Mineral Resources (MIN)
HOLD

Fumbled

 27 Apr 2023
Sector: Materials

3Q23 PRODUCTION

Need To Know

  • FY23 iron ore production guidance lowered to 245-255Mt
  • Spodumene concentrate production guidance lowered at Mt Marion, but expansion on track and budget.
  • FY23 lithium battery chemicals sold guidance 5.0-6.0kt, lowered from 8.5-9.5kt

Mineral Resources has dropped the production ball in the third stanza this year. Production guidance for the full year has been lowered in iron ore and spodumene concentrate. 

Lithium. Mt Marion will finish the year with 160-180k dmt of spodumene concentrate (SC6 equivalent) and lithium battery chemical sales at 19.0-21.3kt. Achieved prices are falling at the same time with the 3Q23 average lithium battery chemical price of US$50,943/t down -31.5% on 2Q23. The $120m expansion project to double plant capacity to 900ktpa of mixed grade spodumene concentrate (570-600ktps SC6.0 equivalent) will add a further $25m for a water saving project. The subsequent delay will see the project commence mid-May and has nudged up FY23 cost guidance to US$1,200-1,250/t (SC6 equivalent) from the previous US$850-900/t.

At Wodgina, mining and processing is ramping up towards capacity production with 49kt (40% share) of 5.6% spodumene concentrate shipped in the quarter +28% on pcp. During the period, 24kt was converted to 3,246t of lithium battery chemicals by MIN’s partner, Albemarle. Wodgina is on track for FY23 guidance of 150-170k dmt (SC6 equivalent) and lithium battery chemicals production of 11.5-12.5kt. The amount of lithium battery chemicals sold will be much lower at 5.0-6.0kt (was 8.5-9.5kt) reflecting the new MARBL JV marketing arrangements with Albemarle now responsible for all sales. Once the Australian part of the restructure is complete, MIN will be responsible for that part of marketing and sales of lithium battery chemicals.

Iron Ore. Quarterly group production of 4.5mt was up 10% qoq and in-line with FY23 production guidance of 17.2-18.8m wmt. The average achieved price of US$109/dmt was up 12% on 2Q23 but unit costs are creeping higher.

Mining Services FY23 volume guidance has been lowered to 245-255mt (was 270-280mt) due to a delay in approvals and award of new contracts.

Investment View

There is no disguising a sloppy quarter of production. But the bigger picture remains positive particularly regarding the expansion projects in iron ore (Onslow) and the new arrangements with Albemarle in lithium and spodumene. 

MIN is now a top five global producer of lithium with approximately 100ktpa of attributable lithium chemical production, increasing to 140ktpa when Train 4 becomes active.

With the recent news that Chile will begin to nationalise its lithium industry, in which Albemarle (ALB.US) and SQM (Wesfarmers’ partner at Mt Holland in WA) have a large presence, there could be greater interest in Australian projects as a consequence. 

More immediately for MIN, it needs to sharpen up its operational execution and deliver on its various expansion projects. The disappointing outcome of the Lockyer-2 gas drilling results has left MIN with 88.08% of Norwest Energy under its takeover proposal. Fortunately, progress on the 30mtpa Onslow iron ore project is good with first iron ore shipment targeted for June 2024.

We have retained our Hold recommendation. 

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Company Overview

Mineral Resources is a mining services company with iron ore, lithium and energy assets in Western Australia.

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