Mineral Resources sharpens focus

Mineral Resources has highlighted new growth opportunities in mining services, infrastructure and manufacturing after posting a sharp fall in annual earnings and cutting its dividend payments to shareholders.

The company said its strategic focus was on its bulk ore transportation system (BOTS), with a final investment decision targeted for early next year, and development of a 22 million tonnes per annum transhipment facility within Port Hedland harbour.

It was also evaluating opportunities to manufacture mining equipment using carbon fibre.

“The development of innovative transport and materials handling infrastructure services for customers, which are capable of providing stable long-term revenues regardless of the economic cycle, remains the key growth focus area for MRL,” managing director Chris Ellison said.

Mr Ellison said the company’s strong balance sheet, with $118 million of net cash, ensured the company was well placed to pursue its development options.

BOTS is a radical development concept that involves construction of an elevated monorail designed to dramatically reduce bulk ore transportation costs.

Its design has been modified to incorporate standard narrow gauge rail and rail componentry.

Mineral Resources is targeted its Iron Valley mine, 331 kilometres from Port Hedland, for the first application.

The final commitment is subject to confirming project costs, completing route approvals and the iron ore market remaining stable.

BOTS would dovetail with the proposed transhipping service, which is also designed to achieve lower costs for mid-tier miners.

MinRes has partnered with Canadian Steamship Lines to deliver bulk logistics and transhipping services.

It is working with the state government and the Pilbara Pot Authority to determine the most suitable location at Port Hedland.

While MinRes has talked previously about BOTS and transhipping, an initiative unveiled today is a possible move into carbon fibre manufacturing for mining components.

Its initial focus is to replace steel is mining truck tray sub-structures.

The company said this business opportunity will be initiated, subject to proving up the technology in its operations.

The Applecross-based company today posted a net profit of $12.5 million for the year to June 2015, down from $230 million in the previous financial year.

Direct comparisons are difficult because of a number of one-off adjustments related to asset sales, the repeal of the mining tax and closure of some mines.

The general slowdown affecting its business was reflected in the 31 per cent decline in annual revenue to $1.3 billion.

The company highlighted its underlying net profit of $109 million, which it said was 7 per cent above consensus forecasts.

The company said its core mining services business, which encompasses engineering and construction, met all performance targets and delivered EBITDA of $237 million, down just $19 million after adjusting for one-off factors.

Its mining operations produced a record volume of 10.6 million tonnes, offset by the sharp fall in iron ore prices.

As a result, the mining EBITDA plunged to $50 million, down by $140 million from the prior year.

The directors agreed to distribute about 50 per cent of after-tax earnings (after impairment charges) to shareholders as dividends.

That equated to a final dividend of 15 cents per share, lifting the full-year payout to 22.5 cents, well down from 62 cents for the previous financial year.

The company’s shares fell 6.1 per cent today to close at $4.47 per share, continuing a sharp two-month slide.