Ellison confident in MinRes lithium future

Diversified miner Mineral Resources says its in-house operations model has allowed it to keep its lithium business profitable and cash flow positive, despite depressed market conditions.

MinRes’s December quarterly report revealed its Wodgina, Mt Marion and Bald Hill projects remained cash flow positive at current prices, as it maintained strong lithium output despite tough market conditions.

“All three mines are operating profitably at current prices, and those prices are going to continue to decline over the next three to six months,” MinRes managing director Chris Ellison said.

“We’ve operated in an environment in the MinRes business in lithium, where we’ve been sub-$US600 in sale price for longer than we’ve been above $US1,000 per tonne.

“We used to make money at $US600 per tonne, and we can still do that.”

Production increased 30 per cent to 83,000 dry metric tonnes at Mt Marion, where 86,000t of spodumene concentrate was sold at an average price of $US738/t on a lower, 4.2 per cent grade basis.

Highlighting the scale of depressed market conditions MinRes received $4,159/t for its Mt Marion product in the same quarter a year earlier.

Free-on-board costs at Mt Marion were $548/t for the half, and MinRes expects these to fall to around $500/t on a product basis by July.

Production by the restructured MARBL joint venture with Albemarle at the Wodgina project was down 17 per cent quarter on quarter, at 866,000t, as the company’s focus shifted to pre-stripping for its second stage at the project.

The JV sold 6474t of battery chemicals during the quarter – up 52 per cent from the previous quarter – at an average quarterly realised price of $US18,712/t.

Chemicals produced at Wodgina generated revenue of $US51,209/t in the same quarter a year earlier.

Mr Ellison said Wodgina’s processing plants had been constrained in 2023 due to quality of ore, as a result of cut-back works.

The company anticipates that work to be complete by mid-year, with operating costs expected to fall from $845/t of spodumene concentrate in the first half of the financial year to below $550/t as a result.  

At Bald Hill, where MinRes took control in November after buying the project from the administrators of Alita Resources, the company shipped 20,000t of spodumene concentrate generating revenue of $US979/t.

Mr Ellison said the company planned to make a few changes at Bald Hill.

“The mine is profitable to date, and we will continue to reduce costs down there,” he said.

MinRes has shifted away from a contract model at the site, employing company owned equipment and introducing MinRes management into the operation.

The company’s interest in local lithium assets and explorers was also addressed, with Mr Ellison pointing to the company’s integrated business model as a huge advantage in current market conditions.

“We’re probably the only mining company in the world that can design, build, construct and operate all inside the business, we can do it faster than anyone else and … we can deliver those projects for a substantial percentage of cost less than anyone else can,” he said.

“If you’ve got prospective ground out there, and you’re a junior, we’re well and truly open for joint ventures and to do farm-ins, or to take a piece of the company.

“Who else would you want on your share register?”

MinRes last year built a stake in Azure Minerals, which it confirmed it intends to offload as part of Hancock Prospecting and SQM’s takeover move.

It also has a 14 per cent stake in recently listed junior Kali Metals.

Iron ore the backbone

MinRes achieved solid performance from its iron ore business in the December quarter, with shipments up 23 per cent quarter on quarter, and realised price at $US119 per wet metric tonne.

The company’s Onslow Iron project remains on target for first ore on ship within budget by June.

MinRes said it expected to introduce a partner to buy a 49 per cent stake in Onslow’s dedicated haul road in the first half of this year.

“Iron ore is the backbone of most big mining companies sitting out there, and it’s the one that constantly generates a lot of cash,” Mr Ellison said.

“We’ve got two of those, and we’ve also got mining services.”

Mining services production volumes increased 9 per cent quarter on quarter.

In the Perth Basin, MinRes expects a final investment decision on its Lockyer gas project, subject to state government approval on LNG exports.

An LNG export approval would require the state to change its domestic gas policy, a move anticipated in the first six months of the year but yet to be put in place.

Mr Ellison said the company would have made a call on Lockyer earlier had the government given it greater LNG export certainty.

“We would have got to FID two months ago, had the government been able to make a decision on where they’re going,” he said.

“We can’t make a decision on FID until we know what size of plant we’re going to build.”

MinRes commissioned a new drill rig during the quarter, which it said would allow it to fast-track development of exploration and production wells in Westrn Australia.

Long-lead equipment procurement has started at Lockyer.

MinRes expects its net debt position to come in between $3.47 billion and $3.6 billion in the first half of the 2024 financial year.

MinRes shares were up 5.4 per cent around 10am AWST, trading at $58.47.