Reporting Season

Mineral Resources FY22 profit dives: Green light for $3bn Pilbara iron ore project

By Market Index
Mon 29 Aug 22, 11:33am (AEDT)
Iron Ore
Source: Unsplash

Key Points

  • Mineral Resources posted FY22 statutory net profit after tax of $351m, down -72%
  • New Onslow Iron Project is expected to ship 35m tonnes of iron ore annually during stage one
  • Macquarie has downgraded its iron-ore price outlook -20% for the next 18 months and forecasts the miner’s earnings to fall -20%

Due to a first half decline in iron ore prices and widening of discounts, Mineral Resources (ASX: MIN) was down -6.70% at the open after reporting a full year FY22 statutory net profit after tax (NPAT) of $351m, down -72%, on revenue of $2.4bn which also fell -8% on the previous period.

Falling iron ore prices, and lower grade iron ore shipments, were partly offset by surging lithium prices yet the miner declared a final dividend of $1.00 a share, down from $1.75 a share a year ago (to be paid 23 September).

Green light for $3bn project

Given that there were few surprises expected within today’s result, management attempted to draw attention away from the disappointing numbers by announcing that the miner, together with Chinese steelmaking giant Baowu, have given the green light to a new $3bn Pilbara iron ore project.

The decision to proceed with the Onslow Iron Project through the JV vehicle Red Hill is expected to open a major new iron ore province and associated port in WA’s West Pilbara.

Management has guided to shipment of 35m tonnes of iron ore annually during first stage of the project.

"I’m delighted that our flagship Onslow Iron Project has reached this significant milestone,” noted managing director Chris Ellison.

“Onslow Iron introduces a low-cost, long-life and low-risk operation to MinRes’ iron ore portfolio, along with the largest mining services contract in Australia."

Key highlights within today’s result included:

  • In May 2022, the miner executed a new US$1.25bn bond raise in the US debt markets.

  • The Company’s strong balance sheet and available cash of $2.4bn continue to the miner’s growth outlook.

  • During the year, the miner was included in the ASX50 index

  • Record Mining Services production volumes – 274Mt, up 10%

  • Expansion to double production at Mt Marion commenced

  • Wodgina Train 1 and 2 successfully restarted production

  • First lithium hydroxide earnings from Mt Marion offtake

  • Record iron ore tonnes sold – 19.2Mt

  • Onslow Iron Project construction commenced

  • Significant Perth Basin onshore gas discovery at Lockyer Deep

Full year results at a glance


Second-best result

Despite iron ore price headwinds, plus inflationary cost pressures and the lingering pandemic impact on everyday operations, Ellison reminded investors that today’s result was still the second-best financial performance in the miner’s history.

“… we achieved the second-best financial performance in our history while investing in major development projects that will set us up for the next 30 to 50 years,” Ellison noted.

Ellison also advised investors that the successful restructuring of the company into four operating pillars – Mining Services, Iron Ore, Lithium and Energy - will allow the miner to better capture the enormous potential now embedded with the business – none more so than in the lithium space.

Looking forward

In lithium, the miner and JV partner Ganfeng approved the next stage of expansion of Mt Marion, to 900,000 tonnes per annum.

The miner also delivered maiden earnings from lithium hydroxide production – a first for an ASX-listed company.

Management also noted that FY23 will see the expansion of the Lithium business’ contribution as the miner expands the Mt Marion mine, restarts Train 3 at the Wodgina mine and commences hydroxide production at the Kemerton Plant.

Mineral Resources share price over 12 months.


What brokers think

Mineral Resources share price is up 25% over one year.


Consensus on the miner is Strong Buy.


Based on Morningstar’s fair value of $75.44 the stock appears to be undervalued.


Goldman Sachs rates the miner a Buy with a target price of $63.60.


Based on the six brokers that cover the miner (as reported on by FN Arena) the stock is currently trading with 14.8% upside to the target price of $74.76.


Macquarie has downgraded its iron-ore price outlook -20% for the next 18 months and forecasts the miner’s earnings to fall -20%.


The broker maintains an outperform rating retained with the target price falling to $91 from $95. (24/08/22).

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