Monsters of Rock: MinRes rollercoaster continues and Sandfire leads quarterly crew

• MinRes responds to ASX on Ellison dealings, lifts over 7%
• Sandfire misses on costs but still pulls in strong earnings at strong copper price
• Ramelius misses, rakes in cash at high gold prices

Mineral Resources’ (ASX:MIN) board knew about potentially damaging tax issues and related party transactions related to boss and founder Chris Ellison long before they emerged in the Australian media but says none of the information released in reports or the fact it had engaged external counsel to look into them was deemed materially price sensitive.

A response to questions from the ASX today delivered a comprehensive rundown of what the MinRes board claimed to know about Ellison’s foibles, which have led to an internal investigation the results of which are expected next Monday.

MIN was informed of allegations related to payments made to offshore entities linked to Chris Ellison before the company’s 2006 IPO and official formation as early as June 2022, receiving more detail in June 2023 and November 2023.

News of Ellison’s settled tax payments with the ATO, which the company regards as a personal matter, came to the MinRes board in October with Ellison “confirming the facts” a month later. A briefing of the investigation the MinRes board initially undertook was delivered and considered by it in June this year.

While the matters were deemed not to be price sensitive, MinRes’ shares lost almost 26% of their value between Friday, October 18, when the news emerged publicly, and Friday, October 25.

They have rebounded over 7% today thanks to the response from MinRes’ board, and reports from The Australian that Ellison has told large investors, wary of a leadership change in a company that has never known anything else, that he intends to remain at the helm.

MinRes pointed to the media reports themselves as the cause for the negative movement in the lithium and iron ore miner’s share price. It had already been under pressure, falling from all time highs early last year of over $92 a share to under $30 this year due to tumbling lithium prices and concerns about its debt profile, before rebounding like Rodman in September due to market optimism around the Chinese economy.

“MIN understands that the key drivers for the negative movement in MIN’s share price since the announcement released to the ASX on 21 October 2024 (21 October Announcement) have been general media speculation, governance considerations and uncertainty regarding Mr Ellison’s ongoing leadership of MIN,” MIN’s board told the ASX in its letter.

“MIN also notes media speculation and coverage regarding ASIC making inquiries. MIN acknowledges that there may be continued speculation until the Board is able to determine matters.”

“Aside from the ongoing investigation which has been referenced in the 21 October Announcement and the subsequent announcement made to the ASX on 28 October 2024 (28 October Announcement), MIN is not aware of any other information potentially known in the market that has been driving the recent share price movement.”

Sandfire rolls out results

A strong Euro saw costs rise at Sandfire Resources’ (ASX:SFR) MATSA mine in Spain, while its Motheo project in Botswana came in below 14,000t consensus copper production estimates in the September quarter.

That saw the miner’s shares slide almost 4%, not helped by stagnating copper prices in response to weak Chinese construction profits.

“Profits at Chinese industrial firms fell 27.1% y/y in August according to data from NBS. Profits decreased 3.5% in the first nine months of the year from the same period in 2023,” ANZ analysts said.

“A Bloomberg survey of property and infrastructure companies showed they had few or even no new projects in September amid tight funding conditions at local governments.”

Copper is fetching historically strong prices of upwards of US$9500/t, though higher prices are likely needed to incentivise new production and ensure profits for current miners amid recent inflationary pressures.

Sandfire produced 27,000t of copper metal in the September term, 12,700t at Motheo at C1 costs of US$1.42/lb, and 14,300t at MATSA at US$1.88/lb, above consensus of US$1.29/lb and US$1.60/lb respectively.

Earnings were estimated by RBC’s Kaan Peker at US$71m for Motheo and US$77m at MATSA, which also produced 21,500t of zinc and 2100t of lead.

Its underlying EBITDA of US$140m for the quarter was not far off consensus of US$149m and RBC forecasts of US$148m, Peker said, calling the financial impacts of misses at Motheo and on zinc at MATSA minor.

“Over FY25, the ramp-up at Motheo, and improved operational performance at MATSA are expected to drive copper production and EBITDA higher,” he said in a note.

“Furthermore, with Motheo capex decreasing, we see FCF stepping up over FY25e-26e, significantly de-gearing the balance sheet. Outperform retained.”

Ramelius Resources (ASX:RMS), meanwhile, was down after missing consensus estimates by 13% at its Mt Magnet and Edna May gold mines, producing 62,000oz in the first quarter of FY25.

That’s down from 74,000oz in Q4 FY24, with all in sustaining costs up 44% QoQ from $1362/oz to $1965/oz, 8% higher than consensus.

That included a non-cash component for the drawdown of stockpiles at the soon to shut Edna May gold mine of $376/oz, with operational AISC of $1589/oz. Realised gold prices averaged $3359/oz including 28,000oz at hedged pricing of $2891/oz.

Spot sales of 34,806oz came in at an average price of $3736/oz. Gold is now trading above $4200/oz.

The miner still stuffed a further $90m in underlying free cash in its gold-lined pockets, with $438.6m in cash and gold at September 30 down from $446.6m at June 30 only due to the $97.6m it spent taking its stake in Spartan Resources (ASX:SPR) to 18.35%.

But including its investments, chiefly the hard running Spartan, Ramelius lifted net cash, gold and investments from $546.7m to $731.5m across the September quarter.

On the longer term front the company, which has maintained guidance of 270,000-300,000oz at $1500-1700/oz this financial year, has set an open pit production target at its Eridanus pit near the Mt Magnet mill at 12-16Mt at 1.2-1.6g/t for 575,000-775,000oz, with an expansion of the plant from 2.5Mtpa to 3Mtpa now viewed as the optimal size for a study planned in December.

A study on the greenfields Rebecca-Roe project near Kalgoorlie is also due in December.

The materials sector was up 0.6% today, with MinRes the leader.

Making gains 

Mineral Resources (ASX:MIN) (lithium/iron ore) +7.2%

Northern Star Resources (ASX:NST)  (gold) +3.5%

Westgold Resources (ASX:WGX)  (gold) +3.2%

Lynas (ASX:LYC) (rare earths) +2.8%

Eating losses 

Coronado Global Resources (ASX:CRN) (coal) -6.6%

Paladin Energy (ASX:PDN) (uranium) -4.9%

Sandfire Resources (ASX:SFR) (copper) -3.4%

Liontown Resources (ASX:LTR) (lithium) -3.3%