MinRes slumps on lower profit

Shares in Mineral Resources fell sharply early today befor recovering some lost ground, after the company reported an interim net profit of $13 million, due in part to an unrealised loss on its stake in Pilbara Minerals.

The company said its underlying earnings were broadly in line with the guidance it provided at last year’s annual general meeting, but the stock was still marked down.

At the AGM, it said earnings before interest, tax, depreciation and amortisation (Ebitda) would be between $280 million and $320 million for the year to June 2019, weighted 35 per cent to the first half and 65 per cent to the second half of the financial year.

Its Ebitda for the first half was $72 million after an unrealised $30.3 million accounting loss on its investment in lithium miner Pilbara Minerals.

After providing for income tax and non-controlling interest, net profit fell 92 per cent to $13 million.

The company cut its interim dividend by 48 per cent to 13 cents per share.

The lower earnings also reflected a 35 per cent fall in revenue to $554 million, after it halted sales of direct shipping ore from its Wodgina lithium project and its iron ore sales were affected by lower prices.

Managing director Chris Ellison focused on the group’s longer-term growth plans.

“This has undoubtedly been the most significant year in the company’s history,” Mr Ellison said.

“The financial results for the first half of FY19 reflect our strategic decision to invest in a number of longer term growth projects.

“These projects will assist us maximise the value of our lithium ore bodies while the infrastructure and innovation initiatives we have been developing over the past three to five years will provide us with additional, industry changing mining services capability.

“Together, these projects will create long-term shareholder value through the development of our world-class resources assets and increased annuity style earnings from enhanced mining services offerings.”

Major initiatives during the half year including selling a 50 per cent stake in the Wodgina lithium project in the Pilbara to US-based Albemarle Corporation for $US1.15 billion.

The company spent almost $400 million on the construction of lithium mining and processing facilities at Wodgina and Mt Marion.

Projected capex for the group for FY19 has been increased to $751 million.

It also acquired additional equity in Mt Marion to take its stake to 50 per cent.

In the iron ore sector, the company completed the acquisition of the Koolyanobbing project in the Yilgarn region and established a 50:50 joint venture with Brockman Mining in relation to the Marillana project in the Pilbara.

It also acquired the Kumina iron ore project in the Pilbara.

The company's shares closed 5.2 per cent lower at $16.84 after touching a low of $15.85 early in the trading day.