Ground Breakers: MinRes is looking healthier as iron ore and lithium prices rise

Big miners take a tumble ahead of ANZAC Day public holiday
Iron ore price on hold as mixed signals transmit from China
MinRes boast stronger iron ore and lithium pricing in March quarter

Into the big miners?

Keep your hands over your eyes as this trading session is going to be a tough one.

Materials and energy are down 3.57% and 2.31% with losses pretty much everywhere.

BHP (ASX:BHP) is the big culprit, down 4.6% after both a timid production report yesterday and some contradictory news for iron ore prices going forward.

The headline commodity is still trading around the US$150/t range, supported by expectations China will boost investment in infrastructure to meet its growth targets later this year.

But that has been infected this week by word the country wants to clip crude steel output to below 2021 levels, the second annual decline in a row.

Lockdowns continue to persist in Chinese cities as it keeps the faith in its Covid Zero policies, including the steel Mecca of Tangshan.

“Considering the domestic policy regulation, the uncertainty of the pandemic and the impact of geopolitics, ore prices are expected to continue to fluctuated widely in the short term, and throughout the second quarter, ore prices will rise and then fall,” the Shanghai Metals Market says.

But BHP, Rio Tinto (ASX:RIO) and Vale’s woeful first quarter numbers will limit downside, ANZ senior economist Adelaide Timbrell says.

“Slowing iron ore production as reflected in major producer’s production report should protect the downside for the market. After Rio Tinto and Vale, BHP reported its quarterly shipments falling by 8% q/q due to logistical issues,” she wrote in a note to clients.

Elsewhere the list of large cap losers reads like a who’s who of stocks likely to be held by your Super fund.

South32 (ASX:S32), Northern Star Resources (ASX:NST) and Whitehaven Coal (ASX:WHC) were among the notable sliders.

GBs share price today:

MinRes posts turnaround, expects Ashburton approvals by June

Mineral Resources (ASX:MIN) had an infamously bad run in the first half of 2021-22, sliding to an unexpected $36 million loss as prices paid for its iron ore tumbled and realisation for its low grade iron ore sunk to 58% of the benchmark 62% fines price.

Its March results should make those days a distant memory, with higher prices improving its sales revenue to US$101.31 per dry metric tonne, up 60% quarter on quarter.

That came in at 72% of the Platts IODEX, with shipments up 22% QoQ to 4.7Mt, defying the logistical challenges faced by bigger miners like BHP and Rio.

MinRes says it remains on track to meet its FY22 guidance of 18.5-19.5Mt (wet metric tonne basis). One issue it does face is higher costs, with its Yilgarn iron ore business facing costs of $96-104/wmt and its Utah Point sales exporting at a cost of $80-88/wmt.

Chris Ellison’s MinRes plans to over come that by bolstering its scale with the development of its large ~30Mtpa Ashburton hub in the Pilbara.

MinRes says final investment decisions from its myriad JV partners in the Ashburton Hub are expected in June 2022.

“The project economics are compelling through all economic
cycles. MinRes remains ready to commence construction as soon as final Government and regulatory approvals and joint
venture sign-offs are obtained,” the company said in its quarterly report.

The company is also looking to develop its 20Mtpa Pilbara Hub with the support of Gina Rinehart’s Hancock Prospecting after the WA State Government signed off on the award of a berth at Port Hedland to the MinRes-Hancock JV.

Lithium prices soar for MinRes

MinRes has the advantage of being diversified in a number of businesses outside iron ore, including in mining services, gas and lithium.

In response to soaring demand for lithium from electric vehicles and battery storage the company has already announced plans to significantly increase the scale of its Mt Marion and Wodgina mines.

MinRes and Ganfeng produced 104,000t of spodumene at Mt Marion and shipped 94,000t during the March quarter, with prices climbing 69% to US$1952/dmt against costs of just AUD$570-615/dmt.

Wodgina, which has been on care and maintenance until recently, also shipped some 22,000t of spodumene concentrate from stockpiles at a price of US$2200/t.

The first concentrate from the restarted first 250,000tpa train at Wodgina is expected in May 2022, with the MinRes-Albermarle JV agreeing to refire a second train, due to come online in July.