Mineral Resources shares slump after missing iron ore and lithium production expectations

Mineral Resources (ASX: MIN) shares fell more than -4.0% in early trade on Wednesday after posting weaker-than-expected iron ore production and lithium shipments for the December quarter.

Let’s take a look at how the company’s three core business segments – Mining services, iron ore and lithium – performed and whether or not they met analyst expectations. 

For perspective, FY22 EBITDA contributions from the three segments are approximately: Mining services (45%), iron ore (5.4%) and lithium (49.5%). From a revenue perspective, FY22 contributions were 43.4%, 40.5% and 16.1% respectively for the three segments. 

December quarter results highlights 

Mining services

• Mining services production volumes were 70m tonnes for the quarter

• The company said this was “steady quarter-on-quarter and in-line with expectations.”

• Ahead of StreetAccount expectations of 68.5m tonnes. 

Iron ore

• Iron ore production was 5.5m wet metric tonnes (wmt) for the quarter compared to 4.9m wmt a year ago

• Iron ore shipments were 4.1m wmt, which was down -9% quarter-on-quarter but in-line with the company’s FY23 guidance

• Still, this was below StreetAccount expectations of 4.55m wmt

• Average realised iron ore prices of US$97 a tonne, up 33% quarter on quarter

• Iron ore prices staged a massive rebound in the December quarter, from lows of US$77 a tonne to around US$125 a tonne

Lithium

• Mt Marion spodumene production was 121,000 tonnes, up 12% quarter-on-quarter

• Below StreetAccount expectations of 139,000 tonnes

• Wodgina spodumene production was 92,000 tonnes, up 43% quarter-on-quarter

• Above StreetAccount expectations of 87,000 tonnes

FY23 guidance: Lithium production takes a hit

Shareholders were also left unimpressed by the downgrades to FY23 lithium guidance and an uptick in costs.

MinRes said that the timing of its Mt Marion expansion to 900,000 tonnes per annum of production capacity has been “pushed back slightly” due to “delayed supply of processing equipment and labour shortages.”

As a result, FY23 shipped guidance was lowered to 250-280,000 dmt compared to its previous guidance of 300-330,000 dmt.

Cost guidance was also pushed higher from $460-510 a tonne to $540-590 a tonne. At the midpoint of both figures, this represents a 16.5% increase. 

Broker views

There’s only been one broker note for MinRes in 2023.

On 24 January, UBS upgraded the stock from Neutral to Buy with a $83.30 target price. The investment bank said it expects the lithium market to remain in deficit for the short-to-medium term.

Despite the Buy rating, the target price reflects a downside of around -11% based on Wednesday’s open of $94.0.