MIN 3.76% $70.87 mineral resources limited

Oh wow. I was expecting better for 2H19.Without the iron ore...

  1. 858 Posts.
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    Oh wow.
    I was expecting better for 2H19.
    Without the iron ore rally this could have been ugly as it contributed to 185m$ of the EBITDA out of 386m$ just for the iron ore division and likely more if you include the mining businesses contribution.

    Lots of stuff I'm not super happy with.
    Costs per ton are high and increasing.

    Fair enough for Wodgina, lower volume, higher costs.
    DSO is not happening anymore anyway.
    Costs for the 6% concentrate remain to be seen.
    Fingers crossed.
    Deal need to go ahead, but pretty confident it will.
    Production profile to be determined by JV is a bit scary in a 60/40 joint venture.

    Koolyanobbing was in ramp-up mode so fair enough for 2019, but they expect another 5% increase in costs in 2020 as well ?
    This means this would be a marginal operation if IO prices go back down to december level as they got 81$/t revenue in H1Y19 and costs of 75$/t in H2Y19.
    A 5% increase would bring costs up to 79$/t.
    Maybe costs will stabilise/fall after expansion.
    Gotta hope the IO rally will last a bit longer.
    Forecast of 8.5mt production for 2020
    => 180m$aud EBITDA @ 100$/t revenue
    => 94m$aud EBITDA @ 90$/t revenue
    I don't believe the 117$/t revenue of H2Y19 is going to be replicated with the recent drop in IO prices.

    Iron ore valley is a goner. Costs went up 22% in 18 months with impurities going up and they expect another 5% cost increase as the mine deepens.
    We can pretty much expect another 6 months of production during the IO rally last leg and that will be it. I'm not counting any EBITDA coming out of this.

    What the hell is happening with Mount Marion ?
    646$/t for H2Y19 ? And they expect it to last in 2020 as well ? That's atrociously high for an established mine chewing that volume and partially producing 4%.

    For reference :
    GXY produced 6% concentrate at 484$/t last quarter.
    AJM reported 570$/t last quarter for all 6% as well.
    PLS costs was 528$/t last quarter and they are targeting 350$/t by Q4Y20.

    They might not include everything in their CFR costs per ton but this is still way lower and they do not produce any 4%.

    Is there a specificity of Mount Marion I'm not aware of ? I saw an allusion to high strip-ratio area in the presentation, does that mean it will eventually get better ? If yes, when and how much costs will go down ?
    Since they expecting same costs or higher for 2020, there most likely won't be any improvements in the short term.

    Forecast of 350kt for 2020.
    Assume same ratio of 4% and 6% and costs.
    We got 890$ in H2Y19, expect further price softening maybe around 800$/t.
    EBITDA of ~25m$ with 50% owned.

    I hope the mining services forecast of 280-300m$ EBITDA for 2020 is real. It's hard to swallow that EBITDA for the mining services division went down 20% between FY18 and FY19 with almost 6 months of massive IO rally.
    The fact that 50% of their contracts are 5-10 years is reassuring on this front, any new contract add volume straight away.

    Capex and Investment of 858m$ for 2019 and expect another 280m$ for 2020.
    That's almost all of the 1.2bn$ we expect from ALB.

    Let's see from 2021 if the 40% interest in the 50ktpa conversion plant is worth it EBITDA wise.
    You would expect at least a 3k$US margin per ton hydroxide. We get 20ktpa equivalent interest => 88m$aud increased EBITDA. Not the deal of the century as it costs us 700m$aud but decent.
 
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