trade payables. That wasn't unexpected given CapEx was always going to peak through this half, and you're just seeing an unwind of less payables. Additionally, in the half, we had the $200 million final payment for Red Hill Iron ore, once we got first ore on ship. and a further payment, sorry, a payment of $26 million in relation to the IV Iron Valley acquisition. Headline net debt numbers adversely impacted by the $300 million revaluation about US bonds of about $3 billion. That was a balanced state revaluation at an exchange rate of $0.62 compared to the $0.66 presented by this at 30 June 24. As you would understand, that's a point-in-time accounting calculation rather than any real adverse impact on the group. We have US dollar earnings that balance that, and the lower AUD is actually welcome for us. In terms of the bonds, if you haven't checked recently, they continue to trade very well, continue to trade with strong support from our bondholders, well above par. And just to reiterate that we have no financial maintenance covenants of any kind on those instruments with the earliest maturity in May 27. In terms of safety, the rolling 12-month TRIFA was 3.83 and the LTIFR was 0.21. The increase in the TRIFA is due to the construction activities and the intense level of work that was going on through the period. We're expecting that number to come down as construction lines off. And just to reiterate, as I said last time, safety remains our priority and we know it's important for our people, it's important for who we are as a business and it's important for our clients as well. In terms of our outlook, we're maintaining volume and cost guidance for all of our continuing operations. We did have higher costs in the first half across a number of the operations, which I foreshadowed on the last call, and I'll talk through that in a little bit. We did also talk back in September of 2020 CapEx and OpEx savings, 180 of CapEx and 120 of OpEx. In terms of the OpEx savings, we've made good progress there. We're now up to about 1,200 roles that have left the business across head office and sites since the start of FY25. That's a considerable increase from where we were at the last call. Those numbers reflect the wind-down of the construction activities, the transition of Boyle Hill and Yorga into Cairn Maintenance. Some roster changes as previously foreshadowed with lithium and a commensurate reduction in head office staff. So comfortable where we are on the APEX. On the CAPEX savings, we have made progress with the CAPEX. What I'm going to say on the CapEx is we're going to provide more detail at the half because we're still working through it. When we made that call around the savings, that predated the deal with Hancock. I think that the deal with Hancock gives us a bit more flexibility to think about how we might spend a little bit, particularly on gas. So you might see some more drilling costs, which again we'll talk about in February as we work through that. In terms of moving into the business now, mining services, production volumes were flat quarter on quarter at 68 million tonnes. We did see volumes come up with Onslow and some external work largely offset by Yule Gardens, Walthill going into Caron Maintenance. In terms of guidance, as I said, maintaining guidance, we expect volumes will continue to increase as Onslow ramps up. And a point of note on the external environment, I know that's been of interest to our investors. The external environment, the outlook remains positive. We've got good interest with a number of opportunities we're exploring with our key clients. We commenced two new external client contracts in the quarter. One was for rehab and one for mining. And we also renewed four existing external crushing contracts. In terms of iron ore, attributable iron production, iron ore production across the three hubs was 8 million tonnes for shipments of 5.2 tonnes. The average quarterly realised price across the three hubs was 84 US a tonne, which was 81% realisation. There are a couple of percent attributable to prior period adjustments. Without those, it would have been around 83%. In terms of Onslow, so we're pleased with the way Onslow is continuing to progress. The average realised price for Onslow was... $85 US a tonne, which is an 82% realisation. Customer feedback's been very positive. In terms of the operations, as I said earlier, the mine, well, the carry loan's now being repaid. The mine itself is, mining operations are profitable. Mineco is profitable. and generating cash and mining services continues to generate cash out of that operation. So the operations there are performing as we would have hoped. We believe we're now at peak leverage with that maxing out of the CapEx spend through the half. Over the quarter, we produced 4.4 million tonnes, which represents an annualised run rate of 17.6 million tonnes. Just to note that that's done with effectively two crushes operating, the third one's in the final throes of commissioning. January production, we are expecting to be... at least 1.6 million tonnes, which is a production rate annualised of just over 19 million tonnes. And again, we'll see the benefits of the third crusher really kick in through February and beyond. Third transshipper started in October, loaded 18 vessels and 3.10 million tonnes shipped over the border. January shipments were running at over 18 million tonne run rate before we got hit by severe tropical cyclone Sean. That was a somewhat unusual cyclone in terms of its nature and the direction it took. It basically disrupted transhipping for eight days. And we have identified the need to do some rectification works to limited sections of the road. to repair flood damage caused by the cyclone and a separate recent heavy rainfall event. The amount of water that moves up in that region is quite extraordinary in this instance. And I'm sure Mike can provide further flavor if you have any questions on that. The third next-gen crusher, the reclaimer, Truck loadout will commence commissioning in December. We're very happy with the way each of those is progressing. The transshippers are operating at nameplate capacity. Fourth is scheduled to arrive in February and the fifth is expected in April. The truck unloading circuit, product handling, shed, the bridge reclaimer and the transshipper loader are all complete and each have demonstrated they can achieve nameplate capacity raise. I just want to take a moment to talk about the road train rollovers that occurred in the December quarter, or in the half actually. There were four different incidents between August and November. One of these occurred on the Hall Road, and the others occurred on various access roads around the mine. Hall Road's been operational since late October, and there have been no incidents in December or January. All incidents involve some degree of operator error, but notwithstanding this, our response has been intense. We've included a number of operational improvements, strengthening driver training, looking at the road design, making some improvements, and improving signage and lane delineation. We feel that we're in a good space there now. On the other operations for Iron Ore, Yorgon and Pilbara Hubs, the shipment's total 3.5 million. Yorgon, as we flagged, has transitioned to Cairn Maintenance and we've successfully redeployed over 780 people to other roles within Minres. We are running a process for a potential sale of the Yorgon. If and when we have any updates on that, we'll make an appropriate announcement. In terms of costs, Bob at the Yorgan was higher than guidance, primarily because we wrote down some remaining unsold stockpiles. We also had to carry a fair bit of fixed costs through that quarter as we moved into care and maintenance. Pilbara with Iron Valley and Wanmana, another solid quarter just ticking over. 2.4 million tonnes shipped. Again, some write-down of some stocks, but comfortable with the way those operations are performing. Moving to lithium, spot production across all three sites was 136,000 biometric tonnes, with shipments of 143,000 Average realized price achieved across all the sites on an SE6 equivalent basis was US$827, which was a solid performance in a market that we believe is improving. And we continue to see prices better than that as we move into this second half. In terms of Marion, we previously foreshadowed a a shift to deliver a higher grade product, which we've executed on, and to realign volumes around market conditions. As a result, production decreased to 58,000 tonnes and we shipped 55,000 at 4.4%. The underground development, we've taken that to 160 metres vertical depth. We've paused at that point. We sold... 56,000 tonnes at realised price, SE6 equivalent of $816 a tonne. As previously foreshadowed, we have implemented a range of cost reduction measures across our lithium operations, including workforce roster changes to two-on-one, mine plan changes. We've seen that Marion, 190 people off that site, along with a whole lot of gear. First off, Bob costs, again, on an SE6 basis were $1,076. We're maintaining our guidance of $870 to $970. We're already seeing the cost reduction measures flow through towards the back end of the quarter, and those will continue to have an impact through the second half, and we continue to see expected improvements in recoveries. partly because of the introduction of WIMS, which we'd flagged previously. In terms of Wojana, production was at 54,000 tonnes, which is up 5% quarter on quarter. I talked last time about the challenges we'd had in the first quarter with the transitional ore and the quality of the material that we were working through. We have seen more fresh ore. We are getting better recoveries. in this second period. We shipped 61,000 tons at an average SE6 realized price of $834 US. Similar story on costs. First half fold, We expect them to be a touch over 1,000, 1,013 or thereabouts. Again, we're maintaining guidance. As we see the impact of those cost reduction measures flow through, we're seeing the cost per tonnes decrease. We've seen that through the tail end of the half, and we expect that to continue as production increases. As we disclosed a few months ago, it's been placed in care and maintenance given the market conditions and it's our highest cash operation. We saw shipping decrease as a result to 27,000 tonnes. We are maintaining the site on the basis that we can turn it on again for a quick restart as needed. So we have three months pre and post-pressure. or in Vast Soccer Vale, or make prices a bit easier for us when we need to go, when the market moves. In terms of FOB costs for Bald Hill, they've come in, we expect them to come in about $1,150 or thereabouts for the first half on their C6 basis. Farther than guidance, but again, impacted by the decision to move to care and maintenance and lower associated production costs. So there's some introductory comments. Hopefully they help provide a little bit more context of the numbers that were in the announcement this morning. With that, I'm going to hand back to Josh to queue for questions. Thanks.

Thank you, Mark. If you have not yet submitted your text question or joined the live audio queue, please do so now. I will introduce each caller by name and ask you to go ahead. You will then hear a beep indicating your microphone is live. Our first question today comes from Ben Lyons from Jordan Securities. Ben, please go ahead after the beep.