Monsters of Rock: Staring at the clock as reporting season winds up

Sayona, TerraCom and Paladin among the late breakers with end-of-season results drops
ANZ mulls iron ore outlook
Spartan surges in delayed Pepper sneeze

Financial results are basically done, with Cinderella stocks clearing the decks before the ASX enforcement team turns them into pumpkins at COB today.

A handful of smaller producers wound up in the dregs after yesterday’s mammoth offering, which included a cavalcade of ASX 100 and 200 players including Mineral Resources (ASX:MIN), IGO (ASX:IGO) and South32 (ASX:S32).

On the bill today was Sayona Mining (ASX:SYA), which is really stretching it at the North American Lithium operation in Quebec.

Operationally things are better, with recoveries rising in the direction of 70% and 155,822dmt of spodumene concentrate rolled out of North America’s only significant hard rock lithium producer in FY24, where Piedmont Lithium (ASX:PLL) also has a 25% stake.

70,000m is also being drilled at Moblan and 30,000m at NAL to grow its resource base at the Abitibi hub.

“This past year focused on delivery and performance, driven by our commitment to operational excellence and innovative practices. NAL has been the centrepiece of this focus with concentrate production of 155,822 dmt at the top end of our FY24 guidance,” MD and CEO Lucas Dow said.

“After only 17 months, NAL is nearing steadystate production and we will start to see improved operating metrics as this flows through into FY25. Safety will be an area of particular focus for FY25 as we strive to improve performance year on year.”

But financially things were less spectacular, with underlying EBITDA losses clocking in at $54m, $23m associated to NAL.

Depreciation and non-cash charges led to a $119m loss after income tax, though with $91m in the bank Sayona still has a decent cash buffer.

On a unit basis, SYA saw average selling prices of $1272/t in FY24 against FOB unit operating costs of $1417/t. That margin pressure was more stark in the June half, with prices down 41% to $962/t and costs 19% higher at $1526/t.

SYA has tried to curb costs by combining cargoes into larger shipments of 30,000t a pop. But its shares rose on guidance showing a lift in concentrate production and sales to 190,000-210,000dmt and 200-230,000dmt respectively with unit costs of $1150-1300/t, capex of $20m and exploration spend of $30m.

Yield demon demures

Pulling back its shareholder returns was the briefly flying coal miner TerraCom (ASX:TER).

The Queensland and South African coal producer saw profits after income tax slide 90% to $25.95m, with a 3c September 2023 dividend the only payout for the year.

It means shareholder returns dropped almost 10-fold, in line with sliding profits, from $244m in FY23, when it was a yield monster, to $24m in FY24.

Late yesterday also saw the release of Paladin Energy’s (ASX:PDN) FY24 results.

It banked a 607% lift in profit to US$53.63m for FY24 and saw operating profits shift from a US$27.05m loss in FY23 to US$60m profit, though that largely resulted from the reversal of write downs recognised eight years ago on stockpiles of uranium at its Langer Heinrich mine in Namibia.

The reversal resulted in a US$92.2m gain on the results.

Production resumed at the previously mothballed Langer Heinrich in March this year, with 517,597lb of uranium oxide produced in FY24. A first shipment of 319,229lb of yellowcake sailed from Walvis Bay on July 12, with 4-4.5Mlb of U3O8 scheduled to be produced in FY25 after the US$119.7m restart.

Paladin received a nervous moment earlier this week after its takeover target, TSX-listed Fission Uranium, was forced to delay a merger vote with too many investors yet to provide their voting intentions. A vote is now scheduled for a meeting on September 9.

How are analysts feeling about iron ore?

Iron ore has held strongly above US$100/t after a fortnight below US$100/t sending shivers down the spines of the WA Government.

Daniel Hynes and Soni Kumari at ANZ have run the ruler over the State of a tepid looking Chinese steel market to see where prices land up, predicting a balanced market will put equilibrium at US$90-100/t for the rest of 2024.

The risk, on top of China’s ailing property market appears to be the risk of tariffs of Chinese steel in the US and Europe.

Exports have surged in the past couple years, making up for China’s weak domestic economy.

“Under the worst-case scenario, prices would come under pressure. We see a strong support level at USD80/t, where domestic Chinese supply is pushed out of the market. A 10% reduction in demand would ultimately see prices push towards USD60/t,” Hynes and Kumari said.

“Nevertheless, China is likely to continue to rely on the international market for its steel-making raw material. Imports have remained strong, with January-August volumes up 6.6% y/y.

“This is likely to remain the case, with imported ore still the most cost-effective way for Chinese steel mills to lower costs.

“This should be a positive for exporters such as Australia. There are reasons not to be so pessimistic over the medium term. In sectors such as auto, infrastructure, manufacturing and shipping, demand remains positive.”

While there are concerns about new sources of supply from Brazil, the Pilbara and especially Africa, ANZ sees only 1% growth in seaborne exports in 2024 and 0.7% in 2025, though the headwind of China hitting peak steel demand and production is clear.

“China still needs lots of iron ore, and the market looks relatively balanced. However, its demand is clearly past its peak. The recent rally in prices is unlikely to persist given the short-term headwinds. We see prices in the USD90-100/t range for the remainder of the year,” they said.

Materials moved 0.71% higher today amid a broadly positive market.

Spartan Resources (ASX:SPR) lifted over 12% in what may have been a delayed response to hits at its Pepper deposit, a new high grade orebody near its company changing Never Never discovery close to Mt Magnet in WA.

The best strike came in at 27.01m at a haughty 39.15g/t gold, reported to the ASX on Wednesday.