Whereas earnings earlier than curiosity, tax, depreciation and amortization (EBITDA) within the firm’s mining providers division rose to a document A$550 million, EBITDA for the lithium enterprise plunged 71% to A$384 million, whereas margins fell from 70% to 27%.
“We’re in a troublesome market. We’re in a kind of downturns. It’s nothing we have to panic about. You simply want to shut your eyes and go, ‘we’re in a downturn’. Nobody’s getting cash,” Ellison advised analysts throughout a briefing in Sydney Thursday morning.
MinRes operates the Mt Marion mine in three way partnership with Ganfeng Lithium, the Wodgina mine in JV with Albemarle Company and the extra just lately acquired Bald Hill mine, all in Western Australia.
In response to market circumstances, MinRes will pull again manufacturing at Mt Marion to 150,000-170,000 tonnes of spodumene this monetary 12 months from 218,000t in FY24.
Ellison mentioned he was stunned by how far the lithium worth had fallen and anticipated it might stay at present ranges for one more six months.
However he mentioned there wasn’t a selected worth that might immediate the corporate to close down operations, as sustaining the workforce was vital and low-cost modifications being made to every plant would decrease unit prices.
“If the worth of lithium continues to drop, there gained’t be a mine on the planet that’s getting cash, so we’ll actually simply begin pulling more durable and more durable on the spend till we strangle it,” Ellison mentioned.
‘Boring’ iron ore
MinRes has simply commissioned its 35 million tonne each year Onslow Iron undertaking within the Pilbara and is shutting down its increased price manufacturing in WA’s Yilgarn area.
Group iron ore steering for FY25 as Onslow Iron ramps up is 21.5-24.7Mt, up from 18Mt in FY24, together with 10.5-11.7Mt at free-on-board (FOB) money prices of A$58-68 per tonne from Onslow Iron.
Ellison described iron ore as “boring” however mentioned it was the one cause the world’s mining majors had been so massive.
“Iron ore just isn’t the sexiest commodity, like lithium, diamonds or copper, however it’s the very best,” he mentioned.
“Even in a foul 12 months, it’s going to make A$1.5 billion for us.”
Ellison believes the iron ore worth has discovered assist at $100 per tonne and can rise again to $130/t “within the subsequent few years”.
“You solely want 12 or 18 months within the solar with iron ore till you say ‘what debt?’”
Stability sheet considerations
Capital expenditure in FY24 was A$3.3 billion because of the improvement of Onslow Iron.
MinRes reported gross debt of A$5.3 billion and web debt of A$4.4 billion, which is predicted to peak within the present half.
The corporate didn’t declare a closing dividend and is shifting to defer enlargement tasks and preserve money.
MinRes has already reduce 140 jobs from its head workplace in Perth.
Capex steering for FY25 is A$1.94 billion, primarily regarding Onslow Iron.
Ellison performed down considerations over the corporate’s steadiness sheet, saying when he met with US bondholders, they had been extra taken with speaking about fishing.
“I’ve received a nervous bunch of Nellies in Australia,” he mentioned.
“If the lights exit and we don’t do any extra improvement for the subsequent 30-40 years, the enterprise goes to make some huge cash it doesn’t matter what. We’ve sunk the capital, we’ve received a bit extra … after that, we’ll simply be getting parked up, catching fish and watching the money are available.”
‘Conservative’ 12 months
Ellison mentioned FY25 can be a “very, very conservative 12 months” for MinRes with each greenback spent scrutinized.
“Why are we doing that? As a result of if we come out the opposite aspect of this with a bucketload of money, that’s the place the chance sits in these instances,” Ellison mentioned.
Mining providers volumes are forecast to develop from 269Mt in FY24 to 295-315Mt.
Group lithium manufacturing is predicted to be 480,000-545,000t on a 6% spodumene foundation.
FOB money prices are guided at A$800-890/t for Bald Hill and Wodgina and $870-970/t at Mt Marion.
Ellison predicted Onslow Iron can be cashflow constructive by December and absolutely ramped up by June or July 2025.
“It’s not the very best set of annual outcomes we’ve ever turned out, however we’re victims of the circumstances, like everybody, however be assured that we’ll proceed to do what we’ve achieved for a very long time. We’ll handle the money, we’ll handle the enterprise, and we’ll come out as we at all times do. We’ll come out a lot stronger,” he mentioned.
MinRes shares plunged by greater than 10% in early ASX commerce on Thursday to a close to three-year low and closed 8% decrease at A$40.61.
The inventory, which peaked at greater than A$96 in January 2023, has halved in worth since Might.