Mineral Resources (ASX: MIN) left investors stunned this morning after reporting a net loss of -$36m in the first-half of FY22. The emerging iron ore and lithium giant cashed in $430m in the previous period.
Due to the loss, and uncertainty around the iron ore price, no dividend was declared.
Mineral Resources shares fell -13% as the market opened.
Financials at a glance:
Revenue of $1.4bn, down -12%
Statutory net profit of $20m, down -96%
Macquarie believes higher transport and shipping costs in the iron-ore business (plus price discounting) have more than offset a better result in Mining Services.
But while Macquarie viewed today's interim result as weak, the broker maintains an Outperform rating and $75.00 target.
Macquarie notes buoyant iron-ore and lithium prices generate 23% and 92% higher earnings than the broker's base case for FY22 and FY23 at present spot prices, respectively.
Having expected a solid profit result of $262.4m, both Bell Potter and Citi were equally disappointed by Mineral Resources result today.
However, in defence of the result, managing director Chris Ellison noted:
“It hasn’t been easy and the challenges during 1H22 were amplified by the collapse in iron ore prices. This has delivered our worst first half financial result in three years."
“These results do not reflect the substantial progress in our iron ore, lithium and gas business during the last six months which will create significant value for decades to come.”
Benchmark iron ore prices plunged from all-time highs of US$218/t at the end of June to lows of US$87/t in November last year.
Mineral Resources, which produces a lower 58% grade product versus benchmark 62% received an average realised price of just US$71/t.
By comparison, production costs averaged around $100 a tonne.
The iron ore segment contributed a -$104m loss to overall earnings, down -$686m from the previous period and making up the bulk of losses in the first half.
The Mt Marion Lithium Project exported 207,000 dry metric tonnes (dmt) of lithium spodumene, generating $67m in earnings for the Group.
Lithium spodumene prices increased favourably, up 204% to average US$1,011/dmt.
Mineral Resources is also working towards restarting its Wodgina Lithium Project, which is 60% owned by one of the world’s largest lithium producers, Albamarle.
First spodumene production is expected in the first quarter of FY23.
Mineral Resources is optimistic about the its growth trajectory over the next 5 years.
The company's mining services segment, which generated a bulk of the company's first-half earnings, is expected to average 15-20% year-on-year growth over the next 5 years.
Mineral Resources hopes to transition towards a low-cost, long-life producer in the near term. FY22 iron ore exports are expected to be flat compared to last year, between 18.5 to 19.5m tonnes.
Over the next 5 years, Mineral Resources is targeting to more than double its iron ore production to 50m tonnes per annum.
Likewise, the company has in its possession two long-life hard rock lithium assets.
Over the next five years, it hopes to emerge as a top 5 lithium producer.
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