'No one is making money in lithium', says big dog Ellison as MinRes cuts back

MinRes pauses dividend as humbling lithium prices curb profits
Boss Chris Ellison pledges supply discipline, saying no-one is making money in lithium
But long term he remains bullish on iron ore and lithium demand, even as MIN pulls back its investment to conserve cash in FY25 ‘downturn’

Mineral Resources’ (ASX:MIN) billionaire boss says “no one in lithium is making money” as it dumped its dividend to “conserve cash on every front”.

The lithium, iron ore, gas and mineral services player saw revenue lift 10% to $5.278 billion in FY24, but copped a 40% hit to $1.057bn in underlying EBITDA and 79% crunch in underlying net profit after tax to $158m.

Statutory NPAT fell 53% to $114m, with $1.9bn in operating cash flow (up 9%) dressed up with a $600m pre-payment for iron ore from the Onslow Iron project.

Mining services earnings were a bright spot, lifting 14% to $550 million.

Despite volumes lifting from 293,000t on a 6% Li2O basis from its Mt Marion, Wodgina and Bald Hill lithium mines to 486,000t, realised prices crumbled 76% from US$5267/t to US$1279/t, which comes on top of grade discounts on MinRes’ spodumene concentrate.

Onslow Iron’s first cost read has come in well above the ~$40/t previously mooted cost pre-production, with its first full financial year to see MinRes – the mine’s 57% owner and operator – produce 10.5-11.7Mt at $58-68/t.

That comes in below the higher cost and closing Yilgarn Hub (2-3Mt at $100-110/t) and Pilbara Hub (9-10Mt at $76-86/t), though Onslow is only intended to hit its full 35Mtpa production rate at the end of FY25, after which it plans to hit a cost level of ~$45/t.

MinRes shareholders were vicious in response, tanking its price by over 10% in early trade.

Blaming a ‘stubborn lithium price’ and continued investment in the $3bn Onslow Iron, where MinRes has clawed back $1.3bn from the sale of a 49% stake of its haul road to Morgan Stanley, Ellison placed the focus on cost reduction and cash preservation.

MinRes has set production levels slightly below 2024 levels for FY25, having previously flagged it wouldn’t pursue growth in a choppy market that appears oversupplied.

“I’m starving the product going in the market, I don’t want to oversupply the market,” Ellison said this morning. “I don’t want to waste my ore and it is the best result in terms of cash out of my bank account over the next 12 months is to do the pullback.”

It’s the second time in recent years MinRes has paused its dividend after canning an interim dividend on flopping iron ore prices in the first half of FY22.

Lithium in limbo

It wasn’t the only lithium miner to suffer, with conglomerate Wesfarmers (ASX:WES) showing the low pricing and elevated ramp-up stage costs at its Mt Holland mine lost $26m for WES on 20,000t of spod sales in the second half of the year.

Having cost $978m to develop so far, it says the company and its partner, Chile’s SQM, remain on track to produce lithium hydroxide in 2025 at a 50,000tpa lithium hydroxide refinery, with sales to begin in 2026.

It grinds against Ellison’s view, who expressed his joy to have exited downstream investments last year. He said Australia remained too expensive and that it was costing “US$1.8bn” to build plants that would cost “US$400m in 20 other countries”.

But he does see the supply-demand curve flipping in 2026-2027, as western automakers protected by tariffs against Chinese cars are forced to return to investment in the electric vehicle market.

“I see Canada recently this morning, have just come out and said they’re going to protect cars going into Canada … they’re going to give all of their car manufacturers a free ticket to keep making combustion engines,” Ellison said.

“It’s coming, the world’s not going to stop demanding we get carbon out of the atmosphere. The cheapest and quickest way of getting it out is we’ve got technology that gets it out now – run electric cars, and the amount of carbon you take out of the out of the atmosphere worldwide is phenomenal.

“So I think we’re probably a couple of years behind where we wanted to be. I think that probably by the time we get up to around late ‘26 early ‘27 we’re going to see a big change in the supply-demand curve.”

Taking questions from analysts, Ellison said unless prices recover from current levels after six months “a lot of operations” are going to turn off.

Ellison commentary

While lithium is in a hole, Ellison said calls the iron ore boom was over as majors look to prioritise copper acquisitions were overegged.

He has little doubt prices, which have flirted with a drop below US$100/t in recent weeks on putrid steel market conditions in China, will return to US$130/t at some point. While he wouldn’t commit to a call on where it will go in the short term, he said there was a lot of resistance at US$100/t.

“Iron ore is not the sexiest product in the world, it doesn’t have that ring like lithium or diamonds or copper, but it’s the best of any commodity that’s mined,” Ellison said.

“The biggest mining companies are only the biggest mining companies because they’ve got iron ore in their portfolio.

“You take the iron ore out of the big miners, and there is nothing there, and have a look at their bottom line – year in, year out, what the biggest contributor is to that, and which is the most boring.

“Every year, those big tier-1 guys are going to turn out billions and billions on those iron ore commodities they produce.

“On a bad year, it’s going to make $1.5bn for us in the commodity and mining services.

“If it bounces up to US$130/t, it’s probably going to make $3bn for us. So somewhere around the traps, over the next few years, we will see iron ore at US$130.

“I mean, sh*t, this is about my fourth iron ore downturn I’ve done in the last 20 years.”

At the same time, he said Onslow Iron would be paused at 35Mtpa until prices in MIN’s key commodities recovered, pledging to spend nothing on growth capex.

Longer-term, Ellison doesn’t see the development of Simandou in Guinea as a ‘Pilbara Killer’, saying its JV and major offtake partner Baowu, which also has a stake in the West African giant, is investing big bucks to create blending yards in China that will merge Simandou’s high-grade ore with Onslow Iron’s low grade product.

Despite his enthusiasm for the long-term market outlook, Ellison acknowledged it was a ‘downturn’, confirming the exit of 140 workers from its Osborne Park office.