Monsters of Rock: Pilbara dumps dividend, Ramelius posts monster profit lift

Pilbara Minerals dumps dividend, but analysts see bright spots in FY results
Ramelius pumps profit on record gold prices, though Gold Road and Alkane’s tyres look a little deflated
De Grey, Nickel Industries and uranium producers intrigue

Pilbara Minerals (ASX:PLS) boss Dale Henderson says overseas competitors will be finding current lithium price levels ‘difficult’ after spodumene and Chinese carbonate market prices fell 22% and 18% in the month and a half since the start of the financial year.

It came as PLS dropped its full-year dividend despite sitting on $1.6 billion of cash, with 74% fall in realised prices from its Pilgangoora mine underpinning a 69% drop in revenue to $1.254 billion, 84% slide in EBITDA to $538 million, 86% profit slide to $318m on an underlying basis and 89% tumble in statutory NPAT to $257m.

That PLS remained profitable last year was a testament to its position in the cost curve, pushing ahead with expansions of its Pilgangoora mine to 680,000tpa and soon 1Mtpa despite significant losses at competitors like Albemarle (-US$188m in the June quarter) and SQM (-US$656m for the June half).

But Henderson said a number of suppliers and converters would be suffering at current hard rock and chemical lithium prices in China.

“There’s been some further declines across the PRAs (price reporting agencies) for spodumene, roughly 22%, and China domestic carbonate, approximately 18%, from that period, 1st July to 22nd August,” he said on a conference call today.

“So a little bit more softness on pricing and we suspect that at these price level, it be a very difficult price point for many of the converters and suppliers through the industry.

“We will continue to see how others in the market behave in response to these price levels.”

PLS has used the opportunity provided by its cash buffer and falling sentiment for lithium juniors to do some counter-cyclical M&A, announcing a $560m all scrip takeover of Brazilian explorer Latin Resources (ASX:LRS) last week.

It has also restructured its balance sheet, announcing it was in talks with financiers including mainstream Australian and international banks on a revolving credit facility that will improve its financial flexibility and liquidity, though Pilbara’s top brass suggested it did not imply it was building artillery for more dealmaking.

Analysts respond

Analysts say the non-payment of a dividend was in line with expectations as Pilbara continues to spend growth capex and weather the storm of lower lithium prices, which at current rates are likely to be worse in the current period than they were in FY24.

RBC’s Kaan Peker said higher costs, however, meant earnings and profits came in below consensus estimates.

That aside RBC, which has a $3.90 price target and outperform rating on PLS, said most metrics were unsurprising having been reported previously.

Jarden’s Ben Lyons, who holds a $3.70 PT and buy rating on PLS, said the escalation in corporate costs had been expected ($66m vs $42m) by the corporate advisors.

But he said the results were robust.

“The robust operating cash generation demonstrated in FY24 reinforces our view of the quality of the Pilgangoora asset and PLS corporate strategy,” he said in a note.

“With 100% equity, and located in the second quartile of the cost curve, Pilgangoora is free to operate unimpeded by any JV complications or vested interests which may impact assets located even lower on the cost curve.

“Despite the precipitous drop in SC6 prices through FY24 to <US$1,000/t, PLS still generated Underlying EBITDA of A$538m and Operating FCF of ~A$333m (excluding the A$773m tax true-up related to FY23 earnings).”

Gold, coal stocks on the bill

If it’s been a depressing reporting season for lithium producers it’s been anything but for gold miners finally milking the udders of record gold prices.

Ramelius Resources (ASX:RMS) has been among the cream of that crop in recent years and ratcheted up its fully franked final dividend today 150% to 5c a share.

That came off the back of a 166% lift in NPAT to $200.3m on an underlying basis, with statutory NPAT 252% higher at $216.6m.

Higher gold prices and record production saw revenue climb 40% to $882.6m, with EBITDA 76% up at $462.2m.

It comes as RMS signals confidence in the life of its Mt Magnet operations by inking a power purchase agreement with PWR for a gas, diesel, solar PV and battery hybrid power station and future renewables growth in the form of wind and expanded solar PV generation.

“The second half of the financial year was particularly strong with 80% of our NPAT for the year coming in this period as we converted the substantial benefits of our disciplined investments from prior years,” RMS MD Mark Zeptner said.

“This is not only true of Penny, where multiple stoping areas are now available, but also Eridanus where grades improved notably in the last quarter of the year.

“Indeed, the future for Eridanus is very encouraging with over 3Mt stockpiled and attractive underground / open pit options currently on the table.

“In June 2024, we also commenced development of Cue with first high grade ore to be delivered late in October 2024, another key source of future cash flow generation for the Mt Magnet hub.”

RMS expects to produce 270,000-300,000oz at AISC of $1500-1700/oz in FY25.

Less impressive were Gold Road Resources (ASX:GOR) and Alkane Resources (ASX:ALK), who suffered from production issues at the Gruyere and Tomingley mines in WA and New South Wales respectively.

GOR, which reports results on a calendar year basis, was down almost 5% after cutting its interim dividend from 1.2c in June 2023 to 0.5c this year.

Its half-year gold sales (on its 50% equity basis) fell from 80,115oz in June 2023 to 63,542oz in the first half of 2024, with free cash flow falling from $74.6m to $4.2m and operating cash flow down from $110.3m to $68.5m YoY and NPAT sliding from $55.7m to $43.1m for the June half.

Impacted by wet weather, Gruyere’s guidance was trimmed to 290,000-305,000oz in July, with all in sustaining costs set at $2050-2200/oz. Production is expected to improve in the second half.

Alkane said the transition to the Roswell underground deposit at Tomingley resulted in more tonnes coming from the lower grade Wyoming and Caloma deposits, with profit after tax down 58% from $42.45m in 2023 to $17.677m in 2024.

Moving to the world of coal (also known as Queensland) and Stanmore Coal (ASX:SMR) reported a slide in half-year EBITDA from US$650m in H1 2023 to US$407m in H1 2024.

Its profit after tax fell from US$340m last year to US$136m this year.

Lower average sale prices and rising capex were to blame, though Stanmore believes PCI prices are improving as cheap Russian supply of the met coal product stops flooding the market. SMR will pay a US4.4c per share dividend while also refinancing its debt facilities with a five year US$350m term loan and US$100m revolving credit facility.

Port operator Dalrymple Bay Infrastructure (ASX:DBI) meanwhile announced a $36.8m NPAT having shipped 29.9Mt of coal in the first half, in line with 2023 levels. 81% of that coal was exported to steelmakers, with Indian exports notably climbing 30%.

DBI has lifted dividends 4.65% of 22.5c per share for the coming financial year, targeting distribution growth of 3-7% per annum. It’s also increased terminal infrastructure charges for miners to $3.59/t from $3.44/t, up 4.2%.

De Grey gets de NAIF

Back in WA and the country’s next major gold development, De Grey Mining’s (ASX:DEG) ~500,000ozpa Hemi mine, has moved a step closer after Canberra agreed to tip in $150m through the Northern Australia Infrastructure Facility.

The low cost loan will form part of a $1bn senior debt facility for the ~$1.3bn development, with a $130m cost overrun facility also on track in this half.

Hemi is being pitched as an important project to diversify the Pilbara against a backdrop of weakening iron ore and lithium prices.

“Hemi is an important project for the Pilbara region which will help provide commodity diversification and new mineral processing skills in what is already a mining heartland of Western Australia,” DEG MD Glenn Jardine said.

“The Hemi processing facility will be a strategic long-term piece of regional infrastructure with potential to process gold ores from the Pilbara and potentially from other parts of Northern Australia.

“Hemi is located on Kariyarra lands and the development of the project will provide the Kariyarra People with important economic, employment and vocational opportunities. It will also support the preservation of Aboriginal cultural heritage and land management through the establishment of a ranger program within Kariyarra country around the Hemi area.”

A final investment decision rests on the completion of environmental approvals.

50 more years for NIC

The go-to nickel name on the ASX, Nickel Industries (ASX:NIC), has plotted out a long-term future, buying up additional nickel laterite resources to feed its processing plants in Sulawesi.

The company will acquire the Sampala project some 37km from its rotary kiln electric furnaces in the Indonesia Morowali Industrial Park, immediately north of the Sulawesi Cahaya Minerals project 49% owned by NIC’s largest shareholder Shanghai Decent, a limb of the world’s biggest stainless steel player Tsingshan.

SCM has 1.14Bt at 1.2% nickel for 13.9Mt of contained nickel metal, a hint of the potential high-grade endowment at Sampala, where initial drilling has defined a resource of 187Mt at 1.2% nickel and 0.09% cobalt for 2.3Mt of contained nickel and 200,000t of cobalt.

“The majority of the acquisition payments for the Sampala Project are expected to be due in 2026,” NIC’s Justin Werner said.

“Further, once in operation, the excellent mine economics are also underpinned by a minimal capex requirement in the tens of millions of dollars and an extremely quick payback of less than 12 months.

“The initial Sampala Project resource of 2.285 million contained nickel metal tonnes and HM’s (NIC’s existing Hengjaya mine’s) current resource of 3.7 million contained nickel metal tonnes increases Nickel Industries’ total nickel resource inventory to in excess of 5 million tonnes of contained nickel metal with the opportunity to increase this significantly which would position Nickel Industries as one of the largest owners of nickel metal in the ground and ensure nickel resources for its operations for the next 40 to 50 years.”

Materials stocks were up 0.83%, but uranium miners led the market after Kazakhstan’s Kazatamprom followed up news a few weeks ago it would increase production guidance in 2024 by just as quickly slashing its production target for 2025. Cue the yellowcake euphoria.