Monsters of Rock: Iron ore, lithium miner Mineral Resources makes bank in record 2021

Chris Ellison’s Mineral Resources (ASX:MIN) says record iron ore volumes and sale prices have driven the miner and mining services business to a 230% rise in profits in 2020-21.

MinRes turned over $1.1 billion in underlying net profit after tax in the last financial year on a 148% rise in EBIDTA to $1.9 billion and 76% jump in revenues to $3.7b.

The company has been exposed to two commodity booms this year, with MinRes also a partner in the Mt Marion lithium mine, although its Wodgina lithium mine has remained on care and maintenance.

MinRes will pay out a fully franked final dividend of $1.75 per share, taking its total payout for 2021 to $2.75 per share, more than $500 million over the year and 175% more than its dividend payout in 2020.

On the release of the results Ellison said it positions the company to invest in expanding its iron ore division – where it is using acquisitions to underpin its ambition of developing its 30Mtpa Ashburton hub – despite the emergence of cost pressures and Covid battles.

“The full-year result is the culmination of continued strong growth in our Mining Services division, which is our Company’s heartbeat, and realises the rewards from our decision to build long-horizon businesses in iron ore and lithium,” Ellison said.

“This result positions Mineral Resources well to build our business with further significant investment in iron ore in particular, and seeking additional growth in our Mining Services division through the delivery of highest-quality, value adding and innovative solutions for our clients.

“The outlook for Mineral Resources is positive, notwithstanding the impacts related to COVID-19 and the cost pressures creeping into the West Australian resources sector. Our focus remains on providing a safe and supportive workplace that attracts and retains the best people in our industry.”

MinRes expects similar volumes of 10.5-11Mt coming out of both its Yilgarn and Utah Point iron ore hubs in FY22, with Mt Marion to export 450-000-475,000t of spodumene and mining services business expected to be 15-20% higher than in 2021.

Meanwhile, the iron ore price dropped again overnight by 5.8%, or more than US$10/t to US$162.75/t.

As recently as mid-July prices for seaborne 62% fines were above the US$220/t mark.
This time reports from China said steelmaking hub Tangshan had been ordered to curb future steel output by 12.37Mt to reduce the risk of air pollution at the Beijing 2022 Winter Olympics.

News about steel production cuts and evidence of decreased imports of iron ore by Chinese steel mills has driven the decline, but there remains skepticism from analysts about whether China, which is also fighting an outbreak of the Delta coronavirus strain, will stay on this path.

In spite of that big iron ore miners performed fine today, with BHP (ASX:BHP), Rio Tinto (ASX:RIO), Mt Gibson (ASX:MGX) and Fortescue (ASX:FMG) all in the green or even as 3.50pm AEST.

Liontown Resources (ASX:LTR)

Scorching hot lithium stocks continued to catch fire today, with Liontown the biggest percentage gainer among the key battery metals companies on the ASX with an almost 9% rise.

$1.9 billion-capped Liontown is aiming to bring its Kathleen Valley mine in WA, one of the highest grade undeveloped resources in the state, into production by 2024.

Pilbara Minerals (ASX:PLS) continued the purple patch it has enjoyed since news of its US$1250/t spod sale hit the market a week and a half ago, and was up another 5% to lead the large cap miners.